Apr 302012

There’s a very depressing trend in the media these days, one I suspect has been present for decades: using unsubstantiated sources to say stupid things about successful entities. Hitwhores like Business Insider and Gizmodo use sensationalist headlines and rumors about Apple the same way outhouse TP like OK Magazine and Us Weekly use “close friends” to titillate stupid people with their headlines about that status of Brad and Angelina’s relationship. Up until their scathing non-expose of Apple’s management of its supply chain, respected publications like The New York Times kept out of this cesspool. Now it seems like they’ve dove in head-first and are gleefully doing laps.

Our latest derision under the theme “Apple has so much cash” comes in a Times piece “How Apple Sidesteps Billions in Taxes.” It make come as a shock to some people, but Apple actively employs several means at its disposal to minimize its tax burden – all of them perfectly legal and used by hundreds of other tech companies. Why is Apple special? Because it’s so successful, obviously. Which leads us to statements in the article like this one, which ties Apple’s reduced payment of California sales tax to the welfare of state programs (cue the violins):

Such lost revenue is one reason California now faces a budget crisis, with a shortfall of more than $9.2 billion in the coming fiscal year alone. The state has cut some health care programs, significantly raised tuition at state universities, cut services to the disabled and proposed a $4.8 billion reduction in spending on kindergarten and other grades.

And California is such a well-run state! Apple is taking money from cripples! From kindergarteners! Why do you hate America, Apple?!

I’ve said it before, but it bears repeating: if you want corporations to become more responsible for the tax revenue “experts” bellyache about not getting, change the tax laws. Apple employs practices that every one of its competitors employs and pointing out how what you’re not getting from them affects social services does nothing. I was happy to see, however, that Apple didn’t like being singled out by the Times and actually had a response to the article printed. My favorite part:

We have contributed to many charitable causes but have never sought publicity for doing so. Our focus has been on doing the right thing, not getting credit for it.

Maybe the Times could direct its attention to the laws and lawmakers that make these practices possible, as opposed to pointing out hypothetical dollars lost by one of the numerous companies taking advantage of them. You know, what journalism used to look like.

Update: well it looks like the Times couldn’t even be bothered to accurately depict Apple’s tax rate. According to this piece in Forbes, the 2011 tax rate calculated by the Greenlining Institute was based on Apple’s profits in 2010, a laugher that sailed past the Times’ crack fact-checkers and used in the article. Tim Worstall, the author of the Forbes piece, calls it an “Appalling, ignorant, calculation cobbled together by [a] small time think tank.” Another fine piece of journalism from The Gray Lady.

Apr 262012

Google researcher Sebastian Thrun, Founder and head of Google X, was a guest on Charlie Rose last night talking about his online University project Udacity, driverless cars and, of course, Project Glass.

Locutus looks quite comfortable in front of the camera

You probably know that Glass is Google’s attempt at immersive reality, featuring a super-discreet pair of boss glasses that allow you to use interact with the world via HUD and let you share your mundane life with your friends in real time. Information that Google will no doubt share with its customers (advertisers) in order to shave off another sliver of your identity for their monetary gain. Glass didn’t get much air time, but Thrun did snap a picture of Rose during the interview and posted it to his Google+ page:

Looks a lot like the pictures I see on Instagram lately...

All kidding aside, it’s kind of cool that Google is blowing all this ad cash on these fanciful visions of the future. As scattershot as their projects appear to me, who am I to accuse the company of Microsofting their capital into the void?

I do think Glass will be “personal” in a way that Android is not. Using an Android device, there’s a lot of things going on behind the scene that are invisible to the people carrying them. When people put on a pair of glasses, I think the idea of potentially having everything they do documented in some way is going to put the creepiness factor front and center. I don’t know if the world is ready for that level of immersion.

Apr 262012

I’m married, so that means I’m never right. It was one of the subliminal vows I took at the altar. Thank God I have a blog.

When Verizon announced their intent to carry the iPhone, I made a prediction about what that would mean for Android. I was pretty aggressive about what the market would look like a year after the announcement, once a substantial number of peoples’ 2-year Verizon contracts expired.

Gave RIM WAY too much credit

Back to my being right, the market share numbers for the first quarter were released and – wouldn’t you know it – the iPhone holds a 59% share. I’d say I should work for Gartner, but I think my being right about things would wreck their curve.

Apr 262012

No one with any reasonable sense of the smartphone timeline still thinks that Google didn’t pull an about face with the design of their Android handsets when the iPhone was released. There’s ample photo evidence.

