AAPL - Apple Inc.

[Liberty]

http://rampantinnovation.com/2014/05/13/design-is-about-intent/

 

Icahn bought more AAPL: http://blogs.wsj.com/moneybeat/2014/05/15/icahn-discloses-new-stake-in-ebay-raises-stake-in-apple/

[fareastwarriors]

Designer of Beats Headphones Prototype Discovers There's No Free Lunch

 

 

 

http://www.bloomberg.com/news/2014-05-19/designer-of-beats-headphones-prototype-discovers-there-s-no-free-lunch.html

[ni-co]

I think what matters more is whether it's better than the competition. Everybody has the same 22 million songs or whatever, so the real differentiators are curation, interface, OS integration, brand, algorithms, exclusive content, etc.

 

That's exactly what I'm thinking this acquisition is about – nice additional touch: Iovine's network. To me, the Beats brand and hardware are just a distraction from that. That's why there is no logical explanation for it that also fits Apple's goals. In its core Apple is a very simple company and its philosophy has always been trying to provide the best user experience. Every acquisition to date has been centering around that and Beats – at least in my opinion – is no exception.

[fareastwarriors]

Apple Agrees to Buy Beats for $3 Billion

 

Beats Co-Founders Jimmy Iovine, Dr. Dre to Join Apple

 

http://online.wsj.com/articles/apple-to-buy-beats-1401308971?mod=WSJ_hp_LEFTWhatsNewsCollection

 

Apple said it would pay $2.6 billion in cash and $400 million in equity for Beats Music, a subscription music-streaming business, and Beats Electronics, which makes pricey headphones, speakers and audio software.

[Liberty]

Apple Agrees to Buy Beats for $3 Billion

 

Beats Co-Founders Jimmy Iovine, Dr. Dre to Join Apple

 

http://online.wsj.com/articles/apple-to-buy-beats-1401308971?mod=WSJ_hp_LEFTWhatsNewsCollection

 

Apple said it would pay $2.6 billion in cash and $400 million in equity for Beats Music, a subscription music-streaming business, and Beats Electronics, which makes pricey headphones, speakers and audio software.

 

I wonder if they shaved off 200 million from the price to teach them a lesson about leaking information  8)

 

"The ugly truth is that there is such a Berlin Wall between Silicon Valley and L.A.," Mr. Cook said in an interview. "The two don't respect each other, don't understand each other.

 

"We think these guys have a very rare talent," Mr. Cook continued. "We love the subscription service that they built—we think it's the first one that really got it right."

[moody202]

 

"The ugly truth is that there is such a Berlin Wall between Silicon Valley and L.A.," Mr. Cook said in an interview. "The two don't respect each other, don't understand each other.

 

"We think these guys have a very rare talent," Mr. Cook continued. "We love the subscription service that they built—we think it's the first one that really got it right."

 

Looks like this acquisition is as much about people as technology!

[Pauly]

 

"The ugly truth is that there is such a Berlin Wall between Silicon Valley and L.A.," Mr. Cook said in an interview. "The two don't respect each other, don't understand each other.

 

"We think these guys have a very rare talent," Mr. Cook continued. "We love the subscription service that they built—we think it's the first one that really got it right."

 

Looks like this acquisition is as much about people as technology!

 

It's certainly starting to look that way. I didn't like this acquisition at all when it was first rumored, but I'm starting to see the sense behind it. Iovine and Dre built Beats from nothing to being the No. 1 premium headphone brand in just a few years using nothing but savvy marketing. Their product is nothing special but people will pay a premium for it. I can see why Apple wants to partner with people who can do that.

 

 

[Liberty]

Looks like Apple is now one of the top - if not the #1 by profit dollars - sellers of Android accessories  ???

 

I've also read somewhere that they said they'd keep the Android version of the Beats Music service. That's not what I expected, though they could still change course in the future, but that also makes sense as a kind of Trojan Horse. If it's a really good service (and they keep improving it), it's a good way for Android users to get familiar with an Apple product. Kind of like the iPod and iTunes was the introduction to Apple to so many Windows users.

