AAPL - Apple Inc.

[hardincap]

something else that may burst your optimism bubble: employee morale is a real problem. i have more than a dozen very close contacts all over the management chain at apple. its a consensus that apple work culture is not a good one, and many of them want to leave. some who have left say they will never go back.

 

how should apple fix this? not by going silent on products for 16 months.

[hardincap]

if thats true you have a communication problem, because all your posts are about how amazing apple is.

 

why does that matter? i am bullish on the stock and its reflected in my portfolio. im also bullish on the company as well. forstall leaving was good. ive is the real inventor of iphone+ipad and has the midas touch. tim cook is a terrible promotor, but an incredible operator. phil schiller needs to get better at marketing. we can see him trying - he chose to do a sneak peak of the mac pro (when does apple ever do that?) to show that innovation isnt dead. he talked to the press before s4 launch.  but his message is not clear, focused, nor compelling. i dont blame cook entirely for letting negative perception get out of hand, schiller takes plenty of blame as head of marketing. on capital allocation, apple went from horrendous to just a bit better than mediocre. they could be buying back alot more stock. 

 

schiller probably leaked the iwatch thing too.

 

Because I think you are a lot more optimistic about Apple than I am ;)

 

 

[Guest valueInv]

if thats true you have a communication problem, because all your posts are about how amazing apple is.

 

why does that matter? i am bullish on the stock and its reflected in my portfolio. im also bullish on the company as well. forstall leaving was good. ive is the real inventor of iphone+ipad and has the midas touch. tim cook is a terrible promotor, but an incredible operator. phil schiller needs to get better at marketing. we can see him trying - he chose to do a sneak peak of the mac pro (when does apple ever do that?) to show that innovation isnt dead. he talked to the press before s4 launch.  but his message is not clear, focused, nor compelling. i dont blame cook entirely for letting negative perception get out of hand, schiller takes plenty of blame as head of marketing. on capital allocation, apple went from horrendous to just a bit better than mediocre. they could be buying back alot more stock. 

 

schiller probably leaked the iwatch thing too.

 

Because I think you are a lot more optimistic about Apple than I am ;)

 

Optimism and risk are orthogonal.

[hardincap]

if thats true you have a communication problem, because all your posts are about how amazing apple is.

 

why does that matter? i am bullish on the stock and its reflected in my portfolio. im also bullish on the company as well. forstall leaving was good. ive is the real inventor of iphone+ipad and has the midas touch. tim cook is a terrible promotor, but an incredible operator. phil schiller needs to get better at marketing. we can see him trying - he chose to do a sneak peak of the mac pro (when does apple ever do that?) to show that innovation isnt dead. he talked to the press before s4 launch.  but his message is not clear, focused, nor compelling. i dont blame cook entirely for letting negative perception get out of hand, schiller takes plenty of blame as head of marketing. on capital allocation, apple went from horrendous to just a bit better than mediocre. they could be buying back alot more stock. 

 

schiller probably leaked the iwatch thing too.

 

Because I think you are a lot more optimistic about Apple than I am ;)

 

Optimism and risk are orthogonal.

 

silly. go read some psychology books. your perception of risks are clearly biased by optimism. paul graham would agree  ;).

[Guest valueInv]

something else that may burst your optimism bubble: employee morale is a real problem. i have more than a dozen very close contacts all over the management chain at apple. its a consensus that apple work culture is not a good one, and many of them want to leave. some who have left say they will never go back.

 

how should apple fix this? not by going silent on products for 16 months.

 

So these guys were happier working under an asshole like Jobs who kept them in the dark and abused them? Not that Cook opens things up, sets them up to be more collaborative and treats them better they are suddenly suffering from low morale?

 

Then, there was Scott Forstall who weilded a lot of power but was so political and power hungry that people like Rubenstien and Fadell left. Cook fires him and now suddenly everyone is unhappy?

[hardincap]

steve jobs was a cultural icon. he held the culture together. no one else could do that because they dont have the cultural capital, not even forstall or cook.

 

watch it, your optimism is showing again  ;)

 

something else that may burst your optimism bubble: employee morale is a real problem. i have more than a dozen very close contacts all over the management chain at apple. its a consensus that apple work culture is not a good one, and many of them want to leave. some who have left say they will never go back.

 

how should apple fix this? not by going silent on products for 16 months.

