Category Archives: rant

Five myths about Apple’s tax avoidance

Tuesday’s hearing on Apple’s tax avoidance schemes made for pretty good Washington, D.C. theater. Apple CEO Tim Cook was friendly and forthcoming and most of the senators went out of their way to proffer their love of Apple products. So I doubt the hearing will help advance the much needed cause of corporate tax reform — probably the opposite. But Cook & Company also left the public with more than a few misconceptions, which I will try to clear up.

MYTH 1: Apple doesn’t owe U.S. taxes on its sales outside of the United States

U.S. tax law is clear. U.S. companies must pay corporate income tax on all profits earned anywhere in the world (here’s a good primer). The same is true for ordinary folk – if you have overseas income, you still owe Uncle Sam. There’s a credit for taxes paid to other countries and, for companies, an option to defer taxation until the money comes home. But the law of the land is U.S. taxation of worldwide income. Of course, the option to defer has long been abused, which leads to the next point.

MYTH 2: Apple is following the spirit of the tax laws

John F. Kennedy must have been rolling over in his grave when Tim Cook uttered this one. When multinational corporations avoided paying income tax by sending profits overseas and using sneaky methods to bring back the cash, President Kennedy pushed Congress to close the loopholes and we ended up with a 1962 law known as “Subpart F.” The very core of the law is to look past corporate shenanigans and tax overseas profits. Sound familiar? That’s exactly what Apple’s various Irish machinations achieved through loopholes that clever lawyers have found in Subpart F and behind-the-scenes lobbying made bigger.

MYTH 3: Apple doesn’t use tax gimmicks

Apple’s testimony on Tuesday claimed the company does not use tax gimmicks and then offered a list of a couple gimmicks it does not use – no Cayman Islands bank account, no revolving loans from foreign subsidiaries and so on. But, surprise, surprise, it’s a limited list that simply left out all of the tax gimmicks Apple does use and even invented, like the so-called Double Irish Dutch sandwich that shifts and shovels products and profits from here to there until deductible expenses end up in places with high tax rates like the United States and much of the profit – $74 billion in four years – ends up where there’s no taxes at all.

Richard Harvey, who worked in Ronald Reagan’s Treasury Department, at a Big 4 accounting firm and then at the IRS, said he nearly fell out of his chair when he read Apple’s no gimmicks claim. Apple’s denial is like notorious bank robbers Bonnie and Clyde saying they never robbed a 7-Eleven or a Safeway. About 4% of Apple’s employees and 1% of it sales are in Ireland but the Emerald Isle somehow ended up with 64% of Apple’s 2011 profits upon which it paid nearly zero tax. No gimmicks?

MYTH 4:  Apple pays the least taxes the law allows

As a couple of tax experts noted at Tuesday’s hearing, Apple’s tax maneuvers are aggressive but hardly the most aggressive in corporate America, where 30 large companies paid no taxes at all from 2008 to 2010. Just as an example, Apple has chosen to re-route almost all its profits outside of the Americas through no-tax subsidiaries in Ireland. But profits coming from Canada, Brazil and Mexico come home to be taxed in the U.S.

The whole argument that Apple is just doing what it must doesn’t stand up. Apple and other tech companies regularly make decisions that cost them money, such as to address poor working conditions at factories owned and run by subcontractors or to make their products more environmentally friendly. A variety of short and long term concerns can come into play when Apple decides what to do, not just what maximizes profits in the current financial quarter. With corporations gaming the tax system, contributing near 65-year lows in taxes as a proportion of the economy, society suffers – the very society where Apple must find its employees, customers and shareholders.

And it’s arguably worse than that specifically for Apple shareholders. As tax guru Ed Kleinbard has pointed out, the kinds of tax games Apple has played can be detrimental to the future prosperity of the company. So much cash has been piled up outside the United States that it cannot be deployed profitably or returned to shareholders through dividends. As a result, Apple is disappointing investors and depressing its stock price (Apple’s recent bond issue was a partial attempt to address this mess).

