Apple’s December quarter results weren’t bad; revenue grew by 18 percent, but net income was flat, due to a 30 percent rise in cost of sales. They didn’t blow the doors off like in past years, but it wasn’t a bad quarter by any stretch of the imagination. It’s easy to explain their increased cost of sales because they turned over a very large amount of their product lineup, resulting in higher costs—just as Apple’s executives did.

What’s concerning, though, is their guidance for next quarter. Apple said revenue should fall between $41-43 billion for the March quarter; year-over-year, that would only be 4.6-9.7 percent growth. Compared to Apple’s past five years, that’s positively anemic.

But should that be a surprise? With such explosive growth since 2007, and already dominating the markets they’re in, it’s difficult to continue it:

A big part of Apple’s challenge is that it is now so large that it seems unrealistic, mathematically, for the company to continue finding new pots of gold big enough to maintain its growth. In a recent research report, A. M. Sacconaghi, an analyst at Bernstein Research, calculated that were Apple to grow for the next five years at the same rate as the last five years, its revenue would be $1.2 trillion, or about the size of Australia’s gross domestic product.

Apple could enter TV and content more forcefully, and China is an incredible opportunity—but even then, it wouldn’t sustain the blistering growth rate they’ve been on indefinitely. I think we need to abandon the idea that Apple can (or should) sustain such high rates of growth in the future. Lower rates of growth should not be the concern—what should be is if Apple’s iPhone business begins to decline.1

The iPhone is a huge, huge business. In the December quarter (first quarter of fiscal-year 2013), the iPhone generated $30.6 billion of revenue for Apple. $30.6 billion—more than 56 percent of Apple’s total revenue. Apple’s incredible success is on the back of the iPhone, full-stop. They can generate so much revenue because not only are they selling a ton of them, but they have an incredibly large margin on them. That’s why Apple’s share of the mobile phone industry’s profit is so high.

That’s good, but it’s also very dangerous. If the mobile phone market begins to decline, or worse, Apple’s ability to create fantastic products and sell people on them declines, Apple’s revenues will deflate like a popped balloon. As the iPhone goes, Apple goes, too.

So that’s what people should be focused on. There’s no reason to be worried right now; Apple’s products are quite good and they continue to do well. But Apple should do what it can to diversify its revenue stream away from the iPhone. Reducing the iPhone’s proportional contribution to revenue (and net income) will decrease risk for the company. As of now, most of Apple’s eggs are in that basket.

That means that continuing to create new brilliant products, and brutally cannibalize their own existing products, is the most integral part of Apple’s future. The typical response to the situation Apple finds itself in would be to milk as much money out of the iPhone cash-cow as possible and to sustain the business as long as possible, but that is exactly the wrong path for Apple to take. Going forward, Apple has to build such great new versions of the iPhone, or new devices that obviate its need for existing, that people have little choice but to purchase them. That’s the only way they’ll be able to stay out in front of the industry and to avoid the risk associated with one product accounting for more than half of revenue.

In other words, Apple has to continue being Apple—a company that’s all too willing to kill its own best-selling products, and is laser-focused on meeting people’s desires and needs. Apple made it look easy over the last decade, but it’s an incredibly hard thing to sustain.

1. This, of course, is problematic for Apple’s stock; tepid business growth means little stock growth, so its value should decline. That’s terrible for Apple’s investors and it’s not good for Apple’s employees or for its ability to hire new talent and retain existing talent at the company. It also would put more pressure on management, which could lead to rash decisions that harm the company. Steve Jobs may have been able to largely ignore unhappiness among investors and/or the board, but that is an exception. Tim Cook may not be able to do the same. [↩]

Speaking of great software for the Mac, Black Pixel released Kaleidoscope today, a fantastic file comparison tool for images, folders and text files.

Federico Viticci has a very good look at it, too. (Side note: does that guy ever sleep?) If you work with text all day (writing, software development, whatever), I’d recommend giving it a look. Black Pixel is doing very impressive work.

Napkin is a new application for the Mac that makes annotating images and making diagrams really easy. Rene Ritchie has a good look at the application and how he’s using it.

Lovely looking application that looks like it should be a part of the iWork suite. I love that to create a new shape, you draw it with your cursor, and Napkin figures out the shape you were drawing and creates it for you. Super clever, and what a great interaction.

