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Jason Z. Wu
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Jason Wu is currently a portfolio manager at Optimization Asset Management LLC, a Long/Short hedge fund based in the U.S. Dr. Wu spent seven years as a quantitative strategist/portfolio manager at Perry Capital, an event driven hedge fund, where he managed quantitative strategies. Jason Wu also... More
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Optimization Fund L.P.
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Market Diary
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  • My First Impressions of Apple's Keynote at WWDC

    Apple (NASDAQ:AAPL) presented the latest Mac OS (Lion), iOS 5 and iCloud in the World Wide Developer Conference (WWDC). These products are significant and may mark the beginning of another tectonic shift in the tech industry: from PCs to the connected mobile devices and the cloud.

    The most important product is "iCloud". "iCloud stores your content, and wirelessly pushes it to all your devices", and "iCloud is integrated with your apps, so everything happens automatically" said Steve Jobs.  "A competitor that doesn't own apps or does not have great developers to integrate the apps, they can never do this, they can never make 'it just works'." added Steve. Like email, the content (messages) is tightly integrated with the email app, so users don't need to worry about where and how the messages are stored. iCloud is the new digital hub for connected mobile devices. As more sophisticated apps or possibly business apps are developed over time, iCloud will become a more important piece of Apple's ecosystem. iCloud at least doubles the whole Apple's platform's stickiness because developers not only have to deal with the iOS APIs but also the iCloud APIs when they transition their apps to another platform like Android. Not to mention data or content, which are harder to move. Even though Google does not even have anything like the iCloud yet, I do expect Google, a great copycat these days, to follow Apple's footsteps soon, but other competitors like Ressearch In Motion (RIMM), Microsoft (NASDAQ:MSFT), Nokia (NYSE:NOK) and Amazon (NASDAQ:AMZN) would have a far harder time to catch up because they are so far behind in the operating system/app/cloud offerings. The new iCloud/iTunes' music match is another well-thought-out, clever and efficient offer, which sharply contrasts with Amazon and Google's comparable "brute force" counter-parts. Some people may be disappointed that iCloud does not stream to the mobile devices. Why should it? Why should Apple worsen users' experience on AT&T? Who said it is a good idea?

    My other important takeaway from the iOS 5 and iCloud is the "demotion" of a PC from a digital hub to just another device. This is done by adding more editing functions to iOS 5 and allowing software updates over-the-air (OTA). iCloud replaces PCs as the new digital hub where iTunes resides along with all the content. The most intelligent part is that everything is done automatically in the background and OTA. The end result is that the whole process is easier for users to create and access content seamlessly from multiple devices. They don't have worry about finding, syncing, saving and backing up the content. "It just works" said Steve Jobs. The demotion of PCs may have a huge impact to the entire PC food chain in the long term. A small decrease in growth rate may not matter much to the high margin players such as Microsoft (MSFT) and Intel (NASDAQ:INTC), but it is an issue of life or death for the likes of Advanced Micro Devices (NYSE:AMD) and Micron (NASDAQ:MU), which have razor thin margins.

    One subtle new feature of iOS 5 is the Safari Reader, which allows a user to get rid of distractions or ads when reading an article on the web. It not only improves users' experience, but it also hurts Apple's competitor Google (NASDAQ:GOOG), whose "display distractions" may be negatively affected. Obviously, Yahoo (NASDAQ:YHOO), who makes a living on display ads and spam, will be much more affected.

     

    Another new feature of iOS 5 is "iMessages", which allows instant messaging for all iOS devices. This is a very smart move for Apple because it increases the stickiness of iOS devices. Clearly, it is going to take a bite out of the carrier controlled SMS, which has been a cash cow for them. 

    There are two other trends about iOS devices worth noting. One is that iPhone 4's cameras may just be good enough to dissuade a typical consumer from buying another alone conventional camera - the losing streak of Japanese consumer electronics makers such as Sony (NYSE:SNE) continues. Another trend is that Apple's Game Center has more games (over 100,000) and more users (50 million) than the comparable figures for Microsoft's XBox. At some point, I expect Apple to erode the user base of video games. The game developers, console makers and retailers, GameStop (NYSE:GME) in particular, have good reasons to worry about their growth rate.

    "Lion", the latest Mac OS, contains more iPad-like features such as multi-touch gestures and is only downloadable at Mac App Store. Mac App Store has become the largest software channel for personal software, surpassing Best Buy (NYSE:BBY) and Walmart (NYSE:WMT) in just 5 months. If this becomes a major trend for software distribution, it is going to have major consequences to software retail segments for Best Buy, Walmart, GameStop and others. Another trend is that Macs are getting more mobile: the latest laptop sales made up almost three quarters of the total. With the introduction of iPad-like features of App store, multi-touch functionality and long battery life, a Mac laptop is becoming an iPad on steroid.

    In summary, Apple's innovation train shows now no signs of slowing. The people at Apple just "get it"! They just have a fundamentally deeper understanding of the "cloud" than their competitors who are bound by their PC experiences. iCloud and the demotion of PCs will have far greater consequences for years to come. The people, who are disappointed about the lack of a new gadget, are too near-sighted and are missing the forest. Apple's direct and indirect competitors from Microsoft, Google to Sony have good reasons to worry. How can they compete? Apple may not kill your business, but may kill your stock if your growth rate slows as the experience of RIMM and NOK showed.



    Disclosure: I am short RIMM, NOK, MSFT, INTC, AMD, MU, WMT, GME.

    Additional disclosure: I am long AAPL.
    Tags: AAPL, GOOG, INTC, AMD, MSFT, BBRY, WMT, NOK, MU, GME, YHOO, BBY
    Jun 09 7:09 PM | Link | Comment!
  • Another Chance to Buy Mosaic (MOS)

    Mosaic (NYSE:MOS) is the largest integrated phosphate fertilizer producer and third largest potash fertilizer producer in the world. Historically, the stock price closely tracked Potash's (NYSE:POT) stock until January 18th when Cargill, majority owner of Mosaic, filed to sell 100 mm shares of MOS. Since then, Mosaic underperformed Potash Corp. by roughly 15% mostly due to the anticipated offering of these shares. After the offering finally took place on May 20th at $65/share, the stock quickly rebounded above $70. The recent sell-off brought the stock back down to $66.70 on June 7, giving investors another attractive entry point to own it. I believe the long term prospect of owning fertilizer stocks is very good, given the annual addition of 70 million people to the world population and the continued urbanization or industrialization in the developing countries. 

    Jun 07 9:24 PM | Link | Comment!
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