Daniel Eran Dilger
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Analysts race to the bottom on Apple nonsense, from cash to A6 chips

Daniel Eran Dilger

Must be a slow news week. Analysts covering Apple seem to be competing with the world’s major religions in their efforts to concoct the most absurdly ridiculous stories to be told with a straight face.

Speaking of which, let’s start with money. Apple has a lot these days, somewhere north of $75 billion. That’s considerably more cash holdings than any other non-finance US corporation. Microsoft and Cisco come in second and third with around $40 billion each (as of the end of the year), and neither is generating new cash faster than Apple. That’s something.

What isn’t anything is the comparison of A) one corporation’s cash with B) the short term holdings of the United States. But once somebody stumbled on the link bait algorithm known as “compare Apple’s cash to X” it was just a matter of time, I guess.

David Sarno of the LA Times jumped on it with a vengeance, asking “Could Apple pull a J.P. Morgan and bail out the U.S. government?”

Well, no it couldn’t Mr Sarno. The US owes trillions of dollars. Apple’s cash pile is not large enough to pay off the expense of Bush’s two very long wars ($1.4 trillion), his huge spending program benefitting big pharma and the bailout of banks (another trillion plus), and the also yet unpaid government tax rebate to America’s ultra rich ($1.8 trillion, a gift that keeps on giving), nor the additional $1.4 trillion in stimulus Obama has spent through 2017. Apple couldn’t even cover the monthly minimum payment of interest on the public debt, even were it to make any sense for a corporation to attempt to do so.

Apple makes its cash pile larger by the month by buying (and designing) various components and then selling them as integrated products with a profit margin. The United States’ cash pile changes in size and value by arbitrary fiat of a roundtable of old men. There is no comparison to be made here. The US can pay off its own debt by simply inventing cash, although such an action would turn Apple’s cash pile (and everyone else’s) into worthless recycling. There isn’t any way for Apple to–in any respect–solve any financial problems for the US apart from continuing to hire employees and generate wealth for them as part of the economy.

That didn’t stop the silly story from making the rounds, including Sarno’s public wonderment about the prospects of Apple bailing out the United States. He contrasted the historical president of a bank co-signing the national debt. Hmm, except that A) Apple isn’t a bank and B) Apple’s $76 billion could be spent by the US in the procurement of a few seconds of general operations in Iraq, were Apple’s cash to even be in the US. And much of it is not, because if it were repatriated into the US, Apple would have to pay a lot of taxes on that cash generated in other countries.

I could just as well point out that I have less debt that Apple, and therefore should, plausibly, be able to therefore finance more than Apple. Mr Jobs, would you like me to cosign on that new headquarters you’re building? Absolute absurdity.

But wait, there’s more.

Not to be outdone, another analyst has invented an even sillier idea. After announcing that Apple was on the verge of building its own TV sets (apparently in an effort to obsolesce its entire retail store chain with products too large to sell in any sort of volume in those stores), Peter Misek with Jefferies & Co. has decided that Apple is on the verge of merging iOS and Mac OS X.

Never mind that they’re already merged. They are the same operating system: essentially the same kernel, almost identical frameworks, and soon, nearly the same App Store model. Sure there are key differences, including the fact that Mac OS X runs on Intel processors while iOS is currently only running on ARM.

But that difference is entirely a marketing construct. Apple could certainly have called the iPhone OS “Mac OS X Mobile,” and nearly did before deciding to instead muscle the iOS name away from Cisco. There is far more commonality between Apple’s platforms and that of, say, Microsoft’s Windows 7 and Windows Phone 7. The only difference is that Apple isn’t trying to hide failure with naming obfuscation. In Apple’s case, creating a new OS name was warranted by the creation of an entirely new business that is now much larger than its Mac business.

What benefit would there be in “merging” Apple’s two platforms? Purportedly, it “would allow users to have content be available and optimized on an even wider range of devices,” as if content can’t currently move between them. And what would the benefit of replacing Intel processors with ARM chips be? Let’s count the ways. Zero.

Mac developers charge more money for Intel-compiled desktop Mac apps because they’re more complex and sophisticated than their iPad (and particularly iPhone) siblings. Users aren’t harmed by the need to buy Mac and iOS apps separately. If anything, the convergence of iPad and iPhone binaries has had a slight disincentive impact on the creation of iPad-unique software, not that one could notice given the voracious demand for iPad titles.

