Tech Brew Ride Home - Fri. 05/03 – Apple Earnings Underline Their Predicament

Episode Date: May 3, 2024

Apple earnings are out and revenue was down almost everywhere. Boy, AI can’t come fast enough for them. Did you know you can send Bluetooth signals to satellites in space? The full Rabbit R1 reviews turned out exactly how we expected. And, of course, the Weekend Longreads suggestions. Links: Apple Sales Fall as iPhone, China Businesses Remain Sluggish (WSJ) FDA Qualifies Apple’s AFib History feature as an MDDT (MyHealthyApple) Hubble Network makes Bluetooth connection with a satellite for the first time (TechCrunch) Coinbase’s First-Quarter Profit, Revenue Top Forecasts (Bloomberg) Rabbit R1 review: nothing to see here (The Verge) Weekend Longreads Suggestions: The Revenge of the Home Page (The New Yorker) Nick Bostrom Made the World Fear AI. Now He Asks: What if It Fixes Everything? (Wired) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Friday, May 3rd, 2024. I'm Brian McCullough today. Apple earnings are out and revenue was down almost everywhere. Boy, AI can't come fast enough for them. Did you know you can send Bluetooth signals to satellites in space? The full Rabbit R1 reviews turned out exactly how we expected. And of course, the weekend long-range suggestions. Here's what you missed today in the world of tech. So Apple earnings and see if you can detect a pattern here. Q2 revenue was down 4% year-on-year-on. These are all year-over-year numbers. Net income down 2%, iPhone revenue down 10%, iPad, down 17%, the wearables home and accessories category down 10%, China revenue down 8.1%. The loan bright spots,

Mac revenue was up 4%, and revenue from services was up 14% to $23.9 billion in all-time record. The stock jumped 5% overnight after Apple announced a $110 billion share buyback. its largest share buyback ever. But you get the message here, right? This was the quarter that Apple's various revenue lines all hit the ceilings. It looked like they were headed for. The numbers were slightly better than analysts expected, and Apple is ever so slightly signaling that it thinks this quarter could see revenue growth. Still, quoting the journal, Apple is struggling on a number of fronts. The company's single most important business, the iPhone has faced sluggish growth. In recent years, Apple has seen success by steering consumers

towards its more expensive pro-designated phones. Its latest iPhone 15 Pro Max was its most expensive ever, with a starting price of $1,200. But this premium strategy isn't propping up overall revenue as much as it did in the past. For the first three months of the year, Samsung reclaimed the number one spot for worldwide smartphone market share. According to research firm IDC, Apple's iPhone unit shipments slipped nearly 10% for the quarter over the previous year, while the total smartphone market expanded about 8% annually. Apple had briefly become the number one smartphone vendor near the end of 2023. Some investors said they had expected declines in revenue in the quarter, but these results

weren't as bad as anticipated. The main thing we're looking for is some form of stability in the hardware and iPhone, said Charles Reinhart, chief investment officer at Johnson Investment Council, and Apple shareholder. The iPhone is down a bit, but it held on to their profitability, he said. Challenging conditions in China, Apple's third largest market have been an area of concern for many shareholders. Huawei, China's homegrown champion, has been rapidly gaining ground since getting back into high-end phones. In China, Huawei's smartphone sales rocketed up nearly 70% from the previous year, while Apple's sales fell 19% according to counterpoint research. With investors, CEO Tim Cook has promised to unveil new AI innovations within the company's ecosystem, which analysts

believe will happen at its annual June developers conference. We also see incredible breakthrough potential for generative AI, which is why we're currently investing significantly in this area, Cook said at the company's recent annual shareholder meeting. Earlier this year, Microsoft took the crown from Apple as the world's largest company by market capitalization, and its lead has grown in the months since. Microsoft's stock is trading up 5% from the beginning of the year, while Apple's stock is down 10% in the same period. Investors are hopeful that these AI announcements will lead to renewed iPhone sales after a disappointing sales cycle with the latest iPhone 15. The last three iPhones have not been exciting, said Hal Edens,

vice president at Apple Investor Capital Investment Companies. But hopefully with the iPhone 16, they roll out new AI features, and it will be off to the races, end quote. Yes, I would say this WWDC is becoming maybe the highest stakes one Apple has held in a long time. They need to roll out some at least mildly interesting AI features, not just to keep investors happy by showing some sort of AI strategy, but also can you honestly tell me what has been different about the iPhone since, I don't know, 2020 off the top of your head?