 

So these guys were happier working under an asshole like Jobs who kept them in the dark and abused them? Not that Cook opens things up, sets them up to be more collaborative and treats them better they are suddenly suffering from low morale?

 

Then, there was Scott Forstall who weilded a lot of power but was so political and power hungry that people like Rubenstien and Fadell left. Cook fires him and now suddenly everyone is unhappy?

[Guest valueInv]

if thats true you have a communication problem, because all your posts are about how amazing apple is.

 

why does that matter? i am bullish on the stock and its reflected in my portfolio. im also bullish on the company as well. forstall leaving was good. ive is the real inventor of iphone+ipad and has the midas touch. tim cook is a terrible promotor, but an incredible operator. phil schiller needs to get better at marketing. we can see him trying - he chose to do a sneak peak of the mac pro (when does apple ever do that?) to show that innovation isnt dead. he talked to the press before s4 launch.  but his message is not clear, focused, nor compelling. i dont blame cook entirely for letting negative perception get out of hand, schiller takes plenty of blame as head of marketing. on capital allocation, apple went from horrendous to just a bit better than mediocre. they could be buying back alot more stock. 

 

schiller probably leaked the iwatch thing too.

 

Because I think you are a lot more optimistic about Apple than I am ;)

 

Optimism and risk are orthogonal.

 

silly. go read some psychology books. your perception of risks are clearly biased by optimism. paul graham would agree  ;).

 

Your % of Apple stock is an order of magnitude higher than mine. If I am biased by optimism, who is that so? On a cost basis, my Apple investment is about 3% of my portfolio. Clearly, evidence of my biased optimism  ;)

 

I told you in December that there was a good chance that Apple would go down further and I would buy more.

 

I continue to do so and lower my average cost.

[hardincap]

you assume. not surprising, given how irrationally optimistic your silly interpretations are.

 

good for you for lowering your average cost. not sure how thats relevant.

 

im done with the back and forth. getting a bit like mud wrestling with a pig.

[Guest valueInv]

you assume. not surprising, given how irrationally optimistic your silly interpretations are.

 

good for you for lowering your average cost. not sure how thats relevant.

 

im done with the back and forth. getting a bit like mud wrestling with a pig.

 

Lowering average cost is obviously not relevant to a value investor  ;)

[hardincap]

you assume. not surprising, given how irrationally optimistic your silly interpretations are.

 

good for you for lowering your average cost. not sure how thats relevant.

 

im done with the back and forth. getting a bit like mud wrestling with a pig.

 

Lowering average cost is obviously not relevant to a value investor  ;)

 

making obviously true statement that has nothing to do w/ previous topic. another silly comment. strike 3.

[Guest valueInv]

you assume. not surprising, given how irrationally optimistic your silly interpretations are.

 

good for you for lowering your average cost. not sure how thats relevant.

 

im done with the back and forth. getting a bit like mud wrestling with a pig.

 

Lowering average cost is obviously not relevant to a value investor  ;)

 

making obviously true statement that has nothing to do w/ previous topic. another silly comment. strike 3.

 

Should I post the PM you sent me to show who is irrationally optimistic?

[Palantir]

 

 

Should I post the PM you sent me to show who is irrationally optimistic?

 

Yes.

[Guest valueInv]

 

 

Should I post the PM you sent me to show who is irrationally optimistic?

 

Yes.

 

Let him give permission.

[hardincap]

really?

 

"What I'm trying to really understand is whether Apple will be able to continue to protect its 35% margins when competitors are happy with 0-1% and are producing very good alternatives."

 

"What is clear to me is that incremental upgrades are getting less worthwhile as the law of diminishing returns have caught up, and cheaper devices are able to deliver very similar value as iPhones. This leads me to believe unless apple finds a way to grow significantly in china and Europe or enter a new market it's growth will plateau or slowly decline. "

 

"I downloaded about a dozen apps, all the apps I use on iOS, and i was surprised how good they were on Android. Yes the mini has more screen but the nexus screen works extremely well. Im not convinced more is better in this case. "

 

that sounds irrationally optimistic?

 

you're grasping at straws.

 

and private messages are private messages. posting them w/o permission only shows that youre a douchebag. you do not have permission to post my PMs. ive had enough mud wrestling with you.

 

 

 

Should I post the PM you sent me to show who is irrationally optimistic?

 

Yes.

 

Let him give permission.

[Guest valueInv]

really?

