AAPL - Apple Inc.

[txlaw]

Phone looks great. I immediately wanted one. I may finally give in and get a smart phone.

 

Apple Pay looks interesting. Not available where I live (Canada) but we'll see. If I understand the "tokenization" feature, it should go a long way to defeating simple card skimming fraud schemes. The concept of a phone replacing credit cards also opens up some fascinating possibilities. When I was involved in the financial industry, there was a lot of talk about replacing multiple debit/credit cards with a single chip card. The technology was there but the idea seemed to be a non-starter as no one wanted to see their card disappear from the consumer's wallet. Now we have an iPhone that can handle Visa, MC, and AmEx. If this works, I think it's only a few years before we see smart phone apps replacing not only debit/credit cards but things like drivers licenses and even passports.

 

Not sure about the watch. Love the idea but I'd like to hold one in my hands to judge the ascetics and comfort. I've also heard the battery life is pretty short.

 

Disclaimer: I own a few shares.

 

Please read about how credit cards work in other countries.  This is coming to the USA now.  The way payments will work on this phone are exactly how they are going to work for all credit cards in the US/Canada in 1-2 years as credit card companies are mandating that retailers and banks upgrade.

 

People at work were laughing ... wondering how many people will think that Apple invented this technology.  The change is being forced by credit card companies.  It would have been a gross oversite for Apple to not finally get on the NFC bandwagon.  Oh, this is just NFC by the way.

 

It's definitely true that Apple has not invented anything really new here with regards to mobile payments.  Secure Element + NFC payment is being used in other countries and, in fact, in the US (see Softcard -- formerly known as ISIS).  But there are some interesting differences with Apple's version. 

 

First, with Softcard, because the Secure Element is SIM-based, you can move all your payments data to other phones.  So if you have an Android device with enhanced SIM and NFC, and you decide to switch to a different Android device, all the payments info gets transferred with the SIM, and all you have to do is install the SoftCard app on your new phone.  With Apple, you can't move the info off the phone because it's stored in a chip in the phone.  So if you switch to Android from Apple at some later date, I believe you'll have to reload all your payment card info.

 

Second, whereas Softcard and others use passwords and PINs to allow for the release of your payments info off the Secure Element, Apple simplifies all this through TouchID.  There is no app you need to download, open, and log into.

 

Third, Apple appears to be enabling the use of this payments functionality in-app, which threatens to cut out guys like Paypal who encourage developers to integrate Paypal in-app payments into their apps.  I'm not sure exactly how in-app Paypal payments work, but I'm willing to bet the steps involved are more onerous than simply using Apple Pay.

 

As I understand it, "tokenization" is just the new way of storing payments info on card/phone that is being implemented by Visa, Mastercard, et al.  Instead of keeping account data on the phone, your phone will store "tokens" that correspond to your accounts.  Similar to the way that websites which you log into using connect to Google or Facebook store tokens associated with those accounts and not actual password data.

[jeffmori7]

I showed this video to my wife:

 

https://www.apple.com/ca/watch/films/#film-design

 

Now she wants one with multiple bracelets...

 

The health movie is pretty interesting also. When I see multiple people around me using watch and phone for the training, I can see Apple gaining a big share of this market.

 

With the multiple models, they found a way to adress many different market at once. That could be a truly remarkable achievement if they succeed.

[Ross812]

http://i.imgur.com/4yD0PSp.jpg

[Liberty]

Yeah, because a product is just a list of specs, and being first with something means you got it right  ::)

[Palantir]

Yeah, because a product is just a list of specs, and being first with something means you got it right  ::)

 

At least you're not taking this personally..... ;)

[rkbabang]

I think the Moto looks better. I don't agree with this assessment that it makes other smartwatches look like crap.

 

http://cdn0.mos.techradar.futurecdn.net//art/Watches/Motorola/Moto%20360/moto-360-smartwatch-580-90.jpg

 

 

 

It's round!  As of yesterday round watches just became so 20th century.  The Apple Watch is rectangular you know.

 

[fareastwarriors]

It does look nice I have to admit.

[Liberty]

Yeah, because a product is just a list of specs, and being first with something means you got it right  ::)

 

At least you're not taking this personally..... ;)

 

Nothing personal about it. It's just tiring to constantly see this adolescent mentality. People always focus on what is easily measured instead of what matters... People use the wrong metaphor: They think this stuff is a race, a kind of competitive sport, but it's really more like cooking. It's more important to make it a delicious experience as a whole, with all the ingredients working well together, than to be first out of the kitchen and to pack the most stuff on the plate. Apple's claim to fame isn't that it constantly does things before everybody else anyway, it's that it does them right at the integrated product level.

