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back to article Apple to maintain phone profit lead through years of 'enormous transition' – report

Some observers have said that the high-profit party is over for Apple's iPhone now that the global smartphone market is becoming saturated, but the market researchers at IDC would beg to disagree. IDC projections of smartphone average selling prices through 2018 – graph There are low-cost Android phones and expensive ones – but …

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Silver badge
Holmes

History says otherwise

Apple thought they could sell computers at a premium while the rest of the world was in a race to rock-bottom prices for PCs, and Apple very nearly went out of business with that model. Commodity Wintel hardware destroyed their business model, and they were nearly dead by the late 90's.

I think they are facing a much greater loss than 0.5% of market share if they continue to focus solely on high-end, high-dollar smartphones, in the same way they lost massive market share to the PC market.

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Re: History says otherwise

If you think for a second that Apple are betting the future of their company on mobiles you're a [puppies] [rainbows].

Apple's next jaunt will be into home robotics, mark my words. Mobile devices will be around for some time - you can still buy an iPod, eh? - but Apple are at work on the next high-margin thing. That means "lifestyle devices" (read: portable medical units and "the quantified self" widgets) as well as home robotics.

Similarly, Google has invested $stupid into robotics recently, and the old rivalry will continue.

Microsoft, meanwhile, is poised to become a third-rate power in a market that peaked 12 months ago. Rock on!

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Re: History says otherwise

Apple makes more profit selling desktops/laptops than anyone else in the world, so that strategy seems to have gone pretty well for them even if they don't dominate in market share, despite still selling at premium prices. Yes, they almost went bankrupt, but that was due to utter mismanagement that had nothing to do with their pricing scheme. When Jobs came back and rescued them, he binned their lower cost models and back to the premium price model they'd started to abandon, and increased Mac sales.

I do agree that Apple will lose more than 0.5% market share, because IDC seems to not understand the difference between the "smartphone" market and the "mobile" market, and how the two will be one in the same by 2018. All the feature phones that exist today will be smartphones in 2018. Maybe running Android, maybe running something else. Apple will sell 0% to the $50 smartphone market. What it'll amount to is that Apple's "smartphone" market share in 2018 will be about the same as today's mobile market share, with perhaps a bit of growth (because they do keep growing their phone sales every year, just not at the crazy rates they were growing them a few years ago) So maybe 10% market share in 2018.

Their prediction for a gentle fall in the ASP of Android phones is laughable, and will only happen if Android is completely muscled out of the feature phone replacement market by Firefox, Ubuntu or Tizen. If Android claims most of that market, having the size of their market doubled by devices which all sell for well under $100, along with more price competition and "good enough" specs in the midrange will cut Android's ASP at least in half by 2018. Android will dominate in market share but the OEMs (except maybe for Samsung) will all be fighting to stay in the black.

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Re: History says otherwise

> I think they are facing a much greater loss than 0.5% of market share if they continue to focus solely on high-end, high-dollar smartphones

That might still be the most profitable route. The fact that iphones are expensive is what makes them status symbols, if they were cheap they wouldn't be as desirable. It's the Designer Jeans effect: the desirability of the product is positively correlated to price, and the smaller volume is more than compensated for by the enormous profit margin.

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Re: History says otherwise

I would argue Apple's lack of success in the desktop field, in the 90s, was due more to the lack of a modern OS more than price. Apple is certainly successful on the desktop now, in spite of a an entry cost that is (IMHO) higher than need be.

Back when Apple was being unsuccessful, anyone wanting a modern desktop OS, at a reasonable cost, had a choice of NT, OS2 or Linux. OS9, with its co-operative model of multi-tasking was not really an option, I this respect. OSX was a game changer for Apple, at least for the consumer and creative markets. Outside of the desktop, the big winner has been Linux.

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Bronze badge

Register Handbags

Instead of showing meaningless graphs on who does what - sells how many; we should introduce a more pertinent valuation for commodities:

The Handbag.

Inexpensive but not less functional commodities should be given similar handbags to more expensive but not more functional stuff; slight distinctions being credited with more and shinier buckles. No, that's not quite right...

Functional utilities would start off on the one handbag standard and rise from there.

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Re: History says otherwise

> OS9, with its co-operative model of multi-tasking was not really an option

It was a goddamn freaking horrible OS. It did not have functioning virtual memory, or dynamic memory allocation: each app had to be manually allocated all the RAM it would ever need, if you gave it too little it would crash, usually overwriting the system and causing the machine to crash with it. Yeah, you could turn VM on, but that was begging for problems because it was buggier than hell and the OS had only partial memory protection.

