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Robert McDonald

 
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  • Why Apple's China Mobile Launch Was A Flop [View article]
    =======MY RESPONSE=====
    I recommend to SA readers that they go to other sources of information about Apple's Mobile China launch before buying into this story and any of the conclusions drawn here. I also recommend they wait until real data comes out before drawing any conclusion even close to as extreme as the one used in the title of this article.

    One more time we have an article with a bunch of anecdotal and unrelated data to the conclusions drawn, yet the conclusions are drawn anyway ("$AAPL" comments posted below are from my tweets on Stocktwits):

    1. “Only about a dozen customers showed up to actually buy an iPhone despite Cooks' attendance, according to reports.”

    My comment: A correct interpretation is that this was a publicity event with a controlled audience, not a normal sales event.

    $AAPL Lots of customers at China Mobile stores for the launch! http://stks.co/g0AtD" Just the beginning

    $AAPL EVEN BEFORE CHINA MOBILE SALES START: "Crowds rush Apple's Chinese stores for 'Red Friday' discounts" http://stks.co/tqQk


    2. “But the "Premium" priced segment of that market has been shrinking as a percentage of the total, falling from 16% in 2012 to 10.8% in Q2 2013”

    My comment: Apple’s sales into China are at a new high and this will soon be documented with numbers Mr. Blair can cut and paste into one of his future articles (maybe with an apology, that would be nice). Apple mobile devices control 57% of the mobile device internet traffic in China. That is an omen of things to come as Apple comes up on what will soon be by far the largest LTE network in the world, China Mobile’s.

    $AAPL 57% INTERNET USAGE MARKET SHARE IN CHINA "Apple: One Incredible China Stat" http://stks.co/f0CCt

    The sell side Apple analyst community has predicted 10 – 40 million new iPhone users on China Mobile. I submit that this won't stop at just the iPhone, they will want iPads, macs, participate in the ecosystem etc. In other words all that Apple has to offer

    3. “An iPhone 5S starts at 5,488 Yuan with China Mobile, well above the 3,000 Yuan lower bracket of the top segment above. The iPhone addresses a market that is likely less than 45 million units and is at the high end of that segment”

    MY COMMENT, PREDICTION AND A KEY STATISTIC THAT IS A HARD FACT: There are currently 45 million iphone users with unlocked grey market phones already on China Mobile running at very slow 2g speeds. These people bought unlocked iPhones on the grey market at prices well above the current China Mobile sales price and brought them up at reduced performance on the China Mobile network. I expect most of these customers will upgrade to a new iPhone running 4g on China Mobile in addition to 10's of millions of new subscribers in fiscal 2014.

    $AAPL Rich Chinese from mainland being bused around to buy real estate in Silicon Valley. They and several tiers down wanna buy LTE iPhones < This is the most rapidly growing middle class in the world

    $AAPL Looming iPhone Price War In China To Boost Apple < Similar to what happened in Japan in last 6 mo http://stks.co/a05Wb


    4. “Why Apple's China Mobile Launch Was A Flop”

    My comment: A hopelessly premature conclusion that has no data to support it. The hard data needed to confirm such a wild claim is not even out. This claim is nothing but speculation.

    I regard this article is an inappropriate and unjustified hit piece on Apple. I think it is time that these writings be called out to editors of Seeking Alpha.
    Jan 23 11:25 AM | 73 Likes Like |Link to Comment
  • Apple's Margin Hike Sell-Off: Should You Care? [View article]
    I thank you very much for your homework but not the implication that there is nothing really wrong here. I remain deeply concerned about what might have happened.

    I have to care big time that some obscure clearing house called COR can trigger or contribute to a 4.8% selloff in a $500B Fortune 500 company with impunity. I have to care that COR can apparently do this with no accountability or justification.

    I have to care that this could be yet another stock price manipulation scheme engineered by some folks on Wall Street trying to outfox other investors including individuals who would not even know such an action was possible.

    I have to care big time that there are no controls or no validation is required for such actions meaning that they can be arbitrary. Or done on a scratch my back and will scratch yours basis.

    I have to care big time that this kind of thing disrupts what is advertised as a fair marketplace.

    I have to care as an individual investor with my largest position having sold off4.8% today despite sound company financials, sound company business fundamentals and sound company position its marketplace.

    I have to care that dividend paying Apple valuation remains at depressed levels and was pushed back down today despite a TTM PE< 13, a forward PE <10, a PEG < 0.5 and a cash and equiv. of >$120B. This is despite having been as successful as any company I have followed as an investor for the last 20 years.

    Something is very wrong with this picture and I do not like it.
    Dec 5 03:18 PM | 42 Likes Like |Link to Comment
  • Apple's About To Release The Kraken And It Has A Very Long Tail [View article]
    Insightful article. Many authors miss the business reality you present. The fact so few people really understand or grasp the overall Apple business model is what keeps the trailing P/E at 15 or below vs. a more normal 20 for a successful Fortune 500 company. And given the 2.5% dividend, this makes Apple an unequaled long term growth and value stock opportunity.

