The Best Acquisition Ever?

Fifteen years ago today, Apple acquired NeXT for $400 million.

AAPL over the last 15 years - 6,613.81% growth

Looks like that worked out pretty well for them. 6,613.81% growth over fifteen years.

Apple TV and Gene Munster

Piper Jaffray analyst Gene Munster made some comments about a rumored TV built by Apple. Among them:

Gene thinks Apple TVs will come in a range of sizes, in contrast to most Apple products, which are one-size-fits-all. Part of Apple’s goal here, Gene says, will be to appeal to young Apple fanatics who can’t afford or don’t have room for a 50-inch flat screen.


Gene thinks Apple’s TVs will be priced at TWICE the prevailing market price for a normal TV: $1,600, for example, for a TV of a similar size from another manufacturer that might cost $800. (If this is really the case, Apple will be able to preserve its extraordinary profit margins).

I had to read these two quotes three times to make sure that I wasn’t missing something…

How can you say that Apple’s target is young Apple fanatics who can’t afford a 50-inch flat screen, then say that they will charge twice (actually, “TWICE“) as much? Aren’t those conflicting statements?

Even if Apple’s goal is to match “its extraordinary profit margin” with a TV, they wouldn’t need to double the price. Apple’s gross margin for the first three quarters of 2011 has been between 38.5% and 41.7%. Even if Apple includes all the components from an Apple TV inside their TV set, they could still maintain their standard margin with a markup of about 50%. Not that I think they would feel the need to maintain that margin with TVs1.

Also, I’m not sure I understand the purpose of the TV if it still requires me to subscribe to a TV provider like cable or FiOS. I don’t see much of a benefit over the current Apple TV device unless the Apple TV set can take in, and more importantly, control the feed from the cable/FiOS. Even then, what’s the benefit over the current Apple TV?

ZoomBySite 1.4

I’ve released an update to my ZoomBySite Safari extension.

There are two main changes in this version:

  1. A new setting has been added to provide a default zoom level. All web sites that do not have a specific zoom level set will zoom to the level specified in this setting.

  2. ZoomBySite now works on Gmail (at least on Unfortunately, I haven’t solved the greater problem of working with all sites with iframes, but I have provided a solution specifically for Gmail.

As always, ZoomBySite is available for download from my site.

Apple’s Software Pricing Strategy

Software Pricing

First, a chart showing changes in pricing since 2005 for OS X, iLife, Aperture, and iWork. The 100% level of the chart is the price of the software in 2005 (when iWork and Aperture were introduced). The rest of the years show the percent of that initial price that the software cost. See the bottom of this post for the actual data including release dates and prices.

For the prices prior to the App Store for iLife and iWork, I’ve divided the price by the number of applications in the package (I only counted iPhoto, iMovie, and GarageBand for iLife – these are the applications that survived the move to the App Store and they are the applications that have received major upgrades with each new release of iLife)1.

Software pricing

Pricing Trend

The trend in pricing is fairly obviously downward. Why is this?

One possible answer is that as the Macintosh market share and overall market size grow, Apple sells more of these applications. The cost to create the applications doesn’t grow, so Apple can afford to lower the prices and still maintain profits.

Horace Dediu wrote an article comparing Apple and Microsoft’s financial performance. One chart in the article showed Apple’s income from software being fairly flat over the last four years.

Apple could likely have increased their profits by not lowering the prices as aggressively, so I think there’s actually another answer as to why the prices are dropping.

Another Horace Dediu article on Apple’s liquid assets contains a chart which shows the massive increase over the last six years (from less than $10 billion in 2005 to over $80 billion in 2011). Numerous financial analysts have asked what Apple plans to do with this large hoard of cash. Apple could lower their prices and decrease their famously high profit margins on their hardware products. They could also afford to lower prices on their software products, which is seems like they have been doing.

