AAPL - Apple Inc.

[fareastwarriors]

 

Why Apple Wants to Get Into the Unprofitable World of Payments Between Friends

 

http://www.bloomberg.com/news/articles/2015-12-01/why-apple-wants-to-get-into-the-unprofitable-world-of-payments-between-friends

[Liberty]

For the siliconheads, some interesting post-chipworks teardown info on the A9X:

 

http://www.anandtech.com/show/9824/more-on-apples-a9x-soc

[LongTermView]

http://www.wsj.com/articles/samsung-to-pay-apple-549-million-as-patent-dispute-continues-1449261446

 

The url says 549 million but the title and body of the article say $548 million.  Here is a key part of the article:

Apple first sued Samsung in April 2011, saying its Korean rival had copied the look and feel of the iPhone. A jury ruled in favor of Apple in 2012 and awarded $1.05 billion in damages.

 

Samsung agreed to pay roughly half that amount—represented by this month’s payment—following several other legal proceedings. In the spring, the two companies will face off in the San Jose court over an additional $400 million from the original award.

 

[TheAiGuy]

http://blog.erratasec.com/2015/12/tesla-is-copying-apples-business-model.html

[giofranchi]

http://blog.erratasec.com/2015/12/tesla-is-copying-apples-business-model.html

 

Very interesting article about AAPL's business model!

 

Thank you for posting,

 

Gio

[giofranchi]

Bad Apple - The company’s ugly, underpowered new iPhone battery case is a sign of trouble in Cupertino.

 

http://www.slate.com/articles/technology/technology/2015/12/the_iphone_smart_battery_case_is_a_very_bad_omen_for_apple.html

 

Any thought?

 

Cheers,

 

Gio

[DCG]

Yeah, the new case is terrible looking, and I'm not sure how something like that got released. Mossberg ripped on it on the Verge yesterday as well.

[rkbabang]

That case is the ugliest thing Apple has made in a long time.

 

This comic is a good description of all the other phone makers and how they design. Apple is guilty of it too with this case.

[giofranchi]

Apple CEO Tim Cook Defends Smart Case’s Design

 

http://www.valuewalk.com/2015/12/apple-ceo-defends-smart-case-design/?utm_source=mailchimp&utm_medium=email&utm_campaign=EMAIL_DAILY&utm_content=quick_link

 

Cheers,

 

Gio

[giofranchi]

Apple's next big thing: Augmented reality

 

http://news.investors.com/technology-click/121015-784753-apple-predictions-for-2016-and-beyond-piper-jaffray.htm?fromcampaign=1&p=full

 

Cheers,

 

Gio

[johnny]

On the batterycase: the only thing stranger than releasing that thing in the first place is releasing it 15 months into the relevant hardware cycle.

 

I've been using the iPad Pro a lot and see so much potential, almost entirely untapped. They absolutely NEED to figure out how to work the keyboard into the operating system correctly here.

 

That said, it is hard to be optimistic. I remember the very first iPad launching with a special 30-pin keyboard stand. The state of iOS 9's keyboard support makes it seem like this is an idea somebody had a few weeks ago that a single dev has been working on during his lunch hours. It's crazy how terrible, incomplete and inconsistent it is. But it is crazier how, even in that almost useless state, the visions of what is possible become so clear.

 

It's funny that all this time people have been talking about wanting to see iOS and OSX merge, when the real outcome is going to end up being something more like iOS forking.

[fareastwarriors]

Apple advertising iPhone 6s to older iPhone owners through App Store popups

 

http://9to5mac.com/2015/12/11/apple-advertising-iphone-6s-to-older-iphone-owners-through-app-store-popups/

[innerscorecard]

On the batterycase: the only thing stranger than releasing that thing in the first place is releasing it 15 months into the relevant hardware cycle.

 

I've been using the iPad Pro a lot and see so much potential, almost entirely untapped. They absolutely NEED to figure out how to work the keyboard into the operating system correctly here.

 

That said, it is hard to be optimistic. I remember the very first iPad launching with a special 30-pin keyboard stand. The state of iOS 9's keyboard support makes it seem like this is an idea somebody had a few weeks ago that a single dev has been working on during his lunch hours. It's crazy how terrible, incomplete and inconsistent it is. But it is crazier how, even in that almost useless state, the visions of what is possible become so clear.

