Todd Sullivan: Round 2

Sullivan responds.

The Macalope
Born of the earth, forged in fire, the Macalope was branded "nonstandard" and "proprietary" by the IT world and considered a freak of nature. Part man, part Mac, and part antelope, the Macalope set forth on a quest to save his beloved platform. Long-eclipsed by his more prodigious cousin, the jackalope (they breed like rabbits, you know), the Macalope's time has come. Apple news and rumormonger extraordinaire, the Macalope provides a uniquely polymorphic approach. Disclosure.
The Macalope
8 min read

On his own site now, Todd Sullivan fires back at the Macalope, asking Is That The Best You Got?

Well, the Macalope doesn't know about "the best". It was OK, he supposes. Good for a Wednesday night. But "best"? Hmm. That's kind of asking a lot, Todd. It's not like yours was very good. Why should the Macalope have to do all the work?

But if you want to go another round, the Macalope's got the time. His nightly frolic with the nymphs doesn't start for another hour.

Sullivan's site, incidentally, has those awesome keyword ads that everyone loves so much that pop up all over the place like whack-a-moles that just hit a vein of underground crack. As Merlin Mann has noted, they are really useful for first-time visitors to the site because they're a quick way of knowing you won't ever be back.

So, now it is CNET taking swipes at yours truly for having the audacity to doubt all things Apple (AAPL).

Actually, CNet takes no responsibility for the Macalope's writings. They were really clear about that! So, the Macalope's words are his own.

As for doubting all things Apple, please note that the Macalope has been known to agree with criticism of the fine folks in Cupertino from time to time. He just asks that it make sense.

This one is priceless.....

Well, thanks, Todd. That's really nice.

He then cherry picks sentences from the post to make the math seem impossible.

The Macalope's not sure how that would be possible as you didn't actually do the math in your post. More to the point, though, what he said was that the particulars of the math didn't even really matter, because the underlying premise stinks.

Where did the number come from? Apparently he has never heard of these little publications called the New York Times, or CNN or MSN Money? Too bad because had he even attempted to read them, he would have found the sources of the numbers and save a whole lot of typing and embarrassment.

Uh, yeah, see the thing is, Todd, if you click through to those links you provide, they don't show the math either. Or even name a name.

The New York Times:

For Apple, the booming overseas market for iPhones is both a sign of its marketing prowess and a blow to a business model that could be coming undone, costing the company as much as $1 billion over the next three years, according to some analysts.

"Some analysts". Hmm. Well, that's not terribly elucidating. How about CNN?

The growing usage of unlocked phones could cost Apple $1 billion in lost revenue over three years, analysts said.

"Analysts". Huh. OK. MSN Money?

This could cost the company about $1 billion in lost revenue over the next three years, analysts estimate.

Yeah, OK, starting to see a trend here. Well, "analysts", whoever you are, as the Macalope's 9th grade chemistry teacher Mr. Robinson was fond of saying, "Please show your work. Because it's bound to be pretty funny."

It is unfortunate but he based the whole article (rant) on the flawed assumption I made the number up.

Todd, Todd, Todd, Todd, Todd, Todd, Todd!

The Macalope did not. He based the whole article (rant) on the assumption that the number is based on crappy assumptions. You didn't make it up, you just took it at face value because it fit this preconceived idea you've been humping for the last year.

Let's move on:

Yes, let's.

Responding to the Macalope's example of unlocked phones in China, Sullivan says:

Well, or maybe China mobile has figured they can put 400,000 iPhones on their network without paying Apple a dime, why negotiate a deal and start paying them now?

Todd, this actually proves the Macalope's point, not yours. If there's no way they can get the favorable revenue sharing they get from AT&T then how is Apple supposedly forgoing it?

Is this thing on? Test. One, two. Check. Check. Check.

Then he moves on to question (mock) my thought that Apple's cutting back on component orders can only mean sales are going to slow.

Can we be clear on what the Macalope was questioning (mocking)? He was questioning (mocking) the implication that this is somehow surprising. The first quarter is always slower than the fourth quarter and, yes, Apple has cut that already lowered estimate even further. Of course, you can't tell how much of that is because of iPods and how much is because of iPhones, but the Macalope fully admits that iPhone orders might be lower than hoped for in the first quarter. It's not exactly like the economy and/or the tech sector is going gangbusters.

Timing is everything in life and had he waited 2 more days to post, he would have again saved himself the inevitable embarrassment of this being affirmed on Thursday.

See, you're still acting like this is "news". It's not. Again, this recent report confirms the previous report which confirms what Apple said in its conference call with investors in January.

