
Apple Reports First Quarter Results: $13.06 Billion Net Profit - yoda_sl
http://www.apple.com/pr/library/2012/01/24Apple-Reports-First-Quarter-Results.html
======
Steko
If you're following the call (fantastic liveblog from Jacqui Cheng at Ars[1])
really great exchange when they try to shoehorn the mac-windows analogy into
mobile OS's:

Tim: I wouldn't classify it like Mac and Windows at all. The Mac has outgrown
the market for over 20 quarters in a row, but still has a single-digit
percentage of the worldwide market

whereas iOS, if you look at phones and tablets and iPod touch, we've sold over
315 million iOS devices

If you look at the NPD data, it shows in the US, and this is just looking at
October & November, so part of our launch in October and all of it in
November, it shows iPhone at 43% and Android at 47%

the Nielsen data from a few days ago shows iPhone at 45% versus Android at 47%

Comscore data that came out on October/November shows iPhone at 42% and
Android at 41%

it seems that all of the data from the US would seem it's a very close race
for iPhone, and I think on the iPad side, I think all of us inherently believe
the iPad is way ahead

there's really no comparable product to the iPod touch out there

I wouldn't say it's a two-horse race. There's a horse in Redmond that always
suits up and always runs and will keep running

So what we focus on is innovating and making the world's best products. We'll
just keep doing that and somewhat ignore how many horses there are.

[1]
[http://arstechnica.com/apple/news/2012/01/apple-q1fy2012-liv...](http://arstechnica.com/apple/news/2012/01/apple-q1fy2012-liveblog.ars)

~~~
gjulianm
Nice hat tip to Microsoft when he says "I wouldn't say it's a two-horse race.
There's a horse in Redmond that always suits up and always runs and will keep
running".

I wouldn't expect these words coming from an Apple executive. It means that
Cook thinks WP is a good product that can be a rival for iOS; or that he's
trying to be politically correct without following Jobs' style. Whichever it
is, I really like the new path they're following.

Oh, and it also means that BlackBerry is completely out of the race, but we
all knew that already, didn't we?

~~~
bitops
I think it means Tim Cook is a smart executive who doesn't write off his
competitors.

Even if you look at Apple's history, way back when, IBM wrote off "all that
software stuff" that Microsoft was doing. MSFT ended up having the last laugh
there as they ate IBM's lunch with software.

(True, IBM did pivot, but I'm thinking in the Apple/Microsoft perspective).

[EDIT: plus, Microsoft trounced Apple once. That means they could do it
again.]

~~~
rbanffy
> [EDIT: plus, Microsoft trounced Apple once. That means they could do it
> again.]

Those were different companies. It was Sculley's Apple (with a lot of an
immature Jobs thrown in) and Bill's Microsoft helped by a seriously
shortsighted IBM. Plus, Microsoft really didn't eat Apple's lunch until
Windows 3, which also ate IBM's lunch for dessert.

I don't think Microsoft is capable of betting the company on some disruptive
innovation like they were with Windows 3. They are too big and there is too
much infighting between the various divisions.

------
solutionyogi
This is mighty impressive. To put things in perspective:

Apple's profits ($13 billion) exceeded Google's entire revenue ($10.6
billion).

Source: <https://twitter.com/#!/fmanjoo/status/161932440737296386> (via
gruber)

~~~
redthrowaway
Anyone know what their cash on hand is? If they aren't going to start paying
dividends again, it seems they must be saving up for something major. Any
speculation as to what it might be would be just that, but I can't see them
leaving that cash laying around.

~~~
romland
They'll buy Hollywood before launching their "TV experience".

~~~
masklinn
Unlikely, that would skirt _way_ too close to trusts and they don't see
themselves as being in the business of content creation.

------
yequalsx
The truly astounding statistic to me is that Apple sold 26% more Macs than the
same quarter a year ago. This while PC sales for other manufacturers declines
or remained stagnant. We expect to see increases in the tablet and smartphone
markets since those markets overall are increasing. But to increase 26% in a
stagnant sector is remarkable.

~~~
SandB0x
With the exception of a handful of brands (e.g. ThinkPads), most people I know
can't stand their computers and plan to buy a Mac once their machines die or
become unusable. I'm surprised that other PC manufacturers manage to sell
anything at all. Crapware, poor build quality, bloated and impossible-to-
comprehend product lines, it's like HP, Dell and co are actively trying to go
out of business.

