AAPL - Apple Inc.

[Guest valueInv]

From the WSJ: "Has Apple Lost Its Cool to Samsung?"

 

http://online.wsj.com/article/SB10001424127887323854904578264090074879024.html?mod=WSJ_hp_LEFTWhatsNewsCollection

 

This is exactly what I mean by stories. Samsung has sold 100m Galaxy S phones cumulatively so far. Apple sold 47M iPhones in the last quarter alone. Samsungs numbers are high not because their phones are cool. It's because of the cheaper phones.

[Guest valueInv]

Why are you using gross margins?  Use net operating margins and net profit margins...that's a heck of a lot more accurate:

 

Operating Margins:

 

MSFT - 24% to 41% over the last ten years - presently around 28-29%

GOOG - 20%-42% over the last ten years - presently around 27-28%

AMZN - 1% to 6% over the last ten years - presently around 1-1.5%

FB - 12% to 52% over the last three years - presently around 12-13%

 

AAPL - 0% to 35% over the last ten years - presently around 28-30%

 

 

Net Profit Margins:

 

MSFT - 21% to 33% over the last ten years - presently around 21-22%

GOOG - 7%-29% over the last ten years - presently around 22-23%

AMZN - 0% to 4% over the last ten years - presently around 0.5-1%

FB - 4% to 19% over the last three years - presently around 4-5%

 

AAPL - 1% to 27% over the last ten years - presently around 24-25%

 

Now how does Apple's moat compare?  How does its valuation compare to Google, Microsoft and Apple?  Cheers!

 

Wow taking a smackdown from the master.  I respectfully disagree and believe you don't paint a very complete picture with your numbers.   

 

Attached is a graph of the margins (Gross, operating, and net profit) for both MSFT and AAPL.  MSFTs have been relatively the same for the past two decades.  Look at AAPL's margins the are at their recent peak, and as of the most recent conference call they fall 6% in the busiest quarter of the year.  Now what this says it that apples products have only recently become popular.  Second, something happened last quarter because gross margins fell hard in the busiest selling season.  Third, the moat is not nearly as strong as you think.  Youare buying a company that only recently achieved that margins you are discussing and we will see if they stand the test of time.   

 

Don't you find it dangerous that this company, a market darling that could do no harm, is facing it's first test.  Competition is coming and it's coming strong and fast. 

 

You could put up graphs of other consumer electronics companies like RIM and Nokia and it would paint a similar picture to where apple is today (then they fell from grace).  You can think Apple has a strong moat but it has never been tested.  The recent quarterly results suggests there may be some holes in the armour. 

 

The video I posted of Prof. Greenwald also discussed this same fact.  Consumer's are fickle, and consumer trends are hard to predict.  Why is Apple going to have a different outcome than every other consumer electronics company that has gone before it?  The four most dangerous words in investing, "This time is different."

 

Don't get me wrong apple isn't going anywhere soon but trees don't grow to the sky.  IMO Apple's stock will go nowhere over the next 5 years.   

 

Cheers and thanks for the smackdown!  Interested in your thoughts on the above.

 

Another example of a story and misuse of history.

[Viking]

As some have rightly pointed out, the challenge with valuing Apple is that what they have done over the past 7 years has never been done before. Their string of hit products has been amazing: ipod then iphone then apps, then ipad; mac have always been great.

 

Today, they are in the sweet spot: cell phones and tablets. Their share of profits is simply obscene. these markets are going to post crazy growth numbers the next 3 to 5 years.

 

Apple is so big we can't actually process it. This leads to comments like 'law of large numbers' and 'this time isn't different'.

 

Right now consensus seems to be saying:

1.) Apple's innovation up to now was a fluke - they have no more game changers in the pipeline (the big stuff). If the company isn't going to tell me what their doing then they obviously are a bunch of con artists and they are doing nothing (or what they are doing is garbage). If I don't know what is coming them obviously nothing is coming.

2.) Apple has maxxed out in size - companies simply cannot grow to more than $500 billion marketcap. Ain't possible so don't even try!

 

I think they have more great stuff in the pipeline that we will see in the coming years. This should lead to higher earnings (as crazy as it sounds). This should then lead to a higher stock price. I also have no idea how big a company can get.