The standard response to ALL problems (and they were many) with Macs in those days was "buy more RAM". Because having tons of memory diluted the effect of the broken memory management.

From a technological point of view, MacOS 9 was less advanced than the significantly older AmigaOS and Windows 95, and far less stable -- but it was sold with overpriced pastel-colored designer computers, and it was almost completely unconfigurable (which is apparently a selling point because it is apparently the same as being "very easy to use").

If there had been any justice in the world, Apple should have gone bankrupt in those days. Instead it found its niche as the computer for people who value status over function, the same niche it holds today.

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Re: History says otherwise

None of the following is pro or anti any product or company. Everything below is applicable for every product and service offering ever. I'll stick with tech, this being El Reg and all.

You can't compare products/markets/models/companies that aren't contemporaries. You can, but there's no point, you could just fabricate all the data and simply focus on the visual appeal of your charts.

You can't compare them because at any given point on a timeline there are countless factors that come together for a few moments and those factors will not all intersect in the same order, nor will they all leave in the same order.

All businesses make (or lose) 100% of their money by anticipating, recognizing and exploiting those factors. The best (product) in the universe is meaningless without all the other factors that make it the best.

Consumer satnav systems were worthless (and stupid expensive) when signal accuracy was intentionally degraded. 'Social networks' weren't even feasible until free web mail became a thing.MP3 was a dream until broadband penetration was deep enough. CD/DVD was a second choice format until the US Congress taxed the living hell out of DAT. Smartphones were called tricorders and were available only to graduates of Star Fleet Academy until mobile phone networks extended more than three blocks. Moving high tech manufacturing to China wasn't nearly as good of a deal until you could repatriate overseas funds, tax free, if used for R&D. Hell, touchscreen anything was an absolute laughing stock, a HUGE joke until DuPont, 3M, PPG and Corning all, basically stumbled, onto several wholly unrelated materials processes that somebody put all together into today's touch screens. Actual click-to-purchase websites were either always broken or actually charged more than at a retail store until the banks all got together and began developing the framework for online payment that we all still use and would eventually create PayPal and without PayPal we've got no SpaceX or Tesla automobiles.

Zillions of different factors come into play and if you can anticipate and exploit just one of those factors, one single factor , you have an excess money situation to deal with. You hit a few of them and you've got enough money to invade and conquer any Southern Hemisphere country you want.

The reverse is also true. Maybe not as shockingly, suddenly true, but if you misread one of those factors, or something totally surprising blindsides you, one single factor can jeopardize an entire industry and crush huge companies if it's a big enough bad call.

But you must evolve as those factors change. Today's model won't be viable for too terribly long and if you wait too long, or miss your forecast on how things will move you can go from an industry leadership role to a moderately interesting blip in history in a really, really short time.

Back to the original point, because something did or didn't work in the past, doesn't mean it can't/won't work in the future. No industry is a vacuum (not even the vacuum industry) and something completely inconsequential for one group turns another group into wealthy, powerful entities that will make inconsequential internal changes that will knock someone else right out of the gainfully employed category.

Each business, product, market, etc... Must be addressed individually, time and time again because it is 100% certain that something, somehow related, has changed and you've got to decide if the change was significant enough to push a resurrected (something) back into the market.

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Anonymous Coward

Apple & Form over function

These days OSX is very functional indeed. I can do pretty well anything I can do on Windows on OSX and in many cases, in a far easier and more logical way.

I write code for Windows Server Systems for my day job. Firing up OSX at home is a great pleasure. Things work without effort. No buggering around with UAC and File securities and stupid windows hidden directories (where has all my C: drive space gone? Look in the AppData tree)

Microsoft's OS's are in a crisis. Powershell is a complete pile of dog-poo (executing .ps1 scripts from with a .bat can be a nightmare).

I find OSX just more consistent. Sure it has gaping holes but for me and after a day with Windows, it is pure joy.

You are right that OS9 was crap.

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Re: History says otherwise

Apple got a way back partly because Jobs had a clear picture of the niche they needed to target. But also because the rise of the web and email in the late 90s as the major use for most PCs. This effectively diluted the monopoly effect of Windows, because you could choose another OS and still view/create emails and web pages that everyone else could read regardless.

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Re: History says otherwise

> Powershell is a complete pile of dog-poo

Yeah. Microsoft has never been able to make its mind up about Powershell. It doesn't fit with Microsofts vision of where Windows is going (i.e. mobile devices), but on the other hand it fills a function. Powershell is the red-headed stepchild of Windows.