~~~
whichdan
I used a ThinkPad T400 for about a year and a half before getting a Macbook
Pro. The ThinkPad is junk compared to the MBP. Sadly, it's still one of the
best Windows business laptops you can get.

~~~
srparish
I've had exactly the opposite experience. I've owned 3 thinkpads, 4 macbook
pros (between my wife and i), and an ibook. The thinkpads are tanks that take
any beating i give them and keep running. The ibook was solid. The macbook
pros have been complete crap--breaking dvd drives, failing harddrives, failing
keyboards, cracked displays, failing trackpads. On the dvd drives, Apple has
refused to admit the problem, and has repeated deleted forums with people
discussing it. They've completely lost me as a customer.

------
ChuckMcM
_'We are very happy to have generated over $17.5 billion in cash flow from
operations during the December quarter,” said Peter Oppenheimer, Apple’s CFO_

Ok, I'm impressed. That is a literally almost 200 tons of cash when printed in
100 dollar bills [1]. I sure hope they go back to paying dividends.

[1] If you can believe this source ...
<http://answers.google.com/answers/threadview?id=441929>

~~~
nirvana
Dividends are taxed like ordinary income (IIRC), so paying dividends would be
sending money out to shareholders, it gets reduced by taxes, and then the
shareholders have to figure out what to do with it that would return as much
as Apple would. The best return would thus be likely re-investing it in Apple
shares. Its then a smaller amount, due to taxes and thus there's no really
positive effect of it. I think the mainstream thinking about dividends isn't
quite right-- the value of each Apple share goes up a dollar for every dollar
they retain, and more than a dollar for every dollar that Apple can re-invest
in its business at a profit.

This is why, for instance, Warren Buffett doesn't pay dividends in Berkshire
Hathaway.

Apple is a very fast growing technology stock. It's really not the kind of
company that should pay dividends because it has lots of opportunities to
invest that money profitably.

Its quite possible that Apple is contemplating a $50-$70B acquisition that is
very strategic.

~~~
philwelch
Without paying dividends, how is a stock any more an investment than baseball
cards?

~~~
artsrc
If a company has 100 shares on issue how is paying you $0.10 per share in
dividends different from a buy back of 10 shares at $1 each.

Either puts $10 dollars into the pockets of shareholders and out of the hands
of the company.

Dividends versus a buyback are the same thing except from a tax point of view.

If you choose not to sell that is like an automatic dividend re-investment
plan.

~~~
kevin_morrill
Not true. Marc Cuban has written an excellent blog post on this:
[http://blogmaverick.com/2004/07/20/microsoft-dividends-
and-s...](http://blogmaverick.com/2004/07/20/microsoft-dividends-and-stock-
buybacks/)

Dividends reward you for _holding_ a stock. Buybacks you when you sell the
stock. I'd much prefer dividends, and if we had a better tax policy on them, I
think you'd see companies do a lot less crazy #&*$ to expand into markets that
they have no business in.

------
marcamillion
For those keeping tracking, that means their growth rates are absolutely mind-
blowing.

Revenues, YoY, grew at about 75%. Profits, YoY, grew at about 117%.

Keep in mind this is billions of dollars we are talking about. It's
"relatively easy & common" for a "small" company to grow that fast on say
revenues up to $400M or even $1B range. But on QUARTERLY numbers of $25B and
still be growing that fast...that's...just...mind blowing.

To show how mind-blowing this is, let's do some speculation - what will those
numbers look like for the next 4 years (assuming that growth rates remain
constant):

Next Year (Y1) - Revenue = $81B, with Profits = $28.34 in Q1.

Year after (Y2) - Revenue = $141.75B, Profits = $61.49B in Q1.

Y3 - Revenue = $248B, Profits = $133B in Q1

Y4 - Revenue = $434B, Profits = $288B in Q1

Before you dismiss these numbers as fantastical, keep in mind a few things.

a) The tablet market is still nascent and is likely to continue exploding.

b) The smartphone market is nowhere near as big as the mobile market - even
the mobile market still has room for growth.

c) We haven't even seen other products that will likely come out of the
pipeline that could create new categories (iTV anyone?)

d) iCloud was just launched. It's like AWS - but for everybody. Give it some
time, but I can guarantee you it will be a major, major source of revenue and
profits for them (just like Amazon) in the next few years (more than likely
towards the latter part of the next decade).

The truth is, seeing these numbers makes me very skeptical myself, but I would
have never imagined that I would see a company as old as Apple, doing $26B in
revenues per quarter and still growing at 75%/year.

~~~
notatoad
"It's like AWS - but for everybody."

what? icloud has exactly zero things in common with AWS.

~~~
marcamillion
>exactly zero things?

So it's not a 'data storage service in a remote data center'?

Sure, AWS is made for servers - but the core business is the same. Charge
people (AWS charges developers) to store your data in our cloud. Apple charges
consumers.

Different demographic, exact service. Btw, iCloud is like AWS because AWS has
many services (S3, EC2, etc.). Just like iCloud has 'store all your images and
files', and 'match your music via iTunes'. Two services, via the same
underlying core product.

It's identical to AWS - except for the target market.

~~~
trobertson

        > It's identical to AWS - except for the target market.
    

It is similar to S3. AWS is way more than just dumb storage.

If anything, iCloud is more like Dropbox for "normal" users. It's more limited
than Dropbox in what it stores, but it stores the majority case rather well,
including system settings.