 

It's funny that all this time people have been talking about wanting to see iOS and OSX merge, when the real outcome is going to end up being something more like iOS forking.

 

I think the lack of care Apple, relative to iPhone, has spent on iPad software is as much to blame as anything inherent in the tablet upgrade cycle for slowing iPad growth, and in fact might have caused it.

[DCG]

I've said this before, but I freakin still hate the new iOS music app. Not tasking about the Apple Music service - which is fine - it's the app that is terrible. All I really want to do is have it only show Music I have stored on my phone, not my full apple library. The 'show only music on this phone' option almost never works. It works when you disable and enable the setting, and then restart the app. Then when you close the app, it reverts back again. Also every time I plug my phone into my car stereo it starts playing what lever the first song in my library is that starts with A. It's incredibly annoying.

[rkbabang]

"Apple has reportedly suspended its ambition to offer a monthly subscription TV/video streaming service."

[DCG]

I don't believe anything written on Seeking Alpha, but who knows.

[johnny]

Can't remember if this has been touched on in this thread or not, but the third-party retailer discounting on the Apple Watches is getting even more aggressive. Target is now selling the 38mm for $250, 42mm $300 (sport, of course).

 

I've already expressed my concerns with flooding people who don't really have a use for the watch with the product, but obviously there's a balancing act here with the ecosystem advantage so it really is hard to have a strong opinion one way or another without some real numbers.

 

I still don't see any Watches on the street in the general public. I only personally see them on developers and supernerds. My girlfriend only sees them on other doctors, where they stand in for (some) pagers and are apparently highly valued for that achievement.

[giofranchi]

I don't believe anything written on Seeking Alpha, but who knows.

 

I would like to know why. Imo Seeking Alpha offers a lot of nonsense, but sometimes also really interesting news and articles. Obviously you seem to disagree, and I would like to know why.

 

Thank you,

 

Gio

[DCG]

Because they allow virtually anyone - including people looking to promote companies of stock they're buying and trash companies they're shorting - without any vetting.

 

- it looks like they finally addressed the bug in apple music I posted about (show only music in the phone not working) with yesterday's iOS update.

[giofranchi]

Apple Pay, Chip Credit Cards Help Redefine Payments

 

http://news.investors.com/technology/121515-785312-mobile-payments-rise-credit-cards-more-secure.htm?p=full

 

Cheers,

 

Gio

 

 

 

[giofranchi]

Eric Topol's Top 10 Tech Advances of 2015

 

http://www.medscape.com/viewarticle/855826

 

Cheers,

 

Gio

[fareastwarriors]

Apple Names Williams COO, Elevates Srouji in Management Shuffle

 

http://www.bloomberg.com/news/articles/2015-12-17/apple-names-jeff-williams-coo-among-other-management-moves

[Liberty]

Apple Pay coming to China with Unionpay partnership:

 

http://www.apple.com/pr/library/2015/12/18Apple-China-UnionPay-to-Bring-Apple-Pay-to-China.html

[Liberty]

I wrote a few thoughts on Apple in my investment journal. It's kind of stream of consciousness, so it might not all make sense or address everything. Apologies in advance:

 

---

 

Random thoughts on AAPL:

 

Software is a great business if you can get your customers to pay for it. Fairly easy in the enterprise, very hard for consumers.

 

The typical approach with consumer software is to give it away and charge third parties for access to the attention (advertising), wringing small amounts from each person but building scale to compensate (Google, Facebook, Twitter). Even Microsoft on the consumer side sells most of its Windows licenses embedded in the price of new computers (most people have no idea how much they actually paid for Windows).

 

Despite what most people think, Apple is primarily a consumer software company.

 

Thought-experiment: An iPhone and a Mac running Android and Windows. What would the selling price be like? What would the margins be like?

 

This makes it clear that most of what people pay for is the software differentiation. Nice hardware can command a small premium, but not much if most of the actual user experience is the same as on much cheaper hardware. You can see that in how premium Android handset makers have little pricing power. If you’re making a commodity, the primary way to make money is to be the low-cost producer (Samsung).

