Which Is the Better Investment, Apple or Research In Motion? 26 comments
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Man alive, the topic of what's going on at Apple (AAPL) is as hot as a Miami Beach asphalt street in August. Having grown up in Miami Beach I know what I'm talking about, but when it comes to Apple's investment value right now (over $188-per-share) I confess that I'm not sure myself or too many others know what they are talking about.
The latest: Apple is going to announce big back-to-school promotions, "some of the biggest incentives in the company's history," according to AppleInsider.com.
Here is where Henry Blodget wonders if promotional activity is really a "good thing," because Apple typically hasn't had to put stuff on sale:
My take is that Apple may be willing to sacrifice margins in order to gain a share of the market, a smart strategy as it tries to cement its dominance with the under-25 consumer. (Imagine being a college student going to class with a boring Windows-based laptop or, heaven forbid, a Zune.)
At the same time, Apple would be prudent to take advantage of demand for its products from adults, too, especially as Microsoft (MSFT) loses its grip on corporate IT budgets. That's exactly what I thought they'd be doing with the release of their upcoming iPhone. Maybe I was right. The folks at AppleInsider.com reported:
A new research note by Lehman Brothers calls for an Apple device with an Intel Atom processor within 12 months, and expects the iPhone to reach more than one billion potential customers before the end of 2008.Analyst Ben Reitzes makes the prediction based on Intel chief Paul Otellini's talks at a Lehman-hosted telecoms conference, where the semiconductor company head notes that he has been "positively surprised" by the take-up of the Atom by the market.
The statement contributes to an existing sentiment at Lehman that Apple may release an ultra-portable device within a year that Reitzes speculates would be oriented towards sharing media. This likelihood grows even further with statements by Otellini that future iterations of Atom will be efficient enough to fit into iPhone-sized devices as early as 2009; having this technology at the smartphone level could have significant implications for Apple, Reitzes says.
"We believe any product using Intel architecture in terms of an ultra-portable or iPhone could be met with orders in the multiple millions, making our estimates for Apple conservative," he elaborates.
The financial researcher also notes that Apple's steadily growing number of carrier deals now gives it access to a potential 650 million subscribers as of the TeliaSonera deal or about four times as many subscribers that can be reached today. The rapid expansion is characterized as evidence that Apple is pushing for sheer volume in terms of sales and that the company may be counting on added iPhone numbers to compensate for reduced or absent carrier payments.
That number may also be poised to explode before the year is over, the analyst notes: Lehman anticipates the signing of a Chinese carrier by the end of 2008 that would push Apple's total potential customer base to one billion, or more than six times the current range. Such expansion will not only help Apple reach targets but could see any success spill over into other categories.
"We believe higher phone volumes mean that Apple will experience an enhanced halo effect that could drive millions of upside to Mac units," the researcher states."
Meanwhile, the closing of New York's 24-hour Apple store has some folks buzzing about the possibility of a 3G iPhone commercial. More important, Apple continues to rack up agreements with international carriers as it prepares (we all assume) to soon roll out the 3G iPhone.
Doesn't Research-In-Motion (RIMM)stand a chance to compete in this frothy Apple-mania? BusinessWeek.com (www.businessweek.com) recently reported "The smartphone's chief competitors offer real satellite navigation systems, users love the feature, and it could be a moneymaker for Apple".
BusinessWeek goes on to postulate,
If there's anything the iPhone has lacked compared with other phones in its class, it has been high-speed connectivity and the ability to determine its location accurately. Apple will address the first shortcoming in a matter of days, when it unveils the second version of the year-old iPhone on June 9.
I'm hoping Apple also tackles No. 2—by including support for Global Positioning System [GPS] navigation. For one thing, most of the handsets in the iPhone's peer group contain GPS chips by default. Research In Motion's BlackBerry devices have included GPS support for a few years now, while Finland's Nokia (NOK) considers GPS so strategically important that last year it spent $8.1 billion to acquire Chicago's Navteq (NVT) (BusinessWeek.com, 11/12/07), a digital mapmaker that supplies all the major navigation device companies.
