Seeking Alpha

Keith Woolcock

 
View as an RSS Feed
View Keith Woolcock's Comments BY TICKER:
Latest  |  Highest rated
  • Apple's Revolutionary Move Into Robotic Manufacturing [View article]
    apologies, that is a mistake. it should read, what happens in Japan finds an echo in south korea
    Jun 14, 2012. 07:31 AM | Likes Like |Link to Comment
  • Apple: Not Spending Enough on R&D? [View article]
    Thanks for the in-put cannot disagree with any of it. Yes, real intelligence knows what to leave out; any fool can freight an argument or a project with detail. Michel de Montaigne wrote a marvellous essay about the power of constrictions and the benefits of doing without. In one arresting metaphor he made the point that if you want to really make a loud noise - don't shout at the top of your voice, try instead to blow through a mouthpiece of a trumpet. That is why form works - think of poetry, the rules are a constriction that force us to be more creative, to compress.
    Unfortunately, the abundance of computing power pushes us the other way. We become lost in detail. I used to head a team of technology analysts when I was an investment banker - I saw the best brains of a generation sucked dry by overly complex spreadsheets. I was therefore struck by a comment by David Bohm (if you havent already, I would strongly recommend getting your hands on anything you can by him), that physics was being killed by data and not enough thought. Freeman Dyson has probably said a similar thing - those big instruments can be useful in proving theories but they also come with a price - they may kill some aspects of original thought.
    On the subject of R&D - I have looked at quite a few companies and cannot see a pattern. I'll give you an example - check the R&D spend of Qualcomm. Each year it goes up yet the share price has only just broken out of a ten year range. Question, is that due to Qcomm's fantastically creative scientists or is it due to Apple 'inventing the smartphone market?' By way of contrast, check the R&D expenditure of Cypress Semiconductor - it has been falling for a number of years, yet the company now has a booming new business making capacitive touch sensitive chips. The stock has gone up several times over the last three years. The point is that Cypress has developed a whole new business line while choking R&D. That's the way to do it. Michelangelo painted the Sistine chapel, one of the wonders of Renaissance art, but he cursed Pope Julius II everyday for making his life difficult and holding the purse strings tightly.
    Apr 14, 2011. 05:28 AM | Likes Like |Link to Comment
  • Apple: Not Spending Enough on R&D? [View article]
    If you check Apple's R&D spend since the late 1990s you'll see that it fell sharply after Steve Jobs rejoined the company in 1997. The spend did not rise much for quite some time - ie during the period when the ipod and the iphone would have been developed. r&d has risen more rapidly following the 2007 iphone launch. Therefore, you could quite easily make the case that cutting R&D led to a rise in the rate of innovation.
    There is a video interview with Steve Jobs on Youtube, with Walter Mossberg, where he makes what I think is a surprising statement. When asked why he chose not to support Adobe Flash he stated that Apple was a "small company with limited resources". I dont think any other leader of a tech major would make a statement like that. Certainly, Microsoft nor Nokia would not have said that. They would have said the opposite - we're big and so can outspend our rivals on research.
    I have looked at R&D spend for quite a few companies and I am not sure that there is a link between the amount spent on R&D and the payback that investors see. The classic case of this would be the pharma industry where RD was strong all through the 1990s and last decade, but with diminishing returns for shareholders. The same can be said of both intel and microsoft - they might spend a lot on R&D but so what - where is the payback. Both stocks have been essentially dead for a decade. Why, even Jeremy Grantham now thinks that Microsoft is a value play. No doubt Warren Buffett likes it too - how bad is that? Seriously, both might be great investors but they have zero ability in the area of tech where value has little relevance.
    I cant help thinking that Nathan Myrhvold's newly published, multi volume, multi hundred dollar book, on cooking highlights the problem. Myrhvold was CTO at Microsoft, but retired early. He has just co written a book on cooking that suggests that you need a laboratory stuffed with very expensive equipment to boil an egg. Microsoft bloatware seems to have come to the world of cooking. I'm not sure what Myrhvold's approach to R&D ever did for Microsoft -nothing as useful as a boiled egg ever resulted from his efforts, that's for sure.