Meaningful enough that you're like, I'm upgrading this year to get that. They need AI right now to give people a reason to upgrade their phones. Slightly related, Apple Watch's AFIB history feature has gotten FDA approval for use in clinical studies, the first digital health tech to qualify under the FDA's MDDT program, quoting My Healthy Apple. The MDDT program is a way for the FDA to qualify tools that medical device sponsors can choose to use in the development and evaluation of medical devices. Tools such as biomarker tests, clinician reported outcome measures, or computational models and digital health technologies like sensors or wearables play an important role in helping the FDA understand how medical

devices work in terms of safety, effectiveness, and other aspects of performance. The stringent FDA process for MDDT qualification evaluates the tool and available supporting evidence to determine and whether it can be used as intended to produce scientifically plausible measurements within a specified context of use. The two programs slash tools approved this year by the FDA for MDDT focus on arrhythmia features. More importantly, the Apple Watch is the first device within the smartwatch product category to obtain a MDDT device classification by the FDA, end quote. Hubble Network has become the first company to ever establish a Bluetooth connection directly

to a satellite. What's this now? Quoting TechCrunch. The Seattle-based startup launched its first two satellites to orbit on SpaceX's Transporter 10 Rideshare mission in March. Since that time, the company confirmed that it has received signals from the onboard 3.5 millimeter Bluetooth chips from over 600 kilometers away. The sky is truly the limit for space-enabled Bluetooth devices. The startup says its technology can be used in markets including logistics, cattle tracking, smart collars for pets, GPS watches for kids, car inventory, construction sites, and soil temperature monitoring. The founders say the low-hanging fruit is those industries that are desperate for network coverage even once per day, like remote asset monitoring for the oil and gas industry.

As the constellation scales, Hubble will turn its attention to sectors that may need more frequent updates like soil monitoring to continuous coverage use cases like fall monitoring for the elderly. Once it's up and running, a customer would simply need to integrate their devices chipsets with a piece of firmware to enable connection to Hubble's network. Hubble was founded in 2021 by Life 360 co-founder Alex Harrow, Eotera founder Ben Wilde, who sold his startup to Ring, and aerospace engineer John Kim. Harrow said the first time Wilde presented the idea of connecting a Bluetooth chip to a satellite. His initial reaction was no freaking way. And it does sound crazy, especially as consumer electronics can struggle to connect to other Bluetooth

enabled devices that are just a few feet away. But the demand is there. Existing Internet of Things devices are power-hungry, are costly to operate, and lack global connectivity the company says. These are fundamental limitations related to Bluetooth-enabled devices today, but they prevent many industries from leveraging IoT for their businesses. The company joined Y Combinator's Winter 2022 cohort and closed a $20 million Series A last March. Hubble's first innovation was to develop software-enabling off-the-shelf Bluetooth chips to communicate. communicate over very long ranges with low power. On the space side, the company also patented a phased array antenna that can launch on a small satellite. The antennas work almost like a

magnifying glass, and it's what enables an off-the-shelf Bluetooth chip to communicate with the Hubble satellite. The team also had to solve Doppler-related problems, frequency mismatches, occur between fast-moving objects, exchanging data via radio waves, end quote. We don't usually cover their earnings, but I will do so this time to illustrate something. reported Q1 net revenue up 116% year-on-year to $1.59 billion. Also, net income of $1.18 billion. Consumer transaction revenue was $935 million, up 99% quarter over quarter. So, over 100% jumps in key metrics, and you get net income of $1.1 billion off of net revenue of $1.6 billion. What this illustrates is, man, when crypto is hot, Coinbase has a hell of a business. When crypto is hot is the key, of course,

quoting Bloomberg. Net income was $4.40 a share compared with a loss of $34 a share a year earlier. Coinbase's trading volume and mobile app downloads surged during the revival of demand that was driven by the January introduction of U.S. spot Bitcoin exchange traded funds. Bitcoin rose to a record of almost $74,000 in March. The second consecutive quarterly profit followed seven straight losses, a period that has been referred to as crypto winter. Guidance is good, but a lot of it depends on crypto prices, which came down in April, said Paul Goldberg, a senior industry analyst at Bloomberg Intelligence. The accounting change plays to the same tune of crypto price dependence, end quote. I promised you full Rabbit R1 reviews when they came out

and they're here and they are basically what we expected. In The Verge, David Pierce says, the rabbit has got a fun design and a good mic, but the best features are all missing in action. It's finicky and slow, and using a phone is just better. Quote, as I've been testing the R1, I've been trying to decide whether Humane's approach or Rabbits has a better chance as AI improves. Right now, it's easy. Don't buy either one. In the near term, I'd probably bet on rabbit. Humane's wearable and screen-free approach is so much more ambitious in solving its thermal issues and interface challenges will be tricky. Rabbit is so much simpler an idea that it ought to be simpler to improve. But where Humane is trying to build an entirely new category and is building

