Apple hit with lawsuit over the “completely reinvented” Macbook keyboard it rolled out back in 2015

A little more than three years ago, Apple just announced a new MacBook with a “butterfly” keyboard that was 40 percent thinner and ostensibly four times more stable than the previous “scissor” mechanism that MacBooks employed.

The promise was to more evenly distribute pressure on each key. Not everyone loved this “reinvention,” however, and now, Apple is facing a class action lawsuit over it.

According to a complaint lodged in the Northern District Court of California yesterday and first spied by the folks over at AppleInsider, “thousands” of MacBook and MacBook Pro laptops produced in 2015 and 2016 experienced failure owing to dust or debris the Butterly design that rendered the machines useless. The complaint further alleges that Apple “continues to fail to disclose to consumers that the MacBook is defective, including when consumers bring their failed laptops into the ‘Genius Bar’ (the in-store support desk) at Apple stores to request technical support.”

It just not a lack of disclosures at the outset that’s problematic, the suit continues. Customers who think the issue will be covered by their warranties are sometimes in for an unpleasant surprise. As stated in the filing: “Although every MacBook comes with a one-year written warranty, Apple routinely refuses to honor its warranty obligations. Instead of fixing the keyboard problems, Apple advises MacBook owners to try self-help remedies that it knows will not result in a permanent repair. When Apple does agree to attempt a warranty repair, the repair is only temporary—a purportedly repaired MacBook fails again from the same keyboard problems. For consumers outside of the warranty period, Apple denies warranty service, and directs consumers to engage in paid repairs, which cost between $400 and $700. The keyboard defect in the MacBook is substantially certain to manifest.”

The lawsuit was filed on behalf of two users, ZIxuan Rao and Kyle Barbaro and more broadly “on behalf of all others similarly situated.” It was brought by Girard Gibbs, a San Francisco-based law firm, which has battled with Apple numerous times in the past, including filing a class-action suit centered on the iPod’s “diminishing battery capacity.” (Apple appears to have settled that one.)

Interestingly, AppleInsider appears to have provided the fodder for the lawsuit, or some of it, at least. Last month, the outlet reported findings of its own separate investigation into the problem after hearing enough anecdotes to support a deep dive. It says that after collecting service data for the first year of release for the 2014, 2015, and 2016 MacBook Pros, it concluded that —  excluding Touch Bar failures — the 2016 MacBook Pro keyboard has been failing its users twice as often in the first year of use as the 2014 or 2015 MacBook Pro models.

AppleInsider says it collected its data from “assorted Apple Genius Bars in the U.S.” that it has worked with for several years, as well as  Apple-authorized third-party repair shops.

The investigation clearly resonated with MacBook owners, because soon after, more than 17,000 people signed a Change.org petition demanding that Apple recall all MacBooks with butterfly switch keyboards.

That petition — which cites among others the highly regarded writer and UI designer John Gruber, who has called the keyboard “one of the biggest design screwups in Apple history” —  is gaining steam again today, presumably fueled by this new lawsuit. As of this writing, roughly 18,000 people have provided their signature.

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The many twists and turns of hardware

Note: This is the final article in a three-part series on valuation thoughts for common sectors of venture-capital investment. The first article, which attempts to make sense of the SaaS revenue multiple, can be found here; the second, on public marketplaces can be found here.

Over the past year, the VC-backed hardware category got a big boost — Roku was the best-performing tech IPO of 2017 and Ring was acquired by Amazon for a price rumored to exceed $1 billion. In addition to selling into large, strategic markets, both companies have excellent business models. Ring sells a high-margin subscription across a high percentage of its customer base and Roku successfully monetizes its 19 million users through ads and licensing fees.

In the context of these splashy exits, it is interesting to consider the key factors that have made for valuable hardware companies against a backdrop of an investment sector that has often been maligned through the years, as I’m sure we’ve all heard the trope that “hardware is hard.” Despite this perception, hardware investment has grown much faster than the overall VC market since 2010, as shown below.