 

"What I'm trying to really understand is whether Apple will be able to continue to protect its 35% margins when competitors are happy with 0-1% and are producing very good alternatives."

 

"What is clear to me is that incremental upgrades are getting less worthwhile as the law of diminishing returns have caught up, and cheaper devices are able to deliver very similar value as iPhones. This leads me to believe unless apple finds a way to grow significantly in china and Europe or enter a new market it's growth will plateau or slowly decline. "

 

"I downloaded about a dozen apps, all the apps I use on iOS, and i was surprised how good they were on Android. Yes the mini has more screen but the nexus screen works extremely well. Im not convinced more is better in this case. "

 

that sounds irrationally optimistic?

 

you're grasping at straws.

 

and private messages are private messages. posting them w/o permission only shows that youre a douchebag. you do not have permission to post my PMs. ive had enough mud wrestling with you.

 

 

 

Should I post the PM you sent me to show who is irrationally optimistic?

 

Yes.

 

Let him give permission.

 

i thought so  ;)

 

No, I am not going to post it without your permission.

[Palantir]

 

Apple might be promoting its US base because it is lobbying for repatriation of international cash. But the message is more than that.

 

?

 

Could you go back to this...what is the message?

[Ross812]

So to review: right now apple is priced as if its earnings have stagnated where they are right now. This means they maintain revenue and margins, increase revenue and margins contract, or revenue goes down and margin increases. Most will agree Mr. Market thinks it is one of the first two.

 

We all know the arguments for why Apple’s earnings will decrease. Margin contraction due to competition, less products being sold, etc… There is only one argument for why Apple will increase earnings, and is mispriced: Apple will innovate.

 

So are you a gambler or not. Will Apple produce a new product as hot as the iPhone, iPad, and iPod or are the new product categories for Apple through? Stop with the: This advertising campaign says this or that, Apple’s CEO is XX% of Steve Jobs, this refresh of the product is XX% better than the last, and the whatever product is ‘this’ good in comparison to the iWhatever.

This is a 375B dollar company and I assume everyone here is looking for a 25% move (~$100B) and the only thing that is going to do that is a new innovative product. Not the iPhone 5s, 6, Mini, Retina this or that; only a brand new product is going to truly move the company forward.

 

Your money is either on red or black. Either they innovate and you win, they stagnate and you collect a 3% dividend and modest price appreciation from the buyback, or their earnings go down and you lose. This is a consumer electronics company like Nokia, Blackberry, Motorola, Dell, HPQ, and Sony. Either it stays in the sun and grows like a weed or bounces around in the shadow of the next chosen fad.

 

Am I missing something here?

 

 

[Palantir]

My prediction: Earnings will decrease, but they will continue to innovate and come out with kickass products....I mean what else do they do at work, play ping pong all day?

[Viking]

I was looking forward to seeing Blackberry results today to get further insight into how sticky ecosystems are. There was alot of pent up demand for the new Blackberry devices; this report was Blackberry's opportunity to shine and hopefully change their sales momentum.

 

What did we learn today from Blackberry? Sales of the new phones are coming in below expectations. It looks like Blackberry's best course of action is to get bought out.

 

Comscore released US smartphone market share data to the end of May: looking at platforms, Android and Apple grew share and Blackberry and Microsoft lost share. Looking at manufacturers, Samsung and Apple grew share and HTC, Motorola, LG & Blackberry all lost share. This data supports the results we saw today from Blackberry; the new phones will likely keep the company afloat a little longer until a buyer for the company can be found.

 

The 'winner' with the Comscore data has to be Apple. HTC, BBY and Samsung all released new handsets during this data period and if they were successful you would expect to see them starting to show in the share results (by showing at least some share growth). Apple's phone was released in September of last year. The fact that Apple is able to continue to grow share in the three month period to the end of May is surprising and bodes well for their Q3 results (as the US is their largest most profitable market) although I think it likely they will show high 4S sales (which will lower average seeling price and margins). 

 

Apple and Android are the two dominant platforms and Apple and Samsung are the two dominant hardware manufacturers. This was the year for the smaller players to get some traction. I am not seeing it. And ecosystems will likely get more sticky as we move forward making it even more difficult for a number three to emerge.

[Guest valueInv]

So to review: right now apple is priced as if its earnings have stagnated where they are right now. This means they maintain revenue and margins, increase revenue and margins contract, or revenue goes down and margin increases. Most will agree Mr. Market thinks it is one of the first two.