 

I did listen to the conference call and I also heard the awkward silences and non-traditional answers to questions. They also do not issue a glossy annual report and there is no promotion in the document. My read is they are focussed on running the business for the long term. And they don't get overly fussed about quarterly results. I think this also answers why they have $137 billion in cash with no long term debt... they can run the business for the long term and not be beholden to bond holders or others. Their quarterly onference calls are about as fun to listen to as Buffett's (if they are so important why doesn't he hold one)? And due to the competitive nature of the business (and the culture of the company) they are not going to give you any information they don't have to. I think it's time to read Steve Jobs biography.

[actuary]

To me, the bulls on this thread appear a lot more defensive than the bears. Maybe it's just the stock price. I have no position in AAPL but have shorted it successfully in the last year.

 

Very enjoyable discussion about the quality/nature of earnings at various firms, switching costs, etc. As always, this forum is a gem.

 

I do believe Apple employs some of the world's best designers and has some potentially revolutionary products in the pipeline. But, as a value investor, that is just not good enough. I want to get a deal on the enduring business I can see now. Maybe that opportunity never comes with a company like AAPL. Oh well. I already own plenty of it through index funds in my passively managed accounts.

 

For tech in general, it is very hard for me to picture the enduring businesses within a firm. But it does seem easier with GOOG, MSFT, AMZN, as some here have mentioned. It is a question of recurring revenue. Thinking about the major drivers of profits here....

 

GOOG: people keep using the world's best data indexer (with a huge lead, network effects, etc) for search/ads. MSFT: businesses keep paying license fees for software and services that are extremely difficult to switch and do have some unparalleled functionality for certain key tasks. AMZN: people keep wanting a good deal on all sorts of products from a retailer with unmatched predictive modeling and customer service (huge lead, network effects, etc).

 

With these companies, inertia is in the shareholder's favor. (IMHO, MSFT is the only one with compelling valuation at today's prices.)

 

How much of AAPL's revenue is recurring? If I already have an iPad, iPhone, etc... they have to convince me to upgrade or buy another device, right? Over the lifetime of a device, how much profit do iTunes and the App store generate vs. the initial sale of the device? I am not the best educated on their business model, but isn't the recurring revenue piece negligible? Maybe that changes if they disrupt payment processing in a big way. Maybe it changes with their next device or with some subscription cloud service. But I don't want to be in the business of making those assumptions when I can buy equally "cheap" businesses with a lot more visibility.

 

 

 

[alertmeipp]

it will be an interesting one to watch to say at the least.

 

love the discussion, much better than the cheer leading threads :)

 

 

[no_free_lunch]

How much of AAPL's revenue is recurring?

 

The app store revenue is actually fairly significant and it will continue to grow.  Keep in mind the app store is just icing on the cake, as even if they broke even on it it's drawing people to their product.  I am not an expert on Apple's past but I think it was the lack of software that almost killed them in the 90's.  Everything was being written for Windows.  The iOS is currently considered a better market by developers as it tends to generate much higher conversion rates.

 

Anyways, in direct response to your question:

 

Apple’s App Store is on track to generate over $9 billion in revenue in calendar 2012 which would be a 33% increase from 2011’s $6.9 billion and just over 5% of total company revenue.  The margins for this segment should be improving since originally a large portion of sales came from music which had very low margins and now Apple takes a 30% cut of app sales.

 

http://www.forbes.com/sites/chuckjones/2013/01/10/apples-app-store-could-generate-22-billion-in-2016-revenue/

 

I also disagree that Apple only sells products once.  I have known numerous people with iphone's and guess what, many of them are on their second phone.  They don't NEED to replace them but there are newer and cooler models out.  These things are almost more fashion accessory than utilitarian computing devices.  You need to get a newer cooler one because that's what your friends have.  When we get to the point where they can't find any way to improve the devices then the game's up but I think there is a good 5 years left before that happens and I wouldn't be surprised if it goes for 10-20 years. 

[actuary]

Appreciate those numbers, no_free_lunch. To me, though, $9B app store rev doesn't seem too material on a $300B enterprise value, even if you assume the full 30% margin. Heck, even if you assume 30% growth for the next five years..that's $10B/yr in pre-tax profit from app store 5 years from now, assuming the full 30% margin.

 

I didn't say they only sell products once. Agree that they have been successful selling updates. My wife is a good example... she upgraded a macbook last year. I have other family members who have upgraded iphones. My point was merely that GOOG, MSFT, AMZN make money off customers continuing to do exactly what they're doing... searching, using Excel, wanting to buy things cheaply. AAPL actually has to convince people to get off their butts and upgrade products that are already pretty awesome. That is a higher risk, lower visibility business that deserves a much higher discount rate.