> This effectively diluted the monopoly effect of Windows

Microsoft actively kept Apple alive precisely to avoid becoming a monopoly (and possibly face being broken up, a real possibility in those days). For some reason neither Apple nor Microsoft seem keen to remember this today.

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Holmes

Re: History says otherwise

@cap'n - "Apple got a way back partly because Jobs had a clear picture of the niche they needed to target."

- and mostly because Jobs' buddy Bill Gates used MS money to give Apple a life-saving cash infusion.

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Re: History says otherwise

It was a bit more complicated, but you're fairly correct.

For the purposes of government market regulation, 'monopoly' has a variety of different meanings. Microsoft was never, ever, a candidate for an 'industry monopoly', like with Bell, which is the only monopoly in North America, most of South America, all of Europe and lots of Asia that provides for a company being broken up.

Microsoft was determined to have a 'product monopoly' where a company has an unfair advantage within a product category, within a defined area. The attributes of that defined area determines what penalties are available (a monopoly on snow shovels in Quebec is worse than a monopoly on snow shovels in Manitoba simply because more people live in Quebec and are unable to realize the full value of 'competitive markets) but none include dismantling the corporation.

An 'industry monopoly', like Bell, is a monopoly where one company controls an entire industry within a predefined area. MS was screwing with competing browsers and really leveraging hardware manufacturers, but they didn't own or have majority control of the hardware manufacturers or the mines where raw materials for hardware were extracted or the manufacturers of individual, board level, components. Bell owned the lines, the land the lines were on (a lot of it anyway), the exchanges, the land the exchanges were on, the hardware in the exchanges, the majority of the companies that made that hardware, they owned the company that managed telecom market share on behalf of the US Govt (really!) they owned the chemical company that provided the weather proofing chemicals that were applied to telephone poles in huge soak ponds owned by Bell that came from forests Bell owned and were harvested by Bell owned timber companies and turned into poles (and railroad cross ties) by saw mills owned by Bell as well as the 'telecom operations furniture' made in Bell owned furniture factories and the foundry that actually made the actual bells that went inside the phones being made in Bell owned factories and the company that made the truck driven augers that dug the holes to set the poles in. Completely different thing than with MS. (It's actually really interesting. Bell was as close as you can possibly get to a comic book style gigantic company set on global domination through sheer brute force. Other than the US itself, there has never been a bigger threat to life as we know it than Bell. And to think, all the trouble got started because the railroads became concerned after Bell started buying up rail line to run phone lines beside (like with telegraphs) but they wanted to own the rail lines, not rent space alongside them from the railroad companies).

Anyway, do you know the quickest way to boost the value of a company's stock? Introduce another player into the market with a distinctly different set of pros/cons than the '5,000lb Gorilla' in the industry. In the big finance world there were serious people, at serious places, having serious discussions about MS and Apple being two halves of the same company that were driving each other's success. Was Paul Allen the actual man behind the curtain, secretly controlling the emerging industry of microcomputers? Probably not, but that didn't stop those serious folks from talking about it. Out loud and in public. Linus Torvalds was momentarily considered a candidate for secret overlord of tech, then serious people realized that was impossible as he knows nothing useful about business, resource organization or anything related to Humans really. I was always disappointed he wasn't secretly in charge. He's such a fun little fella. It would be like having a classically trained French mime for President.

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PJI

Re: History says otherwise

>>Back when Apple was being unsuccessful, anyone wanting a modern desktop OS, at a reasonable cost, had a choice of NT, OS2 or Linux.

Earlier in the comment you mentioned the '90s' as the low point for Apple. My memory is a bit vague about dates and the 90s was a decade of rapid, technological change; but I think Linux was barely in the picture for most of the decade for "normal" users seeking a Windows alternative. Some specialists were trying versions of BSD at home.

For most users, even now, at home or at work, Linux is not a "winner". They still use windows for desk tops or laptops. On tablets, they use IOS or, increasingly, some version of Android Linux, though out and about IOS still seems to be the single most popular (I do not include dedicated book readers) and the users are more or less unaware.

Just to conclude with the usual, anecdotal observations (not to be dignified with the word, evidence): having had some time on my hands lately, I seem to have spent some of it helping friends and friends of friends with their systems, either cleansing or upgrading or just discussing. They seem to be running OSX, Windows 8 and, in two cases, both computer professionals, a mixture of Linux, Windows XP, Windows 7 and OSX (in both cases). The "civilians" seem to be split equally between Windows and OSX, no Linux nor BSD. The Windows help has been to improve performance, update and clean ransomware and other unpleasantness; the OSX help is to upgrade the OS and implement the built-in back-up system (TimeMachine) to external disc; despite years of benign neglect, the OSX users' only "problems' were just ancient OS and no back-up.