As if another nail was needed in that coffin, during yesterday’s testimony at the Oracle v. Google trial, mock-ups for the 2006 vision of the Google Phone were introduced into evidence.

Not an iPhone

Google intended to release a BlackBerry-like device that eschewed a touch interfaced in favor of soft keys. So they were planning to knock off the most popular phone at the time – until a better one was announced in 2007. So what did the first Android shartphone, the HTC Dream/T-Mobile G1, look like?

Nothing like the iPhone

Now the Dream also had a slide-out keyboard and hardware keys, but there’s the handy home screen icon layout and touch interface. Imagine that. Subsequent versions of Android are even more derivative of the iPhone. Although Creepy King Eric Schmidt says “Most people would agree that Google is a great innovator, and I would also point out that the Android efforts started before the iPhone efforts.”, it’s pretty clear now, even more so than before, that Schmidt is a disingenuous shit. You need only watch 10 seconds of Senate subcommittee testimony to know that anything hanging out of that guy’s mouth hole is bullshit.

So Apple has an additional little something for its back pocket should it decide to ever go after Google itself. Thanks for the bullets, Mountain View. Not that Apple needs them.

Apr 262012

Writing in his parislemon blog:

Probably around late summer every year going forward, iPhone sales will dip ahead of the expected new device and some Android manufacturer will find a way to capitalize, rising the entire ecosystem’s share as a result. But it will always be short-lived. The new iPhone will come along and crush it.

I also said that Verizon was the only thing keeping Android competitive in the U.S. When you looked at markets where the iPhone was on more than one carrier at the time, it was obvious.

People are over Android, and Android’s ecosystem has as much to do with this as the quality of the iPhone’s offerings. Google can’t push its latest operating systems to devices even 6 months old, their market is a malware minefield, and their manufacturers offer undifferentiated hardware and software that only differentiates itself from the next guy by the way it worsens the user experience compared to stock Android.

People are over the gimmicks like HDMI out and Beats(off) Audio. Consumers never gave a shit about “free and open”; when they were stuck on Verizon’s network, they settled for a phone that was pitched as being just like the iPhone. They no longer have to settle for “just like an iPhone.”

Between Oracle and Apple, Android is starting to look a lot like the middle segment of The Human Centipede.

Apr 252012

One of the most popular categories of Apple bashing is based on the theme that Apple has too much cash. From the ample cash on hand that Apple enjoys (currently over $110 billion), we get the evergreen “what Apple should do with all that cash” positioning by pundits (buy TiVo) and the more humanitarian cries from misguided groups like SomeOfUs.org that Apple must show us that it’s not a greedy megacorp and invest in its supply chain. My response to all the grousing has always been straightforward:

Engage coping skills on my mark

It’s refreshing to see some people put some actual work into Apple’s embarrassment of riches. In a recent paper, three academic authors from the UK’s Centre for Research on Socio-Cultural Change attempt to put Apple’s use of the Chinese leg of its supply chain in the larger context of global “financialization”. The paper is titled “Apple Business Model: Financialization across the Pacific”. What is financialization, you ask? Aside from being a word my spell check refuses to acknowledge, the term can have a bunch of meanings. The most generic is the movement from a market dominated by people making things to a market dominated by financial institutions. What does this have to do with Apple? Aside from the attention guaranteed by putting the most successful company on the planet in the title, not much. The paper takes an early turn and equates the pressure of financialization with a company’s desire to increase shareholder value by all means at their disposal. In Apple’s case, it means outsourcing the bulk of their kit assembly to China. This is bad because it takes jobs from the U.S. economy and exports them to countries where labor is cheap and prone to exploitation while the company using the practice enriches itself. For purposes of the paper, financialization is a force that causes abuse of foreign supply chains. Financialization bad.

The paper is actually pretty well written, mostly well-cited and dense with context. The point at which the wheels fall off the cart comes when the authors jump on the Apple brand and use it as the poster child for supply chain abuse, a model designed to enrich corporate America with little domestic upside. Then the cart starts on fire and explodes when the authors suggest that Apple could just transplant its supply chain to the U.S. and still achieve awesome margins. I could pick on a bunch of factually incorrect statements leading up to the piece’s money shot, such as the statement “Microsoft the utility software provider directly employs 90,000 globally which is more or less exactly twice the 46,000 employed by Apple whose hardware plus software offering is inherently more labour intensive.” (their business is 90% software and their hardware is assembled in China), but I want to focus on the ridiculous setup for the “domesticating the supply chain” scenario.