Telling developers to also add their Mac code to the same binary package as iOS apps wouldn’t solve anything, it would just create more problems. But the biggest problem of merging two things that are separate for clear and obvious reasons is that ARM chips are nowhere near the performance of today’s desktop Intel Core i5 and i7 chips.

Adding four ARM cores isn’t going to enable the A5 to catch up with what Intel already offers (let alone the further development of new desktop class chips that needn’t be constrained by power consumption and the thermal/size limitations of highly mobile devices).

Even if Apple’s Grand Central Dispatch can help harness the power of multiple chips and multiple cores, adding more multicore A5s to gain more performance can always be outmatched by adding more quad core i7s along with discreet graphics chips and other components like the Thunderbolt chip, none of which will be possible to pack into an ARM based mobile device in the near future.

If Apple were planning to move its Macs to ARM in the near future, introducing Thunderbolt this year would be a curious way to move in that direction. Thunderbolt is now in every new 2011 Mac, and it’s proprietary to Intel. It can’t be bolted onto ARM chips.

Dear Jefferies & Co.: just because you can conceptualize incrementing the number of the latest ARM chip to A6, doesn’t mean Intel can’t actually build a new generation of faster Core chips to beat your prognostications. There’s a huge gulf in processor power between the bottom end of the MacBook Air and the fastest iPad 2. That’s not going away anytime soon.

iPad 2 feels fast because it isn’t doing very much. It doesn’t handle nearly as many background tasks as Mac OS X does, by design. If it did, it would be painfully obvious that the A5 that it uses is far less powerful than even the Core 2 Duos of several years ago. ARM chips are getting blazing fast for what they are, but they’re not desktop class processors.

You can sell me an ARM-powered MacBook Air only after convincing me to Motorola Xoom over an iPad because it’s clocked faster and has more RAM. That’s a tall order. Look at the performance of Intel’s other Ultrabooks and you’ll get a clue about how much power Apple is currently wringing out of the mobile Core i5 and i7 at incredible cost efficiencies. Apple is also doing the same to squeeze an inordinate amount of performance from the A5 in comparison to alternative tablet designs.

But don’t confuse begin good at two things with the potential for being good at only one thing, and then jump to the conclusion that it would be good for Apple to only be good at doing one thing just for simplicity’s sake. What’s next Mr. Misek, will Apple converge iBooks and iTunes so that every title can be a musical book for the convenience of the public?

  • stormj

    I just do this: any time I see a headline that says “Analyst Predicts Apple [Will do x],” I immediately rule X out as a possibility.

  • http://www.jazzmic.com jazzmic

    I just do this: any time I see a headline that says “Analyst Predicts Apple [Will do x],” I immediately rule “Predicts” out as a truth but a means of getting publicity…
    Truth being said, this site has lots of predictions that have turned out to be correct, it’s a matter of choosing who to read and even then, consider the options.

  • roz

    Daniel – FYI your Forums for this site are down. Thanks!

  • Mike

    First, let me welcome you back, Daniel. Your writing is excellent as ever.

    Second, you’re absolutely right that these analysts are basically making up ridiculous notions just to drive the stock price. Of course, that’s probably why they invent these “rumors”. To drive up or down the stock price so they can make a quick buck. Soon people wise up if they keep telling silly “rumors”, but in the meantime, they get accepted as fact, even if they aren’t even close to reality. Thanks for clearing that up.

    But I always wondered whether an ARM Macbook might have lower performance, but make up the difference in amazing battery life. This could work in say, the Air, where lightness and battery life would be prized, almost above all else. Of course, maybe they feel that the Air shouldn’t have these compromises, and have more full-featured performance like its bigger siblings and so that would be the reason why they included the Core i5 and i7. But I can’t help wondering if graphics would be better if they switched to ARM because they control the whole widget then…

  • relativity

    “what would the benefit of replacing Intel processors with ARM chips be? Let’s count the ways. Zero.”

    Negatory Dan. I can count at least one big factor for going ARM – small form factor. Intel, for freaksakes, has been unable to scale x86, let alone, ia64 to performance-per-watt with low TDP levels as ARM has with ARM11 and the upcoming multicore ARM Cortex-A15. This chip will be a world-beater and it will be running server hardware with Windows 8, and looking very likely, iPhones, iPads, iTouches, Macbooks, AppleTV and Mac minis of 2-3 years down the road! Apple’s roadmap in three years does not see x86 or ia64 meeting their required Performance/W for a given TDP in SFF devices unless Intel somehow pull a rabbit from Alice’s —

    ARM has a huge momentum in this heat-constrained market. They have a potential to turn this market upside down much like how Apple has done with the smartphone market. I really believe in them competing with Intel with their Cortex-A15 64-bit cores.

