Guest valueInv Posted April 17, 2013 Share Posted April 17, 2013 My ongoing argument against investing in Apple has been that the economics of handset manufacturing (broadly consumer electronics) are garbage, primarily due to the commoditization of said handsets. Exxon only achieves margins that are half of Apple's today. This is Apple's future. Again, if handsets are not being commoditized, then show me a significant smartphone feature that is not widely replicated on all other smartphones. Commodities are marked by their lack of differentiation. The closer matched handsets are, the more price competition becomes a leading factor in a purchase decision. Here's what a "commoditized" market looks like ;): http://www.asymco.com/2013/04/16/escaping-pcs/ That's actually a market in decline after commoditization had already set in. Maybe you can explain to us how the smartphone industry structure is any different than the PC industry structure? Ie what makes the PC market so different from the smartphone market that one can be commoditized and another can escape this completely? If his numbers are correct, after "commoditization" has set in and after Apple "lost" the PC market, Apple makes more operating profit in PCs than the other 5 large vendors combined. Where can I sign up for "commoditization"? Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 17, 2013 Share Posted April 17, 2013 Sounds like that could be Samsung with manufacturing and Google with its software and services. How will Apple respond? Also see Chapter 6 of The Innovator's Solution. Apple is vertically integrated in all layers - thats your answer. Notice that they split out itunes revenues last quarter. Why would they do that? Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 17, 2013 Share Posted April 17, 2013 This is Apple's biggest short tier problem: http://tracks.ranea.org/post/47791661856/the-default-narrative They're letting the narrative get away from them. Link to comment Share on other sites More sharing options...
VAL9000 Posted April 17, 2013 Share Posted April 17, 2013 If his numbers are correct, after "commoditization" has set in and after Apple "lost" the PC market, Apple makes more operating profit in PCs than the other 5 large vendors combined. Where can I sign up for "commoditization"? You're saying you want Apple's margins in the PC business for their iPhone business? You'll probably get that soon. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 17, 2013 Share Posted April 17, 2013 If his numbers are correct, after "commoditization" has set in and after Apple "lost" the PC market, Apple makes more operating profit in PCs than the other 5 large vendors combined. Where can I sign up for "commoditization"? You're saying you want Apple's margins in the PC business for their iPhone business? You'll probably get that soon. I'm saying I'll be quite happy if Apple continues to make more profits that all the other vendors combined after the market has be "commoditized" Link to comment Share on other sites More sharing options...
txlaw Posted April 17, 2013 Share Posted April 17, 2013 Sounds like that could be Samsung with manufacturing and Google with its software and services. How will Apple respond? Also see Chapter 6 of The Innovator's Solution. Apple is vertically integrated in all layers - thats your answer. Notice that they split out itunes revenues last quarter. Why would they do that? No, that's actually my point -- Apple provides a vertically integrated solution, as opposed to a modular solution. Remember, the thesis is that the innovation gap in the OS layer is closing, and, therefore, there is an increased movement towards the modular solutions (think Android, for example). That results in commoditization of the OS layer. Therefore, you could very well see the profit from "mobile devices" made in the manufacturing layer (think Samsung), and then in the apps/services layer (think Google or Amazon). Implicit in that is the idea the Apple will no longer make all the profit in the industry -- it could be an IBM waiting to happen. iTunes is a nice business that is different than making money off of embedded licenses within iOS and OSX devices. I have actually argued in the past that iTunes could potentially be put across multiple OS'es in the future and therefore has value separate and apart from the Apple ecosystem. Other Apple software and services aren't so great though. They need to address this. Maybe partnering with people like Yahoo! is a good idea? Link to comment Share on other sites More sharing options...
