Another Questionable Bloomberg Report on iPhone Demand, What’s Going On With Bloomberg?, Impact on AAPL (Daily Update)
Hello everyone. Today’s update will be dedicated to discussing Bloomberg's new report on iPhone 14 demand.
Another Questionable Bloomberg Report on iPhone Demand
Over at Bloomberg, here are Debby Wu and Takashi Mochizuki:
“Apple Inc. is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, according to people familiar with the matter.
The Cupertino, California-based electronics maker has told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family by as many as 6 million units in the second half of this year, said the people, asking not to be named as the plans are not public. Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the prior year and in line with Apple’s original forecast this summer, the people said.
Demand for higher-priced iPhone 14 Pro models is stronger than for the entry-level versions, according to some of the people. In at least one case, an Apple supplier is shifting production capacity from lower-priced iPhones to premium models, they added."
It’s shocking how similar this Bloomberg report is to one that the publication pushed out 10 months ago.
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John Mayer vs. Apple Watch Ultra, Apple Watch Ultra’s Appeal, Apple and Oprah End TV+ Deal (Daily Update)
Hello everyone. We will start today’s update in Apple Watch land. Let’s jump right in.
John Mayer vs. Apple Watch Ultra
John Mayer is known by most as a musician. However, in the mechanical watch world, he is considered a trendsetter / influencer.
“Anyone who follows John Mayer on Instagram is accustomed to seeing watches on his feed. Typically, they are very nice, very exclusive watches: Rolex ‘Rainbow’ Daytonas, the new Audemars Piguet Royal Oak with gems set in a design that mimics an equalizer, one of Patek Philippe’s impossible-to-find sport watches. But he shared an unexpected message on Wednesday.
‘Did Apple just make….a tactical watch?’ he wrote. ‘Been wearing the Apple Watch Ultra for a week…’—build that suspense, John!—‘and it’s great.’ This news probably registered as a sizable earthquake in Geneva. Because Mayer is not just any well-heeled and avid collector, he is likely the watch world’s most prominent tastemaker. When he wears a green-and-gold Rolex Daytona, the value shoots up in price and is now known as ‘the John Mayer.’ Spotting a certain Royal Oak on his wrist can inspire dealers to go out and snap up a couple dozen of that exact piece. Certainly, Mayer’s co-sign won’t have that sort of effect on the Apple Watch, which is already bought up in higher quantities than what the entire Swiss watch industry is moving combined. But given the Apple Watch’s unique place in the watch universe—worn by nearly everyone, but nobody’s idea of collector bait—Mayer’s endorsement is a huge deal."
To be exact, Apple is on track to sell three times as many watches as the Swiss will export in 2022 (my estimate).
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Central Banks Rush to Raise Rates, Stronger Dollar’s Impact on Apple, Apple Music to Sponsor Super Bowl Halftime Show (Daily Update)
Hello everyone. Welcome to a new week.
Let's jump right in with a story that jumped out at me over the weekend.
Central Banks Rush to Raise Rates
Here’s the WSJ:
“Central banks around the world moved Thursday to combat the effects of a soaring dollar and rising inflation, joining the Federal Reserve in risking a recession to rein in climbing prices.
In a flurry of central-bank meetings from Norway to South Africa, many raised rates by larger-than-expected margins in a day that analysts at ING billed as ‘Super Thursday.’
The Bank of England raised its key interest rate for the seventh consecutive time on Thursday. Before the news came out, the British pound briefly touched its lowest point in 37 years against the dollar before recovering some of its losses to reach $1.13.
Even some countries that didn’t move rates—the Bank of Japan left its policy rate at its previous low level—took other action to ease the growing inflation pressure.
Japan said Thursday it intervened in currency markets to sell dollars and buy yen, the first such intervention in 24 years, to slow the recent fall in the Japanese currency. The yen fell to 145.87 to the dollar, its weakest level since 1998, before the intervention. It then surged to hit 141 yen, though still far off the 115 yen mark at which the dollar was trading earlier this year.”