[hardincap]

 

"The ugly truth is that there is such a Berlin Wall between Silicon Valley and L.A.," Mr. Cook said in an interview. "The two don't respect each other, don't understand each other.

 

"We think these guys have a very rare talent," Mr. Cook continued. "We love the subscription service that they built—we think it's the first one that really got it right."

 

Looks like this acquisition is as much about people as technology!

 

It's certainly starting to look that way. I didn't like this acquisition at all when it was first rumored, but I'm starting to see the sense behind it. Iovine and Dre built Beats from nothing to being the No. 1 premium headphone brand in just a few years using nothing but savvy marketing. Their product is nothing special but people will pay a premium for it. I can see why Apple wants to partner with people who can do that.

 

+1. Plus they know the industry cold.

[txlaw]

Eddy Cue: "We have the best product pipeline at Apple that we’ve seen in 25 years at Apple."

 

Should be a fun WWDC this year.

[abitofvalue]

Mary Meeker's internet trends presentation -

http://s3.amazonaws.com/kpcbweb/files/85/Internet_Trends_2014_vFINAL_-_05_28_14-_PDF.pdf?1401286773

 

looks like there is still a fair bit of room for smartphone penetration rates to run even without considering the upgrade cycle.

[tiddman]

This is a good article about all of the non-headphone reasons why the Beats deal is a good one, and paints a pretty good picture of the online music landscape as a whole.

 

http://www.forbes.com/sites/anthonykosner/2014/05/29/beats-music-acquisition-gives-apple-a-way-out-of-the-itunes-and-app-store-traps

[Liberty]

Thanks to the person who helpfully forwarded this to me on Twitter.

 

Apple Inc. AAPL +0.18%  is paying slightly less than $500 million for the Beats Music streaming service, and more than $2.5 billion for Beats Electronics in its $3 billion deal, according to people familiar with the matter.

 

The breakdown between the two portions of Beats Electronics LLC offers insight into Apple's thinking for the most expensive acquisition in its history.

 

A person familiar with Beats said its 2013 sales totaled close to $1.3 billion—all from the electronics unit that sells headphones and other audio gear—and the company was profitable. Beats launched its streaming-music service in January.

 

http://online.wsj.com/articles/apple-paying-just-under-500-million-for-beats-music-streaming-service-1401403287

[ASTA]

I have been thinking the past week of selling apple as I am up 57% in less the one year. When I bought it it was a 5 star morning star stock now 3 and first page on magicformulainvesting and very high in demand here. Now its none of the above.

 

Can any one tell me why this stock is better then C which is much more hated.

[LC]

I have been thinking the past week of selling apple as I am up 57% in less the one year. When I bought it it was a 5 star morning star stock now 3 and first page on magicformulainvesting and very high in demand here. Now its none of the above.

 

Can any one tell me why this stock is better then C which is much more hated.

C, after all is said and done, will probably grow in line with GDP. But it has the near term undervaluation.

 

AAPL gives you a free call option on any future mass-market consumer technology.

 

Not sure which is the better option, but that's how I see it.

[Guest wellmont]

I have been thinking the past week of selling apple as I am up 57% in less the one year. When I bought it it was a 5 star morning star stock now 3 and first page on magicformulainvesting and very high in demand here. Now its none of the above.

 

Can any one tell me why this stock is better then C which is much more hated.

C, after all is said and done, will probably grow in line with GDP.

 

AAPL gives you a free call option on any future mass-market consumer technology.

 

Not sure which is the better option, but that's how I see it.

 

it also gives you a call option on potential technological dislocation. it's kind of interesting to go back and review SJ "Macworld" videos and watch him talk glowingly about products that are in either in total decline right now, or inconsequential to the business. meanwhile banking is still the second oldest profession.  ;)

[KCLarkin]

I have been thinking the past week of selling apple as I am up 57% in less the one year. When I bought it it was a 5 star morning star stock now 3 and first page on magicformulainvesting and very high in demand here. Now its none of the above.

 

Can any one tell me why this stock is better then C which is much more hated.

 

I am in a similar boat. I bought AAPL because it was just too cheap. Looking to trim now that it has hit my fair value. However, AAPL is still showing up on Magic Formula (at least for >$1B). It also has significant momentum and the upcoming product pipeline sounds solid.