    So much so that I shall place $5 on this kitty that Apple will move in that direction starting with A6 then full-blown with A7. The only models that will stay Intel are the Pro lines – both desktop and notebooks – where power is everything and heat be damned! ;)

    Daniel, you are very good at observing and pointing tech trends – especially Apple’s – but not seeing Apple moving to ARM architecture in the SFF computing devices is head-scratching.

    Anyhoo, welcome back from your extended sabbatical – or whatever… ;)

  • there is no god

    Dan, agree with you on the ARM thing but beg to differ re: the TV thing. If they get their packaging right (and until now nobody’s done it better) a 40 or 50 inches shouldn’t take up any more stock room width than their 27″ inch iMacs. And as far as displaying them goes, take a look at their wall space, theres a lot of it, usually between the entry and the accessories racks. A lot of the stores have a mix of flat screen and backlit panels in place there right now. Replace all of these with the new TV’s and have them rotate between media and advertising display and you’ve got the ‘problem’ solved, and fairly elegantly too.

  • http://www.roughlydrafted.com danieleran

    @relativity: Well it does make sense that Apple might want to eventually migrate its Macs to alternative CPUs, particularly ones it has more control over.

    However, the analyst in question said the MacBook Air would move to the A6 next year (impossible i say) and that the rest of Apple’s Mac line would be ARM by 2016. That’s further out, and a lot can happen in 5 years, so it becomes dangerous to say X WILL or WILL NOT happen that far away.

    However, the reasoning presented around the move to ARM, the non-sensical need for “unification” between iOS and Mac OS, and the critical tipping point for ARM 2016 being that it “goes to 64 bit” are all telltale signs of someone who doesn’t understand technical details attempting to make predictions based on what makes sense to them.

    Saying that a move to ARM could solve thermal and performance/watt issues that Intel can’t makes some sense. Saying Apple wants independence from Intel makes sense. Saying Apple wants the ability to integrate components and design custom silicon makes sense. But none of those arguments were presented.

    Additionally, the Thunderbolt move makes absolutely no sense if Apple plans to take the MBA to ARM next year, unless Apple can talk Intel into giving up its best stake in maintaining proprietary control over the design of the platform architecture. In my view, Thunderbolt also erases any chance of Apple going to AMD as well.

    Also, its hard to stress what a huge gap there is between mobile ARM chips and the Core i7. Apple made huge gains in GPU (9x) and CPU (x2) speed from the A4 to A5, and the next A? (based on the 2012 Cortex A15 MPCore, featuring as many as two 4-core clusters per chip) could be as much as ten times faster yet.

    That still doesn’t compare to Intel will be offering in its desktop CPUs next year. Beyond that, who knows. Apple has the flexibility to move native Mac apps to ARM long before Windows 8 will be able to set up web apps that can run on ARM. And once that happens, there could be a dramatic tipping point reached where the WinTel PC world completely collapses in favor of a more open ARM computer. And the taint of the 90s will finally be over.

  • relativity

    “Thunderbolt is [sic] proprietary to Intel. It can’t be bolted onto ARM chips.”

    Thunderbolt does not rely upon i5 or i7 logic core to function. It is not “proprietary” to Intel that it must be bolted next to an i5/i7-only architecture hardware. Thunderbolt only requires the PCI Express bus and that is a standard bus architecture controlled by a non-Intel controlled PCI-SIG body. Apple can easily integrate Thunderbolt with the ARM Cortex-A15 architecture if they wanted in the upcoming A6 or A7 processors. Thunderbolt is not a reason why Apple are crippled to go down the ARM road.

  • jimglidewell

    The analyst is clearly full of it. But I think you are looking at the Intel/ARM thing a bit to rigidly. The pretty clear solution to addressing a single device that can run both x86 and ARM apps is to include both CPU types. And this doesn’t necessarily mean an increase in chip count.

    Intel has publicly stated that they would be willing to work with Apple on an Apple-exclusive custom CPU chip. What might be on such a chip? Well, at least a couple i5/i7 cores, but perhaps an ARM core or two as well?