More aggressive central banks would be a positive for Apple from the perspective of currency swings. Of course, if higher rates lead to slower economic growth around the world, Apple is exposed. However, Apple's competitors are more vulnerable to weaker sales due to slowing economic growth.
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Disney CEO Talks ESPN’s Future, Apple’s Sports Play, Apple Watch Ultra Reviews (Daily Update)
Hello everyone. Let's begin today's update in the live sports world.
Disney CEO Talks ESPN’s Future
Last week, Disney CEO Bob Chapek, who recently had his CEO contact extended by three years, sat down with CNBC’s David Faber to talk about ESPN and where live sports goes from here.
Here’s Chapek:
“We're hard at work in our offices, both on the east coast and the west coast, figuring out how we make it more friction-free sports environment for our viewers. And obviously, some of these things take the cooperation of a lot of the people in the ecosystem, whether they be the leagues, other broadcast partners, but we foresee a world where ESPN, even more than ever, is the pinnacle of all your broadcast needs and we’re excited to continue working on that and at some point, when we’re all fully backed, we’ll come back.”
Chapek referred to four broad working areas as to where Disney is focusing ESPN's energy:
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Peloton Launches Peloton Row, What Peloton Should Do With Peloton Row, Spotify Launches Audiobooks (Daily Update)
Hello everyone.
Let's jump right in.
Peloton Launches Peloton Row
My approach regarding analyzing Peloton is changing.This week’s Inside Orchard essay was focused on why it’s now time to begin writing Peloton’s eulogy. We should no longer look at Peloton as a threat to Apple or Apple Fitness+.
However, there are still interesting lessons and notes to observe with Peloton. Specifically, where the hardware versus software balance is found with connected fitness in mind. Peloton believes fitness equipment and software integration are key. My stance is software is vastly more important than fitness equipment when thinking about connected fitness. Apple’s HW/SW/services mantra integration isn’t applicable to every consumer-facing product vertical.
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The iPhone 14’s Surprise Redesign, iPhone Longevity, Changing iPhone Upgrading Trends (Daily Update)
We kick things off with Neil’s thoughts on iFixit’s iPhone 14 discovery. The discussion then expands to take a broader look at how iPhone longevity impacts Apple and the iPhone installed base. We also look at what Neil sees as changing dynamics found with iPhone upgrades. The update goes over Neil’s estimate of where the iPhone upgrade cycle had been and where it is likely headed.
September 20th, 2022: The iPhone 14’s Surprise Redesign, iPhone Longevity, Changing iPhone Upgrading Trends
Hello everyone. Today’s update will have an iPhone focus. Let’s jump right in.
The iPhone 14’s Surprise Redesign
iFixit is a publication dedicated to educating people on device repair. The site is known for its device teardowns.
In recent years, iFixit has moved more into advocacy and opinion, presumably because it’s good for business. iFixit makes money by selling device parts, replacement tools, and repair kits. This means it’s in their interest to talk up what it views as device repair injustices – that’s putting it nicely as to what they have been doing.
With that said, the following post from iFixit caught my attention.
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Apple and Enhanced Reality Portals, Thoughts on Apple Watch Sales/Preorders, Apple Passes on LIV Golf (Daily Update)
Hello everyone. Welcome to a new week.
Let’s jump right into today’s update.
Apple and Enhanced Reality Portals
Last Thursday’s update regarding Apple and satellites concluded with the following:
“My suspicion continues to be that satellite connectivity is ultimately a story about device connectivity. Apple is building an ecosystem that will consist of billions of devices. Take secure, low latency connectivity and combine it with hundreds of millions of cameras sold each year and Apple will be able to build location layers and graphs that can be used to create enhanced reality portals.”
Enhanced reality portals can be thought of as playgrounds for adding context to our surroundings.
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Apple Buys Satellite Capacity, Apple and Starlink, Apple’s Satellite Ambition (Daily Update)
Hello everyone.
Happy Thursday.
One quick update regarding Dark Sky, the popular paid iOS weather app acquired by Apple in 2020.