[Liberty]

it also gives you a call option on potential technological dislocation. it's kind of interesting to go back and review SJ "Macworld" videos and watch him talk glowingly about products that are in either in total decline right now, or inconsequential to the business. meanwhile banking is still the second oldest profession.  ;)

 

Yeah, because there are no dislocations in banking ;)

[Palantir]

Or you guys could just not overthink it and hold.....this is a high profit margin brand that's going to be paying off nice dividends in the future.....

[ASTA]

Thanks for the responses will have some Williams snaps and think about it will see and tell next week :D

[rpadebet]

In the exact same boat with about the same returns.  I am still pleasantly surprised that we could eke out >50% gains in one year, in such a widely followed name as Apple. Mr. Market is truly amazing sometimes.

 

Selling is a very difficult decision in value investing world. You do so much research and so highly invested in the idea intellectually and maybe emotionally during the hold period, that once it hits the fair value you have in your mind, you find it very difficult to let go. I did this mistake with MBIA a year ago. This is probably a bias I need to be aware of as well.

 

But I am under no illusion that this is any compounder like company. It is simply a high margin brand+consumer electronics business. New product ideas/categories need to be > iphone blockbuster to move the needle or keep it from slipping away.

 

I want to trim/sell, but I need to find other compelling investment options. So have been thinking hard about selling some OTM covered calls now and give up some upside. We can get a >10% call premium on our cost + dividends/buybacks along the way. Meanwhile we can keep hunting for the best bargains.

 

 

 

 

 

 

 

 

[tiddman]

I find it interesting that the ~+50% move in AAPL is based almost solely on a change in market sentiment.  They haven't really announced any big products or earnings.  The Beats deal is the most significant but really won't affect the bottom line much. But all of a sudden the headlines are primarily positive instead of primarily negative.

 

Back when it was in the low 400's the headlines all said that Apple had stopped innovating and it was too big to grow etc.  Today the headlines, of the same company without any new news, is that they have a strong product pipeline and may get into new big markets like the Internet Of Things. Nothing but a mood swing.

 

AAPL has a great long term growth story but in the short to medium term is very much a momentum stock, in both directions.

 

From a valuation perspective, AAPL will deserve a higher multiple if it can demonstrate at least some steady growth in its markets.  Microsoft is a testament to the fact that you don't need great new products to achieve growth, Microsoft has flopped with almost every new product it has tried to launch but has successfully grown its established products incrementally.  A few % here and there can add up to decent growth.

 

If AAPL really can get into some substantial new market then shareholders would really be rewarded, but that is less certain.

[Palantir]

I think this stock is a great example of how the world's most closely followed stock can be misunderstood. Conventional wisdom says that you need to look at underfollowed,  unloved stocks for big returns, but how many value oriented investors were buying this hand-over-fist when it was at 400? If they had not known this firm's name, it would have been more popular.

[rpadebet]

The difference between MSFT and AAPL is, MSFT's core products were a virtual monopoly. So even with flops there were incremental gains from the monopolistic business with super high margins. Their core product shelf life is really long.

 

AAPL's core products are like perishable food items. Their shelf life is much smaller. Margins are no where near MSFT's margins in its core business. Competitors are everywhere in the consumer electronics space. They need to keep running with new new products just to keep pace with their core product tapering.

 

I don't think everyone appreciates the kind of blockbuster product they need to move the needle on a 550B Market Cap. They make about 40B now in profits a year. A move the needle assumption would mean a product throwing off at least 10% of that number which is 4B-5B yearly and growing. Even at 33% incremental margins, you are looking at 12B-15B in yearly sales. Even more if you consider that this product needs to overcome the tapering of sales of other current products. There are not many markets or industries around the world where such sales @ that margin are possible. Pretty soon they need to start designing aeroplanes to move the needle!!

 

 

[jeffmori7]

It is not true to say that only the perception of Mr. Market has changed toward Apple. They have also put in place, or reinforced, a solid capital allocation plan. Still, we could say it has changed the way Mr. Market now see Apple.