Source: TechCrunch

A large part of this investment growth has to do with the fact that we’ve seen larger exits in hardware over the past few years than ever before. Starting with Dropcam’s* $555 million acquisition in 2014, we’ve seen a number of impressive outcomes in the category, from large acquisitions like Oculus ($2 billion), Beats ($3 billion) and Nest ($3.2 billion) to IPOs like GoPro ($1.2 billion), Fitbit ($3 billion) and Roku* ($1.3 billion)**. Unfortunately for the sector, a few of these companies have underperformed since exit; notably, GoPro and Fitbit have both cratered in the public markets. 

As of April 3, 2018, both stocks traded at less than 1x trailing revenue, a far cry from the multiples of forward revenue given to other tech companies. Roku, on the other hand, continues to perform as a stock market darling, trading at approximately 6x trailing revenue and a market cap of $3.1 billion. What sets them so far apart?

The simple answer is their business model — Roku generates a significant amount of high gross margin platform revenue, while GoPro and Fitbit are reliant on continued hardware sales to drive future business, a revenue stream that has been stagnant to declining. However, Roku’s platform is one successful hardware business model; in this article I’ll explore four others — Attach, Replacement, Razor and Blades and Chunk.

Attach

“Attaching” a high gross margin annuity stream from a subscription to a hardware sale is a goal for many hardware startups. However, this is often easier said than done — as it’s critical to nail the alignment of the subscription service to the core value proposition of the hardware.

For example, Fitbit rolled out coaching, but people buy Fitbit to track activity and sleep — and this mismatch resulted in a low attach rate. On the other hand, Ring’s subscription allows users to view past doorbell activity, which aligns perfectly with customers looking to improve home security. Similarly, Dropcam sold a subscription for video storage, and at an approximate 40 percent attach rate created a strong economic model. Generally, we’ve found that the attach rate necessary to create a viable business should be at least in the 15-20 percent range.

Platform

Unlike the “Attach” business model that sells services directly related to improving the core functionality of the hardware device, “Platform” business models create ancillary revenue streams that materialize when users regularly engage with their hardware. I consider Roku or Apple to be in this category; by having us glued to our smartphones or TV screens, these companies earn the privilege of monetizing an app store or serving us targeted advertisements. Here, the revenue stream is not tied directly to the initial sale, and can conceivably scale well beyond the hardware margin that is generated.

In fact, AWS is one of the more successful recent examples of a hardware platform — by originally farming out the capacity from existing servers in use by the company, Amazon has generated an enormously profitable business, with more than $5 billion in quarterly revenue.

Replacement

Despite the amazing economics of Apple’s App Store, as of the company’s latest quarterly earnings report, less than 10 percent of their nearly $80 billion in quarterly revenue came from the “Services” category, which includes their digital content and services such as the App Store.

What really drives value to Apple is the replacement rate of their core money-maker — the iPhone. With the average consumer upgrading their iPhone every two to three years, Apple creates a massive recurring revenue stream that continues to compound with growth in the install base. Contrast this with GoPro, where part of the reason for its poor market performance has been its inability to get customers to buy a new camera — once you have a camera that works “well enough” there is little incentive to come back for more.

Razor and Blades

The best example of this is Dollar Shave Club, which quite literally sold razors and blades on its way to a $1 billion acquisition by Unilever. This business model usually involves a low or zero gross margin sale on the initial “Razor” followed by a long-term recurring subscription of “Blades,” without which the original hardware product wouldn’t work. Recent venture examples include categories like 3D printers, but this model isn’t anything new — think of your coffee machine!

Chunk

Is it still possible to build a large hardware business if you don’t have any of the recurring revenue models mentioned above? Yes — just try to make thousands of dollars in gross profit every time you sell something — like Tesla does. At 23 percent gross margin and an average selling price in the $100,000 range, you’d need more than a lifetime of iPhones to even approach one car’s worth of margin!

So, while I don’t think anyone would disagree that building a successful hardware business has quite literally many more moving parts than software, it’s interesting to consider the nuances of different hardware business models.

While it’s clear that in most cases, recurring revenue is king, it’s difficult to say that any of these models are intrinsically more superior, as large businesses have been built in each of the five categories covered above. However, if forced to choose, a “Platform” model seems to offer the most unbounded upside as it’s indicative of a higher engagement product and isn’t indexed to the original value of the product (some people certainly spend more on the App Store than on the iPhone purchase).

