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Cringely's Final Predictions: Apple Becomes a Financial Service and Hedge Fund (cringely.com) 152

Posted by EditorDavid from the I,-predict dept.
For 22 years technology writer Robert X. Cringely has been making predictions for the year to come -- but this year may be his last. So at age 66, he's promising his 2019 predictions will also "take a look out several years...because I sense the tech industry about to enter an unprecedented correction."

And last week he unveiled his first prediction -- that Apple under Tim Cook "emulates GE under Jack Welch.... Jack Welch took GE into financial services in 1981, transforming the company and increasing its market cap by 4000 percent over his 20 years. "

Tim Cook has already started in 2019 along the same path forged by GE's Jack Welch back in 1981. This strategic shift started to show just this week with Apple directly financing iPhone sales in China and announcing an Apple credit card with Goldman Sachs... Look for Apple to start financing lots of things in 2019. Remember your car dealer would rather lend you money than have you pay cash for that ride because financing is its own profit center. So iPhone prices will continue to rise, but iPhone payments will probably decline as Apple cuts out middle men and efficiently sucks-up that aspect of the phone supply chain. This is how Apple will arrest iPhone market share declines -- by assisting sales and making even more money in the process.

I expect Apple to not just make strategic investments, but participate in strategic financing as well.... What Apple is probably closest to becoming is a hedge fund -- a very big hedge fund in fact. Apple's available financial power is approximately equal to that of the world's two largest hedge funds -- Bridgewater Associates and AQM Capital Management -- combined. So when someone tells you Apple is in decline or doesn't have a clue, they are wrong. Apple will continue to compete in its established technology markets as well as new ones. But Apple has also found a $200 billion hobby that will keep it growing for the next decade no matter where the Information Technology market goes.
Cringely notes that services "are more profitable than hardware." But Cringley has always been gracious about entertaining other opinions. In 2000 he answered questions from Slashdot readers, and last week he reminded his readers again that as technology completes its next great transitions, "I'd really like to hear your thoughts, too."

As dramatic changes (including AI) kick off what may be a new 50-year-cycle, "Everything is changing and nothing -- nothing -- will ever be the same again. I hope that's a good thing."
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Cringely's Final Predictions: Apple Becomes a Financial Service and Hedge Fund More

Cringely's Final Predictions: Apple Becomes a Financial Service and Hedge Fund

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  • Financial services? (Score:1)

    by Anonymous Coward

    Well, I guess since Tim Crook is terrible at technology this is a good course for Apple. I just hope for the sake of everyone they stop making their awful products. It's been long enough under Tim Crock that Apple is unlikely to ever innovate again.

    • Re: Financial services? (Score:5, Interesting)

      by Anonymous Coward on Monday March 04, 2019 @04:50AM (#58211644)

      I have a really fat 50 year old business book (over 3100 pages) and the end part of it basically suggests that once any business has enough financial leverage / savings that it's best to just get into financing/lending/banking, period.

      • Re: Financial services? (Score:5, Insightful)

        by Anonymous Coward on Monday March 04, 2019 @05:24AM (#58211710)

        I have a really fat 50 year old business book (over 3100 pages) and the end part of it basically suggests that once any business has enough financial leverage / savings that it's best to just get into financing/lending/banking, period.

        So, once you amass enough money that paying someone else to shove it in their mattress becomes irresponsible from a financial standpoint, you get into the mattress business.

        Seems logical enough to not validate this as some kind of magical "prediction", and more like common sense and business investing 101.

        This has far less to do with a company dying on the innovation vine as it does leaving money on the table by not participating in the financial sector, especially when you have the funds to back it. Doesn't matter if you're making a popular smartphone or rubber dogshit. Get a business big enough, and you will up in banking, because it's a solid revenue stream.

        • Re: Financial services? (Score:5, Interesting)

          by Cmdln Daco ( 1183119 ) on Monday March 04, 2019 @06:56AM (#58211858)

          Doesn't matter if you're making a popular smartphone or rubber dogshit.

          The best part about discussions like this is that it's near conceded that Apple is now 'a smartphone maker.' The Mac is just about dead.