In any case, iCloud is most definitely not Apple's AWS.

~~~
marcamillion
Well, sure...Apple hasn't rolled out a unifying 'cloud product/strategy'
yet...but the pieces are there. iTunes Store is just an application on top of
the cloud infrastructure. Then iCloud is another application - that while it
doesn't compete directly with AWS it does so indirectly...because of the
implicit threat that it's just a matter of time before Apple moves in that
direction (if they want to).

I prolly shouldn't have used the name 'iCloud' to describe what I meant. What
I meant was, Apple has a clear business interest in selling access to a 'cloud
digital infrastructure'. At first it was iTunes (they sold that access to the
record labels, but consumers subsidized that effort), now they are selling it
directly to consumers. So they have made two major forays into the 'cloud
infrastructure monetization' business....which is the same business Amazon is
in with AWS. They also did it with the App Store, then the Mac App Store (they
sold access to third-party developers). Sure, not in the identical way as
Amazon did, but it's not that far off.

It's not that far fetched to see that they will eventually be competing head-
to-head with AWS.

------
timae
The $13.1B profit is the 4th best quarterly result in world history, the 2nd
best in US history (Exxon Q308), and the best by far of any company outside of
Oil & Gas. Not inflation adjusted of course.

Source:
[http://en.wikipedia.org/wiki/List_of_largest_corporate_profi...](http://en.wikipedia.org/wiki/List_of_largest_corporate_profits_and_losses)

~~~
querulous
How did AOL Time Warner book a loss of nearly a trillion dollars in a single
year?

~~~
alanfalcon
Those free shiny AOL coasters didn't print themselves.

------
DavidChouinard
Also, Apple makes 409,000$ profit _per employee_. (last quarter)

From the ever useful Wolfram Alpha:
[http://www.wolframalpha.com/input/?i=apple+profit%2Femployee...](http://www.wolframalpha.com/input/?i=apple+profit%2Femployee%2C+microsoft+profit%2Femployee%2C+google+profit%2Femployee)

~~~
pnathan
That is _really_ impressive. The management of Apple is definitely to be
commended for doing an epic job.

~~~
jonknee
No need for accolades, they pay themselves extraordinarily well.

[http://www.businessweek.com/news/2012-01-11/apple-ceo-s-
stoc...](http://www.businessweek.com/news/2012-01-11/apple-ceo-s-stock-
options-lift-2011-compensation-to-378-million.html)

~~~
huxley
That wasn't pay, those were stock options that are worthless currently --if he
leaves before 2016, he gets nothing-- but will pay off well if he sticks
around. Half of the stocks vest in 2016, the remainder in 2021.

[http://tech.fortune.cnn.com/2012/01/10/apple-ceo-tim-cook-
di...](http://tech.fortune.cnn.com/2012/01/10/apple-ceo-tim-cook-didnt-really-
make-378-million-in-2011/)

------
deyan
Quite impressive indeed. I was particularly interested in the insane iPad
numbers, which surprised me.

I thought I would use this opportunity to ask the HN community: what do you
think people use their iPads for? Honest question - I have had one for a long
time now and barely use it as it sits in this awkward middle between a "full"
PC and a smartphone. With so many millions of iPads sold and Tim Cook saying
"There Will Come A Day When The Tablet Market Is Larger Than The PC Market” I
am trying to form an informed opinion but just fail to see what the use case
is for the iPad (perhaps reading a book? casual web browsing?
netflix/youtube?).

So what do you think the future of tablets holds? Link to studies on the topic
are much appreciated as well!

~~~
karpathy
I use my iPad all the time in my day to day life, several times a day. In the
morning I flip through my Flipboard and catch up email and news while I eat
breakfast and sip coffee. I take it with me to class and look through PDF's
while the instructor is presenting. For example, I go on Wikipedia and I look
at related material as I learn about it. (And yes in a particularly boring
class I go to reddit, here, or play a game). In office I like to hook my
headphones to it and listen to music. When I work on a problem set I always
open the PDF on my iPad-- no need to print. When I go to a talk I always take
it with me in case it is boring. While I eat dinner I also browse the
internet, with the iPad next to my plate. Finally, I also read all my books on
it now.

All these things could be done with a laptop I suppose, but the iPad is so
simple to take out from the bag and just start using it right away. It
occupies very little space and is much lighter. In fact, I actually don't use
my laptop anymore... I use my desktop in office or home, or iPad everywhere
else.

------
bgentry
Gross margin for the quarter: 44.7%

Holy shit.

~~~
vaksel
yeah, at those rates they could afford to stop using slave labor or at the
very least invest a bit to make life easier for Foxconn employees or maybe
startup the charity programs again

~~~
dimitar
Foxconn is dominant in its industry. Moving to a another location may eat up
way too much from the pie.

I'm not saying they shouldn't do the very least. A bit of CSR might be even
good for business.

~~~
jonknee
No need to move away from Foxconn, Apple could easily dictate exactly what
Foxconn needs to do.

~~~
mkr-hn
Foxconn makes stuff for a lot more companies than just Apple:
<https://en.wikipedia.org/wiki/Foxconn#Major_customers>

They could ask, and even encourage, but not dictate. And Foxconn is not likely
to do something that puts them at a competitive disadvantage.

~~~
jonknee
They can certainly dictate. Apple has the money and volume to get anything
they would like. If Apple told Foxconn that everyone making Apple products
will be paid triple what they are making now and work no more than 8 hours a
day, it could happen tomorrow.

~~~
mkr-hn
What happens when Foxconn does that and every other company switches to
Foxconn's competitors?