gokou3 Posted April 17, 2013 Share Posted April 17, 2013 Waiting for 350 - hoping to see it after the earnings release. Don't worry, you'll probably get your wish. Were you a long since $700, i.e. 100% above where you think it may go? Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 17, 2013 Share Posted April 17, 2013 Waiting for 350 - hoping to see it after the earnings release. Don't worry, you'll probably get your wish. Were you a long since $700, i.e. 100% above where you think it may go? I've been long since 12:-) Nope, I started adding tiny quantities at around 600. I am hoping for some big purchases if there is a drop after earnings. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 17, 2013 Share Posted April 17, 2013 Sounds like that could be Samsung with manufacturing and Google with its software and services. How will Apple respond? Also see Chapter 6 of The Innovator's Solution. Apple is vertically integrated in all layers - thats your answer. Notice that they split out itunes revenues last quarter. Why would they do that? No, that's actually my point -- Apple provides a vertically integrated solution, as opposed to a modular solution. Remember, the thesis is that the innovation gap in the OS layer is closing, and, therefore, there is an increased movement towards the modular solutions (think Android, for example). That results in commoditization of the OS layer. Therefore, you could very well see the profit from "mobile devices" made in the manufacturing layer (think Samsung), and then in the apps/services layer (think Google or Amazon). Implicit in that is the idea the Apple will no longer make all the profit in the industry -- it could be an IBM waiting to happen. iTunes is a nice business that is different than making money off of embedded licenses within iOS and OSX devices. I have actually argued in the past that iTunes could potentially be put across multiple OS'es in the future and therefore has value separate and apart from the Apple ecosystem. Other Apple software and services aren't so great though. They need to address this. Maybe partnering with people like Yahoo! is a good idea? The closing of the innovation gap is nothing more than a narrative - see my earlier post on narratives. Link to comment Share on other sites More sharing options...
hardincap Posted April 17, 2013 Share Posted April 17, 2013 can someone come up with a rational explanation as to why its taking apple so long to decide what to do with all its cash? they said they've been in "active discussions" for over two months. but they had a whole year before that to think about it. what a joke Link to comment Share on other sites More sharing options...
SI Posted April 17, 2013 Share Posted April 17, 2013 That is quite easy to figure out, Apple didn't want to seem to be kowtowing to a $7.5bn hedge fund. Link to comment Share on other sites More sharing options...
enoch01 Posted April 17, 2013 Share Posted April 17, 2013 Waiting for 350 - hoping to see it after the earnings release. Don't worry, you'll probably get your wish. I'm thinking a lot of people believe this is true. This is partly why I capitulated and decided to start a position today. Cheap price, panic selling, what's not to like? :) Link to comment Share on other sites More sharing options...
Hielko Posted April 17, 2013 Share Posted April 17, 2013 I think it's quite uncertain what's going to happen with Apple. Think it's quite obvious that the value of the iOS ecosystem is being eroded fast. I've been a loyal iPhone user since the phone was introduced, but these days the applications I use most are from Google (Chrome/Gmail/Maps) and stuff like Facebook/Twitter/Whatsapp. So not only can I get what I want from other platforms, the switch is quite easy since my data is not stored with Apple. At the same time Android is getting more mature, so there is a decent probability my current iPhone will be my last. And don't think I'm the only one who's thinking like this: the iPhone isn't that superior anymore compared to the competition. Since so much of Apple's profit is coming from the iPhone I'd say that this could be a big problem, and inventing the next big thing isn't easy... Link to comment Share on other sites More sharing options...
DCG Posted April 18, 2013 Share Posted April 18, 2013 I think it's quite uncertain what's going to happen with Apple. Think it's quite obvious that the value of the iOS ecosystem is being eroded fast. I've been a loyal iPhone user since the phone was introduced, but these days the applications I use most are from Google (Chrome/Gmail/Maps) and stuff like Facebook/Twitter/Whatsapp. So not only can I get what I want from other platforms, the switch is quite easy since my data is not stored with Apple. At the same time Android is getting more mature, so there is a decent probability my current iPhone will be my last. And don't think I'm the only one who's thinking like this: the iPhone isn't that superior anymore compared to the competition. Since so much of Apple's profit is coming from the iPhone I'd say that this could be a big problem, and inventing the next big thing isn't easy... I don't disagree with this, but it seems like people think Apple is going to completely stop innovating. Link to comment Share on other sites More sharing options...