It should be noted that OS X and iLife are both included with the purchase of every Mac. The prices here would just be for upgrades. It remains to be seen how upgrades of iLife and iWork applications will work with the App Store. Assuming updated versions of the applications are still available every 12 to 18 months, will they be free? Will they show up as new applications in the App Store? Will the App Store add support for update pricing?

The real profit for Apple comes with the hardware sales. Making great software cheaper (or free) can help drive hardware sales.

Software Pricing Data



  • January 22, 2005 – $79 for iLife (iPhoto 5, iMovie HD 5, and GarageBand 2 – average of $26.33 per application)

  • January 10, 2006 – $79 for iLife (iPhoto 6, iMovie HD 6, and GarageBand 3 – average of $26.33 per application)

  • August 7, 2007 – $79 for iLife (iPhoto 7, iMovie 7, and GarageBand 4 – average of $26.33 per application)

  • January 27, 2009 – $79 for iLife (iPhoto 8, iMovie 8, and GarageBand 5 – average of $26.33 per application)

  • October 20, 2010 – $49 for iLife (iPhoto 9, iMovie 9, and GarageBand 6 – average of $16.33 per application)

  • January 6, 2011 – $44.97 for iLife (iPhoto 9, iMovie 9, and GarageBand 6 – $14.99 per application in App Store)



  • January 22, 2005 – $79 for iWork (Pages and Keynote 2 – average of $39.50 per application)

  • January 10, 2006 – $79 for iWork (Pages 2 and Keynote 3 – average of $39.50 per application)

  • August 7, 2007 – $79 for iWork (Pages ’08, Keynote ’08, and Numbers ’08 – average of $26.33 per application)

  • January 6, 2009 – $79 for iWork (Pages ’09, Keynote ’09, and Numbers ’09 – average of $26.33 per application)

  • January 6, 2011 – $59.97 for iWork (Pages ’09, Keynote ’09, and Numbers ’09 – $19.99 per application in App Store)

Steve Jobs and Tim Cook

I just finished the Steve Jobs biography by Walter Isaacson. Overall, I found it interesting, but was disappointed with the depth of the coverage of Steve’s second term at Apple.

A few quotes from the book that I found interesting…

Walter Isaacson talking about Steve Jobs feelings on John Sculley (page 299)

For Jobs, the problem was that Sculley never became a product person. He didn’t make the effort, or show the capacity, to understand the fine points of what they were making. […] He wasn’t naturally passionate about products, which was among the most damning sins that Jobs could imagine.

Steve Jobs on Tim Cook (pages 651-652)

… After adding a bit more praise, [Jobs] quietly added a reservation, one that was serious but rarely spoken: “But Tim’s not a product person, per se.”

Walter Isaacson on plans for Steve Jobs’ succession at Apple (page 774)

[Jobs] had often discussed with the board, in executive session, his thoughts about who could take over if anything happened to him, presenting both short-term and longer-term combinations of options. But there was no doubt that, in this current situation, Tim Cook would again take charge of day-to-day operations.

A Possible Analysis

If you combine the first two quotes from the book (which were from 25 years apart), it seems as though Steve might have the same complaints about Tim Cook as he did about John Sculley.

Add in the third quote from the book and you wonder whether Tim Cook is just Steve’s short-term answer to his replacement.

Apple did give Tim Cook a $5 million bonus and a stock grant of 75,000. He was also granted 1 million shares, of which half vest in 2016 and the rest in 2021, assuming he is still an Apple employee at that time. If Tim Cook is not the answer for Apple, it seems as though a decision would be made before August of 2016, when 500,000 shares vest for him.

What Do I Think?

With all that being said, I do think that Tim Cook has been invaluable to Apple over the years and is a big part of Apple’s current profitability. He definitely understands Apple’s reason for success:

We believe that we are on the face of the earth to make great products, and that’s not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admin when we’re wrong and the courage to change. And I think, regardless of who is in what job, those values are so embedded in this company that Apple will do extremely well.

Tim Cook is not like John Sculley.