~~~
easp
Just about every other company is already having trouble competing with Apple
on price and quality. So, my guess as to what happens is that Foxconn attracts
and retains the best (most productive + highest quality work) employees,
leaving them, and their customers, at a disadvantage to compete with Apple +
Foxconn, unless they too improve their wages and labor standards.

~~~
jonknee
Apple's cost structure has much more to do with its ability to purchase in
advance than the quality of the workers. The workers are exchangeable, but
Apple buying up 100% of a components supply for a period of time is not
exchangeable. Same for putting down billions for a new factory. They have more
cash than the bank and play banker for a lot of people in the supply chain.

------
Steko
Here's the roundup of estimates, even the rosiest forecast is below the actual
quarter:

[http://fortunebrainstormtech.files.wordpress.com/2012/01/scr...](http://fortunebrainstormtech.files.wordpress.com/2012/01/screen-
shot-2012-01-23-at-9-34-39-am.png)

Just revealed on the call: they sold 1.4 million Apple TVs this quarter (vs
2.8 million in the 4 previous quarters).

------
chj
The success of apple , in my opinion, is largely built on the work of app
developers. Without the effort put into the software, they would not be able
to have so much profits.

We, the developers, are in fact the cheap workers in the Apple Empire, not
those factory workers from China. Funny thing is they even charge money from
us.

~~~
jopt
Consider what convinced us to develop for their platform. That was their work.
Developers don't come to the App Store by accident.

------
r00fus
After hours snapshot: AAPL is up 32 points (7.78%), at $453/share, now has
more capitalization than XOM (ie, largest cap stock in the world).

------
mcdowall
In december I bought a Macbook Air, iPhone and passed down my iPad to my
nephew. I don't begrudge any of their profit, well done to them I say.

------
mladenkovacevic
I wonder what's Apple's strategy when everybody who wants/needs an iPhone gets
one (and I'm sure they have one in place). This is a very deep well right now
and the record profits will likely continue to be posted for years to come,
but the demand is bound to subside eventually right?

Once everybody has a decent iPhone/smartphone is there really a need for
anyone to upgrade more often then let's say every 2-4 years?

Can Apple/Samsung sustain their growth when the only really new prospects are
the next generation of teenagers entering the market?

~~~
rorrr
Most iPhone owners I know buy new versions every single time, just because
they can. (And every time they show me how cool the apps are on their new
phone, though I haven't been impressed in a while).

~~~
rsynnott
> just because they can.

That's largely driven by a very high resale value for last year's model,
though; that also won't survive market saturation.

------
shawnee_
And this is a company allergic to paying dividends. If I were a shareholder, I
would be asking some questions.

~~~
ceejayoz
I'm a shareholder, and I'm pretty thrilled. I've got a few shares from the
$40s, and a bunch from the $70s. I'll take success over dividends any day.

~~~
shawnee_
Why? The only way you'll get that return is if you sell your stock today. That
destroys any chance for you to earn future value from the performance of the
company.

Dividends are the better way companies return value to their shareholders, not
encouraging them to engage in "flipping" which is not sustainable for long-
term value.

<http://money.cnn.com/2011/09/15/technology/thebuzz/index.htm>

~~~
kemiller
Not necessarily. Paying dividends forces everyone to "sell" whether they want
to or not, and the only way to stay on the ride is to accept the taxes you
have to pay and then buy back in. When the company reinvests (and/or buys back
stock), your money grows tax-free.

A split would be nice, though.

~~~
ceejayoz
> A split would be nice, though.

Why? One $100 share versus one hundred $1 shares is functionally the same
thing.

~~~
kemiller
You can sell just part of your holdings when you have 100 * $1.

~~~
ceejayoz
Even at $450/share it seems a little silly to sell them one at a time.

------
blantonl
Congratulations to Apple on a blow out quarter. _BUT_ , I've got to ask the
hard question. What the hell is Apple planning to do with their $97.6 BILLION
in cash?

Apple's recent acquisitions pale in comparison to other's in the tech space so
this cash pile is even more acute.

~~~
jonhendry
It's not so much to buy companies, it's to buy up key suppliers' capacity to
ensure component availability.

Like when Apple bought up all the 1998 Christmas season air freight cargo
space from Asia to the US, to carry the new iMacs, rather than shipping them
by boat.

------
erikpukinskis
It's worth noting that iOS is pretty conclusively outselling Android at this
point. 60+ million devices in Q112 vs. at most 50 million Android devices.
Android _may_ be selling more phones, but at the operating system level,
there's no contest.

------
bjgraham
The $46.33 billion in revenue is insane. The Airspace broke it down in
comparisons—over $5,000 per second! <http://theairspace.net/events/apples-q1/>

------
nicholasblack
I guess someone saw that coming: [http://thestreethub.com/rushi-shah-on-apple-
inc-aapl-until-o...](http://thestreethub.com/rushi-shah-on-apple-inc-aapl-
until-oct-05-2012)

------
mkr-hn
It's great that Apple is reviving a stagnant market, but this isn't going to
last forever. It's an artifact of soaring market share and turning smartphones
and tablets into more than an executive toy.

It could go on for a long time, but all it takes is someone figuring out how
to compete, and that's going to become more likely as their profile grows.
Apple has earned its wealth, but it's too easy for them to forget what made it
possible and slide into mediocrity.