    I think it is inevitable that Apple offers the option of running your iOS apps on a Mac. This is clearly within their reach, and would be an incredible tool for moving iPhone/iPad Wintel converts over to the Mac side, as well as leaving the Wintel vendors standing in the dust trying to figure out how to compete with *that* laptop…

    All of this is speculation, of course, but I think that both the “MacBook that also runs iOS apps” as well as the “iPad that can run Mac apps” are both products that would have significant appeal and would each leverage consumers toward a product that Apple will be uniquely positioned to offer.

    I gotta believe they’re gonna try pretty hard to make such a hybrid work…

  • relativity

    “…who doesn’t understand technical details attempting to make predictions based on what makes sense to them. ”

    Agree. Pity those clueless talking heads disguised as expert analysts.
    They have no idea iOS is Mac OSX stripped off the delicious Cocoa framework (and desktop oriented services) and in its place is just a touch-oriented subset.

    iOS and OSX are not “merging”. They have been literally Siamese twins from the very beginning and only now cross-pollinating each other again in Lion 10.7.

  • http://www.roughlydrafted.com danieleran

    @there is no god: I just bought a svelte Samsung 50″ TV. The box was bigger than a refrigerator is tall, and its about a foot and a half deep. As in, larger than an assembled bicycle box. Not anywhere close to an iMac, nor even a 30″ display. Freaking enormous. Also, extremely fragile (necessitating a lot of shipping material) and heavy.

    The problem with HDTVs isn’t that Apple couldn’t display them in its stores, but that it has no inventory space to stock them, and more importantly, that there is very little profit or room for premium competition in the HDTV space.

    Apple can sell $1000 MBAs against $500 netbooks, or $1200 iMacs against $800 PCs, but it can’t sell a $2000 HTDV that competes with a $1000 HDTV, just because it has the features of a $99 Apple TV inside. Nobody is going to pay much of a premium for an Apple-branded TV, any more than they’d pay for an Apple printer.

    Makes far more sense for Apple to sell that absurdly small Apple TV box for $99 and actually make a profit than devote its entire inventory to a bunch of very fragile, heavy to ship, huge to store, razor thin margin HDTVs, a market where Apple can add very little value outside of ATV anyway.

  • http://www.roughlydrafted.com danieleran

    @relativity: Good to know that about Thunderbolt. While I understood it to be an implementation of PCI Express, I assumed that AMD’s comments about it being ‘proprietary to Intel’ and not something of interest to AMD meant that it could not easily be implemented by third parties.

  • there is no god

    @danieleran: a few months ago I would have agreed with you, but what if it’s more than simply an Apple branded TV? We know Apple loves to design away clutter. So why not a box that displaces all other boxes in your living room? An all-in-one HDTV, cable, wi-fi, streaming, gaming & surround sound unit. A little thicker than the market leaders today, but with everything fully integrated. And unibody-like strength of construction to reduce packaging.

    I’d buy into that in a heartbeat. My wife hates cables, detests my 5.1 speakers in the living room, and wants the PS3 put away after every use (I’m with her on that one at least, the Playstation is butt ugly). If Apple comes out with a class-leading video and near-enough audio solution ‘d already be in her good books. Put the rest of it together and it becomes a no-brainer.

    Add in the fact that Apple would leap-frog the competition and suddenly *own* the integrated living room, and I strongly believe we will see an Apple TV within the next 12 months.

    Enjoy your work Dan, good to see you back.

  • relativity

    Though I agree with Dan re: huge box sizes on those monster 50-60″ displays (I just bought one of those 60″ Aquos that looks like a huge iPad on my wall) the Apple stores only have to display one or two for demo purposes. Then any iCustomer who buys one can will-call their deliveries at a nearby Best Buy, WalMart, or Target of their choosing.

    Apple will still fetch their usual north of 30% margins and the electronic retailers will get their usual MSRP cuts. Apple does not have to price these displays to compete with Vizio. Apple can set their own premium price tiers as expected.

  • mailjohannes

    Interesting discussion about ARM.
    It seems that the current A5 processor is about 3 times as energy efficient as the i5 or i7 (if you compare battery capacity and hours of use before you need to recharge).
    This means the the MacBook Air A5 11inch will run up to 14 hours and the 13inch version a phenomenal 20 hours.
    But it even gets better because the A5 chip has a feature size of 45nm while de i5/7 has a feature size of 32nm (and possibly even less 20nm?) and this difference results in a factor 1.4 multiplication of the clock speed and ‘hours before you need to recharge’ time.
    So a MacBook with 35nm A5 processor will run at roughly the same frequency as it’s i5/7 counterpart and with an astounding runtime of 20 or 30 hours.
    My guess is that this processor will be at least good enough to run all the programs you normally run, and with ease.
    If the A5 has a feature size of 20nm it will be an absolute beast!