MYTH 5: Apple was singled out for criticism

Although Tuesday’s hearing was solely about Apple, the same Senate committee had execs from Hewlett-Packard and Microsoft up last September to air their tax avoidance dirty laundry. And two years ago, it was CEOs of the major oil companies under Congressional fire for their most beloved tax breaks. Next time it will probably be some executives from big pharmaceuticals.

(All comments are moderated)

The iPhone has lost its lead and needs a rethink, not a retread

“iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone,” Steve Jobs, Jan 9, 2007

Introducing the iPhone

From the first version of the iPhone through at least a couple of revisions of its hardware and software, the thing stood so far ahead of any other phone in existence that anyone without one just cried and moaned and if you had the chance to get one you jumped. If your mom or your cousin or the guy three cubicles down asked which phone to buy, you replied without hesitation: get the iPhone.

Starting a few years ago, other phone makers started to catch up and the choice got harder — or at least more interesting. You paused for a few seconds, thought about Android or maybe web OS, but gave the usual advice: get the iPhone.

But finally, in the past year or two, the choice of smart phone got a lot more complicated, especially if you weren’t already deeply invested in Apple’s vast iTunes ecosystem. Among other recent and obvious evidence, check longtime Mac columnist Andy Ihnatko’s column about switching to Android, uber Apple booster Matt Siegler’s positive review of the Google Nexus 4 and Macworld writer Lex Friedman’s general praise of the Nokia Lumia 920 phone running Windows Phone 8. What’s next? Long time Apple blogger John Gruber admits he’s head over heels for Samsung’s Bada-Tizen hybrid phone love child?

Sixth anniversary celebration, anyone?

Personally, I finally got rid of work-mandated Blackberries and got an iPhone 3GS in 2009. But curiosity and a predilection for Google services got the better of me and I switched to a Nexus S running Android in December, 2010. I tried to switch back via the iPhone 4S for a few months in late 2011, but ended up not liking it, mainly for software-related reasons. Lately, I’m quite happy with a Galaxy Nexus and looking forward to trying the Nexus 4 soon.

None of this is to say that the iPhone is about to collapse or immediately decline in popularity. But what’s happened is others have closed the gap and have been able to grab more share in the still fast-expanding global market for smart phones. Eventually, those gains can’t help but eat into Apple’s future sales.

Given how Apple let its early lead in personal computing slip away, but did not let an early lead in iPods evaporate, the company knows what it needs to do, I suspect. Apple slipped in PCs when it ignored where the market was headed and what customers wanted (more recently, its fortunes revived with cheaper models and a broader range of choices). In the case of the iPod, Apple broadened its line by adding offerings at various sizes, colors and price points while still innovating at the cutting edge with the iPod Touch. Competitors were left no empty spaces to get a toe hold.

For a while, the iPhone was so far ahead of the competition that Apple’s simple product line was more than enough to capture huge market share. But as Android phone makers have caught up, the iPhone’s worldwide share peaked and started to slip. Apple so far has left several “open spaces” in the market, allowing competitors like Samsung to thrive by offering phones with larger screen sizes and at lower prices (even the “free” iPhone 4S in the United States costs $450 without a subsidy from a wireless carrier).

At this juncture, I expect the next iPhone will be a 5S-ish upgrade and will do quite well in isolation. But Apple should do what it did with the iPod and hit more price points and physical outlines. The software could use a lot more than that, updating a look that’s grown stale. Otherwise, it could be back to the PC future for Apple.

Yikes, Microsoft’s Time Machine clone leaves out tons of important stuff

(Updated to include a way to unhide files and add them to a “library” for backup)

Basically, this post is a warning to anyone using the new File History backup program in Windows 8. The program is severely limited because it will only back up files in a few preset locations that can’t be expanded. If you have almost any third-party program that saves its own data, File History is leaving you exposed. There is a fix, but it takes a little mucking around.

