30 September 2013

Toxic Shock

The bifurcation of economies has been confirmed. Reported here. What on earth does stuffing have to do with IT? Lots, it turns out.

First up, Apple. The 5C caught the pundocracy off guard. They, and I for that matter, expected a moderately priced off-contract device. What Apple delivered was a 5 with Danish Modern colors at essentially the same price. Will it work? Depends, sort of. There's been ample reporting that this was intentional; that Cook/Apple seek to hold high unit margins, and market share be damned. Meanwhile, iMac approaches (from the upside) 10% of revenue. Apple is a computer company? Not. It's a toy company, aiming for the FAO Schwarz clientele. Just a reminder: FAO Schwarz, the original, has been bankrupt more than once. There is one store left, and in name only. How can Apple, or any high-end producer, keep growing? Where's the volume to come from?

The answer is churn. With the 1% gaining evermore of global GDP, there is less for those approaching the 1%, and even less down-market. To the extent that the 1% is composed of members of the financial services sector (which is a non-productive endeavor), and financial services is a net parasite on global GDP, the high-end market size can't grow at anything like the rate Apple's revenue displayed in years past. Rolex is reported to have found an excellent implementation of planned obsolescence. Rolex undertook this approach in order to churn its customer base; one might wonder that reports of iOS7 crippling any iPhone not a 5S is a learning exercise from Rolex.
Watchmakers in Europe say that Rolex is preparing to put on the market one million watches per annum. That represents a jump of almost 30%. To sell this many, the company is aiming, not so much at taking market share from other luxury watch brands, but rather at existing Rolex owners.
Rolex is promoting a reduced number of its own service centres. Trade sources say that Rolex has issued a global policy, requiring these centres to lift the price for servicing watches brought in by current owners, so that the cost of repair is at least half or closer to three-quarters of the price of a new watch.
a flood of new Rolex timepieces is coming, and to assure that they will be sold, the Rolex strategy is to send as many old Rolexes to the scrap heap where they will compete with Asian-made replicas and counterfeits.

Sounds kind of like the Apple way, dontcha think? Without an Apple clone of an existing platform (you do know that all of Apple's successes have been clones of other's initiatives?) to rely on, Apple has to churn its basically static customer base. The Apple zealots/fanbois/bulls assume that Apple will figure out what that product is. But the fact is, Apple's been riding the smartphone train for rather a while, nearly 7 years. It's beginning to look a bit like a cannibal full of self-loathing.

Second, SSD/flash arrays. For those with a stock market bent, you'll know that Violin Memory has had a not so spectacular IPO. Again, bifurcation has set in before Violin could get itself public. As with Facebook, the growth happened before the IPO. Violin is run by a Fusion-io ex-CEO, Don Basile, who voices unconcern:
We raised over $160 million for the company we're very pleased with that. What the market does on any given day is not really a concern of ours.

Meanwhile, Samsung is shipping consumer NAND/SSDs to a faretheewell. The problem for Violin, and Fusion-io as well, is that NAND is reasonably well understood, they don't make it, and direct attachment of NAND through PCIe (or any non-file system protocol) leaves only the driver software as the value add. And, it had better be really good. Sun released the F5100 in 2009 a SAS device, just before Oracle took over. And there are more every day.

The future looks to be V-NAND and V-DRAM, which will combine to mean in-memory databases will win. Hehe.

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