    The real Innovator's Dilemma is that great ideas come from chance and serendipity and not from throwing money at the problem. You can see a similar truth at work in physics. Today we have billion dollar particle accelerators. So, let's try a thought experiment. Close your eyes and name as many 'great' physicists as you can. Einstein, Niels Bohr, Pauli, Dirac, David Bohm, Heisenberg, Schrodinger, etc etc. Each of these used a piece of paper and a pencil to arrive at their greatest insights - they didnt need huge instruments.
    Moral - just as mission creep comes into government and defence, so it does with R&D. Too often a high R&D spend is like plastic surgery - it is there to mask decline. Google, RIM, Microsoft, Monsanto, Nokia, Intel, etc all spend increasing amounts on R&D over the years but the payback for shareholders has been disappointing. For more on this check out my last seekingalpha piece on Monsanto.
    Jobs' real genius has been to recognise that throwing money at R&D has nothing to do with results. And why should it - isn't there a saying that necessity is the mother of invention? In other words, it has nothing to do with cash. You see the same thing in the arts - giving a writer or a band millions of dollars does not guarantee a great book or album.
    The same goes for financial services - brokers can spend millions on employing analysts but do we as users of that research get a more informed view? I dont think so. I work on my own and I think my record of discovering stocks and themes that outperform compares very well with any major research house. the same can be said for a number of other small independent researchers.
    Apr 11, 2011. 11:05 AM | 13 Likes Like |Link to Comment
  • 2011 a Make-or-Break Year for Nokia [View article]
    Your arguments reminds me of what Nokia people used to say when the iPhone was launched - ie we sell X hundred million phones a year, blah blah. The past is not the key, what is changing is the key. Apple's sales across greater china were up over a hundred per cent. Two year's ago the company earned barely any profit in Asia, now it is around 30%. Google too is expanding rapidly in Asia and RIMM has a good name there. Let's not forget HTC either - currently this Taiwanese company only achieves about 18% of its sales in Asia but the brand name it has established in the West will give it a lot of currency in Asian markets such as China.

    As Mr Elop has just made clear - Nokia's products do not amount to much. Think about it - if you had just bought a Nokia phone and then just read what Mr Elop had said how would you feel?