    What is happening here is that Apple is building out on-going new secure user friendly capabilities of the internet that respect privacy and are being greatly enhanced by wireless accessibility. These capabilities are being enhanced by ability to store, search and easily handle terabits of data for pennies, local as (Bluetooth, NFC) as well as global communications and the addition of cheap local smart computerized analysis and control capabilities everywhere (the internet of things). The result is exponential growth given that there will be a few bounces here and there due to the dynamism of the market and its growth.

    What is happening here is that Apple is gaining monopoly share in a market that is growing at exponential rate while yesterday's companies like Google, Microsoft, Samsung, Intel (I have to say it being an alumnus), Oracle etc are just standing around with very few clues as to what is going on let alone know how or have the skills to do what Apple is doing. By the way, I see Facebook as complementary to Apple in its usage of the internet and the wireless web as the leading social media company. Both will enhance the growth of the other going foward.

    No competitor is even close to Apple in exploiting this huge opportunity and Apple is maintaining if not extending its multiyear lead.

    Of course there will be blips that will send ignorant investors or day traders scurrying. For example when Google Android and Samsung shamelessly copied the iPhone, and temporarily short-circuited Apple's lead in the device sales we now see that the limitations of their narrow focus and lack of focus on the customer experience we will inevitably see that thrust fall by the wayside as it is now. In the long term the high profit market share has been and will continue to be Apple's, so much so that they have been making the majority of available industry profits since the very first iPhone introduction with more than half the companies selling smart phones, selling them at a loss and leaving disappointed customers in their wake.

    Samsung did leave Apple a major blessing, a bipolar driven unbelievably rapid expansion of customer awareness and purchase interest exanding the market size much more rapidly than it would have expanded other wise. Now Apple has an even bigger worldwide market to expand within.

    All the unbelievers and naysayers create huge profit opportunity for folks like me who like to use longer term options as investment leverage. Returns of 50%-200% since 2009 market bottom have been routine with the exception of the irrational Sept 2012 to Mar 2013 selloff. However that yet again provided a great buying opportunity for many investors who were paying attention.
    Sep 29 08:41 PM | 31 Likes Like |Link to Comment
  • I Was Wrong About Apple [View article]
    Mr. Blair, What you don't understand is the power of Apple's devices in capturing customers. The iPhone 4S is a very expensive device in emerging markets, yet people will scrape up the money to purchase this 3 year old product rather than purchase a much cheaper phone powered by Android crapware. You also don't understand the power the Apple ecosystem brings to the iPhone user and power the ecosystem has in locking customers in while getting them to buy other Apple products like iPads and MACs. Once customers opt in they do not typically opt out.

    So many of the customers that purchased the 4S, many of whom are first time smart phone buyers, can be expected to buy more Apple products for the indefinite future. It is amazing how you try to turn good news into bad news by use of a bunch of fancy graphics you borrow from somewhere else. I have yet to see the collections of graphics that you like to use properly support the conclusions you try to make.

    There is a good reason many are predicting unprecedented sales for the iPhone 6 and a great year for Apple overall. I wonder what graphics you will be using then in efforts to support some new dire predictions for Apple.

    PS: How are your Apple "shorts" doing? If you really have the holdings you describe I think you are losing more than your shirt on your money losing shorts.
    Jun 9 02:17 AM | 29 Likes Like |Link to Comment
  • It May Be Apple Harvest Time [View article]
    I heard it was Blackberry harvest time in Canada and you went short before the Apple 25 point runnup. How's that doing?

    You know, sour grapes make lousy wine.
    Sep 25 10:32 AM | 29 Likes Like |Link to Comment
  • Apple Stock Price Likely To Peak Before Long [View article]
    Mr Blair, you say, "Apple bull and long-time blogger Philip Elmer DeWitt captured the sentiment in his May 23, 2014 article" Read the article again. The point was that "smart money" was not so smart after all and here was a great example of such. I also think smart money is coming in way faster than the shorts can cover, yourself included, now that they have figured it out. .

    "I like to think of myself as "smart money," although my dismal track record on betting against Apple suggests that at least in this case I am anything but." At least you admit it but yet you keep repeating the same mistakes. Some people are hard learners.

    "Surprisingly to many, including my immediate family, I am undeterred. Just as the best investments are held for the long term on the bullish side of the street, good shorts sometimes take a long time to mature and the ride can be painful." Everyday you are on the wrong side with a short you are losing money and missing opportunity in about the fastest possible way I know of as a market investor. It is hard to imagine why you would keep talking about your failures so publically. What is the point?
    May 27 09:09 PM | 27 Likes Like |Link to Comment
  • Why Apple's China Mobile Launch Was A Flop [View article]
    PS: For others who may also have concerns about this article, you can go to the bottom of the article above and go to this line: "Problem with this article.?" You can post your concerns in popup box or write a rebuttal article.