[Liberty]

It does look nice I have to admit.

 

It does. But it's mostly because they exactly copied the existing "nice watch" look. Problem is, they didn't really think about how a smartwatch has to be different from a traditional watch to provide a good experience, and the downsides of a round screen with what people will mostly be looking at on it (ie. not round things except for the time).

 

It's also too bad that the bottom part of the screen is black (more like the Moto 270 than 360), it's too big for half the world's population, the software isn't very good, there's no health/fitness stuff, and it has to be charged twice a day:

 

http://daringfireball.net/linked/2014/09/05/stern-270

 

It also doesn't look quite as good in real life as in that rendering:

 

http://arstechnica.com/gadgets/2014/09/moto-360-review-beautiful-outside-ugly-inside/

 

http://cdn.arstechnica.net/wp-content/uploads/2014/09/IMG_00405.jpg

[Guest ajc]

 

Nothing personal about it. It's just tiring to constantly see this adolescent mentality. People always focus on what is easily measured instead of what matters... People use the wrong metaphor: They think this stuff is a race, a kind of competitive sport, but it's really more like cooking. It's more important to make it a delicious experience as a whole, with all the ingredients working well together, than to be first out of the kitchen and to pack the most stuff on the plate. Apple's claim to fame isn't that it constantly does things before everybody else anyway, it's that it does them right at the integrated product level.

 

 

I put Liberty's quote into Google Translate and got this... https://www.youtube.com/watch?v=-wcBDjXhOZk

 

 

 

[Liberty]

I put Liberty's quote into Google Translate and got this... https://www.youtube.com/watch?v=-wcBDjXhOZk

 

;D

 

Don't get me wrong, I like that most people don't get it. Wouldn't have made this much money on Apple otherwise.

[yadayada]

apple products are overpriced pieces of crap. I don't get why you would pay the premium.

 

That said, i just ordered a ipad air.

[Palantir]

^Is this the sort of thing where you're mean to a girl because you secretly like her?

[Viking]

Competition is healthy. There are many very good products on the market from many different manufacturers. However for me, unless these other devices are much, much better I will not consider them for purchase. My family currently owns 2 iPhones, 2 iPads, iMac, 2 iPods and Apple TV. We will be purchasing the iPhone 6. All the devices work together more and more every year. I am very busy and I am not a tech guy and I do not want to spend my time learning new operating systems etc.

 

A big reason we have gone with Apple is forward looking: of all the major tech companies I expect them to launch the best future devices and to have the best platform (I am talking in totality here, not one hardware device or one software product). Since we have made our decision 15 months ago Apple has exceeded my expectations (they are widening the gap with the competition - looking at things from 10,000 feet). What we saw yesterday was Apple further widening the gap in a significant way, adding a new hardware category and payments to their umbrella. And we know they have more major innovation coming. Personally, I look forward to a major upgrade to Apple TV and a larger iPAD.

 

Let's review:

Phone: iPhone

PC: Mac

Laptop: MacBook

Tablet: iPad

MP3: iPod

TV: Apple TV

Wearable: Apple Watch

Software: iOS, OSX, iTunes, App Store, Car Play, Apple Pay

 

Apple is at the top or near the top in every category listed above. When you weave them all together, which you should do given how integrated everything is becoming, no other company comes close to matching Apple. Here is the best part. Even though the stock has increased +40% over the past 15 months it is still much cheaper than the market averages. Apple stock should be able to deliver shareholders a total return in the teens over the next year.

 

The one analyst that downgraded Apple today actually in the same report increased what they expect Apple to earn in fiscal 2015 to $7.80/share = 12.5 PE. Apple also has $22/share in net cash. Doesn't look expensive to me especially given that Apple is widening its moat.

 

I think most analysts completely misunderstand how sticky Apple's ecosystem is becoming and how unlikely existing customers are to change. The majority of people with Apple devices are not idiots or fanboys. They are rational decision makers where value, not price, is the primary decision driver.