[alertmeipp]

>>AAPL actually has to convince people to get off their butts and upgrade products that are already pretty awesome.

 

I think Apple still has huge opportunities outside US and would be interesting to see how Apple is going to capitalize on their huge and loyal user base.

[hardincap]

>>AAPL actually has to convince people to get off their butts and upgrade products that are already pretty awesome.

 

I think Apple still has huge opportunities outside US and would be interesting to see how Apple is going to capitalize on their huge and loyal user base.

 

How about a razor thin ipad/iphone? retina macs that cost half of what they do now? battery that lasts 3 days without charge? a revolutionary TV that works with all your ios devices? synergies with a "smart" TV is a no brainer and indeed apple has something up their sleeve here. remember jobs said he cracked it in 2011.

 

i think there is still plenty of room for them to innovate.

[Guest valueInv]

>>AAPL actually has to convince people to get off their butts and upgrade products that are already pretty awesome.

 

I think Apple still has huge opportunities outside US and would be interesting to see how Apple is going to capitalize on their huge and loyal user base.

 

How about a razor thin ipad/iphone? retina macs that cost half of what they do now? battery that lasts 3 days without charge? a revolutionary TV that works with all your ios devices? synergies with a "smart" TV is a no brainer and indeed apple has something up their sleeve here. remember jobs said he cracked it in 2011.

 

i think there is still plenty of room for them to innovate.

 

Trust me, there's a lot coming down the pipeline.

[Parsad]

Some excellent analysis from Apple's latest quarter:

 

http://tech.fortune.cnn.com/2013/01/28/apple-stock-performance/?source=yahoo_quote

 

Cheers!

[PLynchJr]

Trust me, there's a lot coming down the pipeline.

 

Don't be a tease.  What new things do you think are coming?

[VAL9000]

Some excellent analysis from Apple's latest quarter:

 

http://tech.fortune.cnn.com/2013/01/28/apple-stock-performance/?source=yahoo_quote

 

Cheers!

 

Interesting that Mac sales dropped 15.8% year over year, whereas PC sales only dropped 6.4% year over year.  Any thoughts on this?

 

My guess is that these numbers show the relative stickiness of the Windows ecosystem vs. the Apple ecosystem when it comes to switching platforms.  Presumably most of this decline is due to either: 1. "good enough" hardware specs / further elongation of upgrade cycle or 2. the effect of iPad substituting the PC/Mac.

 

[Guest valueInv]

Some excellent analysis from Apple's latest quarter:

 

http://tech.fortune.cnn.com/2013/01/28/apple-stock-performance/?source=yahoo_quote

 

Cheers!

 

Interesting that Mac sales dropped 15.8% year over year, whereas PC sales only dropped 6.4% year over year.  Any thoughts on this?

 

My guess is that these numbers show the relative stickiness of the Windows ecosystem vs. the Apple ecosystem when it comes to switching platforms.  Presumably most of this decline is due to either: 1. "good enough" hardware specs / further elongation of upgrade cycle or 2. the effect of iPad substituting the PC/Mac.

 

It's because they released new Macs at the end of the quarter and they still have a 4 week delay on shipping them.

[Viking]

Regarding Mac, sales were down 21%. Here is my guess of the bridge Cooks talks abour below: the extra week last year = 8% and supply issues = 8%. Smaller factors were weakness in PC marrket and ipad cannibalization = 5%. This is not anything I am concerned about, although I would like to better understand what the supply issues are. Also, I expect fiscal Q2 sales to be weak as they started he quarter supply constrained.

 

Here is what was said during the conference call.

Ben Reitzes – Barclays: Yeah, thanks a lot. First question is with regard to Macs, could you talk a little bit more about what happened and it would seem that the shortfall there is well over $1 billion in the quarter or maybe even as much as a $1.5 billion and how much of that was pushed into the March quarter within that new March guidance? Thanks.

 

Tim Cook - Chief Executive Officer: Yeah, Ben, it’s Tim. Thanks for asking that question. I wanted to talk about this, as if you look at the previous year, our Mac sales were about $5.2 million. This year, they were $4.1 million and so the difference is $1.1 million. And so let me try to bridge that. iMacs were down by 700,000 units year-over-year. As you remember, we announced the new iMacs late in October and when we announced those, we announced that they would ship, the first one, the 21.5-inch would ship in November and we did ship it at the end of November, we announced that the 27-inch would ship in December and we did ship that in mid-December. And so there were limited weeks of ramping on these products during the quarter, we left the quarter with significant constraints on the iMac. And we believe we know that our sales would have been materially higher if those constraints would not have exist. We tried to tell people this on the conference call in October, I think I said that we would have significant constraints on iMacs, but I recognized to some folks this maybe to surprise.

