Saturday, June 30, 2007

Think Differently: iPhone design mistake?

Watching the iPhone commercial showing off YouTube, I noticed this:
I had my cell phone by me and I realize that the Answer button was on the other side of the phone. Most recent phones follow that standard. A quick look at The New AT&T's offerings confirms this. Blackberry, Motorola, Nokia, and Samsung all seem to use this standard. So why didn't Apple make their interface like everyone else's? Probably either lack of experience in making cell phones, accessability by the right hand, or just Apple thinking different--err, -ly.

Some things never change.

Wednesday, June 27, 2007

Adsense: smart like a trained monkey

Looking at the front page of my blog, I noticed a bunch of gay (as in of interests to the lgbt community) ads. Clearly, the post about the movie plot caused this.

Google Adsense is like a trained monkey: give him a fruit bowl and he'll hand you a banana. The point wasn't that they were gay, the point was that the premise was flawed.

Maybe that's good. If Google really knew what the post was about, their search function could probably do some very creepy things.

Now what's the monkey further down the page up to, these days?

Feature Requests: email clients

Quick post today:

Attaching forwarded messages is fine, but please display the message in the same window as the one I get. I had to explain to my grandma that she has to click the paperclip, then the message, and if the sender was extra-sloppy, click a different thing at the bottom.

Scale down those huge image attachments. Even when the person has a broadband connection, images from digital cameras (and large images, in general) should be scaled down so I can see the image without excessive scrolling.

While you're at it, unlike IE and Firefox, do a bicubic resize. Don't say no one notices the quality difference--I notice. It's being downloaded; surely a good quality resize is faster than my internet connection.

Include a "shut off HTML formatting" button. The internet's grown up, now; we no longer animate for the sake of animating, color for the sake of color, and use strange fonts because they're there.

And to all the ISPs who feel the need to sign your outgoing emails with their name, spam's already a problem; let's not put it in legitimate message, OK?

Tuesday, June 26, 2007

Plot devices and B-List movies

I recently saw a commercial for "I Now Pronounce You Chuck and Larry." The premise is that the state challenges the domestic partnership of Chuck and Larry because they're not either gay or in love.

This didn't add up- since when was love required for marriage, civil unions, or domestic partnerships? Why is "domestic partnership" a euphemism for gay marriage? It's possible that two men live together in just that, a domestic partnership.

Looking this up, it seems that, in the state of California, love, or even being gay is a requirement for domestic partnership. I guess that's not a surprise. A quick look at craigslist can prove that marriage doesn't mean there's love or sex. Why should a domestic partnership mean the same?

(Yes, I know, it's just a plot device.)

Tuesday, June 19, 2007

No-Touching School

In a policy fitting of a TV Orange County jail, a public middle school recently implemented a no-touching (including hugs and shaking hands) rule.

The MSN poll revealed that most people thought it was crazy to do that, and I have no doubt that the country feels the same way.

While the story might be shocking and absurd, there's a reason it shouldn't be: statistics. They always say that a monkey with sufficient time will reproduce the works of Shakespeare. In the same way, given enough schools, one will surely have the set of administrators and teachers that will accept and implement such a policy.

As with terrorism and the lottery, people are bad at perceiving probabilities. The media know this, and they take advantage of it when they sell news. No one cares about where they might get in a car wreck, but the statistically rare, but predictable school is front page news.

Monday, June 18, 2007

The Missing Computer Standard: Internal USB

We all thought SATA would kill the ribbon cable, but here we are with SATA hard drives and ribbon cables going to everything else. There's an easy solution to this, but it isn't used that often: USB.

Optical drives, floppy drives, card readers, zip drives, any almost everything else you can put in a 5 1/4 bay can be found in a different from factor using USB. We had a chance to kill three birds with one stone; the power cable headache could be fixed, devices could be easily hotswapped, and the varying standards would all be unified.

While internal USB is used, the connector is just a pin header--nothing durable, or even keyed.

Computers aren't even close to being truly usable, but we still need to take steps to unify similar systems.

Thursday, June 7, 2007

The Obligatory iPhone Prediction

Based on the stock price increase since the iPhone was announced, somewhere between 25% and 33% of Apple's stock price is due to speculation on the iPhone. Instead of tradational investors, Apple gets "fanboy" investors; from a tradational investment perspective, it's a horrible investment. It's P/E is high, and they haven't paid a dividend since 1995--it behaves more like a startup than a mature company. Prices this high are due to a combination of investors expecting growth, or investors expecting the next product to drive up the stock price.