[nikhil25]

IMHO, I think doing it right is much more important than being the first to do it. While you could argue that Apple is playing catch-up with features like NFC on the new phones and watches... but, it's hard to argue that the impact of these features will be so much more profound given Apple's entry into this space. I'm fascinated by Apple's ability to create/disrupt entire ecosystems and I feel it's one of the few companies that can really move-markets... As an investor and a customer, I think Apple Pay opens up a lot of exciting opportunities for Apple in the payments space and in the entire commerce journey!

 

http://i.imgur.com/4yD0PSp.jpg

[txlaw]

http://www.americanbanker.com/issues/179_175/why-banks-are-buying-in-to-apple-pay-1069868-1.html?zkPrintable=1&nopagination=1

 

Press reports citing anonymous sources said the large financial institutions involved in Apple Pay agreed to either deeply discount their interchange fees for transactions initiated on the platform or give the tech giant a cut. While the parties have not disclosed the terms, in interviews and public statements the banks involved said Apple Pay's enhanced security features, intuitive user experience and brand name made the platform attractive. Several participants also called the timing fortuitous, as merchants are under pressure to upgrade terminals to the EMV chip-and-PIN standard (which makes them more likely to also retrofit for mobile communication).

[TorontoRaptorsFan]

What a great keynote presentation from Apple!

 

I'm probably going to get the iPhone 6. One key note that hasn't got a lot of press is the Cell phone to Wi-Fi handover. Really neat technology for those users with poor cell phone reception at home.

 

I also wanted to add that I think the adoption of payment by phone from consumers will occur very quickly. Impressive to see Apple add so many mass market vendors such as McDonalds, Target, Macys, Walgreens, Nike, etc. Eddy Cue did a really nice job explaining how the technology worked. Biggest laugh was the video which Tim Cook showed before and after credit card transactions.

 

 

[Guest ajc]

 

I put Liberty's quote into Google Translate and got this... https://www.youtube.com/watch?v=-wcBDjXhOZk

 

;D

 

Don't get me wrong, I like that most people don't get it. Wouldn't have made this much money on Apple otherwise.

 

 

My thinking is you're right and wrong. I also think that Ross has a point.

 

I'd say Apple will remain premium and sell a lot of stuff and that the intuitive, uncluttered and aesthetically-pleasing design will all remain.

However, Steve Jobs was a creative genius and he did come up with innovations that brought various things together in a way that no-one else imagined.

Apple doesn't have that any more (obviously) and so it's not entirely accurate to say that their claim to fame has been to do things right at the integrated product level.

They did, but the iPod and iPhone were all Jobs at their essence and were also truly paradigm shifting.

The company is less about that now I think and far more about the experience you describe, but it's worth remembering that what got them here was that as well as some really ground-breaking vision.

 

Anyway, Apple is more like everyone else these days because Jobs has died.

In this respect, there is some truth to what Ross says. The gap between others and them has closed and even though they're still the ones who come up with the best products they're not the revolutionaries that they once were.

As a consequence of that, I think your wording in some of the comments you've left is slightly over the top. They're premium, intuitive and excellently designed but not changing the whole game anymore with their products.

The good news is that there don't seem to be any more people out there right now that can do that, so Apple are 'safe' so long as they continue to apply those principles and protect their brand image and premium.

If the next Steve Jobs comes along 10 years from now, then unfortunately Apple will probably have nowhere to hide and neither will anyone else.

Such is life.

 

So basically, I agree on the design, brand premium and user experience and I'm calling BS on the idea that Apple has always been about what they're about right now and that this product is some truly mind-blowing shit (it's not, it's just really, really good).

 

I'm dragging on, but I'll just add that the payments focus (as others have mentioned) is probably going to be the really interesting news that happened yesterday when people look back.

There were some (misleading, I think though I'm not sure) claims that the watch could be used as a payment device too.

That makes paying far easier because you just wave your arm whereas before you needed to fish into your jacket for your phone.

A wave of the wrist through or over a sensor is even easier.

Secondly, the market for payments (provided Apple get it right) could easily dwarf what they make on hardware given the type of ecosystem that they have and the income brackets their customers mostly come from.

 

So, in summary... Apple is still the best devices company. They used to be revolutionary as well, but aren't now even if they're still so good that they beat everyone in a huge majority of the important areas.

However, as people leave over time and competitors improve, this advantage may well diminish bit by bit each year until the differences are near negligible or until the next Steve Jobs appears and kills everyone in the industry.