In my case, for example, I have gazillions of email messages stored by the program Postbox. The mail is kept in a huge folder in my personal Windows user folder under PostBox’s own folder in the application data area. None of the stuff that your applications have saved here is backed up by File History — none. And you can’t add it, either.

Update: As several commenters have noted, there is a way to get this data added to the backup set. In the Windows File Explorer, navigate to your personal directory and under the View section of the ribbon bar, click for a check in the box called “hidden files.” Then a folder in your directory called AppData should be exposed. Right click on the folder and choose “Include in library…” and add the folder to one of the libraries which is backed up by File History. Phew!

All that File History will save by default are “files that are in your libraries, contacts, favorites, Microsoft SkyDrive and on your desktop,” according to Microsoft. That is a huge hole, especially if you don’t rely on the My Documents, My Pictures and other “library” folders set up in Windows. Even if you do, third-party programs that store their data exactly where they are supposed to will not benefit from File History unless you use the trick above to add them.

That’s a shame because File History is supposed to be Microsoft’s version of the drop-dead easy to use Apple backup program Time Machine. Both work behind the scenes to back stuff up on an automatic schedule without the user having to remember. And both give quick access to old versions of files within the File Explorer/Finder program. But you can set Time Machine to backup anything from just a few files to your entire disk.

The agony and the irony of Tim Cook

Steve Jobs and Tim CookWhen Tim Cook took over as permanent CEO of Apple in 2011, he brought his unmatched, incredible decade-long track record as the Mozart of supply chain management. Under Jobs II, Apple got rid of its factories and outsourced all its manufacturing to quicker, cheaper Asian builders. Overhead was slashed, flexibility enhanced. As the iPod business grew into a titan, Cook was striking better deals, setting up faster supply chains, keeping the trains moving on time and frying it up in a pan.

And so when Cook took over as CEO, the fears and warnings were about everything else — how would Apple’s sense of style and design survive without Jobs? What would happen to innovation and creativity? Would there ever be another massively market disruptive product like the iPhone or the iPad again? No one — NO ONE — said wow, I wonder if Cook is up to the task of scaling Apple’s manufacturing and supply chain to deal with its tremendous rate of growth.

And then came the fourth quarter of 2012. Apple had an amazing, record breaking three months but it was not as big as it could have been and not as big as some Apple shareholders wanted. Listen to Cook on the company’s call with stock analysts today¹. What happened with iPhone sales? Supply constraints hampered sales, even of the older models. What about iPads? Couldn’t make enough iPads to satisfy demand. And even the lowly iMac? Took too long to bake ‘em.

Cook emphasized the pent up demand. He wants you to think that all those unsatisfied customers are waiting, sitting on their hands (and credit cards) until Apple catches up. And I’m sure that’s true in some cases. But this was the holiday quarter, the quarter with Black Friday so named for as the day when the frenzy of sales pushes retailers into profits for the whole year. A lot of those iPads, iMacs and iPhones that were going under the tree (or the menorah), got replaced with something else, be it a Galaxy Tab, Coach briefcase or North Face winter running outfit.

For what it’s worth, I buy the explanation. I don’t think that the Apple gloom and doomers have it right, at all. This wasn’t the beginning of the end for Apple, not by a long shot. But irony of ironies, Cook aced the innovation, offered much sought after new products (maybe too many, introduced too close to the holidays, though) and then flunked the execution worse than Tom Brady’s fourth quarter comeback attempt against the Ravens last week. Ugly.

Notes:

¹”We did have significant shortages due to robust demand on both iPad mini and both models of the iMac that persisted the entire quarter. And we are still short of both of those today as the matter of fact. Additionally, supply of iPhone 5 which short to demand until late in the quarter and iPhone 4 was short for the entire quarter, we believe that we can achieve a supply demand balance on iPad mini during this quarter and on iPhone 4 during this quarter. On iMac, we are confident that we are going to significantly increase the supply, but the demand here is very strong and we are not certain that we will achieve a supply demand balance during the quarter.” -Tim Cook, Jan 23, 2013 conference call

 

I know Apple, Apple is a friend of mine. Lenovo, you’re no Apple

Lenovo CEO Yang Yuanqing made an interest declaration the other day. He’s going to split their PC business into two units, one that does basic stuff aimed at consumers and businesses and another one that will get the Thinkpad brand and shoot for the higher end. The “Think” brand is needed to better compete with Apple, he said. As someone who recently switched to a Thinkpad after more than a decade on Apple laptops, all I can say is that Lenovo has a lot of work if it wants to even approach Apple’s customer service. Don’t get me wrong — I love the Thinkpad hardware. But almost everything dealing with Lenovo has been suboptimal.

