Seeking Alpha

Robert McDonald

View as an RSS Feed
View Robert McDonald's Comments BY TICKER:
Latest comments  |  Highest rated
  • Qualcomm May Follow Apple South As iPhone Volumes Decline In 2014 And Beyond [View article]
    Apple smart phone volumes are not going to decline in 2014. The mobile web is far from building out and there is plenty of room for growth in Apple's ecosystem. Older generation phones are replaced with new ones and older generations will be sold to folks of lesser means or folks who do not want to make the commitment to a high end smart phone.

    Also please do not interpret a between product or seasonal slowdown (summer for example) with a long term slowdown. Since this market is highly cyclical due to these factors, you have to wait for multiple quarters before you can draw any long term conclusions.

    Right now for example Samsung is losing the high end device market. Whether that is a long term trend remains to be seen. Their next product may make a difference or it may not. In my opinion Apple's superior user experience, its ecosystem, and product quality give it a significant edge over Samsung. As the user base becomes more sophisticated and enhancements are made to the iOS7 software, new aps added and the ecosystem more powerful ala iWallet, iBeacon, IRadio and iAd, as is happening everyday, the Apple edge becomes even more significant.

    If you are just throwing out things to see what sticks or what the reader response is in-depth analysis, you should make that clear.

    I would also add that QCOM wins as long as the overall mobile web is building out. If one player declines, that will be made up somewhere else.

    Due disclosure: Long Apple and long QCOM
    Dec 7, 2013. 01:48 PM | 12 Likes Like |Link to Comment
  • Key Learnings From The Icahn Effect [View article]
    I believe you are way off in the conclusion you have drawn. I doubt Cook revealed any information to Ichan that he did not already know.

    There is plenty of public information that says Apple's stock price is severely depressed. Indeed a more appropriate valuation, even as a just a plain old value stock would be a PE 15 which translates $600. And that is a conservative suggestion given the new product lineup expected in the next six and new product areas that are emerging including auto dashboard systems, wearables and expansion into entertainment including TV,movie and video streaming.

    Many investors simply do not understand the company and the businesses it is in and therefore think of it as having declining revenue and earnings like a Blackberry. Quarterly fluctuations yes but not declining overall.

    Apple is a very diversified company and goes beyond iDevces into a mobile web ecosystem including Aps, state of the art PC's, software, retail and entertainment.

    Apple is no Blackberry, Nokia, Samsung or Microsoft. The total available market to Blackberry and Nokia is much smaller than it is for the combined businesses Apple is in. Samsung is also limited in the areas where it overlaps wtih Apple as users become more educated on the limitations of Android in the Tablet market and for all devices in the enterprise and educational markets. Microsoft has the same problem due to its narrow view of what it takes to operate in the same businesses as Apple and they are not even close.
    Aug 15, 2013. 09:01 PM | 12 Likes Like |Link to Comment
  • Carl Icahn Spells The End Of An Era At Apple [View article]
    All he did was call attention to Apple's depressed valuation, something any astute investor should know. It was only a matter of timing.
    Aug 13, 2013. 04:39 PM | 12 Likes Like |Link to Comment
  • Tesla: For Now The Story Is Better Than The Stock [View article]
    You are forgetting the huge pent up demand for the Model S in Europe. It may very well be greater than in the U.S. Fuel prices are 3X those in the U.S. and Europe's emphasis on green energy is much stronger than here. Plus you can argue that driving distances between major cities and attractions are much shorter in Europe so ultimate battery life is less of an issue.

    Recession or no recession, there is still lots of wealth available for a car like this in Europe.

    I expect that when the news of potential 2013-2014 European sales numbers comes out, there will be another pop in the stock price.