 

Number two, if you look at last year, as Peter went through in his opening comments we had 14 weeks in the quarter. We have 13 weeks in the quarter this year. Last year, in the average week, we sold 370,000 Macs. The third part of the bridge here would be that our channel inventory was down from the beginning of the quarter by over 100,000 units. And that’s because obviously we didn’t have the iMacs channel inventory was in significant constraint. So, if you just take these three factors, they bridge more than the difference of between this year sales and last year sales.

 

Now, in addition to these three points, I would point out two other things, and these are lesser things than these other than the total of these other three obviously. One, the market for PCs is weak. IDC’s last estimate I believe was around negative 6%. Two, we sold 23 million iPads and we obviously could have sold more than this, because we could not build enough iPad minis to come into a demand balance. And so there was – we have always said there is some cannibalization there. I am sure there was some cannibalization of Macs there, but the three large factors of it, the aggregated totals of three large, the iMac, the difference in seven days of the previous year having seven extra days and the channel inventory, I think more than explains the difference between this year and the previous year. As a side note, if you looked at our portables alone, they were in line with IDC’s projections of market growth.

[vinod1]

Looking at the sales and income over the last 5 years (figures in billion)

 

Sales          $37  $43  $65  $108  $156

Net Income  $6  $8  $14  $26  $42

 

ROA itself is over 50% and ROE is over 150%, if you take out LT marketable securities.  Looking at the sales and income figures, if these numbers are in million it would be an impressive achievement. In billions, I am dumbfounded.

 

At the current run rate earnings with no growth at all, profits would amount to $500 billion over the next 10 years with absolutely out of this world IRR. I would think such a large profit pool at such high rates of return would attract some pretty intense competition. Apple's success so far has been due to spectacularly innovative products that are miles ahead of the competition. I cannot think of another company that has delivered innovative products on such a large scale and at such large profits.

 

Given the short product cycles and the history of other consumer electronic gadget makers, I am just not able to come up with a valuation model that I can be confident upon to say estimate IV by looking even over the next 5 years. To me investing in Apple seems to be more a matter of intelligent speculation over the next couple of years rather than a value investment. No disrepect intended to fellow board members who are long Apple and who have a much better deeper understanding of the Technology sector.

 

The profits being generated currently are due to superb execution without any long term moat around its products (at least up until now). To maintain its current profits, it needs to be able to create some moat for its products. So before digging into any numbers, one needs to get some idea of where a moat exists for apple's products.

 

From what I see within my own friends circle, there is near zero moat. Most of my friends moved away from iPhone. Apps, iTunes, Facetime, iCloud, etc did not seem to have created any barriers to switching. I might be basing my moat view too heavily on readily available evidence but in a fashion oriented product, that is all I am able to muster.

 

I can see how Apps, iTunes, iCloud may in the future create a moat around switching costs and network effects but I do not see anything right now.

 

In the next couple of years I can see how profits can go up quite a bit but on the same token I can see how profits might collapse over the next 5 years. To me this looks like the anti-BAC. :)

 

Questions

1. Are you investing in Apple for the long term say of 5 years or more?

2. If yes to above, where do you see the moat and do you think it would develop in future or does the moat already exist?

 

Thanks

 

Vinod

[Viking]

Siri certainly has all sorts of possibilies for Apple given how underutilized it is today compared to what the original owners envisioned. We should get lots of great improvements this year (just scratching the surface) and this tool will make the Apple ecosystem even more sticky.

http://www.huffingtonpost.com/2013/01/22/siri-do-engine-apple-iphone_n_2499165.html

http://www.thestreet.com/story/11824383/1/apple-gives-us-the-siri-weve-been-waiting-for.html?puc=yahoo&cm_ven=YAHOO

 

Also, Apple used Siri as the star during the intro to its 2012 App Conference. Pretty cool.

 

Watch the clip Apple produced at the 7 minute mark to understand how Apple's ecosystem is embedding itself into people's lives one person at a time. We are in the first or second inning in App development and how they will improve a person's life.

 

The mainstream will not flip technology ecosystems. Once you lock them in you will have them for life. Apple has proven that they are the best at innovating for the masses (Siri the best latest example - note, I am not saying they are inventing the stuff... they are making it available to the masses in a seemless way). This looks like a pretty durable moat to me....