 

We all know the arguments for why Apple’s earnings will decrease. Margin contraction due to competition, less products being sold, etc… There is only one argument for why Apple will increase earnings, and is mispriced: Apple will innovate.

 

So are you a gambler or not. Will Apple produce a new product as hot as the iPhone, iPad, and iPod or are the new product categories for Apple through? Stop with the: This advertising campaign says this or that, Apple’s CEO is XX% of Steve Jobs, this refresh of the product is XX% better than the last, and the whatever product is ‘this’ good in comparison to the iWhatever.

This is a 375B dollar company and I assume everyone here is looking for a 25% move (~$100B) and the only thing that is going to do that is a new innovative product. Not the iPhone 5s, 6, Mini, Retina this or that; only a brand new product is going to truly move the company forward.

 

Your money is either on red or black. Either they innovate and you win, they stagnate and you collect a 3% dividend and modest price appreciation from the buyback, or their earnings go down and you lose. This is a consumer electronics company like Nokia, Blackberry, Motorola, Dell, HPQ, and Sony. Either it stays in the sun and grows like a weed or bounces around in the shadow of the next chosen fad.

 

Am I missing something here?

 

Yes, Apple entering new segments with their existing products and continued growth in existing products.

[Guest wellmont]

I was looking forward to seeing Blackberry results today to get further insight into how sticky ecosystems are. There was alot of pent up demand for the new Blackberry devices; this report was Blackberry's opportunity to shine and hopefully change their sales momentum.

 

What did we learn today from Blackberry? Sales of the new phones are coming in below expectations. It looks like Blackberry's best course of action is to get bought out.

 

Comscore released US smartphone market share data to the end of May: looking at platforms, Android and Apple grew share and Blackberry and Microsoft lost share. Looking at manufacturers, Samsung and Apple grew share and HTC, Motorola, LG & Blackberry all lost share. This data supports the results we saw today from Blackberry; the new phones will likely keep the company afloat a little longer until a buyer for the company can be found.

 

The 'winner' with the Comscore data has to be Apple. HTC, BBY and Samsung all released new handsets during this data period and if they were successful you would expect to see them starting to show in the share results (by showing at least some share growth). Apple's phone was released in September of last year. The fact that Apple is able to continue to grow share in the three month period to the end of May is surprising and bodes well for their Q3 results (as the US is their largest most profitable market) although I think it likely they will show high 4S sales (which will lower average seeling price and margins). 

 

Apple and Android are the two dominant platforms and Apple and Samsung are the two dominant hardware manufacturers. This was the year for the smaller players to get some traction. I am not seeing it. And ecosystems will likely get more sticky as we move forward making it even more difficult for a number three to emerge.

 

the winner was actually Samsung and Android. But looking at USA data only is getting roughly 1/3 the real story. Android is doing even better outside of N/A. And Windows is doing better outside N/A. I notice that apple centric tech news sites focus a lot on USA and not much on ROW. Makes sense because the appl story is not nearly as good outside N/A.

 

 

[LC]

So to review: right now apple is priced as if its earnings have stagnated where they are right now. This means they maintain revenue and margins, increase revenue and margins contract, or revenue goes down and margin increases. Most will agree Mr. Market thinks it is one of the first two.

 

We all know the arguments for why Apple’s earnings will decrease. Margin contraction due to competition, less products being sold, etc… There is only one argument for why Apple will increase earnings, and is mispriced: Apple will innovate.

 

So are you a gambler or not. Will Apple produce a new product as hot as the iPhone, iPad, and iPod or are the new product categories for Apple through? Stop with the: This advertising campaign says this or that, Apple’s CEO is XX% of Steve Jobs, this refresh of the product is XX% better than the last, and the whatever product is ‘this’ good in comparison to the iWhatever.

This is a 375B dollar company and I assume everyone here is looking for a 25% move (~$100B) and the only thing that is going to do that is a new innovative product. Not the iPhone 5s, 6, Mini, Retina this or that; only a brand new product is going to truly move the company forward.

 

Your money is either on red or black. Either they innovate and you win, they stagnate and you collect a 3% dividend and modest price appreciation from the buyback, or their earnings go down and you lose. This is a consumer electronics company like Nokia, Blackberry, Motorola, Dell, HPQ, and Sony. Either it stays in the sun and grows like a weed or bounces around in the shadow of the next chosen fad.