    This stock is not being bought on fundamentals, it is being bought on future expectations.
    Jun 4, 2013. 12:31 PM | 12 Likes Like |Link to Comment
  • Why You Should Avoid Apple [View article]
    This article has no merit and if the author had done an ounce of reputable research he would know that. How can Seeking Alpha allow this kind of useless stuff from an anonymous author on their website while rejecting other worthwhile inputs? Is there some kind of payoff involved or is it charity to an improvished student seeking notoriety?
    Aug 28, 2011. 04:40 PM | 12 Likes Like |Link to Comment
  • Absurdly Overvalued: If Facebook's Worth $50B Then Apple's Worth $1.4T [View article]
    It is entirely possible that Facebook is the largest Fad that the world has ever seen but a Fad never the less. Fads like Crispy Cream have a way of becoming mundane things we all take for granted and stop talking about. I remember the Big Donuts in LA growing up in the 50's. They had this brown plaster donut on top of their stores that was about 3 stories tall so you could not miss them -- their donuts were every bit as good as Crispy Cremes. The only real moat that Facebook has is its early to market position and its 500M users. Yes that is a lot of users and some version of Facebook will probably be around forever but users are fickle. It would only take another Fad to induce a significant migration. I don't think I will be buying Facebook stock.
    Jan 9, 2011. 11:17 AM | 12 Likes Like |Link to Comment
  • How Apple Keeps Screwing It Up [View article]
    There is no way the Android based phone is superior to the iPhone. As one example it lacks basic cell phone functionality including SAFE OPERATION WHILE DRIVING. There is no Blue Tooth voice dialing and even turning on the phone for manual dialing requires a finger swipe across the screen which would force a drivers eyes off the road. Then the phone requires several more manual steps to make a call. . Verizon says talk to Motorola for the Droid and Motorola says make a complaint to Google on the appropriate website. None of these actions has resulted in a problem solution after several months. . Hello! This is an exact example of what happens when no single owner is responsible for the functionality of a device ala a WinTel PC.

    Google Android penetration may look pretty good right now because Verizon is selling Android phones without any AAPL competition. And of course everyone knows that Verizon is a much better service provider than AT&T for many reasons. I know because I am a long term Verizon customer and was forced to buy a Verizon-Motorola Droid against my wishes for this reason. My experience with the Droid phone has convinced me all the more that I want an iPhone as soon as I can get it on Verizon. I am buying an iPAD too for that matter but it will probably be WiFi only. Apple and its products are much more customer oriented and user friendly than all the Google Android stuff and Apple has a whole infrastructure of things you can do when you live in their universe. Music, books, newspapers, magazines and many very useful aps are eons away from available on Google Android if ever. And now Apple will also be a major player in the mobile ad business.

    The iPAD will just add significantly to the pull in Apple's customer oriented, well supported universe. Think multiple utilites available to the Apple customer that are unavailable elsewhere. All of these business strategies add significantly to customer glue and satisfaction. Plus there is also all the free advertising, religiosity, hype and the Gucchi effect that sells the whole AAPL universe,

    When Verizon sells the iPhone, I predict Googles cell phone penetration in the U.S. will hit a wall. Now that they no longer have China and AAPL does (dah)...well what more can I say.
    May 26, 2010. 01:45 PM | 12 Likes Like |Link to Comment
  • The GT Advanced Technologies Debacle: Where Does Apple Go From Here? [View article]
    It should be noted that glass is an amorphous material without any long range crystal structure. Simplistically, the components are melted, mixed and cooled under controlled conditions. The conditions are much more "casual" than for single crystal formation. Surface properties including scratch resistance and fracture toughness can be adjusted by the controlled introduction of certain species into the glass surface by using fairly simple diffusion techniques. This occurs at well below the glass melting point and usually requires a third relatively simple step commonly called heat treating. Duck soup compared to making single crystals.

    Making single crystal sapphire involves the use of a small single crystal seed that is brought into contact with the surface of a white hot high purity liquid Aluminum Oxide bath and gradually withdrawing the seed at a very controlled speed and closely controlled cooling rates under very specific atmospheric conditions. Keep in mind that aluminum oxide is a ceramic refractory material used in furnace linings that has a melting point of 3,762°F (2,072°C). If done properly, > 12" diameter defect free single crystals of silicon for semiconductor manufacturing are made this way.
    Oct 10, 2014. 05:54 PM | 11 Likes Like |Link to Comment
  • Apple Earnings: Getting Past The Dip [View article]
    If Bezos or Musk had delivered the earnings call the stock would have gone up. Neither Cook or Oppenheimer have a spark of marketing sense when comes to talking up Apple. We have "great products" in the pipeline does not cut it. Therefore shareholders suffer time and time again.