Michael Jurewitz collects a series of tweets that capture developers’ frustration with iCloud.

Sad that NetNewsWire appears to be tangled up in that web.

Federico Viticci wrote a nice review of SketchParty TV, a Pictionary-like game that uses the iPad and Apple TV via AirPlay Mirroring:

We ended up playing SketchParty TV until 6 AM. At one point, I was laughing so hard at my friend’s attempt to guess a platypus (I’m terrible at drawing) that I dropped wine all over my elegant New Year’s Eve outfit (I’m also terrible at laughing without causing things to fall off desks and/or tables).

It’s a very well done game. You break people up into two teams, and then one team member (attempts) to illustrate a word they’re given so their group can guess it. The team member draws on the iPad and can see the word, while everyone else sees what they’re drawing on the TV but cannot see the word. I bought it for a little party a few months ago, and everyone absolutely loved it. It’s a lot of fun.

It’s also a very good use of iOS’s AirPlay Mirroring feature. There’s a ton of untapped potential here for party games of this sort—one I can imagine is Taboo, where the person trying to give hints to their team has the list of “cards” on their iPhone, iPad or iPod Touch, and each team’s score is shown on the TV screen.

In any case, I highly suggest checking out SketchParty TV. It’s a great game.

Earlier this month, I responded to a post by Ben Brooks where he argues that retina displays do indeed significantly change the usability of devices. I argued that while retina displays certainly do make for a better device (reading especially), the contribution it makes doesn’t substantially change the device’s functionality. To illustrate that point, I explained that although I would prefer a retina iPad Mini, the iPad Mini’s smaller size and weight has dramatically changed the usability of the iPad for me. The lack of a retina display hasn’t reduced the iPad Mini’s usefulness; despite the non-retina screen, the iPad Mini is more useful for reading than the full-sized, retina-equipped iPad.

Ben responded to my post:

This is missing the point.

…

The argument isn’t: which is more useful iPad with retina display, or iPad mini. The argument is that retina displays, by themselves, are not a disruptive technology — a notion which I firmly call bullshit on.

Ben, I’m afraid, is missing the point. Ben stated in his original post that “Retina displays, on any device, absolutely change the usability of the device,” and “If you even once find yourself saying: ‘after using technology X, you can’t go back to technology W’ — then you sir have just found a feature that is fundamentally important.”

Ben appears to think that I’m simply arguing that an iPad Mini is more useful than a full-sized retina iPad. That’s true, but that wasn’t what I argued; rather, I was showing that (for me!) the retina display is absolutely something I can live without, and that it did not “absolutely change” the usability of the device. That the iPad Mini—a device with a visibly inferior screen to the iPad 3 or iPad 4—is more usable than its larger sibling puts that into dramatic relief. If the retina screen is such a boon for usability, that wouldn’t be the case. I would have begun using it again for the more usable screen. But my iPad 3 has sat around since the Mini arrived going unused, despite its beautiful screen.

For Ben, though, I’m sure the retina screen is that big of a difference. After seeing a retina display, with its incredibly sharp text and beautiful colors, he can’t stand the thought of going back to a non-retina display. For Ben, there is no going back. And that makes sense—they’re beautiful screens. But that’s part of the point, too: that simply isn’t true for everyone. It isn’t true for me, someone who absolutely loves retina screens, and it isn’t true for many of the people purchasing an iPad Mini rather than its larger sibling. I expected to hate the iPad Mini’s screen. I was wrong.

There’s no doubt that retina displays will replace all non-retina displays going forward, and I am happy for it. No doubt, because they’re simply superior. But it’s also true that they haven’t fundamentally changed our devices’ usability, as Ben originally argued.

Lukas Mathis argues that iTunes 11′s attempt to mask complexity with the new top bar that’s used to shift between media types results in even more complexity:

One of the main problems introduced in iTunes 11 is the new bar atop the iTunes window. This tiny thing combines a vast number of features that were previously served by many different UI elements in iTunes. Sure, the bar seems simple and friendly. How much damage could this tiny thing possibly do? Well, you can’t cram so much stuff into such a small UI element without causing problems.

Wade from Panic details how he replicates iTunes 11′s expanded album view, which matches the text colors to the album artwork. Really cool to read through, especially if you’re a developer.