 

Also, payments is a huge opportunity for them which could easily be their biggest earner if done right. It also seems like the pick of the businesses that they could go into and it's right up Tim Cook's street given that he has always been more of that type of guy than Jobs was. Plus, they're focused on that and not trying every other thing so that's also great.

He's playing to his strengths here and so while the Steve Jobs competitive advantage is fading, the Tim Cook one is starting to kick in and it's different and it seems to revolve around remaining premium (if not very revolutionary), focused on the user experience and in making the payments business the most probable game-changer for Apple going forward.

 

I think then that you make a lot of sound points overall, but are somewhat missing the diminishing revolutionary aspect and have overlooked a very important trick by not even mentioning payments.

And, I'd add that there's some truth worth noting to what Ross posted (and worth chuckling about too. For me anyway).

Other than that though, I agree with the substance of what you're saying.

 

 

 

[Liberty]

Except for the iPhone, no Apple product intro really "blew people's minds". Most times, the stock actually tanked. It's only in retrospect that people look at most of their products so fondly, with the benefit of hindsight. People were really disappointed with the iPad at first ("just a big iPod touch") and now it's 1/3 of the company.

 

While Jobs was a genius, part of his genius was creating the company (it's his Berkshire Hathaway, so to speak), and most of the products that are attributed to Jobs actually had a lot of other people in them. Jobs was always more an editor than anything else. Jony Ive has that role now, as he also did in good part when Jobs was around.

 

btw, I'm not big on saying that Apple is revolutionary and game-changing and all that. Maybe I should pick my words more carefuly because it might be easy to read into them, but I mostly see them like Pixar; a well-oiled machine with a very specific culture and processes that consistently leads to really good stuff. I don't care if the products are revolutionary or not. If they make the best products in the categories where they play, they'll get the top end of the market where most of the profits are.

[rkbabang]

Except for the iPhone, no Apple product intro really "blew people's minds". Most times, the stock actually tanked. It's only in retrospect that people look at most of their products so fondly, with the benefit of hindsight. People were really disappointed with the iPad at first ("just a big iPod touch") and now it's 1/3 of the company.

 

This is entirely true. I remember not thinking much of the iPod at first.  There were already mp3 players on the market, and if I remember correctly the 1st iPod didn't even play mp3s, only an Apple only format from iTunes.  For this reason I went out and bought a Creative mp3 player shortly later.  I upgraded it multiple times with newer Creative players over the years and didn't realize how much they sucked until I bought my first iPod.  Also if you remember a lot people thought the iPhone was a joke, it was going to be useless without a keyboard, and would be a flop.

 

(EDIT) I just looked it up the early iPods did play mp3 files, it was just that iTunes didn't sell mp3 files.  So I got my music elsewhere and I think I might have been under the mistaken impression at the time that because iPods required iTunes that they only played music bought through Apple.

[Guest ajc]

 

Except for the iPhone, no Apple product intro really "blew people's minds". Most times, the stock actually tanked. It's only in retrospect that people look at most of their products so fondly, with the benefit of hindsight. People were really disappointed with the iPad at first ("just a big iPod touch") and now it's 1/3 of the company.

 

While Jobs was a genius, part of his genius was creating the company (it's his Berkshire Hathaway, so to speak), and most of the products that are attributed to Jobs actually had a lot of other people in them. Jobs was always more an editor than anything else. Jony Ive has that role now, as he also did in good part when Jobs was around.

 

btw, I'm not big on saying that Apple is revolutionary and game-changing and all that. Maybe I should pick my words more carefuly because it might be easy to read into them, but I mostly see them like Pixar; a well-oiled machine with a very specific culture and processes that consistently leads to really good stuff. I don't care if the products are revolutionary or not. If they make the best products in the categories where they play, they'll get the top end of the market where most of the profits are.

 

 

I don't really disagree. And maybe there's something to that BRK comparison in terms of the principles they follow and the hiring that gets made.

Then again, in tech do they last as long after the founder dies?

 

Our views on the products also differ, which is fine of course. I see the genius of each new product falling away slightly since the iPhone was created and which I see as sort of the peak.

Others see it differently, but for me that gap is closing even if Apple is often still streets ahead in most aspects (plus, there's the ecosystem and so on).

On the editor topic, I'd say yes and no. My impression is that throughout Apple's history he also brought in some far out or very experimental shit and told his team to make it happen.