While it’s easy to take a narrow view of VC-hardware investing based on the outcome of a few splashy tech gadgets, broadening our aperture just a bit shows us that large hardware businesses have been built across a variety of industries and business models, and many more successes are yet to come.

*Indicates a Menlo Ventures investment

**Initial value at IPO

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Wear OS is getting a new battery saving mode

Given Google’s recent rebranding mode and a few pieces of news trickling out over the past week, it seemed safe to expect some key updates for the operating system formerly known as Android Wear. But the company only really mentioned Wear OS in passing at yesterday’s keynotes.

Google’s push to offer an open, Android-like experience for wearable devices has stagnated a bit in recent years, along with the category itself — but the company is pushing out some key updates for devs this week at I/O. Over on the Android Developer blog, the company is highlighting some key features for developer preview 2, which launches this week.

The biggest news here is the addition of an “enhanced battery saver mode.” Battery life is certainly one of the chief concerns on these devices, thanks to their relatively small size. While in the new mode, the device will sport a “power efficient watch face,” while shutting off radios, the touchscreen and tilt to wake — essentially all of those features that make your smartwatch smart. A quick press of the side button will show the time and a longer press will restore functionality.

Also new here is support for Actions on Google, which should make Wear devices more useful when it comes to working with third-party smart objects. That’s a nice addition that brings the products up to speed with the rest of the Google Assistant ecosystem.

This all comes a couple of days after an LG Wear OS watch appears to have hit the FCC. None of this is earthshaking, but at the very least, it shows that Google’s not entirely given up the wearables ghost.

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Apple pulls the plug on its €850M data center project in Ireland over planning delays

Dark clouds have gathered and broken over Apple’s plans to build a data center in Ireland. Three years ago, Apple announced that it would invest $2 billion into building a pair of new, green data centers in Ireland and Denmark. But today, the iPhone giant confirmed that it was cancelling the first of those two projects, after too many delays in the approval process, which today appeared to be extending in a way that could go on for a long time to come.

“We’ve been operating in Ireland since 1980 and we’re proud of the many contributions we make to the economy and job creation.  In the last two years we’ve spent over €550 million with local companies and, all told, our investment and innovation supports more than 25,000 jobs up and down the country.  We’re deeply committed to our employees and customers in Ireland and are expanding our operations in Cork, with a new facility for our talented team there,” the company said in a statement provided to TechCrunch. “Several years ago we applied to build a data centre at Athenry. Despite our best efforts, delays in the approval process have forced us to make other plans and we will not be able to move forward with the data centre. While disappointing, this setback will not dampen our enthusiasm for future projects in Ireland as our business continues to grow.”

Apple had planned for the data center — which would cover 166,000 square metres — to go online in 2017.

(The first phase of the Danish center announced at the same time, incidentally, is nearly completed and Apple is now working on a second center in the country. We’ve confirmed with sources that this second center is not the “other plan” that Apple refers to in its statement above, meaning another data center announcement from Apple in the region may be coming.)

As originally conceived, the facility in Ireland was planned to be built on land previously used for growing and harvesting non-native trees. As part of its CSR in building the facility on that land, Apple also pledged to “restore native trees to Derrydonnell Forest,” as well as build an outdoor education space an a walking trail.

But within months of Apple announcing the project, issues started to arise around the potential environmental impact and what effect the building of the data center would have on the national electric grid. Initially, the Galway County Council asked for more details from Apple about how the data center would work.

Then, when Apple provided it and the council granted permission to build the center six months later, individual objections started to surface, including from a local environmental engineer called Allan Daly, who has become something of the public face of the opposition to the plans.

Daly’s main argument was that Apple’s data center, particularly at its fullest-possible size, would put too much strain on Ireland’s power grid, including in the building of them. Apple has maintained that its data centers are powered on renewables, that it gives back over time, and that it wouldn’t over-build.

Last October, Apple won a case in the Irish High Court that appeared to give the company the green light it needed to proceed with its plans. But from what we understand, there was still some uncertainty that lingered, because opposition could have still taken the case to the Supreme Court to appeal once again.

That continued uncertainty was the final straw for Apple. With no guaranteed end in sight, Apple finally made the choice to “move on”, as one source close to the situation told TechCrunch.