 

So Apple sells software, but it monetizes it through hardware, which is something that people are willing to pay for (cognitive bias favoring physical things?).

 

If Apple didn’t make hardware and sold its OSes directly to consumers, to be installed on other manufacturers’ hardware, they could be successful, but I doubt that the average selling price would be nearly as high as the delta between an iPhone + iOS and an iPhone with Android. In other words, paying for software through hardware feels like a better deal to most people than paying for just software, even if they are actually paying more in the first case.

 

The differentiation provided by the software is key. Add to that a brand that was built over time (one of those intangibles that Dorsey talks about, very hard to value, but can still make a big difference) and the hardware+software+services integration that comes from one company building the whole stack, and you get a better, more differentiated user experience than what a company selling just OSes could ever make.

 

Apple has a flywheel working for it, and would-be competitors in the premium segment of the market have barriers to entry.

 

If you are not differentiated, it’s very hard to be premium. If you spend a lot of time, care, and effort building a premium product from high-quality materials. Spend a lot on R&D to have cutting edge features that requires lots of expensive customer parts, you hire the best designers and engineers, etc. You still won’t be able to sell your product for much more than the rest of the Android competition because the user experience, which is mostly in software, won’t be that different. You can never price much higher than the material costs because why would someone pay $500 for your thing when they can get mostly the same thing for $300?

 

If you are differentiated, people who want your thing either come to you, or they don't get it. If someone substitutes your Samsung for a Motorola, it’ll be different, but not a huge deal. If someone swaps your iPhone for a Samsung, it’s a whole different thing that you have to learn that works differently (don't underestimate muscle memory for things that people use all day), has different aesthetics, a different feel, integration into a different ecosystem, etc. Apple doesn’t have to appeal to everyone, as long as it appeals to enough people at the higher-end of the market.

 

Some seem to think that Apple has to win people all over again all the time, but the facts are otherwise. People in the Apple ecosystem tend to stay in the Apple ecosystem. Not only do they tend to buy Apple devices again when they upgrade existing devices, but they also tend to buy more devices from Apple over time. A lot of people who just wanted an iPod or an iPhone probably ended up with Macs and iPads over time…

 

The market for mobile devices is unique in size and opportunity. Almost nothing that I can think of is the same when it comes to universality and to the value that it brings to people. The difference between a regular car and a premium car versus the value provided is a very hard thing to make work for most people. Absolute numbers matter. Paying tens of thousands of dollars more for a better experience and a product that makes you feel better to own and use is a lot to ask. But paying a few hundreds of dollars more for a device that arguably brings most people more value than a car is a no brainer to many. A car that is 30% more expensive than average can still be less affordable than a smartphone that is 100% more expensive than average.

 

Apple is almost uniquely positioned to get ambitious new products off the ground. It has built goodwill over the years, and millions of people trust the brand enough to try what they have to offer and be early adopters.

 

A lot of it is getting passed the chicken & egg problem and getting to critical mass. Let's say Motorola releases a smartphone that is very differentiated, with unique features. How many developers are going to write apps that take advantage of the unique characteristics? Very few, right? Because they are worried there won’t be enough (paying) users to make it worth their effort. And if very few developers are willing to take advantage of a phone’s unique features, how unique will the user experience be really? Does it mean that Motorola can’t make anything other than what its in-house software engineers can code for on top of Android? Yikes. Google certainly won’t spend time on that, they are worried about the lowest common denominator and fragmentation. And if you do make something unique that requires hardware+software integration, you’re stuck maintaining a fork of the main Android tree and as soon as you stop, you’re likely to break things for users.

 

In Apple’s case, as soon as there’s new hardware or software features, a large number of people buy the new hardware and almost everybody upgrades to the new software rapidly. This is a massive target for developers, having users who are a group of self-selected people who are ready to spend more on things they want. So it’s not a surprise that pretty much all developers write for the Apple platform first and sometimes only, and the quality of apps tends to be higher (I remember comparing the iPad Bloomberg app vs the Android tablet app — yuck).

 

Competing in the smartphone space is easy, but competing with Apple is surprisingly hard. Anyone can make a smartphone these days, just ask some Chinese supplier and they’ll make one for you. But competing with Apple means getting someone who would buy an iPhone or a Mac to buy something else, it means fighting for those juicy profits at the top end of the market.