  • http://lineoftheday.com schwabsauce

    One of the things I love about this site is the high content quality in the comments. They frequently feel like an extension of the article text itself, and in the case of this piece, I appreciate how you were able to clarify that you haven’t ruled out these possibilities – you are simply not convinced by the particular arguments that have been offered.

    With that in mind, I have a few thoughts on the TV question. I believe that there are many potential reasons why consumers would be willing to pay a premium for a better TV product. Display quality, build quality, beautiful design and customer support are good starting points.

    Things could get really interesting from there. Almost every TV I’ve ever used has had big problems in terms of the user interface and the generally high number of button presses that are often required. There is typically little in the way of logic that customizes the TV to your personal viewing habits and preferences.

    Much of the interface these days is provided by cable companies, but a company with the resources, technology, clout, and track record of Apple could potentially form partnerships that enabled the creation of wrappers for these interfaces. As far as I am aware, there are few enough cable providers in the US that supporting them all might be feasible.

    Deploying sophisticated software to make complicated devices seem simple to use could be compared to what Apple has brought to the table in, for example, the area of Wi-Fi technology. There are certainly still headaches and crashes, but overall the systems work well and they get used all the time.

    Including motherboards and apps might or might not make it into the first generation of a TV product. But compared to problems like interface design and integration with cable networks, this is the easy part. The computing power of the top-end TV could also lead to a bigger profit margin, which would justify the assignment of Apple engineers to the project.

    TV is a big market and so is gaming. Perhaps using iPhones and iPads as controls for games would lead to cool paradigms. It could also be a powerful up-sell: four iPhones in every home. Upgrade your iPhones to get better accelerometers.

    There is also the outside chance of an acquisition of Sony or Nintendo. Now, typically Apple doesn’t feel that it would benefit from buying a big company – but I think part of that situation is that in buying a Skype or Netflix, they might not gain a lot of technologies or content that they don’t already have. They are willing to compete and win rather than buying the competition. Yet perhaps a Sony or Nintendo represents a portfolio of technology, intellectual property, human resources, and manufacturing that is differentiated enough from what Apple has mastered to make the upside more in line with the price tag. Sony and Nintendo are also very strong brands with intense loyalty. I remember reading on this site that when the 100 millionth iPod was sold, there were already well over 100 million PS2s all around the world. Also, if Apple could eliminate Netflix support from one of those consoles, it could lead to many millions for the iTunes store.

    One of your main arguments for why Apple might not gain a lot from selling TVs was that they would take up too much space in the inventory portion of Apple’s retail stores. But there are many Apple products that are not sold in those stores – such as laptops with 8 gigs of RAM. In fact I kind of doubt if you or virtually any of the commenters have ever opted for one of the configurations that they do sell off the shelf. Shipping refrigerator-sized boxes around the world is a logistical challenge that I suspect Apple can rise to and overcome.

    Speculating about this has been fun and I can see why so many analysts like to do it. At this point I’d like to try to set myself apart from some of them by saying that I do not believe that Apple makes product decisions for the purpose of earning money. I think Steve and many of his employees look at things in a different way: focusing on the positive impact that they can have. Doing business like that leads to success, and it’s inspiring to have a role model who can verify this for us (and an analyst who can debunk anyone who claims otherwise).

    TV is a platform that has tremendous potential to do good things for our culture and for individuals – a potential that I feel is, today, largely unmet. Perhaps, by assuming a role in the living room and the bedroom, Apple knows a way to push things in a more positive, educational, artistic direction, and is willing to do that for us.

  • chelgrian

    The reason Thunderbolt is considered proprietary is that the specific ‘over the wire’ interface is completely closed to Intel and therefore only Intel can make transceiver chips.

    The chips themselves from a software and hardware perspective just look like PCI-Express bridges so little software support is needed and you can put one in any system which has a PCI-Express bus.

    However the fact that you require a extra chip from a single source dooms Thunderbolt as a mass market interface. Unless the specification is opened and there are standard implementations that can be integrated into SoCs then it will only be used in niche markets that really need it and can afford the monetary and power cost of the extra discrete chip needed.