I could use the note on 2 of the figures used in the paper, “Figures 5 and 6 are based on industry tear down analysis by iSuppli of the Apple iPhone 4G (sic).”, and stop there, leaving readers to laugh their asses off at the folly of the authors, but I want to be thorough here. So let’s see how our academic friends break out the cost of building the iPhone 4:

I’m sure Apple would be thrilled to be getting 72% margins from their phones; unfortunately they don’t. People who put thought into their work know that the iPhone’s margin is closer to 45% . Where’s the missing 27%? Probably lining the greasy pockets of Apple’s executives. Or it could be the delta between a shitty model and actual research – one of the two. There’s also the issue of how long it takes to make an iPhone. The paper says it’s 8 hours. Citation needed. Then there’s the issue of how much 8 hours costs in labor – as of 2010 it was $14.65, or twice what the paper claims. According to Marketplace reporter Rob Schmitz’s exclusive tour of Foxconn, that price doubles again, as wages double “after a couple of years”. So from the outset, we have a margin calculation that’s over 20% off and the labor component of the paper’s equation is off by a factor of 2-3. Let’s not let egregious math errors cloud the point of this exercise.

So how would Apple’s grossly unnecessary margins look if we plugged in a domestic labor rate?

Not bad, right? Sure, if they took into account anything but the basic wage rate of $21/hour. This number is cited as “the average wage in the US electronics industry” by the paper. No citation. Doing a little digging, you can find that jobs with descriptions like “manufacturing process engineer” typical land in the $28/hour range. And what doesn’t this rate include? I’d bet that it doesn’t include benefits that have to be paid by the employer – be they Apple or the mythical domestic manufacturer. This can add anywhere from 20-30% on top of the base salary. And then there’s the infrastructure costs of moving your entire manufacturing operation to the U.S. If Apple were to move its assembly stateside, I’m sure there’d be plenty of manufacturers willing to partner with them, but it won’t be free. We’ll also have to assume that Apple will have to pay more to have the parts made in China shipped to the U.S. location. Plugging in an “average wage” and using that as the basis of your non-material costs is obscenely irresponsible. Academics.

And what about the jobs leaving China? Manufacturing assembly is a way for agrarian workers in China to significantly improve their lives. What will replace that? I’d wager that the Chinese workers at Foxconn prefer making $14 – $28 a day over pushing dirt with sticks. You’d think the Original Imperialists in the UK would understand some of the upsides to “exploitation”.

Exploiting foreign supply chains is bad. This is the strawman that anyone with an axe to grind against Apple – or aspiring academics looking to gain some notoriety -prop up. Apple is not innocent on all counts, but their commitment to their workers abroad is documented in the numerous audits it conducts and the pay raises it continues to subsidize. The global marketplace is complex and a lot of the messages contained in “Apple Business Model: Financialization across the Pacific” are thoughtful. The point is lost entirely when the authors choose to use an iSuppli breakdown of manufacturing costs and compound the error with incorrect assumptions about wages. The extra step of transposing these costs domestically without consideration for what it would take to support a quarter million new manufacturing jobs in the U.S. takes the work from embarrassingly inaccurate to absurd. If you’re going to bang the Apple drum, at least sharpen your fucking pencils.

Maybe we should call this trend of poorly-substantiated screed against Apple’s supply chain the “financialization of good research”.

Apr 242012

If you’re Apple, how do you follow up the most successful quarter in corporate history? With the second-best quarter, obviously. Cupertino announced its 2nd quarter earnings this evening and it’s safe to say the company is continuing to kick & take, beating analysts’ consensus estimates for earnings by over $2 billion. This coming in a non-holiday quarter that had one less week than Q1. Let’s roll the quant pr0n:

39-11-47? Hubba hubba...

Other miscellaneous factoids of interest:

  • Apple’s total cash on hand is now $110.2 billion, or almost enough to overpay for Motorola 10 times
  • Apple just closed its 24th quarter of beating PC market growth – that’s 6 years
  • Apple’s retail stores averaged $12.2 million per location, a 23% YoY increase
  • The percentage of Apple’s revenue that came from international sales increased from 58% in Q1 to 64%
  • iTunes store revenue was up 35% from the prior year, ringing up $1.9 billion in sales.
  • There are now over 365 million iOS devices in the wild, enough for every person in the United States with enough left over for everyone in Argentina

