Did iPad 3 Live Up To The Hype?

[txlaw]

It would mean that people understand what Apple is doing and their moat would start to erode.

 

I have yet to see anyone articulate what Apple is actually doing, including those who are very vocal supporters on the board.

 

I have seen a lot of Apple supporters dissing on GOOG and RIMM though.

[Guest valueInv]

It would mean that people understand what Apple is doing and their moat would start to erode.

 

I have yet to see anyone articulate what Apple is actually doing, including those who are very vocal supporters on the board.

 

I have seen a lot of Apple supporters dissing on GOOG and RIMM though.

 

Here's the short version:

 

Apple is one of the few design-driven tech companies in the world. It's fairly easy to add new features to tech products but it is really, really hard to make them both simple and powerful. Apple is one of the few companies in the world that has mastered this. As Jony Ive said, when design is done right, it feels obvious. But getting there is incredibly difficult. The reason why people have a hard time getting Apple is that they look at the end result and go, "Oh yeah, anybody can do this" because they don't understand what it took to get there. It's fairly easy to copy an existing design once you know it works but it is really hard to come up with a new one that pushes the boundary. An Apple product is tens thousands of little details honed to perfection and stitched together coherently. Most people don't notice the details but somehow the product feels "right" and "slick". Any one of these details won't make a big difference but when you have thousands of them working together, you have a product that few can match but many can imitate. That's what Apple does.

 

The long version will take a whole book:

http://www.amazon.com/Inside-Apple-Americas-Admired---Secretive--Company/dp/145551215X/ref=sr_1_1?ie=UTF8&qid=1331841684&sr=8-1

[DCG]

Another great post ValueInv. I've been looking at that book, but read some mixed reviews. Worth reading?

 

 

[txlaw]

It would mean that people understand what Apple is doing and their moat would start to erode.

 

I have yet to see anyone articulate what Apple is actually doing, including those who are very vocal supporters on the board.

 

I have seen a lot of Apple supporters dissing on GOOG and RIMM though.

 

Here's the short version:

 

Apple is one of the few design-driven tech companies in the world. It's fairly easy to add new features to tech products but it is really, really hard to make them both simple and powerful. Apple is one of the few companies in the world that has mastered this. As Jony Ive said, when design is done right, it feels obvious. But getting there is incredibly difficult. The reason why people have a hard time getting Apple is that they look at the end result and go, "Oh yeah, anybody can do this" because they don't understand what it took to get there. It's fairly easy to copy an existing design once you know it works but it is really hard to come up with a new one that pushes the boundary. An Apple product is tens thousands of little details honed to perfection and stitched together coherently. Most people don't notice the details but somehow the product feels "right" and "slick". Any one of these details won't make a big difference but when you have thousands of them working together, you have a product that few can match but many can imitate. That's what Apple does.

 

The long version will take a whole book:

http://www.amazon.com/Inside-Apple-Americas-Admired---Secretive--Company/dp/145551215X/ref=sr_1_1?ie=UTF8&qid=1331841684&sr=8-1

 

Not quite what I was looking for.

 

But thanks for the book recommendation.  Will have to check it out.

[DCG]

It would mean that people understand what Apple is doing and their moat would start to erode.

 

I have yet to see anyone articulate what Apple is actually doing, including those who are very vocal supporters on the board..

 

I'm a bit confused about what you're asking here.

[txlaw]

It would mean that people understand what Apple is doing and their moat would start to erode.

 

I have yet to see anyone articulate what Apple is actually doing, including those who are very vocal supporters on the board..

 

I'm a bit confused about what you're asking here.

 

I guess what I'm asking for is a more detailed thesis regarding AAPL that addresses the more credible criticisms from people on the board -- for example, criticisms regarding potential gross margin compression.  Note that I do not view criticisms of Apple products as faddish convincing in the least.  I also do not view responses like "look how awesome the new iPad is" as particularly convincing.

 

What will happen to moat, margins going forward?  What is the addressable market?  What are the revenue streams?  Why is AAPL like an "annuity"?  Is there operating leverage in the business?  Etc.

 

The only post I have seen that even attempts to do something like this is a post by Tariq Ali reporting on what Einhorn has said on AAPL:

 

David Einhorn on Apple at the CIMA conference

 

-trades at a low multiple because historically investing in high multiple hardware cos ends up bad

-Apple creates recurring revenue streams by getting customers to adopt platform. iPod > iPhone > iPad > iTV (you start with one and typically buy the others)

-Once a customer, very likely to renew

-Every 2 years people buy a new device, so like an annuity

-Reality: apple is a high growth company at low multiple

 

On valuation:

-TV potential is being ascribed no value

-Trades at 390 ex-cash, should earn 45, so 8 P/E

-grew revs at 70%

-iPad, iPhone penetration still ongoing

-Large margin for error in value destruction

-No crazy M&A so far, R&D spending is controlled

-Hidden potential: they might revolutionize TV and create new device with high margins

-Don't need TV for Apple to be cheap right now.

 

I own some AAPL, btw.

