Month: September 2013

Interview: EA‘s New CEO Pledges to Stay the Course

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By Ian Sherr

Andrew Wilson, an Electronic Arts insider, has been named as the company‘s chief executive. The Australian comes into the job during a period of dramatic transition for the industry, particularly as it looks forward to new videogame consoles being released in November, and the continually rising importance of mobile devices.

He spoke with the Wall Street Journal about his plans for the company. Edited excepts follow:

WSJ: Often, hiring an insider is a sign to investors that things aren‘t going to change much. What‘s the case at EA?

Wilson: It‘s a sign to investors that we believe our strategy is sound — that our focus on talent and our brand and our platform, our investment in new consoles, mobile, PC free-to-play and emerging markets are exactly where we need to be driving this company.

I wouldn‘t say it signals a lack of change because I think it‘s important that we are focused and we have a ruthless sense of execution against our plans ahead to ensure our continued success.

WSJ: What‘s your long-term vision for EA? How‘s it going to be different from today?

Wilson: There were a couple of factors that fed into this process. Inside the company, I‘m a known quantity. I‘ve had the great fortune of having worked at this company for over 13 years. I‘ve worked internationally, I‘ve worked in a number of areas of the company, but I grew up inside our studio system.

…

When I think about our vision for the future, we have a very strong strategy around the ongoing development of the most amazing teams in the world.

We have a tremendous pipeline of intellectual property, both current intellectual property and new intellectual property, and we have been making investments against our digital platform that in my vision for the company moving forward will really start to pay dividends.

 

To read the rest of the story, either contact me directly or read more online at the WSJ: here. (subscription required)

 

(Published September 17, 2013, @ WSJ.com.)

Why Apple Has Trouble Keeping Its Secrets

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By Ian Sherr

In one of his first interviews after becoming Apple‘s chief executive, Tim Cook vowed to double down on secrecy. It seems to be a hard promise to keep.

The company‘s product launch Tuesday had the typical Apple flair and flashes of excitement, but there were few surprises associated with the two new iPhones unveiled by Cook and his lieutenants. Keeping product details quiet has always been a challenge for the company and its competitors, but a predictable trickle of leaks turned into a torrent of details about its latest offerings just before the event.

Rumor blogs and websites devoted to writing about every step Apple takes published a stream of photos, videos and detailed descriptions of the two gadgets for months leading up to the event — including features like the addition of fingerprint-scanning technology, the new iPhone 5S color and the new chip that can process 64 bits of data at a time.

Websites even posted photos of the packaging for Apple‘s low-cost iPhone 5C, as well as video tours of its design.

An Apple spokesman declined to comment for this article. But company executives tried to play up the positive attributes of pre-event publicity Tuesday.

“Some of you may have seen some shots on the Web, and that‘s cool, because people are excited,“ said Phil Schiller, Apple‘s senior vice president for worldwide marketing.

Of course, companies have been known to try to orchestrate such excitement by planning leaks, not that any evidence has emerged to suggest Apple tried that tactic this time. In any case, the stock market reacted negatively, driving Apple shares down nearly 6% in recent trading.

Analysts attributed the drop largely to higher pricing than they expected on the new iPhone 5C, which could limit Apple‘s ability to expand its market share in emerging countries.

One major reason controlling product secrets has become harder is the vast and growing number of people now involved in designing and making consumer devices, experts in managing company supply chains say. In Apple‘s case, participants range from engineers at its Silicon Valley headquarters to the young, relatively low-paid workers on the assembly lines at contractors in China, which pump out millions of devices each quarter.

“When they‘re paying employees dollars a day, they‘re not going to pay the kind of security it would take to make it air-tight,“ said Pierre Mercier, a partner and head of supply-chain efforts at Boston Consulting Group.

 

To read the rest of the story, either contact me directly or read more online at the WSJ: here. (subscription required)

 

(Published September 11, 2013 @ WSJ.com.)

Apple Plans to Ship Less-Expensive iPhone to China Mobile

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By Daisuke Wakabayashi, Lorraine Luk, Ian Sherr and Paul Mozur

 

Apple Inc. is preparing to ship iPhones to China Mobile Ltd. , people familiar with the matter say, an arrangement that would significantly increase Apple’s distribution in the world’s biggest smartphone market.

A deal would cap years of negotiations between the two companies. Apple has tried to hammer out an agreement with China’s largest wireless carrier that has 700 million subscribers, seven times the size of the U.S.’s largest carrier Verizon Wireless. Greater China is Apple’s third biggest market after the U.S. and Europe in terms of sales.

On Tuesday, Apple will hold an event at its Cupertino, Calif. headquarters, where it is expected to unveil two new iPhones. People familiar with the matter have said Apple is shipping a new high-end model and a cheaper version this month.