To quote: "Apple has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008." OUCH...

Yeah, and that's all got to be the iPhone, right? It's not like Apple makes anything else that uses flash memory.

He then goes into some wandering diatribe about Research in Motion (RIMM) or Google (GOOG) coming out with new products somehow does not matter or should be dismissed? I can't figure out what the point was.

The point is, Apple will also come out with new products. Everyone will come out with new products. The fact that one phone maker will come out with a new product means nothing unless you know something about those future products that makes them inherently better than the other company's future products. And, as you admit, you know nothing.

As for the gPhone which you spookily allude to, the Macalope will just quote Panic Software's Steven Frank:

Hm, a 34-company committee overseeing an open-source suite of mobile software. What could possibly go wrong.

Now, some of the Macalope's antler scratching over Todd's "analysis" probably stems from the fact that he says he was only considering the U.S. market. Frankly, the Macalope didn't catch that assumption, probably because it's not spelled out anywhere. It does explain why he said RIM was #1 and it conveniently allows him to dodge the embarrassment of having to explain why he thought all 10 million iPhones had to be sold to existing AT&T customers. (And even then, he got the number of AT&T cellular customers wrong, saying it was 47 million in May of last year. At the end of April of 2007, AT&T had 62 million wireless customers. But that's really beside the point.)

Comparing Apple sales that until recently were only in the US would have been unfair.

And you certainly wouldn't want to be that!

The irony here is that had I done a post that claimed Apple was a distant third in market share, I am sure his response would have been to attack me for an unfair comparison.

See, the Macalope used to take a somewhat U.S.-centric view and a number of readers outside the States wrote in and said "Hey! Goober! What are we, chopped liver?!" And the Macalope said, "No, indeed, dear international readers. You are not chopped liver. You are foie gras." And they said "That's better!"

Then a couple of days later they wrote back and said "Hey, that's just a fancy way of saying 'chopped liver'!" And then we all had a good laugh. Ha-ha!

But, anyway, Todd, the fact of the matter is, the Macalope can't ignore the rest of the world, scary numbers or not. And your contention that while the Macalope pointed out that Apple was third he would have said it was unfair if you had done so really doesn't hold any water. Because, you know, it was the Macalope who pointed it out. See?

Is there something wrong with selling phones in only a handful of countries and still being third in the world? That sounds pretty darn good. Why is the horny one supposed to have some kind of problem with that?

All cell providers have revenue share agreements. They have them with software developers, providers, wireless companies etc.. it is the way the industry functions. It is the degree of the revenue share that dictates the exclusivity in Apple's case.

The Macalope knows that other firms get revenue sharing, but that's not even the point. The point is, as you note, that Apple gets more revenue sharing because of exclusivity. What the Macalope is saying is that the $1 billion figure is simply a bogus multiplication of the revenue Apple gets from AT&T times the number of unlocked phones times the number of years. You can't do that. If you open the phone up to multiple carriers in a single market, the revenue sharing number is going to drop like a rock.

If there's another way to come up with such a ridiculously large number, the Macalope is all ears and antlers. If only we could track down "some analysts"...

There are two ways to play this game. One is to open up your phone to every provider, sell a mess of them but get very little extra per phone sold. The other is to lock it to one provider, sell fewer phones but get a whole lot extra per phone. Apple's predilection when entering a market is lower volume and higher margin. And when you're a company that puts emphasis on selling products that "just work" (or, at least, "just work" better than your competitors' products), starting with one provider makes more sense. None of this discussion takes into account the changes AT&T needed to make to enable visual voicemail and, more importantly, the control over the user experience it ceded to Apple (activation alone was a huge sea change -- moving it from the store to the customer's home). Other carriers were reportedly not willing to make such concessions, but it was critical for Apple because ease of use is one of its primary differentiators.

One last thing... he has not mentioned in any of his "posts" that my call before the first phone was sold on the need to drop the price of it was DEAD ON....

Well, the Macalope wasn't aware it was his job to run around patting you on the back for your brilliance. Why is he supposed to keep track of all of your posts when you clearly don't keep track of his?

See, you wrote:

A $599 phone will not gain mass acceptance no matter what it does...

To which the Macalope responded:

Like a monkey typing on a keyboard, you've finally typed something that's true.

Looks like the Macalope actually agreed with you on that particular point! Yay! We both win! High fives all the way around!

Long-time readers may remember that as the post you're referencing as the one where you also said that no one wanted an all-in-one device and that you wanted to be able to drive your family down the highway, listen to music and talk on the phone all at the same time.

Yeesh. Are you sure you really want to call attention to that particular oeuvre?