        • This is exactly what happened to GE, the largest (by number of employees) company in the world.

          And as for the company with the largest income, which would be Saudi Aramco, I wonder if they went into financial services, too?

      • I suspect that the interesting thing to watch is whether Apple gets into obvious ancillary financial services(as they are already doing to an extent, something like "AppleCare+ with Theft and Loss" is basically an insurance product backed by Apple's competitive advantage in performing repairs where those are more cost effective, something competing insurers are less able to do); consumer credit for purchases of their products being the big one(and proven by the car manufacturers to be quite a profitable sid
      • Google seems to be better understanding of their ecosystem.

        • Re: (Score:2)

          by Altus ( 1034 )

          Yes they seem to have an excellent understanding of their advertising ecosystem

      • I figured that Apple would eventually go the IBM route, and start buying other companies in order to keep their product line fresh. Perhaps they'll

        Like Big Blue, it seems that they forgot how to innovate, and have just been coasting with incremental improvements to their products for the past five years.

        • Grr... I meant to say that perhaps they'll buy a company like Nvidia to expand into the gaming market, or a company like Twitter if they want to go the Social route.

          They might even surprise us an try making a business play by buying a company like Salesforce, but that's less likely.

      • once any business has enough financial leverage / savings that it's best to just get into financing/lending/banking, period

        Especially if you're a non-profit, like Harvard University, which has a 37 BILLION DOLLAR TAX-FREE endowment.

  • /. editors are retarded, here is the link (Score:5, Informative)

    by jdoeii ( 468503 ) on Monday March 04, 2019 @04:53AM (#58211654)

    This is the link to the actual post by Cringely with the Apple prediction: https://www.cringely.com/2019/... [cringely.com]

  • Well... (Score:5, Insightful)

    by Kokuyo ( 549451 ) on Monday March 04, 2019 @05:09AM (#58211676) Journal

    ...they're certainly not gaining points through engineering and innovation lately, that's for sure.

    • Re: (Score:1)

      by Anonymous Coward

      Except engineering for increased costs, right? Then again, the financing plans are inevitable artifacts of pushing the products into markets that can't take the one-time cost. How many US customers actually pays their phones upfront? The contracts have been financing plans all along for selling phones to people who can't actually afford them. Soon, NVidia GPU Plans for gamers and professionals.

    • Re: Well... (Score:1)

      by Anonymous Coward

      Dairy farms Apple should open dairy farms

      • Apple should buy Adobe and start making Adobe Creative Appliances and end Adobe making software for anything else. And then shut down a year later.

  • Bob's sharp! (Score:5, Interesting)

    by aglider ( 2435074 ) on Monday March 04, 2019 @05:12AM (#58211680) Homepage

    Bob's predictions haven't been right all the time. But never at 50-50. More something like 75-25 or even 80-20.
    The good part of Bob's predictions is how acute and sharp he's been so far.
    And not just the predictions, but also any other piece he'd added to his blog (or whatever else you define it), one or a kind [cringely.com].
    Going far beyond the pure appearance and surface, adding thought value by interconnecting news and facts from different sources and, of course, putting in a good dose of his own sharp intelligence.

    I would suggest anyone how likes seeing things under a different light and yet getting most of those right, go heave a deep read to that blog.
    It's worth every single information bit.

    • Re:Bob's sharp! (Score:5, Insightful)

      by 110010001000 ( 697113 ) on Monday March 04, 2019 @08:29AM (#58212124) Homepage Journal

      That is because his "predictions" are for things that have already happened. For example he "predicted" this last year:
       
      "The H-1B visa problem will NOT go away. Immigration reform will have little actual effect on H-1B visa abuse".
       
      Oh wow. Massive prediction there from 2017. Here is MY Prediction for 2019: "The H-1B visa problem will NOT go away. Immigration reform will have little actual effect on H-1B visa abuse"
       
      Everything he listed is a multiyear issue. Completely idiotic.

    • Re:Bob's sharp! (Score:5, Interesting)

      by dissy ( 172727 ) on Monday March 04, 2019 @09:32AM (#58212356)

      Bob's predictions haven't been right all the time. But never at 50-50. More something like 75-25 or even 80-20.