Apple has asked Foxconn, its contract manufacturing partner, to add China Mobile to the list of carriers slated to receive a new low-cost iPhone, one of these people said. It isn’t clear if the two sides have signed an official agreement or when the phones would be delivered.

The decision to offer a cheaper iPhone to China Mobile, one of the world’s last major operators that doesn’t carry Apple’s smartphones, comes at a critical moment for Apple. The iPhone, Apple’s best-selling product, is losing share to competitors including Samsung Electronics Co. and Apple is wrestling with the perception the company is starting to lose its innovative touch.

Apple’s sales in Greater China fell 14% from a year earlier to $4.6 billion during its fiscal third quarter ended June 29. In the June quarter, Apple’s China market share fell to 5%, ranking it seventh behind market leader Samsung, which had 18%, and a cluster of domestic manufacturers such as Lenovo Group Ltd. and Huawei Technologies Co., according to data from research firm Canalys.

China represents a significant growth opportunity for Apple, a comment Chief Executive Tim Cook made in April citing the large number of potential first-time smartphone buyers there. At the time, Apple has also pledged to double the 11 stores it has there in less than two years.

Overall smartphone shipments in China are estimated to rise 84% to 352 million units this year, or more than double that of the U.S., before increasing to 421 million units in 2015, according to research firm Canalys. China overtook the U.S. as the world’s biggest smartphone market last year, making it all the more important for Apple to have more access to that market.

Apple was initially reluctant to bring its iPhone to China Mobile’s unique and relatively unreliable third-generation network that slowed download speeds and made producing phones for the carrier more expensive, according to a person familiar with Apple’s thinking. Meanwhile, China Mobile bristled at Apple’s insistence on sales volume guarantees, a person familiar with the talks said.

Another issue that has hampered Apple’s success in the country has been the phone’s price, which is considered expensive for a majority of consumers, particularly when compared with domestic brands offering a product with similar technical specifications at a fraction of the price. Whereas U.S. carriers provide subsidies to lower the upfront costs of purchasing an iPhone, Chinese carriers’ subsidies kick in later as refunds that can lower monthly phone bills. This does little to ease the initial outlay for a new phone.

But the two companies are now in a position where they need each other.

 

To read the rest of the story, either contact me directly or read more online at the WSJ: here. (subscription required)

 

(Published September 6, 2013 in The Wall Street Journal.)

Apple Tests iPhone Screens as Large as Six Inches

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By Ian Sherr, Eva Dou and Lorraine Luk

As Apple Inc. prepares to unveil both a new high-end iPhone and a cheaper version for the first time next week, it is already working on something bigger.

The electronics giant has begun evaluating a plan to offer iPhones with screens ranging from 4.8 inches to as high as 6 inches, people familiar with the matter say. That would be a sizable leap from the 4-inch screen of the iPhone 5 released last year, and, at the upper end, would be one of the largest on the market.

Such plans signal further that the Cupertino, Calif., company is shifting its smartphone strategy as it searches for new engines of growth, and as competition with Samsung Electronics Co. intensifies.

The Korean rival has taken a commanding lead in smartphone market share in part by offering an array of devices at different prices and sizes. On Wednesday, Samsung unveiled the Galaxy Note 3 with a screen measuring 5.7 inches, a size that places the device in a category of hybrid phone-tablets.

It is unclear whether Apple will ultimately choose to follow a multi-size, multi-device strategy beyond shipping a new lower-cost model for the first time later this month. The company often tests different devices and configurations before choosing a course.

But people familiar with the company’s internal deliberations and plans indicate it appears more willing to move ahead than in years past. Component suppliers say Apple already began testing larger screens for iPhones in recent months. Apple has been particularly interested in recent tests for a 4.8-inch screen, these people say.

The screen sizes of the two iPhones that Apple is unveiling next Tuesday aren’t expected to change, people familiar with the matter have said.

An Apple spokeswoman declined to comment.

A multi-size strategy would echo Apple’s approach to the iPod, as that once-groundbreaking product line matured. Broadening iPhone offerings would also allow Apple to address a threat from Samsung: growth outside the U.S., where Samsung and rivals like Lenovo Group Ltd. are still expanding. Apple Chief Executive Tim Cook said in April the company sees a “significant opportunity in China” with an unusually large number of potential first-time smartphone buyers there. Increasing sales in the country could also help Apple reverse stalled revenue growth and contracting profits, analysts say.

Samsung and other competitors have released numerous products in different sizes and prices in order to cater to a broad swath of customers, particularly in India and China. Apple will for the first time begin shipping two new smartphone products this month, people familiar with the matter say; Samsung alone has released more than half a dozen around the globe so far this year.

 

To read the rest of the story, either contact me directly or read more online at the WSJ: here. (subscription required)

 

(Published September 5, 2013, in The Wall Street Journal.)