The whole thing reminded me of that classic put down Senator Lloyd Bentsen delivered to Dan Quayle back in the 1988 campaign: Senator, I served with Jack Kennedy. I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you’re no Jack Kennedy.

It starts at the start. Go to Lenovo’s web site and try to order a customized Thinkpad.

For the X1 Carbon, there’s a laundry list of features on the customizing list – CPU, display, graphics system, memory and so on., Slowly click your way through the list — there’s a delay between every click. Click, sigh, click, sigh. But it’s all a trick. Almost nothing can be customized on the X1. Not the CPU, not the display or graphics system. But they’re still all on the list. On most models, you can’t even upgrade the RAM from 4 GB to 8 GB. Why? What the…

Oh well. So you finally order and your new laptop arrives. Time to boot it up. It’s not quite as speedy as you expected and when it’s done you can see why. Crapware is everywhere. There’s a ton of Lenovo nonsense — taking over simple functions like the wifi settings, the battery, it’s own software update app. Why do I need all this? Then there’s the actual crapware. Nitro Pro PDF, Norton VIP Access, SugarSync. There’s a cost to users from all this crapware. After the first week or two, my machine couldn’t load any Windows updates, not even critical security patches. The Lenovo support boards were filled with angry customers and no answers. Eventually, the answer turned out to be that the Nitro crapware program was interfering with Windows Update. A patch would be available soon. Hello, I have a quicker fix, Lenovo – don’t install crapware on my new computer.

I paid extra for the extended three-year warranty. I got an email with a spreadsheet attached, which I had to fill out with my serial number, model number and other gibberish and email back to Lenovo to activate my policy. Why? They have all this information — they just took my order and sent me the machine. Maybe they have outsourced the warranty to some third party but why is that my problem?

I ordered right before the Windows 8 roll out. I did it on purpose so I’d get a machine with Windows 7 in case there were big problems with the newer version. After a couple of weeks, I was ready to upgrade. Buried on Lenovo’s site was a 3-page list of instructions, including a list of programs I should uninstall before updating. I followed all the steps and held my breath. Almost everything worked fine but later, looking at the device manager in the control panel, I could see a few hardware driver problems. Resolving all the problems took multiple visits to the support web site, running the Lenovo update program over and over and some additional fishing around on Google for advice. Not smooth.

Apple, obviously, makes none of these mistakes. The ordering and customization process on the web is simple, quick and easy. First boot is clean and quick. There is no crapware to remove because there is no crapware. Small system updates arrive as needed and install. Information about your AppleCare warranty arrives in the mail. And when it’s time for a major OS update, it too arrives via the system updates and simply installs.

Lenovo has great hardware chops but if they want to take on Apple in the high-end computer market, they’ve got to make some serious improvements.

Fail Fail Fail iPad

Checking out the 20 inch luggable tablet from sony“If the heap of new products that Microsoft showed here Sunday is any indication of the future of computing, the desktop PC is old news,” or so read the lead story from the annual Consumer Electronics Show in Las Vegas. Yeah, desktop sales are tanking. Tablet sales are exploding. Yeah, desktops are old news, right on. Oh wait, that’s the lead story from PC World’s report on CES in November 2000, more than 12 years ago.

