Liberty

If you didn't know, they are streaming today's event live: http://www.apple.com/apple-events/october-2013/

But what if in a couple years you kill off they dvd business, and make Netflix streaming exclusively available on Apple TV and iOS devices? I look at it as more of a way to further sell hardware and tie people into the Apple ecosystem. Netflix is barely profitable currently, so it's wouldn't directly add earnings from subscribers. I don't see it. It would piss a lot of people off, make the experience worse for almost everyone who isn't 100% Apple (which is a lot of people, watching netflix on theit Xbox or windows laptop or whatever), and open the door for competitors who are multi-platforms. It's not really the Apple way, at least not anymore. They don't even make iTunes Apple-only... And they'd have to pay like 20+ billion for the privilege of probably seriously crippling Netflix because it would lose a lot of subscribers and its service would be less useful than it was, and get tangled into a lot of complications as a content producer, making it harder to have access to content from other content producers. Apple devices already have access to Netflix, and they wouldn't sell that much better if it was exclusive to them. Netflix's cool, but it's not that big a draw.

That's an interesting idea. The first few things that come to mind are: Netflix has thin margins and an uncertain future. If cable and content companies get their act together and begin unbundling content and improving random access streaming, as is widely expected to happen over the next few years, its value proposition won't be quite as unique. And if they start making more money, the content owners will squeeze it out of them when contracts renew. They can gain more leverage by scaling up some more, but their best hope is to keep creating enough original content to differentiate themselves and be worth subscribing to even if others offer a similar service (like HBO when it made that transition to original content). So if Apple buys Netflix, it's doubtful they'd make much money (not at Apple scale, anyway), and it's doubtful they'd want to get into content creation in a big way as that's not really their business. But if they don't buy Netflix, nothing bad really happens. Netflix will never prevent Apple devices from playing its streams. It would be crazy for a subscription service to prevent the top end of the market to subscribe. So Apple will have access to Netflix even if they don't own it. And by not owning a content producer/distributor, Apple can keep partnering with everybody without feeling like a competitor (unlike how Microsoft went into hardware and started competing with its partners). Indeed, a lot of the small acquisitions they make seem to be acqui-hires. They want talented people who fit in the culture, and if they already have good products that can be integrated (ie. Siri), all the better. Shazam would be nice, though if someone ever removed it from iOS, another company would jump in the hole and fill that need. I don't think Shazam is the only one able to do what they do, it's just that right now they fill the niche so well that few competitors will even attempt it. But if they leave that space on iOS, I'm sure it wouldn't stay empty for long. But getting more talented people is definitely a good use of cash, and Apple buys many small companies and recruits many people. We hear about it when they are bigger companies and better known people, but I'm sure there are also tons of small deals that never get reported because they don't have to. Sadly, there's not an unlimited supply of talented people who fit Apple's culture.

Unfortunately, I won't be able to attend this year. :'(

I don't think Cook has spent too much time with Icahn, and capital allocation should be a top priority for a CEO anyway, so it's not like it's totally wasted time. Buffett recommended to Jobs that he should do buybacks years ago, when the stock was sub-100 IIRC, and if he had, Apple would be in even better shape today. IMO whatever Icahn (iCahn now?) says should be looked at on merit, like what Einhorn and Buffett said. Dismissing it blindly because Icahn said it is just as bad as adopting it blindly because he said it. Whether they end up doing it or not, I doubt it changes the company's long-term focus one iota. They'll look at it through that lens. All this is just input from known good capital allocators, so it can't hurt to at least listen, especially for a company that has a lot of cash to allocate, with more coming in all the time, and few obvious ways to spend it organically. It's not because you're the best at making consumer products that you are the best at capital allocation (we have to be careful about the halo effect). Now, don't take all this to mean that I think they should do what Icahn proposes. I don't know, I don't have Tim Cook's inside view, but I'm glad they're thinking hard about capital allocation, especially when the stock has been relatively cheap.

If the business is good and has a long-term future, buybacks do increase the value for continuing shareholders by giving them a bigger piece of the pie. Look at how happy Buffett is about IBM or WaPo buybacks, or any buyback under IV (his hero is Singleton). It's not like buybacks are forcing anyone to sell. If the daily volume was ±zero, the money would probably be returned via dividends. But since there are many shareholders who will put their shares for sale at prices below IV, it's fine for the company to buy and cancel. Which is why I hope that tomorrow after the announcements the stock will drop a lot, allow more buybacks at lower prices :)

There are now reports that Apple has boosted 5S production by 75%. Who knows how accurate this is, but it shows why it's dangerous to try to figure out what's going on from these supplier reports because there are so many moving parts and you can't tell what's going on from just one or two items in isolation (ie. the recent thing sbout 5C production being reduced).

People on a podcast I was listening to recently quipped that the Nexus was created just so Google employees could buy it and pretend that it's what Android devices are. Obviously that's not literally the case, but I don't think the Nexus has much commercial traction outside of certain circles. Seems like a competent device, though, but is that enough?

Viking, exactly, like in the desktop and laptop industry. Apple only has a relatively small marketshare, but it has most of the profits.