(Via The Beard.)

Ben Brooks responds to Shawn Blanc, who said retina displays don’t fundamentally change usability or use-cases for the iPad:

Sorry Shawn, that’s bullshit.

Retina displays, on any device, absolutely change the usability of the device. Retina displays make text sharp, make text readable, reduce eye strain and they absolutely make me want to use these devices more.

Retina displays are indeed better for reading—to my eyes, they’re less harsh and allow a smaller font size. And they are undeniably beautiful, too.

But text is more than readable on the iPad Mini’s screen, despite having a dramatically lower pixel density than the iPhone’s or iPad’s displays. In fact, because the iPad Mini is much easier to hold comfortably while sitting down and dramatically easier to hold while walking around, I’ve used the Mini for reading books in the last 5 weeks much more than I did the full-size iPad. The Mini is small enough and comfortable enough to hold that picking it up to read a book feels rather close to picking up a paperback—something that you do without much thought or effort. You can just pick it up and read.

The full-size iPad, because of its size and weight, never felt like that. It’s simply too big. At least for me, for most uses, the iPad Mini’s more ideal size and weight make it a much more usable device than it loses by including a less-than-retina display. I would prefer a retina iPad Mini obviously, but between a retina display and a small, lightweight form, I choose the smaller, lighter form. It contributes more to the device’s usability than does a brilliantly clear and beautiful screen.

So I think “that’s bullshit” might be a bit rash.

Apple’s Tim Cook said that Apple will begin manufacturing an existing Mac line in the United States next year. Cook also said that it will not just be final assembly.

Absolutely good news. But what’s better news is, presumably, that Apple believes doing so is efficient enough for their needs.

Twitterrific 5 is out.

The new Twitterrific is simply beautiful. Even if it’s only to study the custom user interface (which you should, if you have any interest in interface design), go get it. It’s stunning.

Fantastical for iPhone is out, and it looks, well, fantastic.

Fantastical for Mac is my favorite way to enter new calendar events or to see what’s happening soon, and now it’s on the iPhone. Lovely app.

If you’re a Mac or iOS developer, you need Tokens app. It makes giving promo codes to people, something that’s a big pain in the ass, effortless. It’s too bad Apple hasn’t gotten their act together with iTunes Connect, but until then, applications like these are a godsend.

Mike Spies:

Because how else can you form a relationship with a record when you’re cursed with the knowledge that, just an easy click away, there might be something better, something crucial and cataclysmic? The tyranny of selection is the opposite of freedom. And the more you click, the more you enhance the disposability of your endeavor.

I don’t think this is a made-up problem or some kind of misplaced nostalgia for a past where new albums cost no less than $16, required you to drive to a retail store to purchase, and we had very little idea how good they were until we bought them and listened to them.

This issue isn’t unique to music. The web brings an endless abundance of information to read and reference, and of new content, always something better behind a click or tap. When that’s the case, there’s no time to focus on what’s in front of you, to absorb everything in it, to understand what it is or what it’s saying, and to think about what it means or how it relates to other things. There’s always a better album, a better article, a new breaking story, so we’re always moving on toward greener pastures.

It’s easy to dismiss this kind of criticism as luddite nostalgia for a world that never really existed, or as “first-world problems”—in other words, the substance-free complaining of people who should be happy with what they have and should shut their mouths because they’re lucky to have it. But that dismissive retort, one used all-too-often in the technology community, ignores what I think is one of the great challenges for the technology community: to make the age of the web not just one of unlimited access to unlimited information, but one that empowers people as humans.

Walmart is taking advantage of mobile devices to make their stores less sucky:

If you opt in, Walmart will use your location to provide you with an app designed specifically for that store. Head to another Walmart and your app will work for that store. It has useful features: You can make a list by speaking into the phone. You can search a product by typing in a word or phrase — tissues, say, or light bulbs — and the app will show you what aisle to go to. It has an interactive map. It shows you promotions specific to that store. And Walmart is testing a feature called “Scan & Go” that would you scan can items as you shop, so you can go quickly through self-checkout.

Cheers to Walmart for embracing mobile computing to make their stores better, and especially for using it to make the checkout process better. I go out of my way to avoid Walmart because, among other reasons, their checkout process is dreadful.