    I remain long Apple and intend to stay that way, but lots of patience, thick skin and solvency are required.

    Apple is indeed running on all 8 cylinders including innovation. The fundamental disconnect is that Apple is a very complicated company with many successful moving pieces which makes it very hard for the average analyst and investor to understand. They are simply not a wireless phone manufacture with "decreasing" market share.

    Analyst and pundit misuse of market share data is also big contributor to the depressed price as most people cannot get past a simple market share number as a meaningful indicator. It is not market share "stupid," it is revenues, earnings what part of the market you are in. The low cost smartphone world is a money losing business and Apple is right to stay out of it. It is a no-win business to be in.
    Jan 28, 2014. 02:05 PM | 11 Likes Like |Link to Comment
  • Where Have All The Androids Gone? [View article]
    Great article and analysis. I am sure many have been wondering about this question for some time. I had guessed it had to do with the fact that Apple iOS devices are really being used by their owners for lots of tasks due to available aps, ease of use, reliability of results and no worries about security or malware. You are the first author I am aware of that has gone beyond those initial thoughts and come up with some credible answers that involve a combination of factors. Thanks!
    Dec 11, 2013. 02:21 PM | 11 Likes Like |Link to Comment
  • Why I'm Selling Apple [View article]
    I have been investing in tech stocks since 1984. Yes there are no sure things and regular due diligence is required if one is to get good returns and avoid having their shirt handed to them.

    However, given that, Apple has been and remains the best relatively conservative high growth investment opportunity of my investing career. I would submit that getting out of the stock at these valuations (P/E = 18, PEG at <0.5) is an emotional decision vs. a decision made on business and market fundamentals. It is also one of the best long term option plays (LEAPs) for the same reasons.
    Apr 3, 2011. 02:14 PM | 11 Likes Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    Oh boy! What a lot of folks don't seem to be aware of is that Intel's incursion into mobile undercuts the high profit margins on their proprietarycomplex high transistor count CPU's (see more commentary below). As Microsoft loses its dominance, this will also undercuts the demand for these complex high transistor count microprocessors. This is likely to mean that what they do well and have been able to keep proprietarty to them will no longer command the premium prices that have kept their earnings so high and so dependable.

    Compounding Intel's problem is the fact that their efforts to diversify from this dependence over the last 20 years has been a dismal failure -- 20 years later they are still in the same boat.

    I believe that there is a good reason why these diversification efforts have had so much difficulty. Intel is unbelievably competent and disciplined at what they does well: designing complex high quality reliable CPU's and making them with a manufacturing machine they have engineered to very high yields and high productivity.

    However when they get involved in areas outside of their areas of competence, this success gets in their way in way.

    In new endeavors, my exposure to Intel tells me that they tend to rely too heavily on internal "experts" vs. experts in the fields they are trying to break into or the companies they acquire. It is very hard for them to support and be open to other ways of doing things and also to maintain a culture of entrepreneurship at this point in time. Intel Capital, Intel's venture arm where a lot of new opportunities should come from, tends to suffer from this problem as well.

    Intel's moat and unique core competence is in the proprietary manufacture of high ASP (average selling price), high margin, complex X86 microprocessers with 500 million plus transistors. No other manufacturer is allowed to duplicate or sell the product. The good news is that all the huge server farms that must be built to support migration to the cloud and the mobile internet will require these kinds of CPU's indefinitely. At this point in time this is also a large enterprise upgrade to Microsoft's Window 7 in process which is driving a lot of PC purchases however it is not clear that there will another such upgrade in the foreseeable future. In addition there is a lot of the world that still needs PC proliferation or upgrades (China, especially Middle Western China with >2X more population than the United States is a case in point). So this will hold up Intel's earning power at the current level for some point in time, but not indefinently.