I offer this little historical gem as a bit of perspective and, perhaps, counter-prediction to much of the snarky and dismissive commentary emanating from this year’s CES. Sure, there are some great targets for comedy, like bragging about a phone you can take in the shower (“The Xperia Z can even survive being dropped in the toilet” – great, does it dispense hand sanitizer after that?). But with the entire computer industry in the midst of a transition from boring old form factors to exciting new varieties, that ugly dog you laugh at today may become best in show in a few years.

Looking back at earlier efforts to build tablet computers, you can see the ideas and the technologies evolve. Slowly, the expanding computing abilities of tablets enabled more and better uses and at more affordable prices. The iPad only came along after many, many duds and failures, including even from Apple (although the ill-fated Newton did produce one of the funniest bits ever in Doonesbury).

It wasn’t obvious from the start which features would be most compelling. Bill Gates’ original vision focused on a hybrid of the features of computer applications and a pad of paper. In the first couple of years, the big manufacturers all got on board and built tablets but in a dizzying array of different forms — folding tablets, hybrid tablets with keyboards, many of the same form factors that have shown up again this year at CES, oddly enough. None had mobile broadband and most weighed as much or more than laptops.

I’m not trying to argue that we will all one day be playing virtual air hockey on our computers. But there is some merit to the larger tablets and luggable touch screen computers that will only increase as they get lighter and more powerful.

The other day, my eight-year-old daughter and I were in a local Best Buy perusing one of these weird new form factors — Sony’s Tab computer. That’s it pictured at the top of the post.  It’s your basic all-in-one desktop computer with a 20″ screen. But by adding a small battery and touch sensors, Sony’s also created a giant, luggable tablet. It weighs about 12 pounds and the battery lasts for only an hour or two, but you can see where it’s going. My daughter enjoyed the drawing program, sorting photos and editing photos was a whole new experience and it’s a fine way to watch a movie.

So maybe it’s time to reconsider that most infamous 2001 prediction Gates made about tablets — “within five years I predict it will be the most popular form of PC sold in America.” After being claim chowdered to death on that one, now it seems he was just a bit optimistic on the timing.

 

Putting a close on a great 2012, blogwise

As 2012 winds to a close, I’m looking back at another year on Gravitational Pull dot net, my eighth writing this blog. This year, I suspended my experimental commentary blog, The Orange View, in an effort to write fewer and better stories here. Some months worked out better than others — I had no posts in January, a bunch in February and March, none in April, few in June and July (took a long European vacation in there) and then decent productivity for the rest of the year. Traffic was up 54% from last year and more than double 2010, according to the unique visitor count on Google Analytics, though still far short of what I’d need to do this full time, sadly.

What were people reading about in 2012? Here are the 10 most popular posts I wrote in 2012:

  1. One of these things is not like the other: Apple store, Microsoft store
  2. John Gruber spills 2000 words on the importance of pixels and typography and the awesomeness of the new MacBook Pro with Retina display without ever mentioning that most apps look like ass and relegating to a footnote that the fifteen inch laptop size is a jack of all trades master of none that fits few people’s needs
  3. Great Google Voice apps for Android and freedom from cell phone plan tyranny
  4. A Mac user’s travels in Ultrabook land
  5. It was the worst of times, it was the worst of times: Tough to buy a new Mac
  6. History will show journalists missed the big Amazon story today: ebook discounting is back
  7. The great Google storage price hike of 2012
  8. A longtime Mac user’s first impressions of the Thinkpad X1 Carbon
  9. Finally, serious Lightroom photo syncing on the iPad – no iPhoto required
  10. A Day in the Life: iPhone versus Nexus

I’ve excluded from the list my fixed pages as well as the ever-greens, like Review: Top 10 reasons why Civ V is awful (updated), written more than two years ago but still drawing plenty of traffic (and grouchy comments). Lately, a bit of research I did about which parts of the 2010 Facebook movie, The Social Network, were accurate and which less so has drawn a lot of traffic, too. Overall, though, traffic from search engines suddenly dropped quite a bit just in the past month or so for unknown reasons — maybe Google tweaked their algorithms?