The app will be shut down on January 1st, 2023. The following message is now posted within the app:
Apple's acquisition set off a wave of worries and angst in weather app land. Check out the daily update from April 1st, 2020 for my detailed thoughts on the acquisition.
Since then, Apple announced that it was including Dark Sky’s tech within its own weather app while making the Dark Sky API available to third-party app developers via WeatherKit. This matched my expectations for what Apple would do. Dark Sky is looking like a very intelligent acquisition at what was likely a very attractive price.
Apple Buys Satellite Capacity
“Apple Inc on Wednesday selected Globalstar Inc as its partner for a feature that would allow iPhone 14 users to send emergency messages from remote locations.
The tech giant said it was dedicating $450 million from its advanced manufacturing fund toward satellite infrastructure to support the feature. GlobalStar will receive the majority of the funding, but the iPhone maker did not specify which other players will receive the rest and in what form.
While Apple will pay for 95% of the approved capital expenditure for the new Globalstar satellites needed to support the service, Globalstar said it would still need to raise additional debt to construct and deploy the satellites.
Globalstar, which makes low-earth orbit (LEO) satellites, said it had tapped investment bank Goldman Sachs & Co and expects to complete a financing in the fourth quarter of 2022.
LEO satellites operate 36 times closer to the earth than traditional ones and hence take less time to send and receive information, leading to faster broadband service even in remote areas."
According to Globalstar, which has dozens of LEO satellites and 24 ground stations, its deal with Apple is “transformational.”
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Thoughts on iPhone 14 and 14 Pro Pre-orders, Garmin Trolls Apple, Apple Watch Ultra Battery Life (Daily Update)
Hello everyone.
One clarification regarding iPhone 14 Plus. In yesterday’s update I wrote:
“The iPhone 14 Plus finds itself in a pricing canyon. It’s the third-most expensive iPhone, after iPhone 14 and iPhone SE. However, it’s just $100 less than the 6.1-inch iPhone 14 Pro.”
That should have said "It’s the third-least expensive flagship iPhone.” The broader point is unchanged - the iPhone 14 Plus finds itself in a weird spot within the iPhone line.
With that, let’s jump right in.
Thoughts on iPhone 14 and 14 Pro Pre-orders
Here is the current delivery dates for the iPhone 14 flagships (U.S.):
iPhone 14 (Sept 20 to 21) – available Sept 16th
iPhone 14 Plus (Oct 7) – available Oct 7th
iPhone 14 Pro (Oct 13 to 20) – available Sept 16th
iPhone 14 Pro Max (Oct 20 to 27) – available Sept 16th
Apple has embraced an underpromise and overdeliver mantra when it comes to delivery estimates for online orders. Delivery dates almost always end up being pulled forward. This may explain why delivery dates aren’t dependent on iPhone finish color or storage. Apple may be simply providing an estimated delivery range for each model that it is confident it will not just meet but exceed.
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Deconstructing Apple’s “Far Out” Presentation (Part 2) - Daily Update
Hello everyone.
In today’s update, we will wrap up my Apple event review. As a recap, last Thursday we went over my initial impressions regarding event highlights. Yesterday, we talked about the Apple Watch in greater detail. We will now go over AirPods Pro, Fitness+, and iPhone.
Before we jump into today’s update, there is one additional observation from attending the Apple event that was worth sharing.
I couldn’t help but notice how Phil Schiller was walking around the product demo area for what seemed like an extended period.
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Deconstructing Apple’s “Far Out” Presentation (Part 1) - Daily Update
Hello everyone.
Welcome to a new week.
We will continue my Apple event review. Last Thursday, we went over the event highlights that jumped out at me. Our attention will now shift to more granular topics.
In today’s update, we will focus primarily on Apple Watch. In tomorrow’s update, we will talk about iPhone, AirPods, and any other remaining topics that deserve to be talked about. Instead of just going through the laundry list of announcements, we will focus will on the why behind Apple's announcements.