    When we have this discussion in a year's time it will be all too apparent that Nokia is no longer competitive in emerging markets. If Nokia is to succeed going forward it may have to do what both Apple and IBM essentially did and that is to discover a new market. Apple was left behind in the PC market - Jobs rejoined in 1997 - it took until 2001 for the company to discover the iPod and it took another 3 years before the market caught on to what it had. The piece I wrote for Seeking Alpha on 26 July last year pretty much says it all - the good news is that with the arrival of Mr Elop Nokia has encountered the seminal event I said it needed to shake it out of its lethargy. The mistake that investors are likely to make is believing that the company can be turned around quickly. It wont happen, there is too much innovation taking place in the smartphone market - this will make it very difficult for Nokia to set the agenda. As I said last year, the key to this is the developers and they are already complaining that they have too many platforms to support. Someone needs to introduce some reality into Nokia's corporate sauna, I wish Mr Elop all the luck in the world, he will need it.
    Feb 10, 2011. 09:34 AM | Likes Like |Link to Comment
  • JDS Uniphase Longs Jump on the Telecom Express [View article]
    This feels like 1995 or 1996 to me. Tech PEs and earnings growth are lifting off - it's deja vu all over again. Just about every teleco, broadband equip stock is reporting blow out numbers. Smartphones and tablets represent the first new platform since the PC and video volumes are booming. Cisco predicting a 25 x increase in data volume to 2015. Meanwhile, there are lot of worried people out there. Smells like animal spirits to me.
    Feb 4, 2011. 02:42 PM | Likes Like |Link to Comment
  • 2011 a Make-or-Break Year for Nokia [View article]
    I think Nokia is at a tipping point and will soon face an IMPLOSION of market share in emerging markets. Wouldnt be surprised to see Huawei of China eventually take the company over. The lights are going out in Helsinki. What is odd is that this has been on the cards for the last 10 years - Nokia has been on a long march to oblivion, still a few more miles left on the clock, but we're getting there.
    Feb 4, 2011. 02:31 PM | Likes Like |Link to Comment
  • Japan's Double Dip [View article]
    You know what, I think you'll turn out right on this - no one is interested in japan but more and more are worried about inflation - particularly inflation in japan's largest markets, which are in asia. The big move in US bond prices is great news - as we have just seen - for japanese equities. Secondly, i detect a shift in the mood in japan, I think that the increased friction with China has come as quite a shock to their self esteem. Having an easily identifiable external enemy can really galvanise a country. Lastly, results are beginning to improve for some of the bigger companies. As a note of caution though - we have had a good many false dawns over the last twenty years.
    Nov 20, 2010. 05:47 AM | Likes Like |Link to Comment
  • In Defense of Rubicon - Massive Shorts Show Overcrowded Trade [View article]
    The LED market is fascinating and your article and the accompanying comments throw a lot of useful light on it. In Asia one particular broker has led the bear charge on these stocks, but the scenario mapped out has not really happened yet. One factor that the bears appear to have under estimated is that yields remain lower than expected when using Aixtron and Veeco equipment. In the last week I see that Samsung Securities has upgraded both Epistar and Seoul Semiconductor (linked to Cree). I note also that Cree has just been upgraded by one broker in the US.
    The big short position - as very usefully explained by you - is a real worry however. I remember being a buyer of HTC all through 2008 and 2009 - when the stock collapsed. Eventually I was proven right and HTC is now about the best performing stock in Asia, but in the intervening period it was a stormy ride. At some point I think you are going to be seriously right and Rubicon and other LED stocks will explode when those shorts are finally forced to cover. Beside the coming mega cycle of domestic and commercial lighting, plus headlights in cars - there is another market that is threatening to develop: LED is emerging as very useful component in high speed data networks. As a solid state circuit it can be switched on and off in milliseconds and so can be used to transmit high speed data. The hope is to get up to speeds of one gigabit a second. work at Edinburgh University is on the point of being commercialised in this area.
    Nov 17, 2010. 11:57 AM | 1 Like Like |Link to Comment
  • Japan's Double Dip [View article]
    Isn't Japan a great play on rising inflation - which seems to be taking place right on its doorstep, ie all across Asia and particularly in China.
    Nov 16, 2010. 09:24 AM | Likes Like |Link to Comment
  • Science, Farmland, Monsanto: Who Has the Answers to the Food Crisis? [View article]
    I just want to thank everyone for some excellent comments, some of which I have found very useful, even if they were disturbing.
    I understand the frustration of the readers who wanted share tips - the suggestions I have made are to look at buying farm land or companies and instruments that give you exposure to this asset. Texas Pacific Land Trust -TPL - is kind of thing I would look at, but be aware that the stock has had a sharp run-up in the last few weeks. Companies that own water rights would be another area I would look at. Lindsay - an irrigation equipment company and Jain Irrigation in India are interesting.
    In the piece I was also making the point that part of the solution to any future food shortages is easy to identify - cut down on waste. Refrigeration and process foods would be viable solutions so one should look for stocks in those areas.
    However, it is worth bearing in mind that the main place where these problems will become manifest is in the emerging markets and not the US or Europe ( where I am based). In late January I am hoping to go to Asia - so in a future post I may have some names from overseas. Meanwhile, please note that Chinese inflation has just leapt to 4.4% in October from 3.6% in September and that more than 75% of that increase was due to rising food prices. China is approaching what Lester Thurow once identified as the Japanese Syndrome - i.e. its ability to feed itself will decline rapidly and it will be forced, over the coming decades, to import most of its grains, just as South Korea and Taiwan had to do as they developed. American farmers are sitting pretty, which probably explains why the price of farm land has been rising faster than most American stock indices over the last few years. Buying socks is not the only way to play an investment theme.
    Nov 12, 2010. 01:59 PM | 3 Likes Like |Link to Comment
  • Book Review: 25 Years of Ken Fisher at Forbes [View article]
    I was a big admirer of his book Superstocks, which came out in 1984. still worth reading as a manual for in investing in tech stocks.
    Sep 11, 2010. 03:06 AM | 2 Likes Like |Link to Comment
  • Nokia Needs a Miracle [View article]
    Firstly, I am based in the UK and travel to Asia a couple of times each year. The first few pieces I wrote for Seeking Alpha were on UK companies - ARM ( then 90p now £3.50) and Imagination - also tripled in price, but they did not get much coverage. The pieces I put on Seeking Alpha are a sample of what i do - the non US stuff I keep for clients.
    As for my views on Nokia, they have been consistently bearish since 2001. In 2002, I was asked to present my ideas to a group of Nokia executives in Finland. That meeting was reported on the front page of the Wall Street Journal at the time. Back tthen, I thought it would be Microsoft that would develop the killer smartphone, so I got that wrong.
    I have some familiarity with the Symbian operating system because I used to be the official broker to a UK company called Psion, which developed Symbian. I was also on the advisory board of one of the first mobile data companies back in the early years of the last decade.
    Nokia does have a strong position in emerging markets, but that is now under attack from Android, Apple and, if you look at Nokia's conference transcript, you will notice that they are also beginning to see competition from Chinese handset makers too.
    If you study Nokia's share price over the last ten years the direction seems pretty clear. I confess that it has certain attractions to those who like to catch falling knives.
    Jul 27, 2010. 02:40 AM | 8 Likes Like |Link to Comment
  • Is the Time Right for Nokia? [View article]
    IBM lost in PCs and if you were a shareholder in IBM throughout the 1980s and up until the mid 1990s you didnt make money - that was my point. like Nokia, IBM was regarded as a great company for a considerable period of time. But you didnt make money in it. Same goes with Nokia. I am on record - Fortune, New York Times 2001/2002, saying that Nokia would lose people packets over the coming decade. That happened. Funny thing is that I never could get institutional investors to sell the stock - they admired it too much and it was too big a part of the Euro index. It was the best recommendation of my career but it didnt make me a cent - very frustrating.
    to say that IBM won is an incredible distortion of reality - Intel and Microsoft ended up taking 70% of the available profits from the PC industry. IBM also lost because the PC undercut the mainframe business.It wasnt IBM that displaced apple, it was intel and microsoft - I remember it well because I lived through it - back then you could see the train wreck happening in slow motion.
    It was a classic Innovators Dilemma, the PC offered less margin than mainframes so IBM stuck with mainframes.