      I mention this purely as friendly banter.

      Robert was actually an employee for Steve Jobs back when Apple was in his home garage, I think he was the 11th or 12th employee back in the mid/late 70's.
      In the beginning Jobs had some difficulties getting funding to get Apple off the ground so offered stock options in place of pay. Robert was one of the few that turned down that offer wanting cash instead.

      Not an unreasonable choice over all, but I would guess he's still kicking himself today over that prediction!

      • Re: (Score:1)

        by Anonymous Coward

        He said his mother still reminds him of that incident! Triumph of the Nerds was epic!

      • Re:Bob's sharp! (Score:4, Interesting)

        by Anonymous Coward on Monday March 04, 2019 @01:38PM (#58213550)

        Robert Cringley was found to have lied about having a PhD from Stanford, and lied about having been a professor there. He claims to have been Apple employee #12, but there's no corroborating evidence and another person is well-known to have been employee #12 at Apple.

        Basically, the guy is a fraud.

    • Going far beyond the pure appearance and surface, adding thought value by interconnecting news and facts from different sources

      He bestraddles the warp of the attention economy with the weft of long-tail synergies.

  • Meh (Score:5, Insightful)

    by JaredOfEuropa ( 526365 ) on Monday March 04, 2019 @05:19AM (#58211696) Journal
    “Assisting sales”, financing phones, or even dramatically lowering their profit margins is in itself not enough to arrest the decline of market share. Apple needs to offer compelling reasons for us to not buy Android, the mobile OS that everyone else is using. Switching between OSes is a giant pain in the rear, so they have some leeway there, but if Apple hardware, their OS, their services and integration with other services start to lag behind, people will switch and likely not come back. Having a walled garden is a liability if you do not take good care of it: most people (myself included) know the walls are there but we cannot see them for all the lovely trees in the garden, but Apple hasn’t been watering and trimming them very well lately, and things are starting to look a little shabby. And there are a couple of very good Android phones out there these days; time perhaps to move to greener pastures.

    Google seems to better understand how to care for their ecosystem, not just the core OS but all the services around it: mapping, translation, voice recognition, and so on, all top of the bill stuff. Apple’s services are also-rans. If Apple doesn’t keep up innovation and doesn’t invest some of that vast capital into making their ecosystem the very best, sales will decline. And that means Apple will decline as a tech company. Even with billions in the bank. Same as the guy down the street running a video rental store; he made a killing back in the 80s and saved enough to comfortably retire on, but he keeps the doors to his shop open. Good for him, but I wouldn’t exactly consider him a relevant factor in local commerce.

    • Re: Meh (Score:5, Insightful)

      by cyber-vandal ( 148830 ) on Monday March 04, 2019 @06:56AM (#58211860) Homepage

      Google seems to better understand how to care for their ecosystem, not just the core OS

      LMFAO. If you call abandoning devices after 18 months "caring".

      • Good point, and one of the issues I have with Android devices is the craptastic update policies many vendors have. Another one is that Apple seems to do a much better job of keeping malware out of the App Store. Apple doesn't get everything wrong, and by the same token Google doesn't get everything right. But a lot of the available peripheral services and devices for Android just seem to be of higher quality. And there's a reason for that. Google is in the data business and all of those services are po

        • Re: (Score:3)

          by Zocalo ( 252965 )
          Yes, but that's more a function (or lack thereof) of the Android appliance vendor, no? Google, for their part, does seem somewhat better than some of the Android OEMs in this regard, especially in the IoT sector where many of the devices seem to become abandonware almost as soon as they hit the virtual shelves, as they're stock enough to let you install a few more major updates even after official support stops. I can be a real crapshoot if you try shoving Oreo or Pie on someone else's hardware that hasn'

      • Google seems to better understand how to care for their ecosystem, not just the core OS

        LMFAO. If you call abandoning devices after 18 months "caring".

        They made steps to mitigate this problem. And now, we have a variety of Android One devices with pretty decent support. My current phone, a Xiaomi mi A1 came out in 2017 with Android Nougat, and runs the latest Android (9.0 Pie) with regular monthly security updates. That's not bad for an $200 phone. There is plenty of choice now with long(ish) term support for devices from a variety of vendors.