~~~
itg
Out of all the big players in tech, I think Apple understands very well about
sliding into mediocrity. Apple has been around for a few decades now and they
already experienced a huge decline before.

------
tintin
Impressive but I can't help to think about the people who create all the Apple
products.

------
thedangler
who is in charge of that bank account... I wonder do they get interest? :)

~~~
thedangler
Yeah . I was down voted because I asked a semi serious question. Awesome.

~~~
peterbraden
At that scale they don't use bank accounts. Probably a lot of it is invested
in short term T bills, while liquid cash is kept in a money market. And yes,
apple will be making interest on it.

------
shingen
I wonder how long it's going to be until the monster in DC wants a bigger
slice of Apple.

Big oil gets targeted constantly for windfall tax proposals. As Apple marches
toward $50+ billion in profit, it seems impossible the government will just
leave the world's richest and most powerful corporation alone.

~~~
Tyrannosaurs
You're missing why oil companies are good targets for that sort of thing -
people have little choice but to buy their products, prices to consumers are
rising so the companies are unpopular and they are directly or indirectly
responsible for shed loads of environmental damage.

That's not the case with Apple, Google, MS or other tech companies.

~~~
shingen
To the beast in DC, it has absolutely nothing to do with the arguments you
posit. You're talking about logic; it doesn't apply to their decision making.

It's about the money. That's why big oil has always been a target, it has been
the most profitable enterprise in America since Rockefeller formed Standard
Oil.

News flash: they also didn't target big tobacco because cigarettes are bad for
you (that was merely the excuse they needed), or to pay for healthcare bills.
They targeted them to steal / fleece a golden goose, and then divert the
stolen money to other projects. Which is exactly what they did.

~~~
Tyrannosaurs
The public don't like taxes of any sort on anything, however targeting
specific taxes is far easier to sell if they're levelled at companies seen to
be bad hence tobacco and alcohol taxes, banking taxes, oil and so on.

Walmart are massively profitable and are by many measures the biggest company
in the world yet remain untargeted. If what you say is true why is this?

As you say, it's the excuse they need but if they don't have an excuse then
the won't/can't do it.

------
georgieporgie
If only they put their record-breaking profits into building factories and
inspiring local workers, rather than relying on near-slave labor in a faraway
land.

~~~
curiousfiddler
Not to forget that they don't just sell their products in the US. And not to
forget that their sales in APAC region is bound to grow significantly in the
future. Not justifying the bad work conditions you're pointing to, but it
seems fair to generate employment in places where they're getting their
profits from.

~~~
georgieporgie
My point is that, last I heard, Apple is sitting on $70 billion. Meanwhile,
Steve Jobs was telling Obama that the US could never produce the iPhone. Why?
Because he seemed to think that near-slave conditions (e.g. rousting 8,000
workers from corporate housing for immediate 12-hour shifts) were necessary
simply to create the products he sold.

Also, keep in mind that nobody working at Foxconn can afford to purchase the
iPads they build. It appears that this will remain the case, no matter how
long they work there.

~~~
ceejayoz
> Also, keep in mind that nobody working at Foxconn can afford to purchase the
> iPads they build. It appears that this will remain the case, no matter how
> long they work there.

The same is true for the average American worker at a BMW factory.

~~~
georgieporgie
I don't think you should try to draw conclusions by comparing commodity
personal electronics to luxury automobiles.

~~~
bobbles
Then what is that example trying to prove? There is no way I could afford to
pay for the software my company produces.. Should everyone work in a place
where they can afford what they build?

~~~
georgieporgie
Why do you think that US auto workers, making a living wage producing luxury
automobiles, have anything to do with near-slave labor?

If Apple has stowed away $70 billion, don't you think they could afford to pay
higher wages, benefits for those mangled by RSI (back to back 12 shifts, not
counting unpaid overtime) or machinery, and generally not treat people like
dirt? I think they can afford to.

------
greenpizza13
Ho-lee-crap.

------
johngalt
Not a fan of apple products, but those are awesome results. Nice work apple.

~~~
gcb
won by unethical manufacturing labor and lockin-in customers. not impressed.

~~~
bishnu
And who do you think is building your Android handset, exactly?

~~~
gcb
At least i can charge it with regular usb connectors. use regular microSD
cards. remove the sim card with bare hands. etc. etc.

...now i only have one problem to deal with.

~~~
jmreid
So, like this?

[http://www.usbfever.com/index_eproduct_view.php?products_id=...](http://www.usbfever.com/index_eproduct_view.php?products_id=2390)

And since when is removing your sim card with "bare hands" a feature? Not to
mention all it takes is a pin for the iPhone.

~~~
gcb
I take it you never traveled in your life?

~~~
ceejayoz
I'd imagine even in the worst areas of the developing world you'd be able to
find a narrow pin to eject a SIM card.

------
Iv
How I read it : Apple shows that their hardware is overpriced.

------
olalonde
Any chance it might have something to do with Steve Job's death? Edit: Why is
this being down voted? There are typically record sales following the death of
cultural icons (Elvis Presley, Michael Jackson, John Lennon, etc.). Steve Jobs
is arguably one of those icons.