You can also see the rise and fall of various operating systems in the visitor data from WordPress. After many years as #1, Microsoft Windows saw a sharp decline in its share of visitors and was surpassed by those using the Mac. The Mac usage share actually also declined, but much less than Windows. And iOS? It’s share doubled and now equals almost half the share of either of the desktop OSs. Crazy. Android’s share almost doubled but from a much smaller 2011 base so it’s lagging well behind iOS.

Amazon is discounting ebooks, whenever it’s allowed to, unlike Apple

Some really silly journalism covering the ebook marketplace today. It starts with this really bad, no good article in the New York Times by David Streitfeld. The headline gets off to a completely wrong start — “Little Sign of predicted E-Book Price War” — and it goes down hill from there, as Streitfeld asserts there was going to be a “ferocious price war over ebooks.” Who was ever saying that? Of course, it was the made-up nightmare scenario that publishers were screaming about after they got sued for illegally conspiring to raise ebook prices. Streitfeld never explains that and actively seeks to mislead the reader, writing those expectations were “fueled by Amazon.” It’s a bad set-up that only gets worse.

Next, he asserts that prices have “selectively fallen but not as broadly or as drastically as anticipated.” No data, not a shred, is offered to back up this bold assertion, not even the usual misleading average price of all best-sellers publishers have sometimes cited in the past (an average which included all the sales of 99 cent independently published ebooks). Even a brief look at Amazon’s prices compared with the high price leader, Apple, makes it pretty obvious that a ton of discounting is occurring. It is limited because two of the big six publishers are still banning discounts and another, Penguin, just settled and is not yet allowing discounts, either. But on ebooks where Amazon can discount, it is doing so to the tune of 15% or more.

Compare, for example, ebook prices of the New York Times fiction best-seller list on Amazon and Apple. On four of the top 10, both carry the ebooks at $12.99. And, no surprise, in all four cases the publishers are still banning all discounting. Another older book is priced at $9.99 on both and, again, discounting is banned. On the other five, Amazon is discounting every single one, with the average price $10.93 versus $12.19 for Apple. It’s the same if you go deeper down the list or look at non-fiction.

The biggest laugh-out-loud line comes next:

“The $10 floor that publishers fought so hard to maintain for popular new novels is largely intact.”

See the old switcheroo there? Publishers hated the $10 price — the whole point of their illegal, price fixing scheme was to kill the $10 price. They weren’t trying to maintain a $10 floor — they were trying to push the “floor” up to at least $13 to $15. And that effort has failed. Amazon itself wasn’t trying to get below $10 for best sellers. In fact, even before the illegal price fixing, Amazon often priced best sellers between $11 and $12, just like it’s doing now. Jeff Bezos was going around back in 2009 and saying he intended to make a profit on ebooks as a stand alone business. And that’s right back where Amazon is pricing. Not to mention that we still don’t have a true free market for ebooks as even publishers forced to allow some price cutting retain the ability to limit the amount of overall discounting. Also left out of this narrative is the massive growth of independently published ebooks at prices well below $10. The price fixing conspiracy certainly fed the growth of this part of the market and gave Bezos plenty of cheap offerings for Amazon customers looking for bargains. That wasn’t true back when the Kindle first started.

Streitfeld then picks the one book on the best seller list that’s discounted the least by Amazon as his example. Prices of the other discountable titles are all cut by more. Lame. My favorite example, if we’re going to cherry pick, is JK Rowling’s new novel, A Casual Vacancy, which the publisher was selling for $18 as an ebook, now cut to $12.74 by Amazon.

Then come a couple of wacky theories to explain the lack of discounting, which obviously have to be pretty wacky since they are meant to explain a non-existent phenomenon. It’s the slow down in ebook buying growth rates. It’s the demise of Borders (a true WTF). It’s Amazon holding back. Blah, blah, blah.

I love the next bit where Streitfeld cites an ebook market forecast from two years ago as “typically ebullient.” It’s James McQuivey calling for $2.8 billion of ebook sales in 2015. Crazy? Insane? Hmm, maybe right on. Ebook sales last year hit $2.1 billion and up some 34 percent this year, according to Streitfeld, thus reaching — wait for it — $2.8 billion.