        • A 2 year update guarantee is pretty good for such a cheap phone. How long do the expensive ones such as the Pixel receive updates for? I bet it's not 5 years even though they cost similar silly money as Apple.

    • From my point of view a huge part of their current problem is that they don't actually offer any products I want. My cell phone is not even Android and I'm content. My Mac is a tower. If they'd make a Mac Mini that was a little less "I'm thin pay extra" I might buy it, but they just do not offer hardware I want. And, as far as I can tell, it's because they are trying to turn all their hardware into iPhones. Beautiful industrial design, thin as possible, and let's call the hi-end of the mid-range the low-end

    • Comment removed (Score:5, Interesting)

      by account_deleted ( 4530225 ) on Monday March 04, 2019 @09:12AM (#58212288)
      Comment removed based on user account deletion
    • I enjoy that this ignores many of the issues that Google brings. Apple doesn't spy on its users and sell that data to third parties. Google and companies that operate like them are having difficulty navigating under laws like GDPR, Right to be Forgotten, etc. Their only saving grace is that US Republicans still favor businesses over people. As attitudes change towards a more privacy conscious society (not all of us want our employers to be able to buy up marketing data to use in their recruitment processes)
    • What declining market share are you referencing? iOS has held relatively at 13-14% steady for years now. iPhone sales peak in Q4 around product launches, but otherwise have also held more or less at 14% market share.
  • 0%. Apple is trying to get people to buy devices, not create a financial powerhouse.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Why not? Apple could start leasing their phones out, with or without data and voice plans attached. Minimum contract 18 months / 2 years.

      It's probably the only way some of their poorer customers could afford the expensive new shiny things they crave.

      It could be a (financially) clever move.

      • with 30% APR

      • Re: (Score:3)

        by mccalli ( 323026 )
        In the EU at least that's illegal - unbundling laws happened a few years ago and you are charged for device and plan separately. You could do minimum voice/data of 2 years I think, but you can't do the same for the device - it's a separate finance agreement.

  • "Financial services" is another way to say (Score:3)

    by mark_reh ( 2015546 ) on Monday March 04, 2019 @08:08AM (#58212066) Journal

    loan sharking. Apple will become a huge loan sharking operation that uses their phones to get into your wallet (instead of the more traditional sports book). How else is Apple going to get people to spend more and more on new phones? They're already over $1k. Right now ATT and Verizon are capturing all that revenue. I can't imagine they are going to be very happy about Apple's moves to take that revenue from them.

    The same thing is happening in many industries. Corporations are buying up individual and group owned dental practices and doing a lot of advertising on TV. Under their careful and care-full management, many, many more people get the dentures they "need" for "affordable monthly payments". A word of advice: if you spend more time talking to the staff about financial arrangements than you do with the dentist, find another dentist.

  • up until chapter 11 it was one of the largest health insurance companies and a bank that just happened to make cars.

    when the hardware becomes a commodity and profit margins drop, you suck up all the money spent around your hardware

    • Hmm... with the cash reserves they have, now I'm wondering if their service wouldn't end up being to lease the phones instead of selling them.

    • Re: (Score:3)

      by dasunt ( 249686 )

      up until chapter 11 it was one of the largest health insurance companies and a bank that just happened to make cars.

      The old banking business of GM is alive and well. It used to be known as GMAC. But you likely have heard of their new name: Ally Financial.

      They offer an online only banking system that is known for having really great savings and CD rates (2.20% APR for savings, 2.75% for a 12 month CD).

  • Every Company that does this Fails (Score:5, Interesting)

    by Anonymous Coward on Monday March 04, 2019 @08:26AM (#58212114)

    Every single company that decides that "services are more profitable than productivity" eventually fails big and has to correct.

    I've worked for GE, Honeywell, and a couple of other fortune 500s, and each time I got to witness the destruction from the inside that comes from the CEO and board deciding that they want to be a services company rather than a company that makes things.

    I got to witness the wholesale destruction of jobs as each company outsourced those services to low-cost countries and had only a staff of "front men" in the US to pretend they were the competence behind those services.

