iPad cannibals invade the Mac country club
On Wednesday of this week, Apple posted (yet again) record sales for their first quarter of 2013--a whopping $13.1 billion in profit based on $54.5 billion in revenue, a 17 percent increase over the same quarter one year ago.
You'd think that Wall Street would be happy, given such a stellar performance, but the expectations were that the company would outperform even those impressive figures.
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Between market close Wednesday and market close on Thursday, the valuation of the company's stock has plunged approximately $64 per share, shaving just under $60.1 billion dollars off of the company's market capitalization within a 24-hour period as analysts on the Street adjusted their price per share targets.
None of this makes any sense given how healthy the company is in terms of the size of its war chest, its strong industry position in the mobile sector and expected pipeline.
After years working on Wall Street in trading environments and listening to the bawdy water cooler talk that goes on between financial power brokers, I've never truly been able to understand what goes on inside the minds of these guys that makes them react so irrationally.
I can hazard a guess as to what spooked them this time, though.
Back in July of 2010, I wrote a story called:"Dear rabid Apple fans, your precious Mac club is being disbanded".
At the time the article was written, the iPad was but four months old, however there was strong evidence to support at the time that the growth for the product was going to be massive.
How massive? I said:
...within three years, we'll see anywhere between 50 and 80 million iPad users worldwide as an extremely conservative estimate...eventually, the Mac OS will be completely eclipsed by iOS. That day may not come for four or five years. Perhaps even six. But when it does happen, "normal" people will outnumber Mac users by a significant margin.
By Apple's own admission, as of October 2012, there have been 100 million iPads sold.
That's up 15.4 million units from the same quarter the previous year, just in case anyone is taking notes.
Even if we were to aggressively eliminate about 40 percent of that 123 million unit plus figure due to obsolescence and retirement of first and second generation units, we would still be looking at around 73 million iPads in active use today.
So based on my original July 2010 projections, I would say I was pretty damn close to dead-on as to predicting the iPad market penetration we are seeing today.
Now, about those Macs.
Couched in all that awesome news about the iPad's stratospheric growth was the revelation that Mac sales are down from the same quarter in the previous year--4.1 million units sold in Q1 2013, versus 5.2 million in Q1 2012.
Why, oh, why is this happening?
Well, the answer is pretty damn obvious. A lot of people don't want to spend money on expensive personal computers like the Mac when they could be buying much cheaper iPads to browse the Internet, get their emails, check in with their social networks, and play casual games.
Indeed, the Mac is suffering from the very same post-PC malaise that has also been dragging down the sales of PCs. You didn't think Apple was immune to this, did you? You did? So sorry.
The age of the Mac desktop is coming to an end. The iPad cannibals have invaded the Mac country club and have begun to eat the membership.
So what does that mean, ultimately?
The entire industry as we know it is transitioning to an entirely different form of computing. Apple knows this, and so does Microsoft, the company I work for when I'm not writing blogs with these cute, obnoxious headlines.
Apple removed the word "computer" after the name of their company, and Microsoft has now re-envisioned itself as a "devices and services" company.
Both companies are effectively trying to achieve the same thing--bring down the cost of entry of the device, so that what eventually matters is services.
Now, in the Apple view of the world as it is presented today, those services are monetized from the sale of iOS and Mac App Store applications, in-app purchases, and consumption of content via their cloud. It's a consumer cloud, but it is a cloud nonetheless.
So what about all those people that need to get access to Mac OS X apps? Are they just going to have to sit back and watch their enabling ecosystem die? No, of course not. That's silly.
For years, I have been talking about a transition to cloud based desktop computing. I've used the term "the Screen" to describe a cheap terminal-like device that provides access to applications running in distributed datacenters, all over the world.
The first cloud desktops will almost certainly be Windows-based. I know this, not because I work for Microsoft and I have some secret insight into the company's product pipeline that none of you possess, but because it is public knowledge that Windows Server 2012 has been designed to be a world-class cloud-enablement platform for VDI and remote desktops.
And yeah, if you follow the VDI and remote desktop goings-on Citrix and VMware, those guys are not too shabby either.
There has been tremendous interest in the public and private cloud industry, in both horizontal and vertical applications, to make these desktops actual product offerings that you, Joe end-user can buy in the very near future. In vertical markets this is already happening for specialized industry applications.
You don't have to look very far to find sub-$100, stick-like devices that run Android, which plug into HDMI monitors connected to Bluetooth keyboard and mouse combos and can use RDP and ICA session protocols to run all kinds of remote Windows applications.
It is not a big stretch to put two plus two together to see where all of this is going.
Sure, PC sales are yuck. That doesn't mean the desktop OS paradigm is sunk. Neither is Mac OS for that matter.
We're just going to have to get used to the idea that our consumer "desktops" will all eventually be running in a datacenter, and our applications will all be purchased using a subscriber-based model.
On the enterprise side, they will be living in private clouds. But the access methods will be exactly the same.
It is my belief that like cloud-enabled remote desktops that run on Windows, Apple is probably looking to move Mac to a hybridized cloud model. This could involve building an inexpensive ARM-based "Mac" appliance that runs a basic desktop and can locally execute iOS-like apps, but all of the heavy lifting of resource-intensive x86-based Mac desktop apps might run in the cloud.
This solves many of the issues of ARM not being ready for resource-intensive content creation apps, particularly if Apple ends up using similar server-based GPU technology that is present in Windows Server 2012 in order to create rich multimedia-enabled remote desktop experiences.
The iPad and the iPhone already have Airplay, which enable display mirroring and content streaming to Apple TV devices plugged into HDMI ports on monitors and HDTVs. It would not be a stretch of this technology to connect from an iPad-like device to a virtualized Mac or simply streamed Mac x86 apps running in one of Apple's huge datacenters using a monthly subscriber model.
To the end-user, and to most SMBs and content creation shops that use Macs, this would all be seamless and business as usual. There would be no disruption to business, productivity or workflow. But for Apple, this would be the true realization of the post-PC future that Steve Jobs envisioned.
Cannibalism, it seems, is in the company's DNA.
Is the future of the Mac based in the Cloud? Talk back and let me know.
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