Lowered sales/revenue expectations (part of which was due to far lower than expected sales of the G4 Cube) however forced Apple to issue a profit warning in September 2000. This caused the stock to plummet 50% in trading the next day. This in combination with the bursting of the dot-com bubble brought the arrogance and hubris to an end. Apple’s share price traded within a relatively narrow range for several years until its breakout and meteoric rise in mid-2004 on the heels of the growing success of the iPod. Pre-2007, Apple’s growth was subject to the iPod ecosystem and its influence on getting iPod customers who did not own Apple’s computing products to switch to the Mac. Because of this, Apple was careful with its PR and rarely made any sort of polarizing remarks during this period (at least as far as I could remember).
This all changed with the introduction of the iPhone in 2007. Initial opinions after its announcement and brief demonstration at Macworld SF were naturally polarizing with most of the negative opinions focusing on the lack of a physical keyboard and lack of a native application environment (remember, Apple initially pushed web based apps). However, even to me, it was obvious what Apple had done (scaling the underlying core of their desktop operating system into a mobile platform and coupling it with a touch based UI geared towards such smaller devices). At least to me, it became apparent this new mobile platform had growth potential even before its actual June 2007 sales date. It also made sense to me back then that Apple could strip out the telephony capability and offer the iPod functionality on its own; something it ended up doing with the release of the iPod touch in September 2007. And this was all before Apple outlined the details of its iPhone SDK for actual native apps in March 2008. I felt the growth and revenue potential was so great that I started a new position in AAPL in March 2007 (the details and backstory to be posted later).
The actual roll out of the App Store completed the ecosystem and its success drove the sales of iOS devices in a similar way that the iTunes Music Store drove sales of iPods (pre-touch). With this continually growing mindshare, it naturally spilled over to the higher margin desktop and laptop product line. In recent years, Apple has seen record growth in the unit numbers of portables and desktops shipped. As a result of Apple’s consumer-centric focus with selling iPod’s and iPhone’s to non-traditional Apple customers, there is sizeable growth potential for Mac OS X based hardware with regards to this particular demographic. The introduction and resulting uptake with the iPad and iPad 2 has only reinforced this ecosystem. During this 2007-present period though, Jobs has become far more vocal including his open letter regarding Adobe Flash or his “appearance” on Apple’s FY2010 Q4 earnings conference call where he went on the offensive regarding Google and Android.
Previously, Apple had been enjoying favorable free press in the media but after some of this, a few in the media began to categorize th company as being a bully and letting the success go to its head. Apple of course is now on making more of their products consumer focused. Final Cut Pro X (or iMovie Pro as some are calling it) is a natural result of those decisions (going after the prosumer). The yet to be released Mac OS X Lion (and its add on, Lion Server) will also be catering to this growing number of general consumers whose first Apple products were either an iPod or iPhone. Is this arrogance or hubris though like the G4 Cube? In some regards, the answer is clearly no. Apple is looking at the untapped general consumer market and focusing its efforts by aligning their business decisions along those lines. In other regards though, it does seem like this success is raising the level of arrogance like the changing dictation of what is or isn’t allowed on the App Store (though Apple has said the reason for this is that they are learning as they go along), deciding to immediately EOL FCP7/FCS3 knowing full well that FCP X currently lacks features that its predecessor had, or some things which I cannot currently write about with regards to Mac OS X Lion as of this posting (NDA).
Do a simple search with the terms “Apple arrogance” and see what pops up on Google or Bing. You’ll no doubt come across an article or two about how this arrogance could come back to bite them or how someone isn’t going to buy their products. A few of these articles are several years old to boot. And you know what, karma hasn’t bitten them back yet. The reality is that generally, Apple has a captive market once one has become a part of the ecosystem. I doubt you will find many long term Apple customers looking to switch elsewhere just because they don’t agree with some decisions. And the larger and ever growing number of recent Apple customers have very little history with the company that they don’t really care about that stuff so long as they can get their iPod or iPhone. And what few do decide to move on to “greener pastures” will realistically make zero difference to Apple’s bottom line. For real Apple arrogance/hubris to result in a true financial impact similar to how the G4 Cube contributed to a lackluster quarter in 2000, the company would need to have a large number of product design miscues, miscalculating product pricing (as they did with the Cube), and associated PR gaffes. The iPhone 4 “antennagate” issue was the largest potential show stopper covering its consumer base and that had very little impact on sales despite a chorus of online concerns presented by the tech press. The FCP X issue is a niche demographic and despite the saber rattling from that quadrant, won’t make a sizeable dent even if every single FCP7 customer swears off being a patron of Apple products going forward (something which is highly unlikely).
With this said though, it is also not out of the question that each individual instance while small could have a broader impact when taken together as a whole over the course of time. This is why Mac OS X Lion (and Lion Server) will be interesting in terms of how the long time Mac user will view it when used on a daily basis (i.e. once the “new car” smell has worn off). To be completely honest, I personally believe that Apple does its best when it is coming from behind and not when it is the 800 pound gorilla in the room (as they are now). When you’re at the top of the mountain, everyone else is trying to knock you off the peak. Being able to manage success humbly is not something many individuals are able to effectively handle (by that, I mean attitudes change, egos grow, people forget where they came from, etc). Companies are managed by people and therefore fallible as well in terms of handling success gracefully. As the worlds most valuable tech company and 2nd largest by market capitalization (as of this writing), it will be interesting to see what things are like 5 years from now (a virtual eternity in the technology world) and whether or not Apple is still at the top of their game.