 

As the software races out in front  can only imagine the hardware they will develop in future years to empower people even more.

[Guest valueInv]

Siri certainly has all sorts of possibilies for Apple given how underutilized it is today compared to what the original owners envisioned. We should get lots of great improvements this year (just scratching the surface) and this tool will make the Apple ecosystem even more sticky.

http://www.huffingtonpost.com/2013/01/22/siri-do-engine-apple-iphone_n_2499165.html

http://www.thestreet.com/story/11824383/1/apple-gives-us-the-siri-weve-been-waiting-for.html?puc=yahoo&cm_ven=YAHOO

 

Also, Apple used Siri as the star during the intro to its 2012 App Conference. Pretty cool.

 

Watch the clip Apple produced at the 7 minute mark to understand how Apple's ecosystem is embedding itself into people's lives one person at a time. We are in the first or second inning in App development and how they will improve a person's life.

 

The mainstream will not flip technology ecosystems. Once you lock them in you will have them for life. Apple has proven that they are the best at innovating for the masses (Siri the best latest example - note, I am not saying they are inventing the stuff... they are making it available to the masses in a seemless way). This looks like a pretty durable moat to me....

 

As the software races out in front  can only imagine the hardware they will develop in future years to empower people even more.

 

They just announced the ability to buy movie tickets from Siri. Welcome to the world of Siri commerce.

[Viking]

vinod1, I agree that when looking at Apple there is a fair degree of speculation involved.

 

You mention you do not see a moat. A couple that jump out to me:

1.) Mac and its user base: pretty loyal, likely to continue

2.) ipod: look at the share of this category Apple has maintained for years. Their share SHOULD have come way down many years ago. (Yes, MP3 sales are down; my point here is they took a high share and maintained it over the life of the product).

 

Regarding iphone the jury is out as the product is still simply too new. The ipad is even newer so, again, difficult to prove what kind of moat it has. These two items are where most of the profit is so I understand the challenge with discounting future cash flows.

 

Apple's moat likely rests on how well it integrates the software and the hardware in helping people use technology to improve their lives. I think we are early in this new game and I see no other company able to innovate and reach the masses as well as Apple.

[vinod1]

vinod1, I agree that when looking at Apple there is a fair degree of speculation involved.

 

You mention you do not see a moat. A couple that jump out to me:

1.) Mac and its user base: pretty loyal, likely to continue

2.) ipod: look at the share of this category Apple has maintained for years. Their share SHOULD have come way down many years ago. (Yes, MP3 sales are down; my point here is they took a high share and maintained it over the life of the product).

 

Regarding iphone the jury is out as the product is still simply too new. The ipad is even newer so, again, difficult to prove what kind of moat it has. These two items are where most of the profit is so I understand the challenge with discounting future cash flows.

 

Apple's moat likely rests on how well it integrates the software and the hardware in helping people use technology to improve their lives. I think we are early in this new game and I see no other company able to innovate and reach the masses as well as Apple.

 

Viking,

 

I more thinking about iPhone and iPad as they are pretty much providing most of the earnings.

 

Regarding iPod,  it is a declining business with very low overall profit pool so it is not as likely to attract vicious competition. Similarly, if smartphone and tablet market are stagnant or growing very slowly, they becomes much less attractive markets for competitors and Apple can maintain its lead that much longer.

 

To me a moat implies something that other companies would not be able to replicate at a cost that provides decent IRR. I agree that few would be able to match Apple products usability, but they could just play catch up. When something is very new there is a big difference in features/usability, etc but as the product matures the difference in features/usability becomes much narrower. Once this stage is reached, margins would evaporate. As long as Apple's maintains that huge difference in quality, they can sustain the margins but I do not have the faintest of clues of how to handicap how long Apple would maintain this huge quality difference.

 

Looking back at companies that have developed large moats, they did not look like they are developing a moat when they are small and the moat only becomes obvious after they became very large by which time competitors did not get a chance to make in roads. With Apple, they became very big even before they had a moat. Now the profit opportunity is wide open for everyone to see. Buying Apple seems to be more like a calculated bet that the pessimism is overdone in the very short term rather than a carefully reasoned investment based on an estimate of IV 5 years out.

 

Vinod

[kevin4u2]

Viking,

 

I more thinking about iPhone and iPad as they are pretty much providing most of the earnings.