Their share is actually bigger if you differentiate between devices that are nominally "smartphones" and devices that are actually bought and used as general computing devices. What I mean is there's a very significant number of people who buy devices that could be called smartphones - they run a smartphone OS like Android, they can handle apps and web browsing and video and such - but they are actually used more as feature phones by their users. They make phone calls, send and receive texts, and maybe have one app (Facebook)... The only reason they got something that could be called a 'smartphone' is because cheap android models are basically the same price as dumb phones now. Eventually all phones will nominally be "smartphones", but not all of them will be used the same way... Android's not a monolith (both in users and devices). If we could segment it better and separate real smartphones from what are basically glorified feature phones, and people who want a general computing device in their pocket from those who just want a cellphone, I think we'd see that Apple's share in the market in which they really compete in is even higher. An indication of that is when you look at usage stats; how much web traffic comes from iOS devices vs others. How many dollars are spent on ecommerce sites from iOS vs. the rest. How many apps are installed and used per iOS device vs the rest. etc.

I don't expect Q3 to look very good, but Q4 has the potential to show the light at the end of the tunnel. Wildcard is Chinese gov't. Mr. Market doesn't seem to know quite what to do.. Down about 8% and then back in the green on 5x the average daily volume in half a day...

I suppose we can expect almost all analysts to cluster around the same target. It reduces reputitional risk (safety in numbers). These are also often self-fulfilling prophesies; you say SELL, people sell, the price drops, and you can say "see, I was right to tell you to sell, the price dropped!". On the other hand, who knows, maybe FTP's streak of bad luck will last forever.... It's kind of funny in a way to look at the symmetry of the situation: A few years ago, they were years away from being fully ramped up, still had lots of hardware to build and test, DP prices were at historic highs, so likely to come down, and they didn't have that much cash on the balance sheet. Share price was in the stratosphere and analysts were bullish. Today, they have finally got the cogen running and are almost fully ramped up, they have lots of cash on the balance sheet, DP has been bouncing along bottom for a while but at least they have a plan B with NBHK, and landquart seems to be stopping the bleeding. Share price is lower than at IPO in 2007 and analysts are bearish. I know it's not quite that clear cut, but it's hard to imagine that risks are not better priced in now than they were then... Anyone has the Scotiabank report? Anything new?

Anyone knows what's going on? Any news that I'm not seeing?

http://feedly.com/k/173Ab9i For all of Jobs's genius, he was actually against iTunes for windows, and if he had his way, maybe everything that followed would never have happened -- iPod might have stayed niche, Apple might not have had the resources to do iPhone, etc. Kudos to Schiller and Rubistein.

One of the annoying things about RE in canada is you apparently can't trust the 'official' numbers at all: http://www.greaterfool.ca/2013/10/16/truth-trust/

Are they not releasing videos of the whole interview this time? Usually by this time of day we have the whole thing... :( Oh well. Maybe it'll save me from smashing my fist through the monitor when Joe opens his mouth...

I'm not jumping to any conclusions from this, as there can be many variables affecting production rates. So many moving parts... Some that come to mind: the 5C is mostly 1-year old components, and the new part is easier to make than what it replaces (plastic exterior vs. machined glass and metal with close tolerances), so yields were probably very high and they could make them in overdrive for a while before launch. Maybe they've stockpiled tons of them and now they're just going back to a more sustainable level. Maybe some of the manufacturers are being switched to making more iPads ahead of the upcoming launch. Their supply chain doesn't have infinite capacity (we see that with 5S shipping delays because they ran out of them). Maybe the 5S is selling better than they expected, and those sales are replacing 5C sales (which wouldn't be a bad thing). After all, in prior years nobody would care too much if the year-old iPhone was doing well or not; it's a clear win that they now have two products that are considered 'fresh' and 'new' even though in many ways one really isn't (most people aren't techies, if it looks new, it is new, and with iOS 7, the user experience really is new anyway). Etc. On Apple and China: http://daringfireball.net/2013/10/apple_and_china I think we'll really see what happens in China after the China Mobile deal. Right now they're not even getting distributed most places, and they're still doing well with people who can afford high-end phones.

Awesome, racemize. I'm very happy for you. Kudos to your wife, she gets you :)

Good summary by BI. I've listened to the event, and it's very good. Worth a listen if you are curious about these businesses.

Agreed. You can't make ~30% compounded for an extended period of time by buying "great companies at fair prices" (I assume fair means ~10x earnings). If he had only $1 or $2 million, I guarantee you he wouldn't be wasting capital by allocating it to just "fair" opportunities. Good points, I agree. His personal portfolio is mostly JPM afaik, though, so he's not totally against the idea of moving up even in smaller portfolios. But it's still in the 100s of mils. I guess that's the problem if you compound really fast; you rapidly reach the point where you have to look at bigger companies...

Careful about seeing direct causality there. There are many variables, such as the underlying market movement, the size of his investable assets, etc. Also, some of his early picks weren't cigar butts (GEICO).

I'm using a 40$ used Fredrik IKEA desk set up in standing position. Love it. Takes about 2 weeks to get used to it (feet hurt at first), but after that it's fine.

Unbundling coming to Canada? US next? http://www.reuters.com/article/2013/10/13/canada-politics-idUSL1N0I30BW20131013

The announcement was for thurso, not LSQ. Thurso is 'Specialty cellulose', LSQ is 'Global cellulose'.