Prioritization
Over on Apple's Events page, the company listed the following products/features unveiled at last week’s “Far Out” event:
iPhone 14 Pro (Dynamic Island / safety features / upgraded camera)
iPhone 14 (new Plus size model and better battery life / safety features / low-light photography)
AirPods Pro (ANC and adaptive transparency / personalized spatial audio / better battery life)
Apple Watch Ultra (rugged / capable)
Apple Watch Series 8 (“future of health” = advanced cycle tracking / Crash Detection / Workout app enhancements)
Apple Watch SE ("more capability and an even lower price")
Apple Fitness+ (will be available to all iPhone users)
For iPhone, cameras and processors were not positioned as the most important new features for this year’s flagships. Instead, additional screen real estate with the new Plus model and changes to Pro screens with Dynamic Island were the two big new features. Apple positioned
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Apple Event Highlights (Daily Update)
Hello everyone.
The plan is to go over some of the major highlights / takeaways from Apple’s “Far Out” event. We will focus on the details on Monday.
Let’s jump right in.
Attending the Event
This was the first full-blown in-person product unveiling that Apple has held in three years. WWDC was in some ways a trial run.
There were some changes from prior events.
Security was noticeably tighter with metal detectors in use for the first time (at least that I recall).
All visitors needed to submit a negative COVID test.
The presentation shown in Steve Jobs Theater was taped instead of taking live on stage.
The more interesting takeaway for me was how natural it felt to watch a taped presentation in Steve Jobs Theater. It felt just like any other prior event. Much of that was due to Apple’s taped presentations being superior to traditional onstage keynotes. Apple is able to do so much more from a production standpoint with taped presentations. Tim Cook went on stage at the beginning with a few words about how these events are ultimately about people coming together. There is much truth with that statement. Going forward, the taped presentation shown at Steve Jobs Theater format works. In many ways, it’s like a movie premiere.
About the Rumors
The Apple rumor beat has changed. Apple has seen success in going after leaks and security holes. Whatever remains doesn’t have the same kind of cohesiveness and punch as before.
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Thoughts Heading Into Apple’s “Far Out” Event (Daily Update)
Hello everyone.
As a reminder, this email is meant for Tuesday. It’s being published early to avoid some scheduling conflicts.
Let’s jump right in.
Thoughts Heading Into Apple’s “Far Out” Event
My expectation is that Apple’s “Far Out” event on Wednesday will primarily be an iPhone and Apple Watch event. That means those two product categories will receive the bulk of the presentation time and post-event analysis.
Given Apple’s expanding ecosystem and the company’s efforts at maintaining robust update schedules for its product line, it’s not unreasonable to assume we will also receive an update or two regarding other Apple products and services.
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Disney Considering Memberships, Apple One’s Strategic Value, More Details About Netflix’s Upcoming Ad Tier (Daily Update)
Hello everyone. Welcome to September.
As of now, my expectation is that Tuesday’s update will be published late on Monday (ET). It will be dedicated to going over my thoughts and expectations heading into Apple’s “Far out” product event.
Let’s jump into today’s update.
Disney Considering Memberships
Over at the WSJ, here are Jessica Toonkel and Sarah Krouse:
“Walt Disney Co. is exploring a membership program that could offer discounts or special perks to encourage customers to spend more on its streaming services, theme parks, resorts and merchandise, according to people familiar with the discussions.
The program would be somewhat akin to Amazon Prime, which offers advantages such as free shipping, discounts at Whole Foods and a complementary streaming video service for a monthly or annual fee, the people said. Internally, some executives have referred to Disney’s initiative as ‘Disney Prime,’ although that won’t be the name of the program, one of the people said.
Discussions at Disney are in the early stages. It couldn’t be learned how much the company would charge for membership and how long it would take to launch such a program.
By creating a membership program, Disney would be betting it could offer customers more value, prompting them to spend more on the company’s products and services, while providing Disney with a trove of information about their preferences.
The effort is supported by Disney Chief Executive Bob Chapek, who has been vocal both internally and publicly about the opportunity for Disney to do more to cross-sell to customers, the people familiar with the discussions said."