 

Regarding iPod,  it is a declining business with very low overall profit pool so it is not as likely to attract vicious competition. Similarly, if smartphone and tablet market are stagnant or growing very slowly, they becomes much less attractive markets for competitors and Apple can maintain its lead that much longer.

 

To me a moat implies something that other companies would not be able to replicate at a cost that provides decent IRR. I agree that few would be able to match Apple products usability, but they could just play catch up. When something is very new there is a big difference in features/usability, etc but as the product matures the difference in features/usability becomes much narrower. Once this stage is reached, margins would evaporate. As long as Apple's maintains that huge difference in quality, they can sustain the margins but I do not have the faintest of clues of how to handicap how long Apple would maintain this huge quality difference.

 

Looking back at companies that have developed large moats, they did not look like they are developing a moat when they are small and the moat only becomes obvious after they became very large by which time competitors did not get a chance to make in roads. With Apple, they became very big even before they had a moat. Now the profit opportunity is wide open for everyone to see. Buying Apple seems to be more like a calculated bet that the pessimism is overdone in the very short term rather than a carefully reasoned investment based on an estimate of IV 5 years out.

 

Vinod

 

Vinod you raise some interesting points. 

 

As I was reading you post, I remembered what Buffett said a few years back regarding moats.  He said the real test was if you had a large amount of capital could you compete with the business (the context was Coke)?  For Coke, the answer was he would give the money back and say don't wait your time.  That is a true test of a moat, one that would be able to easily fend of competition while maintaning/growing market position and profitability. 

 

So let's apply the same reasoning with Apple.  If you had a large amount of capital could you compete with them?  The answer is clearly yes, as several companies (samsung, microsoft, nokia, RIM, Goog (android), etc) are spending billions upon billions competing in this market.  The competition in this category have some very deep pockets.  So, I agree that IV 5 years out is very difficult to determine.  Can they easily fend off competition?  It's going to be tough. 

[Guest valueInv]

Viking,

 

I more thinking about iPhone and iPad as they are pretty much providing most of the earnings.

 

Regarding iPod,  it is a declining business with very low overall profit pool so it is not as likely to attract vicious competition. Similarly, if smartphone and tablet market are stagnant or growing very slowly, they becomes much less attractive markets for competitors and Apple can maintain its lead that much longer.

 

To me a moat implies something that other companies would not be able to replicate at a cost that provides decent IRR. I agree that few would be able to match Apple products usability, but they could just play catch up. When something is very new there is a big difference in features/usability, etc but as the product matures the difference in features/usability becomes much narrower. Once this stage is reached, margins would evaporate. As long as Apple's maintains that huge difference in quality, they can sustain the margins but I do not have the faintest of clues of how to handicap how long Apple would maintain this huge quality difference.

 

Looking back at companies that have developed large moats, they did not look like they are developing a moat when they are small and the moat only becomes obvious after they became very large by which time competitors did not get a chance to make in roads. With Apple, they became very big even before they had a moat. Now the profit opportunity is wide open for everyone to see. Buying Apple seems to be more like a calculated bet that the pessimism is overdone in the very short term rather than a carefully reasoned investment based on an estimate of IV 5 years out.

 

Vinod

 

Vinod you raise some interesting points. 

 

As I was reading you post, I remembered what Buffett said a few years back regarding moats.  He said the real test was if you had a large amount of capital could you compete with the business (the context was Coke)?  For Coke, the answer was he would give the money back and say don't wait your time.  That is a true test of a moat, one that would be able to easily fend of competition while maintaning/growing market position and profitability. 

 

So let's apply the same reasoning with Apple.  If you had a large amount of capital could you compete with them?  The answer is clearly yes, as several companies (samsung, microsoft, nokia, RIM, Goog (android), etc) are spending billions upon billions competing in this market.  The competition in this category have some very deep pockets.  So, I agree that IV 5 years out is very difficult to determine.  Can they easily fend off competition?  It's going to be tough.

 

That would be a great theory, except that almost all of them were in the mobile market before Apple. They are competing becuase they are fighting for their lives.

[hyten1]

for me a better moat definition is

 

if the business was run by idiots (not really idiots, you know what i mean) how long will the company last

 

EDIT: i don't mean better, for me its the other side of the same coin

[Guest valueInv]

for me a better moat definition is

 

if the business was run by idiots (not really idiots, you know what i mean) how long will the company last

By that definition, no tech business has a moat.

[txitxo]

for me a better moat definition is

 

if the business was run by idiots (not really idiots, you know what i mean) how long will the company last

By that definition, no tech business has a moat.

 

Exactly.