The whole case underscores some of the ongoing issues that apparently exist in Ireland over how data centers are planned and approved by local authorities.

“There is no disputing that Apple’s decision is very disappointing, particularly for Athenry and the West of Ireland,” Ireland’s Minister for Business and Enterprise Heather Humphreys said in a statement provided to Reuters.

There is talk of reforming that whole process, but that is not something Apple will get involved with at this point.

The company has had a rather complex relationship with the country.

Like many tech companies, Apple has made a lot of investment into operations based out of Ireland, including housing its European headquarters in Cork. But the country has also been the subject of a large tax debate, which has seen Apple just weeks ago finally settle on paying some €13 billion ($15.4 billion) in back taxes to Ireland starting this month, after the EU ruled that the existing tax scheme was illegal.

Ironically, Ireland was on Apple’s side in trying to resist the payment — perhaps in part because it all too well understands its relationship to the companies that subsequently pump hundreds of millions of euros in investment and jobs into their economies.

It’s odd timing, therefore, that we’d hear about Apple pulling out of the data center in Ireland now, although from what I’ve been told the two are very distinct, unrelated issues.

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Apple invests $10M in greenhouse gas-free aluminum smelting

Canadian Prime Minister Justin Trudeau and Quebec Premier Philippe Couillard joined a key execs from Apple and industrial manufacturers Alcoa and Rio Tinto to announce a new process for smelting aluminum that removes greenhouse gases from the equation.

Alcoa and Rio Tinto are creating a joint venture in based in Montreal called Elysis, to help mainstream the process, with plans to make it commercially available by 2024. Along with swapping carbon for oxygen as a byproduct of the production process, the technology is also expected to reduce costs by 15-percent.

It’s easy to see why Apple’s jumped at investing into tech here, investing $13 million CAD ($10 million USD) in the process. The company has been making a big push over the past couple of years to reduce its carbon footprint across the board. This time last month, Apple announced that it had moved to 100-percent clean energy for its global facilitates.

“Apple is committed to advancing technologies that are good for the planet and help protect it for generations to come,” Tim Cook said in a release tied to today’s news. We are proud to be part of this ambitious new project, and look forward to one day being able to use aluminum produced without direct greenhouse gas emissions in the manufacturing of our products.”

Those companies, along with the Governments of Canada and Quebec have combined to invest a full $188 million CAD in the forward looking tech. While the new business will be headquartered in Montreal, U.S. manufacturing will also get a piece of the pie. Alcoa has been smelting metal through the process at a smaller scale in a plant outside of Pittsburg since 2009.

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Tech devices that make for great last-minute gifts for anyone

Makula Dunbar Contributor

Makula Dunbar is a writer with Wirecutter.

Editor’s note: This post was done in partnership with Wirecutter. When readers choose to buy Wirecutter’s independently chosen editorial picks, it may earn affiliate commissions that support its work.

It should be easy to give a gift. But it can be hard trying to choose what gift to give. That’s especially true with technology, where products tend to be more functional than emotional. Here’s what matters most: finding a present that connects to the recipient, creates a sense of enjoyment, and that they’re actually going to use. Here are five tech gifts that will appeal to almost anyone.

Jaybird X3 Wireless Sport Earbuds

The Jaybird X3 earbuds are designed for working out, but their design and great audio makes them perfect for anyone on the go. The X3’s interchangeable tips and fins offer a highly customizable, comfortable fit. Overall sound is high quality out of the box, but we like that the companion Jaybird app allows a tailored listening experience. Eight hours of playback time means you’ll be set throughout multiple workouts or a full work day.

Amazon Echo (2nd generation) Voice-Controlled Speaker

While there’s more than enough buzz surrounding voice-controlled speakers, they’re not yet considered a standard home item. But we think they’re helpful, and we know that a lot of folks find them incredibly useful for ordering food, listening to audiobooks, streaming music, or controlling their appliances and lighting. Our favorite is the Amazon Echo (2nd generation), which does more (and does it better) than any other current model. It supports a huge list of smart-home devices—including thermostats, light bulbs, and vacuums, and it has a set of skills, including offering custom weather, news and calendar alerts. (Note: If you’re giving one of these devices as a gift, make sure the recipient’s preferred music service is supported; Amazon’s devices, for example, work with its own Prime Music service, as well as Spotify, but not with Apple Music.)