The finish is, of course, the most wrong: “this might be as cheap as ebooks will ever be.” That’s pretty unlikely given that Penguin is about to allow discounting again and Macmillan is being prosecuted in court for its recalcitrance.

A second, slightly better piece from Laura Hazard Owen needs a few corrections, too. She buys into the data-free assertion that prices haven’t fallen and the headline is off-base. But she’s correct to point out that not all ebooks were sold at $9.99 before the wave of price fixing in 2010 — though I’m pretty sure she has previously gone along with publishers assertions that Amazon cut everything to $9.99 in the bad, old days (I’ll have to double-check). And she explains that Amazon’s ability to discount now is still limited, as I explained above.

Ironically, it’s the element of competition that she seems to get wrong. Apple isn’t discounting to match Amazon. It’s sticking with high prices. So whereas when Amazon was the only major player, it used $9.99 as a kind of promotional advertising, a psychological sweet spot, now it has a simpler task of undercutting the actual prices of the competition. No need for psychology, there’s a whole ebook marketplace consumers can see. And in the new market where Apple likes to sell for at least $13 when it can, a discount to $11 looks pretty enticing.

But Owen doesn’t get it as she writes: ” These retailers have all shown themselves willing to match Amazon’s price drops on ebooks. The prices aren’t always exactly the same across stores, but they are at least close enough that there is little incentive to switch retailers if you’re already using a platform you like.”

That’s the chuckler in her piece. Prices are not that close. And there’s less platform lock in than ever — it’s easy to switch around. Amazon offers free ereading software for almost any platform including the iPad, iPhone and Mac. Ironically, it seems to be the higher-priced competition that’s having the biggest impact on Amazon’s pricing, creating a price umbrella that has eased the pressure to price at $9.99.

One of these things is not like the other: Apple store, Microsoft store

Boston Apple store I was an hour early for dinner with fabulous wife Whitney Connaughton and friends last Friday so I thought I’d tool around the local Apple store for a bit. The Back Bay Apple store in Boston is a thing of beauty — and it only took two years to get Boston’s historical commission to approve the design.

It’s a typical big format Apple store. I took some cool pictures and got to meet Ron Johnson back in 2008 when it opened. Spinning off the central spiral staircase, the store is spread over three floors with computers mostly the focus on one, iPhones, iPods and accessories on two and training space and more accessories on three. I needed to get Whitney a keyboard for her iPad and selected this lovely one from Logitech. I was surprised to discover that there were no wandering, wireless cashiers in the store. I actually had to go back down to the second floor and wait in line — the horror — to get to a regular register to pay.

One aspect was completely consistent with every other Apple store visit I’ve ever made. Not only were there tons of people in the store, there were tons of people buying stuff — all kinds of stuff — in the store. It’s one of those amazing retail chains like Target, Costco and Whole Foods where there just seems to be something in the air that makes people want to empty their wallets and purses at high speed.

Mission completed, I crossed the street to the Prudential Center mall where I was surprised to see, right at the very center of it all and in the highest foot traffic spot, a brand new Microsoft store. On first glance, it looked just as busy as the Apple store.

Boston Microsoft store

I cruised around the store and noticed a few things right away. Although well staffed and attractive, it was a lot more cramped and harder to move through than any Apple store. Also, the tables featured a wide mix of brands. This isn’t a comprehensive list, but I noticed laptops from Acer, Vizio, Samsung and all-in-one type PCs from Lenovo and HP, I think. Most were running Windows 7 although there were a few computers and tablets running Windows 8 to try — not to buy. They definitely did not have the Lenovo X1 Carbon I have my eye on, however. Phones from Nokia and others were all running older versions of Windows Phone, not the new 8 system.

There were also XBox stations set up at each end of the store and lots of people were playing or watching others play. All of the accessories, like laptop cases and boxed software, were set on shelves at the two ends of the store. Yep, right below the XBox television screens thus requiring a potential customer to get in way of all those people focused on the XBox playing. So the physical layout left a lot to be desired.