Viking Posted April 18, 2013 Share Posted April 18, 2013 Hielko, you commented: "Think it's quite obvious that the value of the iOS ecosystem is being eroded fast." What data points are you seeing that lead you to this conclusion? From what I read Apple continues to grow its phone and tablet sales and its PC sales are at least outperforming its competitors. Regarding phone sales, Apple actually has been increasing not only sales but also market share in the US market (its most profitable region and business). Tablet sales are very strong lead by the recently launched mini. Gov't & businesses continue to purchase more Apple products than ever before. Based on the data, it looks to me like Apple continues to increase the value of its ecosystem (as they have many more users today than 6 months ago). And Apple continues to grow its online sales revenue nicely as it sells more devices. Yes, all is not perfect at Apple. Phone sales are slowing (which is not surprising, given they target the high end market). Yes, GM is coming down (the mini is one factor as it cannibalizes regular ipad sales). And we are at the stage of the annual cycle where competitors launch their products Apple products slow in sales until they come out with their new models (later in the year). Sentiment on Apple continues to get worse. The stock is getting crushed. This is a beautiful thing for those who feel Apple's business is not imploding and its best days are yet to come. Link to comment Share on other sites More sharing options...
Palantir Posted April 18, 2013 Share Posted April 18, 2013 I think the Jobs autobio took away a lot of the "mystique" of Apple, and gave people the false impression of knowledge - that there is nothing after Steve Jobs. But the book barely discussed any future products so people assume there will be none. Apple could easily raise marketshare if they lower prices, and I hope they do, not dramatically, but enough to be competitive. Plus they're growing in India and China and their iCloud service will make their customer base stickier. Plus, a potential dividend. Link to comment Share on other sites More sharing options...
txlaw Posted April 18, 2013 Share Posted April 18, 2013 Sounds like that could be Samsung with manufacturing and Google with its software and services. How will Apple respond? Also see Chapter 6 of The Innovator's Solution. Apple is vertically integrated in all layers - thats your answer. Notice that they split out itunes revenues last quarter. Why would they do that? No, that's actually my point -- Apple provides a vertically integrated solution, as opposed to a modular solution. Remember, the thesis is that the innovation gap in the OS layer is closing, and, therefore, there is an increased movement towards the modular solutions (think Android, for example). That results in commoditization of the OS layer. Therefore, you could very well see the profit from "mobile devices" made in the manufacturing layer (think Samsung), and then in the apps/services layer (think Google or Amazon). Implicit in that is the idea the Apple will no longer make all the profit in the industry -- it could be an IBM waiting to happen. iTunes is a nice business that is different than making money off of embedded licenses within iOS and OSX devices. I have actually argued in the past that iTunes could potentially be put across multiple OS'es in the future and therefore has value separate and apart from the Apple ecosystem. Other Apple software and services aren't so great though. They need to address this. Maybe partnering with people like Yahoo! is a good idea? The closing of the innovation gap is nothing more than a narrative - see my earlier post on narratives. Well, I guess we disagree there. ;) Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 18, 2013 Share Posted April 18, 2013 Sounds like that could be Samsung with manufacturing and Google with its software and services. How will Apple respond? Also see Chapter 6 of The Innovator's Solution. Apple is vertically integrated in all layers - thats your answer. Notice that they split out itunes revenues last quarter. Why would they do that? No, that's actually my point -- Apple provides a vertically integrated solution, as opposed to a modular solution. Remember, the thesis is that the innovation gap in the OS layer is closing, and, therefore, there is an increased movement towards the modular solutions (think Android, for example). That results in commoditization of the OS layer. Therefore, you could very well see the profit from "mobile devices" made in the manufacturing layer (think Samsung), and then in the apps/services layer (think Google or Amazon). Implicit in that is the idea the Apple will no longer make all the profit in the industry -- it could be an IBM waiting to happen. iTunes is a nice business that is different than making money off of embedded licenses within iOS and OSX devices. I have actually argued in the past that iTunes could potentially be put across multiple OS'es in the future and therefore has value separate and apart from the Apple ecosystem. Other Apple software and services aren't so great though. They need to address this. Maybe partnering with people like Yahoo! is a good idea? The closing of the innovation gap is nothing more than a narrative - see my earlier post on narratives. Well, I guess we disagree there. ;) Well then, apply the closed proprietary integrated model to RIM Link to comment Share on other sites More sharing options...