Disney provided a statement to the WSJ confirming that it is indeed exploring a membership program. The WSJ also claims that Disney has “studied” Apple One in terms of coming up with its own membership program.
My first reaction after reading this story this morning was “it’s about time.” My next thought was wondering if they would call it “Disney One” to signify having various Disney experiences available in one place.
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Apple Gives Up Didi Board Seat, Snap Announces Major Pullback, Gauging Snap as an M&A Target (Daily Update)
Hello everyone. We will begin today’s news with a Didi update. It’s been a number of years since we last talked about the ridesharing company in China. The discussion will then turn to Snap.
Let’s jump right in.
Apple Gives Up Didi Board Seat
Over at Bloomberg, here are Lisa Du and Mark Gurman:
“An Apple Inc. executive has left the board of Didi Global Inc., as the Chinese ride-hailing company struggles to regain ground it lost during Beijing’s crackdown on the country’s internet sector.
Adrian Perica, Apple’s vice president of corporate development, has resigned from Didi’s board, according to a one-sentence release posted on Didi’s website this month. Didi didn’t respond to requests for comment. Apple declined to comment.
The departure of Perica, who also heads Apple’s mergers and acquisitions strategy, follows a tumultuous year for Didi. Since the company went ahead with a US initial public offering against Beijing’s wishes in June last year, Didi’s app has been pulled from China’s mobile stores, preventing meaningful growth and erasing more than 80% of its market value.”
Here’s a screenshot of what may be the shortest press release I’ve come across to date:
It took nearly a month for a U.S. publication to notice the resignation.
Perica joined Didi’s board in 2016 as part of Apple’s $1B investment in the company at a $26B valuation.
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Roku Losing Flexibility, YouTube Quietly Unveils Podcast Homepage, Big Ten Passes Over Apple (Daily Update)
The following update was sent to members on August 30th.
Hello everyone.
One quick clarification and then a programming alert.
Clarification. Regarding yesterday’s discussion, Apple offers three months of TV+ with qualifying Apple hardware purchase. That is a promotion with specific language tied to availability and qualifications. Apple does not offer a blanket promotion in which Apple TV+ is given to free to all Apple device owners.
Programming Alert. Over at my other website, Inside Orchard, this week’s essay (Roku's Bad Bet) was focused on why I think Roku is experiencing fallout from one bad bet that it placed regarding its place in streaming. Inside Orchard is home to my perspective and ideas on the tech industry that don’t quite fit with Above Avalon. You can think of them as sibling sites. As a reminder, Above Avalon members can bundle an Inside Orchard subscription with their membership and receive a 50% discount in the process. Judging from the increasing percentage of members who have the bundle, it’s a pretty compelling offer.
In today’s update, we will begin with Roku. My focus is on the company’s most recent earnings report and a read-through to Apple.
Roku Losing Flexibility
Here’s Roku founder and CEO Anthony Wood in the company’s 2Q22 shareholder letter released at the end of July:
“In Q2, there was a significant slowdown in TV advertising spend due to the macro-economic environment, which pressured our platform revenue growth. Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market (TV ads bought during the quarter). We expect these challenges to continue in the near term as economic concerns pressure markets worldwide. In response, we took steps in Q2 to significantly slow both operating expense and headcount growth.”
The macro environment is serving as a cover for what is likely underlying deterioration in Roku’s business model due to changing industry dynamics. Instead of going over various numbers and percentages tied to 2Q22, here are three key takeaways from Roku's earnings release that jumped out at me:
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An Upcoming Flood of TV Content, Netflix Mulls Pricing for Ad Tier, Apple TV+ Pricing Strategy (Daily Update)
The following update was sent to members on August 29th.
Hello everyone. Let’s jump right into a new week of updates.
An Upcoming Flood of TV Content
“Since 2016, the veteran US television executive John Landgraf has been predicting the arrival of ‘peak TV’ — the moment when the number of new scripted shows reaches an all-time high.
The streaming boom has proved him wrong every time but he gamely made the prediction again this month, telling guests at the Television Critics Association press tour that 2022 would mark ‘the peak of the peak TV era’.