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Windows

Re: History says otherwise

"He's such a fun little fella. It would be like having a classically trained French mime for President."

Upvoted for that image alone, not the rest of the argument.

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WTF?

Re: History says otherwise

Shurly some confusion her, must be a Dutch President.

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Re: History says otherwise

@PJI,

My reference to Linux was with respect to its success outside of the desktop. For back end systems, doing the grunt work, it has been wildly successful - thanks to the absence of complex licensing.

I also not it is the OS that runs most of the world's smartphones, thanks to Android.

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Re: History says otherwise

iPhone is not a status symbol. It's a fashion statement.

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Re: History says otherwise

I bought a shiny new iPhone on Saturday, to replace my shiny old iPhone. There are two main reasons that I went with Apple and not Android.

First, my existing apps would continue to work. Second, continued availability of new apps.

Given that both of those apply, there's no reason for me to go Android. However, if the second stops applying, then Apple will eventually lose me as a customer. Palm lost me for the same reason - Palm arsed around for years and lost all their third-party developers, so users got no new apps or services and no updates to existing apps. Users then jumped ship and by the time the Pre came out it was too late - all their customers now had iPhones, Windows Mobile (or whatever it was called that week) or Blackberries.

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OS9

> It was a goddamn freaking horrible OS.

Well, it depends what you wanted to do with it. There was a reason other than mere snobbery or tradition that it was the OS of choice for musicians and graphic designers. When Apple said WYSIWYG, they meant it, whereas Windows's implementation was vague and sloppy and therefore useless if you were planning to actually print anything. For multi-track recording, Macs were better, with more stable timing -- sure, your point about virtual memory is correct, but then, to this day, if you're using a DAW on any platform, you're best installing as much RAM as possible and shutting down all other apps while the DAW's running. I recorded an album on an iMac running OS9 back in the days when attempting to do the same thing on a similarly specced PC was laughable. Now, although OSX is no doubt better than OS9, Windows has got SO much better that there is no longer any advantage to a Mac over a PC for recording music. In the 90s, there really was.

It's interesting that Brian Transeau -- one of the most technically cutting-edge musicians on the planet -- still maintains and uses, among his other kit, a Mac running OS9 as part of his studio. I myself (without wanting to imply for one second that I'm in remotely the same league) went to some considerable effort to figure out how to run an OS9 emulator inside OSX, because, for music, there are still occasions when it's useful.

Arguments about the underpinnings of the OS aside, I always preferred the OS9 UI to the Windows of its day. But then I like Windows 8, so clearly have bad taste.

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Re: OS9

"It's interesting that Brian Transeau -- one of the most technically cutting-edge musicians on the planet -- "

Brian.. who?

"still maintains and uses, among his other kit, a Mac running OS9 as part of his studio."

Thanks for the lunchtime laugh, I really loved this joke. :)

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Anonymous Coward

Windows phone

Rising star. Words that make you spit out you dinner...

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Silver badge

I pity the fool

who pays $650 for his mobile phone.

Plus contract.

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When the service contract costs $100/month with a two year lock-in, the difference between a $100 phone and a $600 phone looks pretty small. Especially with a U.S.-traditional $300 subsidy (where any excess value is retained by the phone company).

I don't see price as a significant Apple vulnerability for increasing customers in the U.S., although slipping share.

Where they are vulnerable is in retaining their "magic". They have to keep selling products that are arguably class-leading. They don't have to be actually the best, but they do need a credible claim to the position. Phones such as the Samsung Galaxy III threaten that position, as does a product such as the IPad-mini-low-res. Apple might get away with saying "it's too big" once, but not "it's too big, too fast and 4K video is overkill" every generation. Once the perception of "best" slips, they might as well be selling them Walmart. (ahhh...)

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The greatest threat is more phones like the Xperia Z1 compact than the humungous S3. Absolutely destroys all crApple devices.

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This post has been deleted by a moderator

(Written by Reg staff) Silver badge

"You fucking dick."

C'mon, man. You can do better than that.

C.

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Anonymous Coward

Better...

OK. How about 'Grow the Fuck up'? Or 'Get a fucking life'? Or just a simple 'fucking Nobber'?