To me, the question is who is the ultimate arbiter of excellence at Apple? Who can make the decision to scrap products that other companies would launch as Steve Jobs did? Who will provide the game-changing vision that Steve did?

Verizon Phone Differences Revisited

I wrote an earlier entry describing the Verizon-specific default settings that I noticed upon getting an my iPhone 4S on Verizon.

I just found a Knowledge Base article at Apple that describes things that are controlled by the carrier settings, such as:

Carrier settings include updates to Access Point Names (APNs), MMS settings, features such as tethering, and default apps such as Stocks, Maps, and Weather.

It does mention the Stocks app, as I had noticed, but doesn’t mention Safari (though their list begins with “such as”, so it’s not complete).

Not only does a new phone come with these configurations, but the carriers can occasionally provide over the air updates to these carrier settings files, allowing them to make changes in the future.

Television – Netflix Streaming

This is the third in a series of posts on television and watching of TV shows, movies, and sports. Other posts in this series:

  1. DVRs
  2. On-Demand

Netflix Streaming

I’ve never been a member of the Netflix DVD service. I did sign up for Netflix Streaming about 7 months ago and have enjoyed. I agree with many others that an Apple TV is a great way to watch Netflix Streaming.


My main problem with Netflix is the content. There are almost no current TV shows available and virtually no “big” movies that I want to watch.

That being said, I still feel like I’m getting my money’s worth. I’ve watch tons of older TV shows that I missed out on when they were broadcast but am still interested in (like Eureka and Futurama). They’ve got all (?) older seasons of Top Gear. In a pinch, I can usually find a movie that’s worth watching as well.

Netflix had an agreement with Starz to stream movies to which Starz had a license. That deal expires at the end of February 2012 and there will not be an extension.

A few weeks after this announcement, Netflix announced a similar agreement with Dreamworks. This deal doesn’t start until 2013, though so there will be an at least 10 month gap between the end of Starz and the beginning of Dreamworks.

2011 – A Year of Changes for Netflix

In March, Netflix announced that it had acquired the exclusive rights to broadcast a new series called House of Cards from executive producer David Fincher (who directed Se7en, Fight Club, The Social Network, and several other movies). The show stars Kevin Spacey.

In July, Netflix announced that it was going to add a new DVD-only plan and also announced new prices for its plans. For customers that had been on a combination DVD and streaming plan, this resulted in a fairly significant price increase.

In September, Netflix announced that it would be splitting apart its DVD rental service into a new company, called Qwikster. This new company would have its own website that would operate independently of the website which would still be the home of streaming operation.

In October, about four weeks after the prior announcement, Netflix backtracked and said that they would no longer be separating the DVD rental service into a new company.

The Future of Netflix

I do think that the future of Netflix needs to be in streaming content and not rental of physical media by mail1. Whether they can make the transition from DVD rentals to streaming is the question. There’s not much the content owners can do to prevent the DVD rentals, but the rights to streaming content is very different.

If they are successful in this transition, then I suspect the monthly cost will rise quite a bit from the current price of $7.99 per month.

At the current price, Netflix is affordable as an add-on to another TV service (such as cable or FiOS). If the price increases too much, then it might need to replace another paid TV service instead of supplement it.

The key thing to watch with Netflix will be how much content they can add and how much it will cost them1.

Switched to FiOS

I just completed a switch from Comcast to Verizon for TV, Phone, and Internet service (I’m up to my neck in Verizon now after recently switching over to Verizon Wireless for my iPhone 4S).

The install process went smoothly and I was able to connect to the wireless network setup by the Verizon wireless modem.