Landgraf, chair of Disney’s FX network, conceded that he could be wrong this time too. But there is little doubt that this autumn will present audiences with a flood of some of the most expensive television ever produced.”
It’s not good to be known as the prognosticator of peak TV. There is no question that streaming has led to the overall video pie getting larger. While we may see a temporary plateau in the number of scripted shows produced, betting on peak TV is basically betting against video. That’s not an attractive bet to me.
An offshoot to Landgraf’s “Peak TV” theory does intrigue me though.
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Apple Sends Out Event Invites to Media, Peloton Is Imploding, A Peloton and Amazon Tie-up? (Daily Update)
The following update was sent to members on August 25th.
Hello everyone. Let’s jump right in.
Apple Sends Out Event Invites to Media
Yesterday, Apple sent out media invites for an in-person event at Steve Jobs Theater to be held on Wednesday, September 7th. It’s been three years since Apple last held a full-fledged in-person product event at Steve Jobs Theater.
Apple’s approach to WWDC was likely a test run for what is in store on September 7th. Apple will welcome press/media/analysts/VIPs/employees to Steve Jobs Theater to enjoy breakfast/refreshments. Guests will then be led to Steve Jobs Theater where Tim Cook will get on stage to welcome everyone. This will be directly followed by Apple playing a taped presentation. Afterwards, the press will be able to check out the new products in the demo area. Apple may even start the taped presentation a few minutes earlier for guests to encourage press liveblogging on social media.
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Revisiting the HomePod Discontinuation, Sonos Earnings, Smart Speakers Getting Squeezed (Daily Update)
The following update was sent to members on August 24th.
Hello everyone. A good way to get back into the swing of things is to talk more about HomePod. The discussion will include a look at the latest earnings report from Sonos and a broader theory of mine regarding smart speakers.
Let’s jump right in.
Revisiting the HomePod Discontinuation
The most recent Above Avalon Report was dedicated to Apple’s HomePod discontinuation, a decision that is still surrounded by many unanswered questions.
In a development that likely deserves its own report, we have seen Apple very recently go down the path of discontinuing a few products (iMac Pro / iPod). While each discontinuation has its own story and surrounding circumstances (the company did embrace a product strategy shift a few years back), the HomePod discontinuation stands out to me as being the most peculiar.
Member reactions to the report came in swiftly. Some agreed with my experience that the HomePod was a very impressive product – one of the most impressive Apple has shipped in years. Others raised concerns with how their HomePod(s) produced a feeling of “never [being] in control of the device.” Additional issues cited included connectivity problems, headaches with needing to restart and update the units, and just an overall uncharacteristic unevenness in experiences. That last item is interesting as the HomePod, in addition to the HomePod mini, are indeed different products when thinking of how they are designed to be used in communal settings while Apple Watch, AirPods, iPhone, etc. are designed for one-to-one settings.
One comment in particular though stood out to me.
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HomePod: The Discontinuation That Still Has Unanswered Questions (Above Avalon Report)
An examination of the run-up, decision, and fallout related to Apple’s most curious product discontinuation.
Written by Neil Cybart
In March 2021, Apple discontinued the original HomePod with the stated reason of focusing on the HomePod mini. The decision was a curious one, not only because Apple rarely discontinues products, but also the HomePod mini is an all-around inferior product in comparison to the HomePod.
More than a year later, all of the questions related to Apple’s decision to discontinue HomePod remain just as valid today. The HomePod was one of the more impressive products Apple had shipped in years. The stellar music listening experience obtained by pairing two HomePods together remains an eye-opening experience. It’s hard to imagine Apple executives have replaced original HomePods in their homes with HomePod minis.
HomePod may be up there as the most questionable product discontinuation in modern Apple. In its quest to say no much more often than yes, the HomePod may have fallen victim to Apple’s focus culture.
The Stationary Smart Speaker Market
In the late 2010s, we experienced a stationary smart speaker mirage. Companies were using smart speakers to take advantage of an awkward phase of technology in which there didn’t seem to be any clear direction as to where things were headed.
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