What's more, navigation applications can make a lot of money for carriers, and by extension, Apple, which splits service revenue with AT&T (T) its partner in the U.S. A survey last year by Nielsen Mobile found that navigation applications were second only to games as the most popular downloadable wireless application. Companies like TeleNav and Networks In Motion have deals to supply their software and services to all the major carriers. The potential market is huge: iSuppli pegged the number of navigation-ready handsets sold last year at north of 160 million units, more than seven times the number of standalone navigation devices sold.
Using Cell Towers Doesn't Cut It
The iPhone currently employs a system often described as pseudo GPS to determine its location. Instead of getting a true location fix from the GPS satellites orbiting Earth, it determines its position in part by using the nearest cell towers, using technology from Google (GOOG). It also fixes its location based on Wi-Fi access points using another technology from Skyhook Wireless.
The result is adequate for the casual pedestrian user, and will even work for basic driving directions. Google Maps is one of the best applications on the iPhone, and its satellite view wowed crowds in early iPhone demonstrations. Still, the accuracy of iPhone's location services is hit-or-miss. It's not unusual for Google Maps on the iPhone to show you a block or two away from where you actually are. Sometimes it will put you within 100 feet. Any civilian-grade GPS receiver worth having should be able to pinpoint your location to within 10 feet.
All the iPhone would need is a GPS chipset, and it wouldn't set Apple back much either. Your standard-issue GPS chipset costs about $5 from the manufacturer, says David Carey, president and CEO of Portelligent.
So is GPS on the way or not? Rumor sites point to what are thought to be iPhone screen shots of features that include "geotagging," a way to associate pictures with where they're taken, which would imply the new phone will contain GPS. Other rumors cite people in the know who also say Apple CEO Steve Jobs will surely promote GPS capabilities. Since Apple is mum on the subject, we can only speculate."
Aha!! Maybe that is RIMM's advantage and competitive edge. If their Blackberry has a GPS system and the iPhone doesn't, and since GPS in your phone is especially important to all of us who travel with our cell-phones, well, I'd think this a tremendous advantage.
This is getting exciting, and there are thousands of speculators who are buying AAPL on the rumor and are planning on selling on the news... like Jim Cramer suggested, selling some AAPL the day before the announcement, some on the day of the announcement, and holding some in case the annoucement is better than anticipated.
So how about RIMM? Is that like chopped liver? Maybe RIMM will capture a surprising amount of the latest cellphone business because their email service has some amazing encryption possibilities, or at least the government in India thinks so.
India's security agencies have said the BlackBerry e-mail device posed a risk as the mails could not be traced or intercepted. Two officials from the Canadian High Commission in New Delhi were also seen at the headquarters of the telecoms ministry on Thursday.
"There was a meeting, that is for sure," one source said. Another source also confirmed, but both were not present at the meeting and could not comment on any development.
Media reports have said Canadian High Commission officials have been attending RIM's meetings with the Indian government to resolve this issue. Indian Telecoms Minister Andimuthu Raja said last week the Canadian firm had assured the government to provide a solution in two months.
But last Friday, Research In Motion said in a customer update that the company does not have a copy of the customer's encryption key and would "simply be unable to accommodate" any such request.
In a world where security breaches on the web are more common-place than ever, maybe it's time for us to switch to a Blackberry over the iPhone if it means our email messages "could not be traced or intercepted". Now how much is that worth? Maybe more than $100 a share?
If you have an opinion on whether you think AAPL is a better investment than RIMM please let us know so we can all make an educated decision in the next few days. After all, it might not be too late to "buy the rumor".
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This article has 26 comments:
RIMM goes up on promises, whereas Apple stock works hard, and honestly, to increase in value.
RIMM's growth rate, sad to say, is slowing.
RIMM is a pumped stock by the hedge funds and brokerages because brokers use the handsets and, thus, think that everyone else does/will.
These misconceptions form the basis of a dangerous bias from an investing standpoint, and as soon as the public understands how Apple is encroaching on RIMM's market, these misconceptions will change in Apple's favor.