[prunes]

I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff beyond whatever's currently in the pipeline. Apple's revenues may continue to rise for a long time, but as Microsoft shows, revenue is a lagging indicator in the technology business.

-- Paul Graham

[Liberty]

I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff beyond whatever's currently in the pipeline. Apple's revenues may continue to rise for a long time, but as Microsoft shows, revenue is a lagging indicator in the technology business.

-- Paul Graham

 

I saw that too on HN, but there was a comment in that thread about how there are probably many employees at Apple who actually have no idea what the company is doing because they have such a culture of secrecy and of compartmentalizing different groups working on different things to reduce leaks. I don't know if that's true, but I think it's worth considering that the person making that comment doesn't necessarily know what they are talking about just because they work there. They could be right, but it's hard to say..

[bargainman]

Read this article:

 

http://www.time.com/time/magazine/article/0,9171,1118384,00.html

 

It gives a lot of insight.  I like the concept car parable.

[damianolive]

txlaw: good questions. The excel file attached is a very crude attempt at trying to answer questions of addressable market and valuation. It includes a 7-year good growth scenario and a 10-year scenario of stagnation in revenues. Both cases allow for significant erosion in prices. You can add a scenario of collapsing margins and see what happens (it will kill the thesis). The potential market is still huge for iPhones and iPads, and I'd argue Macs will grow market share for a very long time (some of this is baked into these scenarios).

 

Maybe the most interesting figures are the ones on R&D productivity (R&D tab) for the last 10 years, they show that Apple is in an separate league in this regard.

 

Good luck with your analysis.

AAPL.xlsx

[TorontoRaptorsFan]

I played around with the new iPad today and wasn't impressed enough to acquire one. I'm perfectly happy with my original iPad and will wait to see what the iPad 4 brings before I decide to upgrade.

 

I did pickup a new Apple TV. Some observations:

 

1) Purchased HD movies and TV shows look really nice in 1080p when streaming it over the cloud.

2) Streaming DVD purchases with the iTunes copy looks average.

3) Netflix picture quality looks a lot better streamed on a Samsung Blu-Ray player versus the Apple TV. The Apple TV didn't suffer any buffering issues like the Samsung.

 

[Guest Hester]

Genuine question:

 

What is Apple's most successful product that wasn't created or co-created by Jobs?

[Guest valueInv]

Wow! Apple has sold 3 Million iPad 3s so far. Even I'm surprised:

 

http://techcrunch.com/2012/03/19/new-ipad-sales/

 

For reference, Amazon sold over 4 million Kindles in all of the month of December,

[Liberty]

Im writing this from my iPad3. It rocks  :D

[txlaw]

txlaw: good questions. The excel file attached is a very crude attempt at trying to answer questions of addressable market and valuation. It includes a 7-year good growth scenario and a 10-year scenario of stagnation in revenues. Both cases allow for significant erosion in prices. You can add a scenario of collapsing margins and see what happens (it will kill the thesis). The potential market is still huge for iPhones and iPads, and I'd argue Macs will grow market share for a very long time (some of this is baked into these scenarios).

 

Maybe the most interesting figures are the ones on R&D productivity (R&D tab) for the last 10 years, they show that Apple is in an separate league in this regard.

 

Good luck with your analysis.

 

Thanks for sharing.

[Guest valueInv]

More evidence of iPad "hype"  ;):

 

http://www.pcmag.com/article2/0,2817,2401676,00.asp

[txlaw]

I'm really enjoying my new iPad. 

 

I returned my AppleTV, though.  I was quite disappointed with it.

[Liberty]

I returned my AppleTV, though.  I was quite disappointed with it.

 

Out of curiosity, what didn't it do that you expected it to?

[txlaw]

I returned my AppleTV, though.  I was quite disappointed with it.

 

Out of curiosity, what didn't it do that you expected it to?

 

The interface sucked, actually.  I was expecting it to be more like a coverflow UI.  And the home screen on the device is not very appealing. 

 

The remote that comes with the device is also terrible.  It's not ergonomic and it just isn't very nice to interact with after using something as nice as the iPad.  Actually, the remote interacted with my Macbook(!) straight out of the box, which I thought was strange.  Meaning that when I used the remote to navigate to a particular app on the AppleTV, iTunes on my laptop would start to play or the volume on my laptop would change!

 

I installed the Remote app, too, and I didn't particularly like that either.

 

I also couldn't get Netflix to work properly, and I didn't feel like messing around with it anymore, so I went straight to the Apple store and returned the thing.  Returning it was surprisingly painless.

 

I ordered a Boxee box from Amazon as a replacement.  We'll see how that turns out.

[TorontoRaptorsFan]

I absolutely love my new Apple TV. I purchased season passes of The Walking Dead, Mad Men, and Breaking Bad. Also picked up the MLB package which allows me to watch every baseball game in hi-def. Netflix works flawlessly. I'm a big, big, fan of this product.

 

It's definitely a lot cheaper to purchase season passes for shows than to have a cable subscription. Renting or purchasing movies is also very simple and anything purchased can be easily accessed through the iCloud service. Not to mention airplay allows me to transfer music and video files sitting on my iPhone or iPad to the Apple TV on to my television with the press of a button. This comes in handy when streaming new episodes of 60 Minutes on Sunday night.