~~~
r00fus
Doubtful. More likely pent-up demand for the next-gen iPhone.

Apple had in previous years been like clockwork - every summer, new iPhone.
Then 2011, and no successor in July... so many people waited (I did). Also
this is the first iPhone launch without AT&T exclusivity (both VZ and Sprint
are alternatives to the big bad T)

~~~
X-Istence
Just wanted to chime in with an "me too".

I had an iPhone 3G for three years before I ended up switching to AT&T from
T-Mobile and bought an iPhone 4S and too date it is still my most favourite
purchase.

------
Andrew_Quentin
Is it just me who is slightly uneasy at the idea that one company can generate
billions in profit at the expense of millions of people who had to pay much
more than the product was actually worth to produce. Is that a fair bargain,
or is it exploitation of a monopoly of invention?

~~~
eugenejen
All business charge highest possible price for service and product that buyers
in the market accept. The cost of making something is practically irrelevant.
We all know raw material in a good restaurant costs only a fraction of price
on menu. But people will all swarm there if it is a high rated by critics.
Will you feel uneasy?

~~~
Andrew_Quentin
No. One restaurant is unlikely to be able to make billions in profit. It is
unlikely to be able to make billions in profit from charging millions of
people _much_ more than a product is actually worth to produce. That is, of
course, because the dinners in that restaurant are not mass produced for the
millions, but finely produced for the very few.

Of course most businesses try to charge the highest possible price, but that
does not mean that to do so is necessarily right as far as society as a whole
is concerned. What, for example, has Bill Gates done to be worth more than
whole countries but win some genetic lottery. How many millions are poor and
perhaps starving and how many geniuses or great inventions have we missed on
because of the insane concentration of wealth that our society permits on the
hand of very few people or companies?

Just because communism has failed I do not think means we should all try and
rip off each other through an exploitative monopoly of invention. Not Apple,
nor any other business can make 30% profit which amounts to billions by
morally clean means. That, I think, is what makes me uneasy.

~~~
stryker
I will concede that there are many reasonable social frameworks designed to
maximize societal wealth in the long run. You are simply describing your own
version.

After all, capitalism is one solution to this very complex problem of resource
allocation. It's not without flaws, of course: e.g. externalities. That's
where regulation steps in. It's possible to get companies to pay for the
negative externalities they are creating or even stop altogether (see:
pollution). A theme in my post will be: let's not throw the baby (capitalism)
out with the bath water (negative externalities).

Here are some points I came across reading your post.

1) You say that products should be priced close to their cost, that they
should not charge "the highest possible price". Why? If Apple forcefully
lowered their prices you could actually argue that Apple is trying to squeeze
competitors out. Apple is hugely efficient. If they charge slightly above
cost, do you think any other company would be able to sell anything remotely
similar for a reasonable price?

I know you're going to say that Apple uses underhanded means to be so
efficient. I agree with that. By abusing human rights, Apple is getting a
cheaper deal unfairly.

But your claim that "products should be priced near cost" is flat out wrong.
If the observation "Apple unfairly gets highly efficient" led to a policy
"let's force all companies to sell at slightly above cost" to "benefit
consumers", that would actually exacerbate the issue, with everyone rushing to
abuse human rights in order to compete with Apple's efficiency. Profits are
not evil. If you're going to target Apple's ethics, by all means do so, but do
not use false economic arguments to support that claim.

2) You want geniuses and great inventions to come about, but then once they do
(e.g. Steve Jobs, Bill Gates) you don't want them to make too much money. How
much is too much? For you, billions. For others, millions. Maybe even just
thousands. Where do you draw the line between "too much" and "enough"? Do you
think it would be a good precedent to force all companies making over a
million dollars a year to donate half of it to some charity? I think this is
yet another slightly irrelevant argument you make to support your main point,
which is that Apple shouldn't be able to get away abusing human rights. To
verify this, imagine: suppose Apple makes billions but also supports human
rights everywhere by only working with legitimate companies. Do you now have
respect for Apple? Or do you think they should still do more things for
society? If the latter is the case, you're basically saying that all wealth
should be redistributed by law, to some arbitrary degree (maybe the voters
decide?). Hmm... not exactly communism, but not capitalism either. I have no
additional points here, I haven't had time to imagine such a world in detail.
I won't dismiss it outright, though.

3) Patent monopolies. I do agree that patents are tricky. On one hand, you
want society to benefit as soon and as much as possible from new stuff. On the
other hand, you want to encourage inventors to spend lots of money on research
with the promise that they will be rewarded handsomely with patent monopolies.
If you remove patents, you risk a world where no one will ever sink mounds of
money and time into research (I would even contend that this world wouldn't be
quite so bad, seeing projects like Wikipedia, as long as theft is not
tolerated). If you support patents too strongly, you risk a world where
society is squeezed dry even after the original inventor passes away (I
believe the incumbents want this way, and it's bad). There is a middle ground
here...

Indeed, your last statement really is the heart of your argument, which is
what you should really focus on instead of spurious economic arguments:
neglecting human rights is a negative externality. We as a society should pay
to uphold human rights and punish those who do not.