So the question is what should Apple be worth? If there's a crash, at what price should it drop to to make it worthwhile? First, if it didn't have such strong growthm, and instead matched the Nasdaq, it's F P/E would be 20.8--a value indicating it's either a little overpriced or moderate growth is expected. For comparison, this is around the average of Microsoft's P/E and F P/E--it's a reasonable value when compared to similar companinies

There are two examples to look at for guessing a reasonable price for Apple: the iPod and the Motorola RAZR (which was interestingly described as the iPod of mobile phones). The forgotten story of the iPod is that it was launched in 2001 as just another mp3 player. It became popular a few years later after 3 generations of hardware fixed the bugs. Apple kept a prices somehwhat high, balancing the phones exclusivity and profits. In contrast, the RAZR was marketed from the beginning as a stylish, exlusive phone. It followed a business model of consistent price drops, eventually leading to the comoditization of the phone. As more and more people obtained RAZRs, profit margins slipped, and Motorola was left looking for the next RAZR. The likely aproach is a phone initially introduced and priced much like the RAZR, at $400-$500, and over time, prices will be reduced, but the phone will always carry at least a $150 price tag. From a business perspective, Apple is in a good position with the product.

But one product, one $30 billion product. According to the F P/E without the recent price increase, Apple needs to increase profit by $1.4 billion per year to keep up with expectations. Apple's current profit is just under $2 billion per year. The iPhone will likely cut into iPod sales. When Motorola released the ROKR, it was rumored the 100 song limit was done by Apple to prevent the ROKR from hurting iPod sales.

The demographics of iPhone buyers probably looks like this: those under 20 probably can't afford it, and those over 35 are in the Blackberry crowd and were skipped over by iPods.

Apple will probably make the profit margin on iPhones steady (unlike Motorola and the RAZR). The 50% rumored profit margin will probably continue. Since I'm after the price Apple should be, I'll look at long term iPhone sales. Due to demographics, of the 200 million cell phone owners in the US, around 25% are in the age group likely to buy iPhones. Around 80 million mp3 players have been sold so 50 million out there, and around 70% are iPods, so that leaves 35 million buyers in the US. At best, that means 20 million iPhones (remembering that the curve representing iPhone buyer distribution is like the iPod one, only lower and narrower). At what will probably work out to $150 profit per unit, or $3 billion. Most of these phones will replace iPods (or cause someone to buy the phone, not the iPod), so the $3 billion is closer to $1.5 billion. The overseas estimate is harder, but the market is probably a lot smaller. Asia and Europe have see far more mobile phones than the US, and they won't be as easily impressed, especially liking smaller designs. If cell phones get replaced every 3 years and overseas sales is the same as US, iPhones will profit $1 Billion per year, the P/E for AAPL.iPhone will be 30. That's very close to the current F P/E.

So that makes the AAPL price apropriate. The problem is that this neglected risk, competition from Motorola, Nokia, and Sony (who knows, maybe Microsoft), and the 10% market share was generous. Since I want to know what price AAPL is actually worth, all I need to do is guess the market share. In reality and in the long term, I think it will be around 4%. I can barely see 1/20 people having one. That makes the P/E for AAPL.iPhone 75.

Going back up to the corrected F P/E, I'd like to see AAPL.iPhone down to either it or the current P/E (20-30). I'll buy AAPL if it dips below 95, presumably after a correction.

The iPhone will migrate users from the lower profit iPod to the iPhone and take another round of money away for them to say cool, but it won't expand Apple's market; it's just an upgrade. Blackberry users need a keyboard, kids need something cheap, and parents don't need the product. The iPod market is almost saturated, and whatever growth is left is already in the high stock price.

The important thing to remember is that reviews and perceptions of the iPhone within the first month will dictate what the market's reaction will be. Apple has an ace up its sleve, here: there's an opening in the market for such a product. There hasn't been a stylish, exlusive phone since the RAZR came out in 2004. It's all left to Apple's execution, though. There was an opening in the market for a similar product, Motorola's ROKR, a phone that could even work with iTunes. Ultimately, both the hardware and software were clunky, turning users off. Apple certainly has the track record to make it work smoothly, provided they get the GSM part right. After all, who wants to pay $600 for bad reception, dropped calls, and music, all in one package?