Looks like all those honest-to-god evil Apple product boycotts didn’t quite materialize. Oh well. Rest assured, with this kind of star power, there will be something next quarter, and the quarter after that. How else is Gizmodo going to maintain a readership? For all you haters, Triple H has a message for you:

Courtesy of ilovewrestlinggifs.tumblr.com

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Apr 232012

I always enjoy reading the thoughts of (usually former) employees about their experiences in-country. The latest dissident from Microsoft, Max Zachariades, paints a picture of the stagnating dinosaur for TechCrunch, calling the company out to be pretty much how I envision them:

This company is becoming the McDonalds of computing. Cheap, mass products, available everywhere. No nutrients, no ideas, no culture. Windows 8 is a fine example. The new Metro interface displays nonstop, trivial updates from Facebook, Twitter, news sites and stock tickers. Streams of raw noise distract users from the moment they login.

The OP ends up getting fired for emailing his higher-ups about the wastefulness that has come to define Microsoft’s culture. This is a company that will continue to operate on the vig afforded them by their Windows and Office Empires. One by one, as workplace consumers  push their preferences and take their choices back from their IT drones, the company will falter. It may take another decade, but this is a company well on its way to obsolescence.

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Apr 182012

Like all slacktivism entities looking to leech some media limelight off of companies that actually make stuff, Greenpeace subscribes heavily to the school of “making shit up”. Because Apple has always been a secretive company that doesn’t bend over backwards to qualify outside parties’ stupid claims, Greenpeace can publish garbage and not think twice about it.

Save the #FAILS!

Lately, however, Apple hasn’t been suffering fools with the same stoicism. Yesterday, Greenpeace posted a report titled “How Clean is Your Cloud”, which aimed to assess the current state of Green Energy use among the leading technology companies. Even though Greenpeace wasn’t able to obtain any information about Apple’s data center in North Carolina, that didn’t stop them from assessing the facility “[u]sing conservative calculations” and the  “best information available to derive power demand”. This “best information” led them to report that Apple’s 20MW solar array and 5MW fuel cell installation “will cover only 10% of their total generation for the data center”, thereby earning them D’s and F’s on Greenpeace’s “scorecard”. In a very un-Apple-like move, the company issued a statement the same day that basically said Greenpeace’s methodology wasn’t worth the pdf it was laid out on. From Apple spokesperson Kristin Huguet:

Our data center in North Carolina will draw about 20 megawatts at full capacity, and we are on track to supply more than 60 percent of that power on-site from renewable sources including a solar farm and fuel cell installation which will each be the largest of their kind in the country. We believe this industry-leading project will make Maiden the greenest data center ever built…”

60%, not 10%. Huguet also threw in some information about a second facility to open in Oregon next year that will be powered by 100% renewable energy. You’d think the order-of-magnitude math error and the mention of the 100% renewable energy facility would change Greenpeace’s grading curve. Of course it didn’t. From AppleInsider:

The organization issued a follow-up post on Tuesday explaining the reasoning behind its estimate and commenting on Apple’s response.

“While we welcome Apple’s attempt today to provide more specific details on its North Carolina iData Center, it does not appear to have provided the full story, and is instead seeking to provide select pieces of information to make their dirty energy footprint seem smaller,” the post read.

Maybe it’s me, but these “select pieces of information” pretty much shoot down your 10% number and call into question the entire foundation of your scorecard. This, of course, assumes you assign any value to reports expectorated from Greenpeace’s orifices, something I have personally never done. It is nice to see Apple stay in front of these asshats, though.

Apr 182012

The lyrical stylings of the 80’s leave a lot to be desired, but the power-hair band Cinderella’s “Don’t Know What You Got (Till It’s Gone)” was a ballad that a lot of recently-broken up teenagers could relate to. It’s a statement about nostalgia that most left most people nodding their heads with empathy. I don’t think Steve Jobs was one of those people.

The decade-long period after Jobs left Apple is typically described by profilers as one he spent dabbling in other ventures, among them NeXT and Pixar, waiting for his chance to take control of the company that ousted him. The period certainly isn’t the one people read a lot about. A recent article in Fast Company details a lot of what went on during this time and how incredibly formative it was in his personal and professional development. The material is drawn from writer Brent Schlender’s 25-year relationship with Jobs and contains excerpts from several never-before released interviews. Although Jobs did spend some time ruminating over his expulsion from Apple (indeed the NeXT project was a tangential attempt to avenge his ousting), he also married, started a family and learned a lot about how to build teams, lessons that would serve him well in his return to Cupertino. I highly recommended it.

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