But the punchline, of course, was that in the 20 minutes I spent perusing the store I did not see a single person buy anything. Not one thing. Why would that be? I’m open to anyone’s theories. A couple of things occured to me:

  • Lack of consistency: At Apple, distinct areas of each store are dedicated to one thing, such as iPods or laptops. In each area, there’s just a whole bunch of the same machines to play with. The message is pretty clear and there’s not much comparing to be done. At Microsoft, too much was jumbled together and yet everything was split apart. I am in the market for a laptop. Should I go to the table called “laptops,” “ultrabooks” or “entertainment laptops”? And each table had a half dozen compeletly different models each with its own tiny sign filled with tiny print showing the specs.
  • Poor layout: As I mentioned above, everything felt cramped, packed together and in the way of everything else. I went to look at the laptop cases but quickly realized I was blocking the view of some people watching an XBox player on a big screen TV on the wall above where the cases were. Embarrassing. And where would I pay? No idea. It made me feel confused. So cramped, embarrased and confused. Not emotions I associate with a positive buying experience.
  • Mixed branding: People see Apple ads on TV or otherwise decide they want to buy an Apple product. So they head to an Apple store. Makes sense. I see a Samsung ad on TV. Where do I go? Is there a Samsung store? What do they have to do with Microsoft? Is Samsung’s Android phone there? I want a Lenovo laptop running Microsoft Windows. It’s actually not here.

Other thoughts?

p.s. Dinner was at Bin 26 Enoteca, an upscale Italian place on Charles Street near the Boston Common with good food and a ridiculous wine list. Recommended.

A Casual Vacancy, a serious rip off?

There’s a bit of a surprise in store for you if you go to buy the electronic book version of the new J.K. Rowling novel, “A Casual Vacancy.” Despite it’s best-seller status, the ebook’s price is not $9.99 or $12.99 or even the high-end of best-sellers brought to you by the price fixing cabal of $14.99. Nope. At Amazon’s Kindle store it’s $17.99. And it’s the same price at the Google Play store, at Barnes & Noble and at iTunes.

How could this be? After all, the Justice Department smashed the price fixers and three of the big publishers, including Hachette, which sells the new J.K. tome, agreed to settle all charges and allow discounting to resume. The answer, it seems, is that “A Casual Vacancy” hit at just the wrong time.

Under the settlement, Hachette almost immediately had to cancel its contract with Apple’s iBooks store, the one that would have automatically priced the ebook lower while banning any discounting. But it didn’t have to renegotiate its contracts with others ebook sellers at the same pace. Laura Hazard Owens at PaidContent says it could be 60 days or so before new deals must be in place with other retailers. Once the deals are done, Amazon will be allowed to discount again. The giant online book seller already has a new deal with HarperCollins, for example, so ebook versions of Mitch Albom’s “The Time Keeper” are only $9.99 on the Kindle. But until all the deals are done, only Apple has price flexibility and it has little interest in discounting when all its competitors must sell at the high, Hachette-dictated price.

Some have gone so far as to argue that the high price shows consumers will be hurt by the DOJ price fixing settlement (see some of the comments on the PaidContent piece linked above). But when the only ebook retailer given price flexibility is the one that was among the accused price fixers and the one that hates to discount, it doesn’t prove much of anything.

Still, JK’s ebook is selling. It’s number 2 among paid ebook best sellers at the Kindle store as of right now. For a book with such high expectations, it’s hard to say if that’s actually a success or a disappointment. But assuming discounting resumes shortly, many folks may be holding off until the $9.99 version arrives. And while they wait, they’ve got plenty of time on their hands to ding the book with one-star reviews, it looks like.

UPDATE: On October 13, I checked again and the publisher on its own has cut the ebook price to $14.99. That may be because the book was slipping down the ebook best seller list at the original price. Then, at the end of December, with discounting back in Amazon’s control, the ebook price was down to $12.74.