    The issue with apple now is that the company is right at the top of its game and investors are in a state of almost religious frenzy. That, at a time when stock markets and the economy are looking fragile, is not a comfortable position for any holder of the stock.
    Jul 7, 2010. 05:37 PM | Likes Like |Link to Comment
  • Research In Motion: The Blackberry's Death Spiral [View article]
    Last year Nokia's R&D spend was 4x that of Apple, so both in per centage terms and real terms it spends considerably more than Apple. In per-centage terms RIM spends a lot more too. If you look at the R&D ratios for all the major tech company, with the exception of Dell, they spend considerably more than Apple. If you compare Apple's revenue per worker, and particularly the growth in the this metric over the last few years, it has been extraordinary - if i remember, it has tripled in five years to $1.2m. By comparison, Microsoft (which spends 14% on R&D), has been static for much of the last decade at c $650K.

    Yes, Apple only makes one phone but that has been the key point to everything I have written over the last few articles. In the smart paradigm you only need one product because Apps give the variety. As the power of the network rises, content and apps grow in influence and power will be concentrated in one or two hands. This is my personal take, I could of course be wrong.

    As for subsidy and the revenue that Apple receives - not all countries subsidise the handset. In china an iphone actually costs $1000, or at least it did when first launched.
    Jul 1, 2010. 04:49 AM | 3 Likes Like |Link to Comment
  • Research In Motion: The Blackberry's Death Spiral [View article]
    would those be american sidewalks or asian ones? just returned from singapore, the puddles on Orchard Avenue were a couple of feet deep after the last summer shower.
    Jun 30, 2010. 11:46 AM | 2 Likes Like |Link to Comment
COMMENTS STATS
63 Comments
161 Likes