    It worked great until their customers realized they could just outsource those services themselves and not have a middleman.

    What Apple looks like it is trying to do is lock its stupidly hyper-loyal fanbase into a cycle of insurmountable debt, turning them into modern-day digital sharecroppers. "Sure we've raised the price of our phones to $1200, but we'll finance it at high rates and a term longer than the lifetime of the product, and when it dies and you need a new one, we'll conveniently refinance the rest of the loan into the loan on the new phone. And oh by the way, if you don't buy a new phone with this convenient rollover financing, you'll have to pay off the note on your dead phone in full right away because we've lost our security."

    Predatory lending at its best.

    • Re: (Score:2)

      by epine ( 68316 )

      I got to witness the wholesale destruction of jobs as each company outsourced those services to low-cost countries ...

      Yeah, there's this one guy in India, who has more work to do than you could possibly imagine, but it barely makes ends meet, so he's reluctant to relax his outsource monopoly.

    • Re: (Score:1)

      by umghhh ( 965931 )
      My thoughts too. What I saw so far is that services connected to the stuff we made were to be major source of income. That was decades ago. In fact we could see that services were bringing a lots of money. Only the art of the services was overlooked by the BMA drones - that the services were directly linked to the stuff we produced. In other words: if we skip producing stuff we have not much to offer that commands a premium from customers. It is not to say it is not possible to have a profitable service ba

    • Re: (Score:3, Interesting)

      by stuff-n-things ( 89988 )

      Yes, indeed. GE is effectively gone, replaced by a retailer in the Dow Jones (https://www.marketwatch.com/story/general-electric-booted-from-dow-jones-industrial-average-2018-06-19). Apple may be just a bank in 20 years, and it will be just a bit player. Past time for Tim to go.

      • Re: (Score:1)

        by Anonymous Coward

        Yes, indeed. GE is effectively gone

        In 2018, GE ranked among the Fortune 500 as the 18th-largest firm in the U.S. by gross revenue. I'd like to be that gone.

    • Good post, but does any of it mean Cringely's prediction of them following this path is incorrect? Maybe it's sort of a black hole that companies get pulled into when they are too successful for too long and the money pushes out the actual business.

    • Re: (Score:2)

      by Shotgun ( 30919 )

      Every single company that decides that "services are more profitable than productivity" eventually fails big and has to correct.

      You'll need to define "fails big" in this instance.

      Every year around where I live, farmers go out with these big machines and DESTROY THEIR OWN CROPS. They call it "harvesting", but the end result is that they completely ravage and destroy every single one of the plants they just spent all year to grow.

      From the C-level view of the world, these are businesses, not religions. If there is more short-term money to be made in finances, that is clearly the path to go. Build it up, then harvest it.

  • > and announcing an Apple credit card with Goldman Sachs

    My grocery store chain has a credit card too. So does that mean they're a financial services company too?

    > Jack Welch took GE into financial services in 1981, transforming the company and increasing its market cap by 4000 percent over his 20 years

    And then lost almost all of it when people stopped being enamoured with a single number on the quarterly reports. And I'm sorry, but Tim Cook does not inspire the same sort of loyalty among money men as

  • ugh (Score:1)

    by negrace ( 984807 )
    What are his predictions doing on the first page? He is wrong most of the time, and then he cheats next year when he awards himself "I guessed it mostly correct", lol. His predictions are a big joke. Ask him about Minecraft though :)

  • What Apple is probably closest to becoming is a hedge fund -- a very big hedge fund in fact.

    So good news for my Apple stock, bad news for my desire to buy a worthwhile replacement for my 7-year-old MacBook Pro.

    At this rate, I'll be calculating my Apple stock dividends on a Linux laptop a couple of years from now.

  • This makes sense to me - If you look at Apple.com right now you already see lots of financing offers for their products. Seems to be a new focus that they've borrowed from car dealers.

    Unlike me, who just bought a refurbed Galaxy S7 for couple hundred bucks cash, very few people I know with high-end iPhones plunk down the thousand bucks to buy them new - They finance them through their wireless carrier under contract and then replace them every three years, repeating the process. Seems to me that's prim

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