enough features to maybe actually one day be a primary device, Rabbit is on an inevitable collision course with your smartphone. You know, the other handheld device in your pocket that is practically guaranteed to get a giant infusion of AI this year. The AI pin is a wearable trying to keep your hands out of your pockets and your eyes off a screen. The R1 is just a worse and less functional version of your smartphone. As some folks have discovered, the device is basically just an Android phone with a custom launcher and only one app. And there's nothing about the device itself that makes it worth grabbing over your phone. The Rabbit team have been saying since the beginning that this is only the very beginning of the Rabbit journey and that they know there's a lot of work left to do,

both for the R1 and the AI industry as a whole. They've also been saying that the only way for things to get better is for people to use the products, which makes the R1 sound like an intentional bait and switch to get thousands of people to pay money to beta test a product. That feels cruel, and $199 for this thing feels like a waste of money. AI is moving fast, so maybe in six months all these gadgets will be great, and I'll tell you to go buy them, but I'm quickly running out of hope for that and for the whole idea of a dedicated AI piece of hardware. I suspect we're likely to see a slew of new ideas about how to interact with the AI on your phone, whether it's headphones with better microphones or smart watches that can show you the readout from chat GPT, the meta

smart glasses are doing a really good job of extending your smartphone's capabilities with new inputs and outputs, and I hope we see more devices like that. But until the hardware, software, and AI all get better and more differentiated, I just don't think we're getting better than smartphones. The AI gadget revolution might not stand a chance. The Rabbit R1 sure doesn't, end quote. Time for the week on long-reys suggestions. First up, a profile of one of our friends, friends who we quote from all the time. As social media platforms pivot away from news distribution, the New Yorker took a look at news sites like The Verge, which feel more like social media with aggregation and more. Neelai Patel, the editor-in-chief of the digital technology publication The Verge, has lately taken to describing theverge.com as the last website on earth.

It's kind of a joke. There are, of course, tons of websites still in existence, including the likes of Facebook.com, but also kind of not a joke. For much of the past decade, publications' homepages were rarely the focus of attention. Journalistic outlets relied on social media to distribute what they published. The Verge is an outlier in that it invested heavily in its homepage when it was out of fashion to do so. In 2022, it launched a dramatic redesign that was meant to make its site a more dynamic destination. It included a story stream of short posts and visual highlights similar to tweets that provide dozens of updates a day in real time. The new Verge looks less like a traditional publication and more like a social network feed, which initially struck many industry observers as ludicrous.

Why bother trying to do what the social platforms already do better? The homepage was dead. TikTok was the future. The immediate reaction was, this is doomed to fail. No one will ever go to a homepage again, Patel recalled. Then Twitter imploded under the leadership of Elon Musk, and all of the major social platforms pivoted away from news distribution. In the end, the Verge's redesign worked.

According to the company, the number of loyalty. users, defined as those who have five or more sessions on the site in a calendar month, increased by 47% in the course of 2023. Though it's not a general interest title, The Verge continues to be the most visited single site under the umbrella of Vox Media, its parent company. One could argue that its makeover, which has now become a subject of admiring chatter among media executives and the editors who work for them, heralds the revenge of the homepage, end quote. Imagine that. Your webpage as, I don't know, let's call it the main digital home, for your brand on the web? What a concept. And finally, Nick Bostrom was one of the first people

about a decade ago to turn a lot of us on to the idea that maybe AI could take over the world. So interesting pivot alert. He's got a new book out saying, what if not? What if AI just fixes everything? Quoting Wired, Bostrom has made it his life's work to ponder far off technological advancements and existential risks to humanity with the publication of his last book, superintelligence paths dangerous strategies in 2014, Bostrom drew public attention to what was then a fringe idea, that AI would advance to the point where it might turn against and delete humanity. To many in and outside of AI research, the idea seemed fanciful, but influential figures, including Elon Musk, cited Bostrom's writing. The book set a strand of apocalyptic worry about

AI smoldering that recently flared up following the arrival of ChatGPT. Concern about AI risk is not just mainstream, but also a theme within government AI policy circles. Bostrom's new book takes a very different tack. Rather than play the doomy hits, deep utopia life and meaning in a solved world considers a future in which humanity has successfully developed superintelligent machines, but averted disaster. All disease has been ended and humans can live indefinitely in infinite abundance. Bostrom's book examines what meaning there would be in a life inside a techno-utopia and asks if it might be rather hollow. He spoke with Wired over Zoom in a conversation that has been lightly edited for length and clarity, end quote.

Go click through for the interview, but also I know what book I'm ordering this weekend. No bonus episodes for you this weekend. Spring has sprung in this neck of the world. If it's done so where you are, go out and enjoy it. Talk to you on Monday.