I'd agree with everyone, though you rarely see them expressed.
I just attended a PTA meeting (los angeles westside private school). 6 iphones present and a whole lotta complaining about them (mainly the keyboard but plenty about the inconvenience of phone handling and mp3 redundancy).
That's the funny thing: a stock like RIMM with NO place to go but DOWN, as the iPhone spreads, rates a 60 P/E and the manipulators keep AAPL mired at less than 40. Imagine AAPL with a "growth" P/E-- you'd be around $300/share.
AAPL have the OSX advantage, even Microsoft can't beat it (3). AAPL has also the advantage of the full compatibility of all the family : Ipod, Imac, MacBook, MacBook Air, Apple TV, etc. (4)
So what will happend?
1) Simple software is repeatable easily. RIMM even sell is own software to competitor
2) AAPL or a another company gonna lunch is own keybord for the Iphone/Ipod touch.
Any advantage left for RIMM?...
3) Maybe a Linux solution like Android can help RIMM but this solution gonna help others even AAPL. Anyway do you really want adds on your phone?
4) The full compatibility and connectivity of the AAPL products, only Microsoft can compete. Until now there is no battle...
There other points can be analysed. Internet browsing ? Iphone is still alone. Game ? Iphone has patented 3D accelorometer...
Of course RIMM can fight against AAPL, but he gonna fight too against ANDROID. Maybe RIMM have enough consummer in cellphone to stay alive. But AAPL have all a family of products to support and benefit of the halo effect.
Just to conclude, I'm not even sure too that ANDROID can compete Iphone
I don't think so.
"Apple may be willing to sacrifice margins in order to gain a share of the market"
I don't think so.
"Apple may release an ultra-portable device within a year"
The word is "may".
"I'm hoping Apple also tackles No. 2—by including support for Global Positioning System [GPS] navigation"
Including a battery you carry on your back.
"Since Apple is mum on the subject, we can only speculate."
Isn't that what the content of this article is? A lot of words about nothing.
Invest on what I know is a fact, and I make money on what other people believe is going to be a fact.
Any questions?
I don't think so!
Some people just don't understand Apple.
Exactly right. Apple tried it; it didn't work. Palm tried it; it killed the company.
The PC out-license model has the APPEARANCE of working because of other factors. The PC took off because DOS was already "in the door" in Enterprise, and it kept it's market share advantage because of anticompetitive practices executed by MSFT surrounding Windows and Office and Exchange.
Consider this: Xbox, though cr*ppy, is LESS cr*ppy than just about any other MSFT product. Why is that? because one company (MSFT) controls the whole widget.
Many thanks to all of you for your comments, suggestions and perspectives. Your feedback was more interesting and more important than my article--no false humility intended. The objectivity and personal opinions (valuable subjectivity) has more empirical value than I first realized. This certainly proves what a useful forum this is. Again, much gratitude to each of you.
Point being, when APPL passes MSFT, the business market will follow. IT staffers have always resisted it, because MSFT has taken good care of them (their true customers). But they are increasing unable to swim upstream against this growing tide.
RIMM has gone up and up on literally nothing. They have not a chance to survive against an iPhone. They are in flat out panic mode, trying to get a decent MP3 feature, desperately trying to mimic the on screen keyboard of the iPhone v1 (not there yet...) Blackberry is looking like those old 80's cell phones at this point, it's just that the 'business users' haven't quite noticed yet.
However, they have a lot of options. If you think there is something to them designing all the hardware and the software then you have been listing to too much MSFT whining. There isn't really any difference between one generic PC and another. All that Apple would need to do is release a good hardware spec for the 2nd tier manufacturers to follow, and then license to them. There would be a strict set of rules they would have to follow to insure that this competition would not destroy their own hardware sales.
I thing they are waiting for MSFT to go off a cliff (such as caving in and going in debt to buy Yahoo!).
Apple has a phone OS
RIMM has a phone but no OS.
Long APPL
Short RIMM