EDIT: Some grammar issues.

~~~
Andrew_Quentin
I think you are mistaken in suggesting that my main argument is that of human
rights. That is because everyone agrees that human rights should be upheld,
thus there is no argument to make.

You make some very good points though. If Apple is to charge just above the
cost, thus making "enough" profit, whatever that may be, then you say Apple
would beat all competition. You say that is so because they are very
efficient. Perhaps, but I think it is more likely that they would beat
everyone because of their inventions. Iphone, Ipad. Efficiency therefore has
little to do with it. Just as Bill Gates became a billionaire despite of any
efficiency. They invented something. Then they have gone on to exploit such
invention by ripping people off through charging them 30% more than the
product is actually worth. Not 10, not 20, but 30. That is greedy and the
consequences are concentration of wealth in the hands of the few for their
benefit alone.

As for the solution, government already decides how to distribute wealth
through taxes. I think it should go further. Perhaps there should be a law
that no man can be paid in total above, say, 1 million per year. Nor can any
company make more than 10 billion in profit. Both, of course, increasing by
the base inflation point. With an individual is easier, you just make it
illegal. With a company is more difficult. Maybe the profit above the 10
billion can be a rebate to those that purchased their product or service.

The very existence of the law would probably incentive companies to treat
their employees and their customers better rather than focusing on a Darwinian
jungle of eating everyone at any expense and ripping off everyone as much as
you can get away with.

~~~
stryker
You are being downvoted not only because a large portion of HN believes that
adding huge amounts of value to society should pay off handsomely, but also
because a lot of your points are easily falsified.

Changing the example from Apple to Microsoft does not make my point any less
true. In any market, the most efficient player, if he chooses to cut prices
drastically, will make it tougher for other players, even if he's not actually
that efficient. Through competition, this process weeds out the less efficient
companies and ends up lowering prices. Microsoft was one of the only producers
of a decent operating system. You can argue that Microsoft was a bloated
bureaucracy, but they were surely the most efficient player of their time.
They would have dearly hurt competition if they lowered prices.

In fact, many today argue that students who pirated Microsoft software
cemented Microsoft's monopoly. Generations of youngsters too poor to afford
Windows somehow got their hands on it and trained themselves so that when they
got old, they were already equipped to use Word, Excel, etc.

If the observation "Microsoft makes too much money" led to the policy "make
them cut their prices" I would bet that the exact opposite of what you
intended would occur. They would have cut their prices by half for about a
year, driven out their competition, gotten every cat, dog, and donkey on their
OS, and cemented their monopoly status.

This phenomenon is not rocket science or new... it's called predatory pricing:
<http://en.wikipedia.org/wiki/Predatory_pricing>.

As for distribution of wealth... I was able to think a little bit more about
it, and I have been able to pinpoint some cons with your idea. Basically, your
idea is closer to communism than capitalism, so my rebuttal is basically a
rebuttal against communism. I do not attach any a priori negativity against
communism. I like to argue ideas on their merits, so hear me out.

As I mentioned before, you might think a cap of 1 million per year per person
is reasonable, but someone else might think the cap should be 100,000.
"There's too many starving kids in the world", he might say. In fact, if
members of the government aren't so well paid, they will probably take an
existing precedent of 1 million and abuse it to grab more and more cuts from
successful businesses. "If you give an inch, they'll take a mile." But let's
say your government is corruption-free for the sake of argument. Is it still a
good idea?

Allow me to tell a story. WIDCO is a company that makes widgets. These widgets
are very complicated and so require manual labor. Meet employees Bob and Jake.
They're both exceptional widget makers, but Jake is above and beyond the
better one. He might possibly be the best in the world. A normal employee
averages 50 widgets a day; Bob averages 100; Jake averages 300. It's clear
that Jake is providing quite a lot more value to WIDCO than any other
employee. But because of regulation, WIDCO can pay at most $100,000 to Jake.
Jake understands. He is a humble man and understands that $100,000 is enough
for him and his family. But day after day, he gets demoralized because he
realizes that his hard work and skill is being used to subsidize the pensions
of employees who just can't do the work as well. Eventually, Jake realizes
that he'd rather leave early to his family than work his ass off for no
additional benefit. He figures that making about 150 widgets or so a day is
enough to keep his salary constant. So he works just 4 hours a day and goes
home soon after. Bob never feels this as he's getting paid $85,000, which he
can still increase by getting better at producing widgets. He still believes
in hard work and produces more and more. Until he reaches the cap, of course.

You might think, oh well Jake goes home! Better welfare! But whereas today,
Jake actually has a choice between working more + get paid more vs. stop
working + go home, in this world the government's basically removing that
choice. Now, if that choice is absent in today's world, yes that is a problem
that points to human rights abuses like I mentioned in my first post.

Do you want to discourage employees like Jake? You can imagine employees like
Jake in the real world, who really aren't greedy, but who also aren't gonna
just work for free when they have alternatives like going home.

You can see that the artificial salary cap has DECREASED the production rate
of WIDCO.