Jackery Bolt USB Battery

A convenient device (which at times doubles as a lifesaver) is a gift that anyone would consider a necessity. We researched more than 300 USB power banks and battery packs and tested 40, naming the Jackery Bolt as our top pick. The Jackery Bolt is made out of aluminum and is the perfect size for carrying around in your bag or pocket every day. It has two connector cables (one Lightning and one MicroUSB), and its 6000 mAh battery has enough power to charge a medium-sized smartphone twice.

Nixplay Seed Digital Photo Frame

The Nixplay Seed digital photo frame is perfect way to keep faraway friends and family members in sight. Since it’s Wi-Fi-enabled, you can be anywhere and use social media platforms, cloud storage, or your smartphone to upload pictures. It’s a great gift because new and old moments can be shared anytime, giving viewers more reasons to touch base with you. It has a high-resolution IPS display that can show images in landscape or portrait orientation. The photo frame’s remote and sensor—which turns the device off when no one’s in the room — lets you choose what you want to see at your convenience. Multiple people can create photo playlists through the Nixplay website, or add pictures to be shown by sending them through email. With 8GB of storage it has the capacity to hold roughly 25,000 smartphone photos.

GoPro Hero5 Black Action Camera

The GoPro Hero5 Black is our top pick for action cameras because it can be used for everyday filming, capturing memories during travel adventures, and is great in environments that aren’t suitable for larger, pricier camera equipment. It doesn’t have a clunky case, but it’s still waterproof. For those who usually place tech integration at the top of their gear list, the GoPro Hero5 Black also has a touchscreen interface and voice-control capabilities. During testing we found its footage to be crisp and clear with accurate color in addition to sound quality that’s worth keeping in professional edits.

Garmin Vivosport Fitness Tracker

If you’re looking for a way to jumpstart your exercise routine and you haven’t picked up a fitness tracker, now’s the time.  We’ve tested 23 fitness trackers over the past three years and think the Garmin Vivosport is the best option. Its built-in GPS, long-lasting battery life and color display set it apart from others. In addition to monitoring your workouts (including strength-training reps), it helps keep tabs on your sleep and stress levels, and is Bluetooth-enabled for IOS and Android integration with streaming music and notifications.

This guide may have been updated by Wirecutter.

Note from Wirecutter: When readers choose to buy our independently chosen editorial picks, we may earn affiliate commissions that support our work.

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Notable launches a service to automatically record and digitize data from doctor visits

Notable, a new startup digitizing the checkup through automatic recording of doctor’s visits and updating of electronic health records, is launching its first product for the Apple Watch.

Billing itself as a white-label solution for wearables, the company’s technology uses natural language processing and voice recognition technology to automatically record doctor-patient interactions and structure the data for inclusion in a patient’s medical records.

After a year in stealth mode, and with $3 million in initial funding from Greylock Partners, Maverick Ventures and 8VC, Notable is finally ready to unveil its first product for the Apple Watch.

It could be a boon for busy doctors who spend more than 10 hours a week on paperwork and administration rather than treating patients. The new technology can also help with the perennial problem of deciphering a doctor’s notes (physicians’ poor penmanship has been frequently mined for comedic purposes, but  has real-world consequences if medical prescriptions are improperly filled).

The team behind Notable was carved out of another Greylock investment — a mortgage lending startup called Blend.

Pranay Kapadia, the former head of product at Blend, said the idea for the company came to him after hearing his wife complain about the tribulations of life as a doctor.

Joining Kapadia in the company are Justin White, the former head of engineering at Blend and Adam Ting, who headed up product design at the mortgage company.

In their efforts to get Notable’s documentation system up and running, the team spent time recording and monitoring over 2,000 physician interactions with patients.

Ultimately the problem was a data issue, according to the company, and data processing and handling is what the founding team has been working on since their earliest days at companies like Mint.com, QuickBooks, TurboTax, ClimateCorp and Blend.

“We started Notable to leverage powerful technologies such as AI, wearables and voice interface to address these challenges and to give physicians what they really want — a seamless, truly hands-free solution, not another screen to learn or computer application,” said Kapadia, in a statement.

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