txlaw Posted April 18, 2013 Share Posted April 18, 2013 Sounds like that could be Samsung with manufacturing and Google with its software and services. How will Apple respond? Also see Chapter 6 of The Innovator's Solution. Apple is vertically integrated in all layers - thats your answer. Notice that they split out itunes revenues last quarter. Why would they do that? No, that's actually my point -- Apple provides a vertically integrated solution, as opposed to a modular solution. Remember, the thesis is that the innovation gap in the OS layer is closing, and, therefore, there is an increased movement towards the modular solutions (think Android, for example). That results in commoditization of the OS layer. Therefore, you could very well see the profit from "mobile devices" made in the manufacturing layer (think Samsung), and then in the apps/services layer (think Google or Amazon). Implicit in that is the idea the Apple will no longer make all the profit in the industry -- it could be an IBM waiting to happen. iTunes is a nice business that is different than making money off of embedded licenses within iOS and OSX devices. I have actually argued in the past that iTunes could potentially be put across multiple OS'es in the future and therefore has value separate and apart from the Apple ecosystem. Other Apple software and services aren't so great though. They need to address this. Maybe partnering with people like Yahoo! is a good idea? The closing of the innovation gap is nothing more than a narrative - see my earlier post on narratives. Well, I guess we disagree there. ;) Well then, apply the closed proprietary integrated model to RIM You're absolutely right. That's why the future -- if there is any future at all -- is in Blackberry's software and service offerings, where they will make money with partners (device manufacturers, developers, carriers, enterprises using their MDM, content providers, etc.), not in making money on devices. That's if BBRY can turn it around. Otherwise, we can only count on run-off value. So, yeah, I have applied the commoditization/de-commoditization model to BBRY. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 18, 2013 Share Posted April 18, 2013 The interesting thing about the stock drop is that the Cirrus Logic report came a few days after a report about a massive hiring ramp up at Foxconn for the next iPhone. Sooooo......they're not buying components but hiring people to put them together? Link to comment Share on other sites More sharing options...
racemize Posted April 18, 2013 Share Posted April 18, 2013 The interesting thing about the stock drop is that the Cirrus Logic report came a few days after a report about a massive hiring ramp up at Foxconn for the next iPhone. Sooooo......they're not buying components but hiring people to put them together? They're not buying older products--it shouldn't impact the newer product line. Here is the quote from Cirrus: The company also announced that it will record a total net inventory reserve of $23.3 million of which approximately $20.7 million is due to a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 18, 2013 Share Posted April 18, 2013 That's why the future -- if there is any future at all -- is in Blackberry's software and service offerings, where they will make money with partners (device manufacturers, developers, carriers, enterprises using their MDM, content providers, etc.), not in making money on devices. That's if BBRY can turn it around. Otherwise, we can only count on run-off value. So, yeah, I have applied the commoditization/de-commoditization model to BBRY. Back on the "M2M/Cloud" train, huh? Good, good. Link to comment Share on other sites More sharing options...
Guest valueInv Posted April 18, 2013 Share Posted April 18, 2013 The interesting thing about the stock drop is that the Cirrus Logic report came a few days after a report about a massive hiring ramp up at Foxconn for the next iPhone. Sooooo......they're not buying components but hiring people to put them together? They're not buying older products--it shouldn't impact the newer product line. Here is the quote from Cirrus: The company also announced that it will record a total net inventory reserve of $23.3 million of which approximately $20.7 million is due to a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components. So why is that being interpreted as a demand collapse by the market? Link to comment Share on other sites More sharing options...
racemize Posted April 18, 2013 Share Posted April 18, 2013 The interesting thing about the stock drop is that the Cirrus Logic report came a few days after a report about a massive hiring ramp up at Foxconn for the next iPhone. Sooooo......they're not buying components but hiring people to put them together? They're not buying older products--it shouldn't impact the newer product line. Here is the quote from Cirrus: The company also announced that it will record a total net inventory reserve of $23.3 million of which approximately $20.7 million is due to a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components. So why is that being interpreted as a demand collapse by the market? That's what they always do, seems like. Most of the analysts/stock reactions to Cirrus news make absolutely no sense. Link to comment Share on other sites More sharing options...
Palantir Posted April 18, 2013 Share Posted April 18, 2013 People talk about small caps being unloved, overlooked, and misunderstood. I feel that Apple now fits into that category along with MSFT... Link to comment Share on other sites More sharing options...
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