    I have already submitted my concerns to the SA editors via this process. My opinion is that the SA community deserves higher quality articles with a more appropriate level of substance.
    Jan 23 12:43 PM | 25 Likes Like |Link to Comment
  • Apple's New Pet: The Black Swan [View article]
    Tim Cook and Peter Oppenheimer need to step back and look at the way they delivered the earnings report. A different delivery method could have saved the day and at a minimum could have avoided the extent of the selloff we are experiencing. For one, the praise heaped on Apple products needs to replaced by a solid discussion of how well Apple is positioned in the marketplace and how they are prepared to deal with the increasing competition. The BOD needs to chastise Tim and Peter and tell them to hire some consultants the way Johnson and Johnson did during the Tylenol scare in order to recover the company image they that they just damaged so badly. The fundamentals are there but the earnings report delivery was just terrible and a very sad day for Apple shareholders.
    Jan 25 01:48 PM | 24 Likes Like |Link to Comment
  • Apple Can Look Forward To A Tough 2014 [View article]
    Mr. Blair mixes these companies up because he does little to no homework in comparing the business models involved and their respective role in the market place. If he did he would not make the mistake of comparing Apple to companies like Motorola, RIM and Nokia and would not be making the very expensive mistake of shorting Apple.

    If he did his homework he would realize that Apple is a much more innovative and diversified company than any of the comparables could ever hope to be.

    If he understood what makes a successful business he would also not be making the mistake of thinking market share is more important than profits. For one thing it makes a big difference as to what part of the marketplace you are talking about. Owning a majority of the mobile device high end is a lot more important than owning the money losing low end. They are NOT one and the same and should not be mixed. The company with the profits is the one that has the leverage and durability to outrun the others in the areas that count.

    If he did his homework he would know that iDevice users upgrade their products to new Apple iDevices at a rate that is much higher than Android phone users up grade to a new Android devices. He would know that the rate at which Android users are switching to iDevices is also growing.

    As to innovation, witness the capabilities of the new iPhone 5S and iO7 which have only just begun to be rolled out. Witness the clever thinking in using a plastic encased iP5 as the lower cost up to date iPhone vs. just lowering the cost of the original iP5. The margin leverage is huge and can be reduced based on the competitive requirements. The iP5S and iOS 7 will enable the plug in of many new additional innovative features over the next year.

    I can only recommend that Mr. Blair fill that short position before the iP5S and iP5C sales numbers start coming in.
    Sep 15 05:59 PM | 23 Likes Like |Link to Comment
  • Apple's Earnings Mediocrity [View article]
    Most Fortune 500 companies would love to have Apple's performance in the market place and would die to have their financials. Four facts:

    1. It is not necessarily good to dominate market share if it requires selling products at a loss or less than optimum margins.
    2. An optimum margin is one that continues to give the company critical market share while maximizing earnings. Critical market share being defined in this case as the market share required for continued domination of the high end market and of market trends. Others get the lower margin leftovers. BMW presents such an example.
    3. Many, including this author draw conclusions ignoring the fact that the high end and middle range wireless device market is very cyclical. The newest products drive the greatest market share growth at any moment in time, with the western holiday season (Oct-Dec), Asian Golden Week and Chinese New Year superimposing huge sales peaks on the peaks caused by new product introductions.
    4. Apple is just now entering its yearly sweet spot with the added benefit of new high margin new iPhone 5S and C models and innovative iPad introductions. These new products are getting rave reviews and are thought to be very innovative by many. Plus there is the possibility of a China Mobile addition early next year.

    As if that were not enough to drive increasing revenues and earnings, Apple is building major momentum in the enterprise and education markets. We are in the early days of this relatively uncontested build out.
    Oct 29 02:54 PM | 22 Likes Like |Link to Comment
  • It May Be Apple Harvest Time [View article]
    I would not call it brave. I would call it an incomplete knowledge of the business reality leading to a "bad" call.
    Sep 25 11:48 AM | 22 Likes Like |Link to Comment
  • It May Be Apple Harvest Time [View article]
    Here is more complete and I would submit rational discussion of the Sell-In "controversy" created by Munster and Misek. I would also add that these sell-side analysts have been way off in other Apple predictions as well.