 

Am I missing something here?

Eh I would say that they are one of the only tech companies to ever establish a durable brand that consumers identify with. Apple has been around since the 80s. In the world of tech that is a long time. And over the past 20 years everyone has said the same thing about apple products.

 

Remember the 90s? PC is more productive but Apple is easier to use. Well, the world has gotten both more productive in terms of computing power, and it has also gotten a lot easier to use in terms of interfacing with computer devices. Apple has certainly led in the latter category.

 

So to say it in a different way, I am not betting on Apple being able to come out with a new innovative a product. The ipad wasn't the first portable music device. But it had the best human-computer interface. Apple owns the game of putting people and machines together in a way that is easy to use and fun for the human! Whatever the hot consumer tech that comes out in 10 years happens to be, I am betting that Apple make it in such a way that it is easy, intuitive, and fun for people to use.

 

PS: Everyone is so shortsighted on this thread. Next ten months? Lets think about over the next ten years!

[Viking]

Ross812, nice short, to the point summary. Thanks for getting us back on track. I think the key in the near term for the stock is what they do in the phone category. Sales are slowing and GM/profitability is falling and this one category represents the bulk of Apple's profits. I do not think Apple NEEDS a new category for the stock to move 25%; I think if Apple shows that it is able to accelerate sales growth and grow profitability in the phone category the stock will respond favourably. There are a couple of things they can do here.

1.) continue improve distribution: get China Mobile and DoCoMo on board

2.) line extensions: launch cheaper (mid market) phone and larger phone

3.) encourage users to upgrade: improve iOS to point user needs new phone to access new features

 

I would not be so quick to write off the growth (sales and profits) in the smartphone and tablet markets looking out over the next 4 or 5 years. Looking at tablets, Apple last year launched the mini in October and it has been an absolutely terrific product. Yes, since launch the mini has cannibalized sales of the regular ipad. Average selling price for the category has come down and total profitability has only growth modestly. However, this will change once we get to October 2013; from this date I expect sales growth will continue at 50%+ and total profit for the category will show better year over year growth.

 

itunes store now represents almost 10% of sales and it is growing at 20% per year. iradio is coming. This continues to develop into a very nice business.

 

Shortly we will get clarity on what the plan is for phones as Sept is typically the launch month. 

[Ross812]

Eh I would say that they are one of the only tech companies to ever establish a durable brand that consumers identify with. Apple has been around since the 80s. In the world of tech that is a long time. And over the past 20 years everyone has said the same thing about apple products.

 

Remember the 90s? PC is more productive but Apple is easier to use. Well, the world has gotten both more productive in terms of computing power, and it has also gotten a lot easier to use in terms of interfacing with computer devices. Apple has certainly led in the latter category.

 

So to say it in a different way, I am not betting on Apple being able to come out with a new innovative a product. The ipad wasn't the first portable music device. But it had the best human-computer interface. Apple owns the game of putting people and machines together in a way that is easy to use and fun for the human! Whatever the hot consumer tech that comes out in 10 years happens to be, I am betting that Apple make it in such a way that it is easy, intuitive, and fun for people to use.

 

PS: Everyone is so shortsighted on this thread. Next ten months? Lets think about over the next ten years!

 

I agree that Apple has a fantastic brand, and they have always been on the forefront of easy to use devices. Over the passed 20 years apple has seen it's ups and downs, but has always had a good brand.

 

"Apple owns the game of putting people and machines together in a way that is easy to use and fun for the human!"

 

I agree that they will still do this 10 years from now, I just wonder how profitable it will be. Apple had the first popular MP3 player and essentially the first mover advantage. I tend to believe that the iPad and iPhone are variations on the iPod touch. Apple may or may not make the next 'big hit' device, but I am sure they will have a fantastic Apple edition of that device.

 

Apple is a great company and I wouldn't be worried in the least if I worked for the company. As an owner, I want growth, and there are significant headwinds ahead of the company. It is not Apple's fault, they are a great company and can continue to chug along doing what they do, but large numbers and competition are always going to be working against them.

 

Can they still grow? Sure. But Apple at 400B with a nearly saturated U.S. market, double the margins of the nearest competitor, and 170B in revenue, and stiff competition is not the same Apple that existed when the iPod was launched.

[Guest valueInv]

Samsung & Apple sitting on a tree:

 

http://online.wsj.com/article/SB10001424127887324682204578513882349940500.html