While we're at it, why haven't you address the crApple gobshite? The 'fucking dick' comment comes from the frustration of a long time reader getting bored of the yammering morons that have overrun the place with this drivel at every level. Nothing to do with Google, Apple or anyone else, just idiots that write thing like 'crApple'. It's fucking old.

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Anonymous Coward

Rejected now? Please...

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Anonymous Coward

The future is pretty much like the past

IDC may be right but they are trying to predict the future, which is never easy [/sarcasm].

Where does the little bump in the middle of the BlackBerry part of the graph come from? I'm guessing they are throwing into the model some economic forecasts that themselves are of dubious reliability, and I'm reminded of Fred Schwed's brilliant little piece in which he ranges from the messenger boys through to the president of a Wall Street firm, explaining the basis of their economic forecasts and showing that they are all equally unreliable.

The important thing is not ASP, otherwise Vertu would be the world's most successful phone vendor. It is unit margin times volume, the basis of actual profit. The question is whether, as portable handheld computers get commoditised, large numbers of people will be prepared to pay a lot for them. Once the screen, CPU, storage and battery life on a £100 phone is good enough, and on a £200 phone is excellent - which I think will be around 2016 at present rates - even the US consumer may start to wonder why they pay so much for contracts compared to the rest of the world and start to wake up. Especially with T-Mobile stirring that pot.

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Re: The future is pretty much like the past

Analysts are never right. If you ever see that an analyst is balls on accurate just short the fuck out of everything he has recommended because that will be the event that sets off a new decade of insider trading cases.

In defense of analysts, they do have a pretty good handle on using easily quantifiable ranges of variables and it lets them claim good accuracy. Like weather forecasters. Sun, moisture, freezing/not freezing + (some totally fabricated number), you've got 75% accuracy right off the bat by stating the obvious. Market analysts do that too, they just get 75%+ of their data from SEC filings and the other 25% is half what you tell them to say, the other half is arrived at by blowing into a straw in a glass of buttermilk and studying the bubbles.

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Anonymous Coward

Re: The future is pretty much like the past

The difference is that proper weather forecasters put error bands on temperatures and rainfall. Imagine what the graph in the article would look like with realistic error bands. Thin little lines for the past, widening rapidly into the future.

A trade becomes a science only when it can put reliable error bands on its numbers.

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404
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All I know is....

Android folks get treated like second-class citizens by Apple people...

Case in point: All the bitching (still) about letting the riff-raff into what was a iTunes-only thing, Clash of Clans, by the iPhone/iPad crowd... hurt my feelings, it did. So much I flashed a couple of Kindle Fires* to vanilla KitKat to play CoC on.

;)

*I'm agnostic with hardware, whatever works best, I say. They fly btw, those Fires make excellent daily-use multipurpose tablets with a proper OS.

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Re: All I know is....

The Fires are fantastic machines. For non-tech people (like my wife), Amazon's out-of-the box OS is pretty bloody brilliant too. I rate it higher for zero-learning-curve usability than any other tablet OS I've tried, especially bloody iOS.

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Small and unscientific survey of high school students

I teach ICT to about 160 kids across years 8-12. I track the technology they use so I can create resources appropriate to the devices. Only @ 10 kids either have no mobile phone or only a feature phone. This number has been constant for the last 3 years.

The current smartphone breakdown is approximately

20% Apple , 20% WinPho & 60% Android. -

12 months ago it was 40% Android 60% Apple and 1 or 2 with winphones.

2 years ago it was %60 apple 40% droid and 2 blackberries.

From what I see around the school when doing yard duty this is representative of the whole 1100 @ school

Interestingly the yr 9 class App Development is exactly 1/3rd each (24 students - 8 winpho, 8 Apple & 8 Droid (all on jellybean or kitkat)). Even more interesting is that the fandroids and winners mock the fanbois (these are names the 3 groups have given themselves as I split the class on technology lines).

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404
Bronze badge

Re: Small and unscientific survey of high school students

HA! I see what you did there.... 'winners' indeed.

That ain't gonna fly, especially here lol

;)

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Happy

Easy life, no guaranty

Easy life, no guaranty. Gartner, IDC and similar are quoted each year. But how come there is never even one article looking back even five or ten years regarding the accuracy of their predictions. Ever seen them boosting about their success in predicting anything years ago. Is a life, a product like that not rather over prized and dubious. Apart from that I sometimes have this feeling that there are companies who might react to their predictions seriously without ever questioning their previous "success". Religion comes to my mind, and money flows in that direction as before, without any questions. Who the hell is interested in a weather report from a week ago. Easy life, too easy.

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