    Even if Intel had a cutting edge mobile device which it does not, the ARM processor along with Apple's proprietary CPU, currently run the majority of mobile and tablet devices. The latter is already undercutting some PC sales.. The ARM processor has less than 50 million transistors, a factor of 10 less complexity than X86 processors and It has been licensed for manufacture by many semiconductor companies. It is sold with a correspondingly low average selling price or ASP. The Intel Atom processor, designed for mobile applications and to compete with ARM, has 47M transistors count and cannot command Intel's usual premium prices. Every Atom CPU that Intel sells potentially competes with or undercuts X86 sales and is a significant potential earnings loss to Intel.

    If that were not enough, the problem is going to get a lot stickier with other very competent companies with great track records adding to the mix. QCOM has its Snapdragon CPU running in cutting edge Android phones, Nvidia's Tegra mobile CPU has promise and Nvidia has now teamed up with ARM for even more powerful devices using their formidable joint core competencies. In addition Broadcom will be introducing an all in one mobile chip with CPU in 2011.

    All of this presents major challenges to Intel's bottom line in the short term and moreso in the longer term. This is not a good situation and is why the stock is currently frozen in place. It remains to be seen how Intel will deal with this problem.
    Jan 16, 2011. 03:35 PM | 11 Likes Like |Link to Comment
  • A Huge Rally for Equities Coming in 2011 [View article]
    I don't think one day, or one week or one month, make that kind of difference.

    On the other hand equity markets are poised to take off big time. Stimulus II monies will begin floating investments around the world at a time when worldwide economic recovery is slowly gaining a significant foothold.

    Goverments around the world are on guard and will do whatever they need to do to keep the underwater financials on life support for as long as it takes to get them back to break even.

    Proposed FASB accounting changes will be reined in so that big banks will be allowed to continue to hide their marginal assets off the balance sheets and even continue to transfer bad loan reserves into earnings just as they have been doing to raise stock prices.

    No government is in a position to deal with Meltdown II.-- the fire department has used up most of the water.

    Most significantly huge piles of money placed in the bond bull market will be coming back into equities. Investments making less than 2% returns will rapidly become a negative investment as moderate and quite welcome moderate inflation starts to gradually take hold again.

    Beyond that bond investors will become more and more ancy about missing equity opportunities like AAPL and GOOG and key stocks in other sectors as they continue to grow at double digits. Dotcom II, driven by the mobile internet and other improved IT capabilities including cloud computing, will help stimulate the economies of the world by providing new services business and consumers want and by continuing to make improvements in productivity. The later will help reduce the damage caused by higher levels of inflation that will occur as we go forward.

    Gold has reached its peak for now. Warren Buffet says it well: "You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all of the farmland in the U.S. Plus, you could buy 10 Exxon Mobils, and have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
    Nov 5, 2010. 11:26 AM | 11 Likes Like |Link to Comment
  • The GT Advanced Technologies Debacle: Where Does Apple Go From Here? [View article]

    Even at best, and despite its almost diamond like hardness, this material is very fragile. It is brittle just like a thin sheet of glass and upon any minor impact it will fracture . For example accidently hitting it lightly with a metal belt buckle while dressing will result in a trip to the Apple store to have the expensive display crystal replaced.

    Any notch or scratch introduced in phone production or usage significantly reduces fracture toughness. Even undamaged the fracture toughness of this material is well below Gorilla glass designed by Corning for this specific purpose.

    By comparison it is relatively easy to make small circles for camera lenses and fingerprint readers and much less costly per sq. cm. It is a leap of some consequence to go to watch crystal size pieces and a monumental leap to go to high quality iPhone 6/6+ size pieces.

    Another historical related footnote: Gorilla glass was made production ready as result of a meeting with Steve Job. He semi-politely told them they could do it. In Corning's case he was right but only because glass is a much more robust and easy to manufacture material. And beyond that Corning already had an experimental glass in R&D that gave them some existence proof that they could do it before they agreed to try and long before they signed any contracts. As far as I know they developed it at their own expense.
    Oct 10, 2014. 05:27 PM | 10 Likes Like |Link to Comment
  • Why Apple's China Mobile Launch Was A Flop [View article]
    CLARIFICATION: The sell side analyst estimate of 10 to 40M IPhones will be sold on China Mobile is for 2014. I speculate, and note that I say "speculate," that the high end of this number is low.
    Jan 23, 2014. 11:50 AM | 10 Likes Like |Link to Comment