Getting AirPort Extreme Base Station to Work

I wanted to keep using my Apple AirPort Extreme though and by default it wasn’t working. Here are the [OS X-centric] steps I followed to get it working:

  1. Connect to the wireless router via an ethernet cable
  2. Open the Network section in System Preferences
  3. Choose Ethernet and then click the Advanced… button
  4. Click the TCP/IP tab and note the IP address listed next to Router
  5. In your browser, type in the IP address from the prior step
  6. Find the default ID and Password for your router
  7. Login
  8. Click on the Wireless Settings tab and then Basic Security Settings
  9. Change the Wireless setting to Off and click Apply
  10. Run AirPort Utility
  11. Click the Internet tab and then then Internet Connection sub-tab
  12. Change Connection Sharing to Off (Bridge Mode)
  13. Click the Update button

At this point, your AirPort Extreme (or Time Capsule) will restart and you should now be able to unplug the ethernet cable and connect to the Wi-Fi network setup by the AirPort Extreme.

What seems to have changed is that my old cable modem from Comcast exposed the public IP address to my AirPort. The new Verizon modem gives out an internal IP address, thus not allowing the AirPort to directly share the Internet connection.


I signed up for the Triple Play, slightly upgraded to include FiOS TV Extreme HD. This also upped the Internet speed to “up to” 25Mbps both up and downstream.

I ran a test on my Macbook Pro through and here are the results (over a 5GHz Wi-Fi network):

30.56 Mbps down and 22.70 Mbps up

I also ran a test from my iPhone 4S:

14.46Mbps down and 22.51 Mbps up

I’m a little weary of the accuracy of these numbers. The download speed was consistently climbing throughout the test and the upload test took less than a second.

I’m very pleased with these results, especially the upload speed which is far faster than what I had on Comcast.


If anyone is interested in signing up for FiOS, feel free to contact me via e-mail or Twitter (see the top right of this page). I can refer you and we’ll each get $50 credit.

Television – On-Demand

This is the second in a series of posts on television and watching of TV shows, movies, and sports.

  1. DVRs


One of the great features of most cable TV services (and FiOS as well from what I understand – I’ll find more out once my switch to FiOS is complete) is On-Demand. It provides a lot of current TV and movie content available for immediate watching. Think of it as a Netflix or Hulu-like service from your cable company… with limited ads. For most movies, there is an ad or two at the beginning. For TV shows, there are generally one or two breaks during the show for ads (with usually one ad per break, not two minutes of ads like live TV). The best part about the ads is that you can still fast-forward through them!

Comcast also provides native applications for iOS and Android devices that lets you watch On-Demand on these devices as well.

For me, On-Demand removes the need to record many of the TV shows or movies that I’d like to watch. There are a couple of situations where recording via a DVR is still more appropriate/required:

  • If you want to watch the show on the same days as it’s broadcast, since shows typically don’t appear in On-Demand until at least the next day.

  • If you want to watch (or re-watch) the show after some period of time, since shows typically stay in On-Demand for only a month or two.

Nokia Lumia 800

All day today, my RSS feed has been full of people praising the looks of the Nokia Lumia 800. First of all, here’s what it looks like:

Nokia lumia 800

… and here are the descriptions that I read today:

Daring Fireball

John Gruber writes:

The Lumia 800 looks like the Windows Phone Mango device to get.

512 pixels

Stephen Hackett writes:

Nokia has announced its N9-esque Windows Phone 7 phone. My, it is handsome.

Ars Technica

Peter Bright writes:

The phone’s design—shared with Nokia’s MeeGo-Harmattan-powered N9—is eye-catching and elegant.


Dan Frommer writes:

It’s called the Lumia 800 […] and it looks good, as far as these things go.

Shawn Blanc writes:

If I were in the market for a different phone, this very well would be the one I’d pick up. It’s nice to see Nokia making fun and drool-worthy devices again.

The Brooks Review

Ben Brooks writes:

I can’t speak much to the new version of Windows Phone 7, but the Lumia 800 looks like a phone that I would want to hold. And I can’t think of a better compliment to an iPhone competitor than that.

My Take

Personally, I think the phone looks awful.

Perhaps its just the photos that I’ve seen, but the front of the phone seems to be shaped like the back of an iPhone 3Gs , with a splash of color around the outside of the screen that looks like an Apple Bumper case.

To each their own, I guess.