What to do when there is no crowd? Interview the CEO, Tim Cook. He was all excited about the congratulatory phone calls he received from around the world. He didn’t say how many watches he sold on those calls.
Fox Business news reported this:
“After months of hype, the Apple fans did not come out for the Apple Watch launch Friday. In contrast to long lines for iPhone debuts, only a handful of people showed up to see the watch in New York City, Friday morning.”For details on this gadget you can read many articles and reviews on the Internet. Therefore, I won’t bother you with that. The important question is, “Will people buy it?” (See my March article, Does The World Really Need An Apple Watch?)
Most customers at the Apple store on Fifth Avenue told FOXBusiness.com that they were unaware that they were visiting during the Apple Watch debut. They were there for iPhones, they said.
Amazingly, hardly any reporter asked that question. But it is critical.
I recently participated in
an informal survey of a revolutionary tennis racquet that a group of
players got to try out. There was a multi-page survey afterwards. Of
course, no one wants to offend the sponsor. So the commentaries were
positive.
The missing question was: “Would you buy the racquet at $…..?”
I asked the players informally. Not one of the players said he would buy it in spite of the positive reviews they gave.
That’s the type of missing questioning that caused the huge failure of the introduction of the Ford Edsel. If you remember that one, you are revealing your age. The marketing research was immense, with paid focus groups, surveys, etc. Obviously, when you are paid by the company to sit in a focus group for part of a day, you will want to reciprocate by being positive.
The marketing research itself cost Ford a fortune. Based on the positive results, the firm decided to invest a record amount to introduce this new line of cars. The flop was immense. The car was soon sent to the marketing junk pile of history.
The hype around the Apple Watch reminds me of these failures. Here is my abbreviated opinion:
1. Buyers will quickly get tired of charging the watch every 8 hours or so. Imagine the hassle if your current watch stopped before the end of a work day!
Actually, if you consider the new versions of existing iPhones under
the new CEO, you can come up with more flops. The larger screen iPhones
were about three years behind the competition. The sales surge of iPhone
6 was nothing but a catch-up from iPhone fans who were yearning for a
larger screen.
I think the watch will flop. Of course, I could be wrong. Apple will hope so. But hope is not a good forecasting tool. Above I have only outlined the faults that I think are critical. Reviewers, much smarter about technology than I, have much longer lists. I only look at it as the average user would.
Interestingly, on the day of the Apple Watch launch, Samsung launched its Galaxy S6. It has great reviews. It could put a major dent into the sales forecasts of the iPhone.
Of course, Apple AAPL -0.51% stock price is a different thing. The stock has been boosted by the largest stock buybacks done by any company in history, about $200 billion. That reduces the number of shares, which increases the earnings per share and makes the stock price go up. It’s called “financial engineering.”
The capitalization of Apple in the market is the largest in the world, more than twice as large is the second largest. Consider that it’s basically a company that thrives primarily on the sales of one product, a cell phone. Companies that make thousands of products, like jet engines, helicopters, airplanes, battleships, the appliances in our homes, and so on are worth a lot less in the stock market.
If I were a shareholder of Apple, that would make me nervous. I would wonder how long such a stock market price can endure. Every mobile phone company in the world is now a big competitor. The iPhone has only about 15% of the market globally. The phone is very much overpriced compared to the competition. Eventually, the ecosystem will fade when people realize that they can get more for less with another phone.
I wonder, what happens when all the money managers heavily invested
in the stock see the iPhone market-share decline, similar to the plunge
in the iPad share, and they want to sell. Where will the buyers come
from? Oh, I forgot: Apple will do more big “buybacks” to accommodate
them. And they will borrow the money to do that.
One analyst who was on TV with me said he buys the stock because Apple buys it back. Is that a new form of investing?
And that’s how the game is played.
courtesy of forbes
I asked the players informally. Not one of the players said he would buy it in spite of the positive reviews they gave.
That’s the type of missing questioning that caused the huge failure of the introduction of the Ford Edsel. If you remember that one, you are revealing your age. The marketing research was immense, with paid focus groups, surveys, etc. Obviously, when you are paid by the company to sit in a focus group for part of a day, you will want to reciprocate by being positive.
The marketing research itself cost Ford a fortune. Based on the positive results, the firm decided to invest a record amount to introduce this new line of cars. The flop was immense. The car was soon sent to the marketing junk pile of history.
The hype around the Apple Watch reminds me of these failures. Here is my abbreviated opinion:
1. Buyers will quickly get tired of charging the watch every 8 hours or so. Imagine the hassle if your current watch stopped before the end of a work day!
2.
It is compatible only with the iPhone 5 & 6. That’s about 38% of
iPhone users, or around 5% of the world’s smartphone users. (The math:
85% of smartphones world-wide use Android.) The other 95% won’t be able
to use many of the features of “the watch.” Is it smart to have a
consumer product that only 5% of consumers can use? That works for
high-priced items such as Rolex, Patek Phillipe, etc. But for a $399
watch?
3. The price is too high.
4. Is it a luxury item or
is it a gadget? The price says, “Neither.” So who is the targeted
customer? Watches have become more like jewelry. $399 for something that
will be obsolete in a year is probably too much.
This launch could well be the end to the perception that Apple can do no
wrong. That perception was based on the successes of Steve Jobs. The
Apple Watch is the first really new product from his successor.
Investors will wonder, “Is this flop a sign of things to come?”
I think the watch will flop. Of course, I could be wrong. Apple will hope so. But hope is not a good forecasting tool. Above I have only outlined the faults that I think are critical. Reviewers, much smarter about technology than I, have much longer lists. I only look at it as the average user would.
Interestingly, on the day of the Apple Watch launch, Samsung launched its Galaxy S6. It has great reviews. It could put a major dent into the sales forecasts of the iPhone.
Of course, Apple AAPL -0.51% stock price is a different thing. The stock has been boosted by the largest stock buybacks done by any company in history, about $200 billion. That reduces the number of shares, which increases the earnings per share and makes the stock price go up. It’s called “financial engineering.”
The capitalization of Apple in the market is the largest in the world, more than twice as large is the second largest. Consider that it’s basically a company that thrives primarily on the sales of one product, a cell phone. Companies that make thousands of products, like jet engines, helicopters, airplanes, battleships, the appliances in our homes, and so on are worth a lot less in the stock market.
If I were a shareholder of Apple, that would make me nervous. I would wonder how long such a stock market price can endure. Every mobile phone company in the world is now a big competitor. The iPhone has only about 15% of the market globally. The phone is very much overpriced compared to the competition. Eventually, the ecosystem will fade when people realize that they can get more for less with another phone.
If I were running Apple, I
would put a much greater marketing effort into the great Apple laptop
computers. These are excellent and beat anything made to run on Windows.
They just need to offer some attractive discounts. Apple’s U.S. market
share in this category is 13.4%, and gaining on the PC’s. Apple’s
operating system is superior. So far it grows without the marketing
hoopla. Much more could be done.
When the watch fades, the
bulls will talk about the Apple Pay, although it can be used on less
than 3% of all retail terminals in the U.S. Samsung now has Loop Pay,
which is compatible with almost all retail checkout terminals. Will
Apple Pay go the way of the Dodo bird? I think so!
One analyst who was on TV with me said he buys the stock because Apple buys it back. Is that a new form of investing?
And that’s how the game is played.
courtesy of forbes
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