    "Apple analysts and the great nine-million iPhone kerfuffle"
    http://bit.ly/qWLlo3

    I do not believe that Apple distorted the 9M iPhone sales results in their public announcements and their 8-K filing. That would be unprecedented.
    Sep 25 11:42 AM | 21 Likes Like |Link to Comment
  • Why I'm Selling Apple [View article]
    Just look at Apple's chart for the last 3 years. Apple has had multiple flat spots in its long term growth curve where the valuation has been flat or even a little down:

    o During the '08/'09 meltdown where it hung out between $90 and $100/share for about 6 months
    o During the first quarter of 2010 where it hung out at about $200/share for about 3 months
    o During the May - Sept period of 2010 period (for about 4 months!) where it hung out between $250 - $260 share

    The current flat spot has existed for about 6 short weeks when we have had at least 3 major issues negatively affecting worldwide stock valuations : middle east instability;the Japan earthquake, tsunami and nuclear reactor disaster; and more Eurozone financial problems.

    In all previous cases back to at least 2005, Apple's so far unstoppable business growth eventually overrules other market anxieties and investor negativity and the stock resumes its growth.

    So I would ask this article's author what is different about this period that would result in a permanent break in Apple's stock growth trajectory? Or was it just time to pipe off on Seeking Alpha? Apple business fundamentals are running on all cylinders with all growth areas having plenty of new area as well as existing market share to grab.

    I would submit that the glass ceiling that might exist with the assumption of the largest market valuation of any publically traded company in the world will turn out to be a red herring.

    I would agree that Apple may never be valued at would be normal P/E and PEG valuations. I believe that this is because the rate of growth of such a large company is historically unprecedented and the usual rules do not apply. Plus there is also the problem with $350/share plus sticker shock which could be addressed by a stock split of on the order of 5:1. I would also add that investor confidence in tech stocks is still below where it should be due to the overhang from the year 2000 dot.com bust.

    I would also submit that the potential gain one would make by buying and holding long term 2013 Apple call options (LEAPS) will overwhelm any returns you might make on your heavy overhead short term call and put trading strategies.

    Due disclosure: Very long on APPL LEAPS
    Apr 3 01:14 PM | 21 Likes Like |Link to Comment
  • Warning Signs Suggest Market Headed for Another Collapse [View article]
    Hi Andy, I think your writeups on AAPL are a good example of what you do very well -- I think you should stick to that kind of thing. Unfortunately this writeup is just another talking head article. I feel like writing a book on common sense investing and may just do that.

    I say let the bears and the "technical indicators" provide more opportunity for the rest of us. The world runs on biz fundamentals with emotion thrown in in large doses. Technical indicators reflect the emotions and not the business substance. Downside emotion provides great buying opportunities when it becomes overwhelmed by reality. Selling on excessive upside emotion after buying on the downside can be a relatively easy way to make money for the wise and vigilant investor. I love it.
    Aug 2 11:29 AM | 21 Likes Like |Link to Comment
  • The GT Advanced Technologies Debacle: Where Does Apple Go From Here? [View article]
    GTAT took on a state of the art problem making defect free iPhone 6/6+ size totally transparent sapphire (single crystal high purity Aluminum Oxide, Al203) at what must have been, by any earlier standard, bargain basement prices. This was a very high risk project and well beyond what had been the current state of the art. It's pretty obvious that GTAT failed to meet the milestones that they had signed up for and therefore they missed the funding deadlines required. This money was needed to pay their bills and led to the bankruptcy filing. I would imagine that they were not ready for a manufacturing ramp.

    By way of due disclosure: I ignored all the exhortations to buy GTAT as a lucrative new Apple suppliers because of the potential problems involved. At least I was right on this decision. Not all are so slam dunk.

    I do not hear analysts, other pundits and what may be naïve investors discussing what probably happened here. I doubt if many, if any, of these understand the extent of the state of the art the material science problems involved. I have a Ph.D. in Materials Science and over 25 years of experience in semiconductor manufacturing and R&D. I have some sensitivity as to what may have happened here.

    It's quite possible that the GTAT and Apple relationship was doomed to fail from the outset. This should have been done as a research project without commercial production deadlines. No one could have accurately assessed how long it might take to deal with the high volume manufacturing problems associated with large sizes of this exotic material. The difficulty of producing defect free material goes up exponentially as the size increases. Its one thing to make relatively small camera and fingerprint lenses. Its another to make watch size crystals and much more difficult to make the iPhone 6/6+ size aluminium oxide single crystal sheets required to replace the work horse Gorilla glass covering the display screen. Both sides should have been heads up to these issues.

    I suspect Apple did not understand the potential difficulties with manufacturing this state of the art material, at least at these sizes, and took a flying leap thinking they could squeeze the problem solutions out of GTAT. Apple was most likely mislead by GTAT management and scientists as the project advanced as so often happens on industrial problems like this. The difficulties and downside involved was probably minimized in GTAT presentations. Apple's no mercy business relationships with suppliers that are having trouble delivering components probably did not help.
    Oct 10 05:03 PM | 20 Likes Like |Link to Comment
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