 

To even play, the table stakes are high. One of them is having an app store that contains everything anyone could want. The only other company that has that apart from Apple is Google. But to compete in the high-end, you need to be differentiated. If you’re running Android, you aren’t — most of the user experience will be the same as on every other commodity Android handset out there. Catch 22.

 

Even if you can be differentiated, that’s not enough. You also have to be good. Amazon tried a unique approach with its Fire Phone and its fork of Android, but very few companies out there are product-focused the way Apple is, integrating hardware+software+services into a package that works as a whole in a way that someone who paid hundreds of dollars for it won’t feel bad. People aren’t buying spec lists or individual features, they are buying a whole products and all the tradeoffs that were made for it. If some Windows Phone out there comes out with a camera that is much better than the iPhone’s, it won't matter terribly because the rest of the package is still a Windows Phone that nobody wants.

 

Back to Apple’s flywheel: If you have fat margins, you can reinvest more than others.  The mistake that I think many make here is that they look at R&D across the industry for things that are available to anyone. If there’s a new, better Snapdragon SOC that everyone uses, it’s not differentiating.  If Google improves Android, all Android phones get it. It’s like Buffett’s story about textile machinery that gets more efficient, but all your competitors buy it, so you end up like people standing on tip-toes are a parade. Nobody is really better off than before.

 

But if you can reinvest in things that are unique to you, you are widening the moat. If you can buy thousands and thousands of CNC machines to mill solid blocks of alimunium and you’re the only one who can do that at scale, or if you build the best chip-design group in the industry and have them make faster, more power-efficient, more featured chips that only you can use, or if you can reinvest in a network of large, beautiful stores in prime locations, the first and best implementation of a fingerprint scanner, a pressure-sensitive screen with haptic feedback, etc. This even includes more esoteric and long-term things like releasing a new programming language (Swift) that you know a whole generation of coders will eventually learn because your platform is the most lucrative, further tying them to your ecosystem and distancing you further from what developers have to deal with elsewhere (Java on Android, ew) while offering them a more modern, more powerful language that will eventually make their lives easier.

 

The company’s culture and long-term approach is also a competitive advantage in creating value. Patience is underrated in business. There’s this idea that Apple releases new products that are perfect and magical… But that’s totally not the case. They tend to release things that are good enough at the time, but based on a good idea, and then iterate until it truly is a great product for the masses. The original iPod impressed people, but it’s the later versions (Nano) that sold like cupcakes. The original iPhone blew people’s minds, but it’s the later versions that became truly ubiquitous (the original didn’t have video, GPS, 3G, cut & paste, an app store, etc). The first iMac with the computer behind the screen was a great idea, but it’s only several generations later that the original idea of a computer truly hidden behind a thin panel was realized. Same for the Macbook Air, which was originally very expensive, very slow, had weird ports, etc. Now there are countless laptops that descend directly from that original Air, and they are selling very well. I think it’s likely that a similar thing will happen with the Watch; a few versions from now it’ll be thinner, faster, have more battery life, more sensors. Developers will think up new apps and complications unique to it that make it more useful, more things in the physical world will interact with it (unlocking doors, vehicles, paying for things, security ID for computers, buildings, payments, etc). At some point it’ll be more of a mainstream thing (though if the estimates are true and they sell close to 14m of them this year, in just three quarters, with supply issues at the beginning, that’s one hell of a start for any new product priced at that level).

 

Apple is sometimes called an integrated company, but that's a bit misleading. They are a hybrid. They are highly modular when it comes to commodity components, with hundreds of suppliers for things like flash memory and other parts, but they are highly integrated when it comes to the more differentiated parts of their products (f.ex. SoCs, software, industrial design, etc).

[intothebreach]

Some seem to think that Apple has to win people all over again all the time, but the facts are otherwise.

 

This. Imagine what would happen to AAPL's multiple if the market ever decided to weight Apple as a subscription model rather than as a seller of devices, risking to be dethroned at any moment. I view it as an embedded option with no expiry date, as long as Apple keeps moving the goal post by continuing to successfully differentiate itself.

 

Interesting rant, thanks for sharing it.