Above all, I think you have a deep-seated belief that consumers need
protection from themselves. It's not a black-and-white issue, of course, but
you're strongly putting words in their mouths by claiming that they're being
"ripped off". When millions of people can't wait long enough to hand money to
Apple, are they really being ripped off? On what basis do you get to decide
how they should spend their money? What if they're actually getting a DISCOUNT
for the happiness they derive from the IPad? Before, they had to spend a
weekend in Tahoe to get X units of happiness. Now, they just need to spend
$600 on an IPad for the same X. In that case, they're not being ripped off at
all right?

My advice to your future theorycrafting: think through the consequences of
policies, not just the immediate and close ones, but also the long term and
global ones.

~~~
Andrew_Quentin
I do not mind the downvoting. I expected it, but still chose to reply because
I do not think that my points are not worth making, I do not think I am
trolling, but instead it seems that I have been able to generate a nice
intellectual debate about a matter which is extremely relevant today in a
forum where intellectual debate is encouraged.

I should also add that perhaps I do not hold any _belief_ in what I said or
any sort of conviction. I am theorising about how a system can be improved and
am very much open to be shown that my suggestions are not optimal.

You say that my points are easily refuted, yet it seem that you are not
addressing them fully.

Predatory pricing, according to the linked wikipedia article, occurs when the
price is set below the cost of production. I have nothing against profits, but
exuberant profit which I think is the product of exploitation.

Apple invented the Iphone and the Ipad and before that the Ipod. All are great
products. All wanted these products. The products have benefited society
greatly. That all is good.

It also explains the great profit made, in my opinion. The competition, which
to start with there was none, came later to the game and as such had a less
favourable environment because they faced a competitor, unlike Apple to begin
with. I think therefore that the profit generated has little to do with
efficiency - although that probably is a factor - and much more to do with the
fact that they invented a unique product which everyone wanted. Thus, had a
monopoly in practice.

Invention is of course to be encouraged, but not the exploitation of such
invention. I do not think it can be doubted that they made a 30% profit on
their revenue because they priced their products 30% higher than their actual
cost. That means that millions of people had to give away more of their wealth
to one person or one company making such person or company richer, while
everyone else poorer.

No one forced them, but that is beside the point. No one forces anyone to buy
electricity. What person can today for example have a decent job and not a
computer. It can even be said what person can have a decent job and not an
Iphone or a smartphone.

If you agree with that point, that one should be able to make a profit but not
excessive profit, then the question becomes technical, namely, what is
excessive.

I said 1 million in total remuneration for an individual. You say why not
100,000? The example you gave is a very good answer to that question. 100,000
would not allow for differentiation between individual productivity. That cap
can easily be reached, as you showed from that example. There are many people
today earning 100,000 and probably they deserve it. They are many people
earning 400,000 or 500,000. You can count on one hand however the people that
are earning a million or more in total remuneration. In my opinion, such
people are awarded such amounts not because of any genuine extra productivity,
but because there is no mechanism which can keep a check and balance on their
pay.

1 million therefore allows for the differentiation of individual production
and is a sufficient amount to incentivise producers.

So what argument can there be against setting a maximum remuneration at a cap
of 1 million? The only one I can think of is that of founders. Bill Gates for
example has certainly contributed more to the world than many others who may
be capped at one million.

It is not difficult, conceptually and even practically to make an exception
for founders and set their cap to 1 billion. One billion, in my opinion, is a
sufficient incentive for anyone. Why, afterall, should their children, who
merely won a lottery, have a higher claim on their fathers wealth than 1
billion?

You may say that it seems that I am simply picking up these numbers from thin
air. Perhaps you are right. I think however that the vast majority of people -
and we live in a democracy where the majority rules - would agree that if a
cap is to be set it should be at such levels, or perhaps, slightly higher,
i.e. maybe 2 million and 2 billion. That, however is a point about technical
matters which is worthy of discussion if one agrees with the main principle.
Which is that society should have a say on the maximum profit and remuneration
of an individual and company so that society as a whole can benefit at an
optimal level.

As to whether it is more communism or capitalism in my opinion is irrelevant.
It is neither. It is a mixture of the two. You can have profit - capitalism -
but not too much profit - communism.

I do not think simply because something may be linked to some ideology it
should be discounted for that reason alone, as you accepted. Neither communism
nor capitalism are perfect, they both are extremes, thus perhaps a middle
ground would be best.

~~~
jonhendry
"That means that millions of people had to give away more of their wealth to
one person or one company making such person or company richer, while everyone
else poorer."

No, the people who bought Apple's products were not poorer. They converted
part of their wealth (or resources if you prefer) from currency to an Apple
device, having decided that the exchange was a fair one.

Electronics don't hold their value very well, so over time the person will
gradually become "poorer" in the sense that they could not sell their Apple
device and get their money back. But in the meantime the person was richer in
that he or she had the use of the device.

~~~
eugenejen
Also this falls into the "pie fallacy" of view of wealth. Total wealth in the
world is not a static function that doesn't change overtime. If people decide
to exchange some of their wealth and "time" to make them feel happy and
satisfied and just their state of happiness make them produce more
stuffs/services/quality of life because they are much happier than they were
before exchange. Is that a negative thing?