 

Definitely a winning product!

[Parsad]

I absolutely love my new Apple TV. I purchased season passes of The Walking Dead, Mad Men, and Breaking Bad. Also picked up the MLB package which allows me to watch every baseball game in hi-def. Netflix works flawlessly. I'm a big, big, fan of this product.

 

It's definitely a lot cheaper to purchase season passes for shows than to have a cable subscription. Renting or purchasing movies is also very simple and anything purchased can be easily accessed through the iCloud service. Not to mention airplay allows me to transfer music and video files sitting on my iPhone or iPad to the Apple TV on to my television with the press of a button. This comes in handy when streaming new episodes of 60 Minutes on Sunday night.

 

Definitely a winning product!

 

Toronto, if you don't mind, how much did it cost to order a season pass on Appletv...say for Walking Dead or if you've ordered it...Game of Thrones?  And do you pay for cable at all, or how does it work?  Do you stream everything?  Like 60 Minutes...did that cost anything to stream?  Sorry for the questions, but I'm thinking about getting one too, and wanted to know how comparable the prices are to cable. 

 

I pay about $250 a month with Telus for high speed internet, landline local & long distance, and full cable with pretty much all the channels, including certain Asian cultural channels.  Cheers!

[txlaw]

Not to mention airplay allows me to transfer music and video files sitting on my iPhone or iPad to the Apple TV on to my television with the press of a button. This comes in handy when streaming new episodes of 60 Minutes on Sunday night.

 

Airplay was very nice, I must admit, although the inability to play flash videos on the iPad makes it not as useful as I would have liked after actually using the device for the weekend.

 

The Boxee box is intriguing to me because you can also use it to watch broadcast TV in addition to Netflix, HuluPlus, HBOGo, etc.  And Boxee apparently supports Airplay, so you can stream music and video to your TV from your MacBook.  There's also a watch later function so that if you find a video when you are somewhere else -- say at work --  you queue it up to watch later and then can watch it when you get home. 

 

The Roku box is also supposed to be very nice. 

 

I am a cord cutter, so I'm trying to figure out the best setup.  AppleTV is not it for now.  Maybe the iTV will be better.

[brker_guy]

TxLaw,

 

You can take it from me on this one.  You really don't need Flash-enabled contents in your life.  Flash has been the culprit of the most recent virus and trojans spreading around.  On all of my personal computers at home and at work, I disable Flash completely.  The only company that handle Flash contents well have been Google.  Adobe is slowly embracing HTML5, and the whole industry is moving to HTML5.  So, your digilife will be better with HTML5.

 

I hate to tell you what else Boxee is enabling and streaming, but I am going to let you enjoy the device.  ;) ;)  It's a nifty little device, but make sure you have good network firewalls at home with Boxee around.

 

I and the whole "LVLT Gangs - ValueCarl, BenGraham, Cirrus 22" SALUTE YOU for being a cord cutter.  I am exploring options at home right now as well.  If it isn't for those darn ESPN and Tennis Channel on my cable box, I would have cut loose a long time ago...  I have 2 WD Media Live Plus with WiFi and a Roku 2 XS at home. 

[TorontoRaptorsFan]

Toronto, if you don't mind, how much did it cost to order a season pass on Appletv...say for Walking Dead or if you've ordered it...Game of Thrones?  And do you pay for cable at all, or how does it work?  Do you stream everything?  Like 60 Minutes...did that cost anything to stream?  Sorry for the questions, but I'm thinking about getting one too, and wanted to know how comparable the prices are to cable. 

 

I pay about $250 a month with Telus for high speed internet, landline local & long distance, and full cable with pretty much all the channels, including certain Asian cultural channels.  Cheers!

 

The 60 Minutes app is $5 on the iPad. Game of Thornes is $38.00 for the season pass in 1080p. I don't watch a lot of TV. So I selected several television series, some cooking shows (America's Test Kitchen) looks fantastic, and the MLB package. I have no need for a cable plan. I'll probably pick up a few more series here and there such as Game of Thornes (everyone is raving about it). They also have numerous free video Podcasts which you can stream as well including Wealthtrack, NBC Nightly News with Brian Williams, various TED talks etc. There's enough on there to keep me busy. For me the key is eliminating clutter. I no longer have a need for physical media to back up my television shows and movies. I can access them at anytime. I wish the Food Network added some more shows along with HGTV.

Try it out. The nice thing as well if you purchase an episode of a show you have the option of buying the remaining episodes with the pass later down the road.

 

What amazes friends is the ease and speed with which I can retrieve shows and view them. It takes mere seconds for a show to load up and begin playing. And if I pause a program and watch it the next day it gives me the option of watching from where I left off. For $109- I think it's an incredible bargain.

 

[Parsad]

Thanks Toronto!  Yes, Game of Thrones is the best show I've seen since the first season of Lost.  Absolutely terrific writing, sets, actors...stunning twists to the stories.  Great show!  Supposedly the second season is taking it up several notches.  Cheers!