I don't think Cook can or is expected to do that to the same intense degree and that's one of the points I'm making.

You're obviously right about Ive and others. That core is still there and Cook and them clearly drive things with lots of excellent results.

I just think that it's a somewhat different company now in that the distinctiveness of the product offering is dropping off very little by very little and that stuff like operational excellence and maybe payments and one or two other things are going to start coming more to the fore.

Then again, I'm not an owner just an interested observer.

 

I read now that the watch does have payment capability though the battery life is apparently a drawback and there are also a few related over-simplifications and errors I made in my previous comments too.

Basically though, I don't think I'm a million miles off when I say that the artistic vision isn't quite as insane as it used to be and that operations and payments or something else is going to be getting a bit more emphasis because that's where Cook's strengths lie.

That might end up being a ridiculously good and profitable thing though. I definitely wouldn't bet against it.

 

Also, I might be slightly exaggerating their slow demise here. That's probably just a combination of my ignorance as well as my preference for being early on these things instead of late. Especially with the average tech company life cycle, though it's hard to argue that Apple are average.

Mostly it's likely to just be my ignorance though.

 

 

 

[Liberty]

You're right that nothing else has been the iPhone, but I don't think anything else ever will be (it's bigger than the PC, which was the biggest thing until then). There are big paradigms in tech that come every few decades and mobile computing was one. I'm not expecting another one of those every few years. But there doesn't need to be for the company to succeed.

 

I think their current products are the best they've ever made (current laptops are the best laptops they've ever made, current desktops the best, current phones the best, current tablets the best, etc), and that they're as good if not better as what anyone else makes. As soon as they release a generation that is worse than the preceding one (and I don't mean the speed of the CPUs, GPUs, etc.. that's always going up. I mean the design, the software, the product as a whole), then I'll be worried.

 

I think the Watch will be like the first iPhone in some ways. It's early in that field. In a few generations, battery life will be much better, they'll iron out some problems, entry prices might come down a bit (though it'll be segmented all the way up to high prices, I'm sure), there will probably be even more branded collections, etc. It's just beginning. The original iPhone didn't have apps, fast cellular data, a GPS, etc..

[peter1234]

I think the Watch will be like the first iPhone in some ways. It's early in that field. In a few generations, battery life will be much better, they'll iron out some problems, entry prices might come down a bit (though it'll be segmented all the way up to high prices, I'm sure), there will probably be even more branded collections, etc. It's just beginning. The original iPhone didn't have apps, fast cellular data, a GPS, etc..

 

Agreed.

 

I am still struggling with tethering the watch to the iPhone.

 

Blackberry Pad tethered to Blackberry phone did not work out well.

 

Has any tethered device ever worked out before?

 

???

 

[Liberty]

I am still struggling with tethering the watch to the iPhone.

 

Blackberry Pad tethered to Blackberry phone did not work out well.

 

Has any tethered device ever worked out before?

 

???

 

I think the first thing is that if it wasn't offloading some functions to the iPhone, it couldn't work. Maybe in a few years we'll have the technology, but right now, if the watch had a cellular connection and a GPS, you'd probably have to charge it 3-4 times a day...

 

And without cell access and a GPS, both the fitness and the internet-connected apps would become mostly useless. You'd also need to pay yet another separate cell plan with a telecom just for the watch -- I don't think people would like that very much.

 

Tethering wouldn't work if it required people to buy a device that few people have and/or want. For example, if HTC comes out with a Watch that requires a HTC phone, their addressable market will be fairly small. But the iPhone is the best selling phone in the world, it owns the high-end, and there are already hundreds of millions of them out there (I think the Watch works with the iPhone 5, so by the time the Watch is released, most people with 4S phones will be updating, and those who are too cheap to do so probably wouldn't buy a Watch).

 

The iPod required iTunes on a Mac or (later) Windows PC to tether to. It was fine, because most people already had a computer.

 

In theory Apple could open the Watch tethering to Android like they did with the iPod for Windows, but I don't think that'll happen. The situation was different with the iPod, as the Mac had a much smaller relatively market share, the Watch experience wouldn't be as good with Android (because control over iOS and iPhone hardware matters), and Apple will like it just fine that the Watch pushes some people to keep buying iPhone, making the ecosystem even sticker than it already is.

[Palantir]

In the future, they may not be tethered to the phone....watch capabilities will only increase. Just like the first iPod I believe required you to own a Mac IIRC.