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Robert McDonald
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FROM INSIDE SILICON VALLEY: Sorting the truth or likely truth from the noise is a key attribute of the successful investor. My commentary is a distillation of some of this effort relative to particular stocks and investment areas. My publishing at this point in time is limited to the blogsphere,... More
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  • Apple "TV" Available By This Years Holiday Season??

    The Apple Home Entertainment system can be produced in time for the holiday season. I would speculate that the first step will be an upgrade of the existing iTV box into a full set top box with a large capacity 4Tb video server, iPad/Siri remote control and gaming features. A partnership or acquisition of Tivo would deliver agreements with some content providers and a slew of valuable patents whose worth has already been demonstrated in legal settlements, some of which are still underway with more successes predicted:

    ZDnet has speculated that a Tivo agreement might even be announced at this year's WWDC.

    The many useful features discussed here-in that will transform the TV and gaming market can then be introduced in a step wise fashion beyond that. I would be very surprised if Apple is not already well down this path. The more complete system, maybe one year out, will include more pay for view content and an optional state of art sound system and ultra HD display:

    Disclosure: I am long AAPL, TIVO.

    Additional disclosure: I bought TIVO stock and a TIVO Jan 2015 LEAP option yesterday

    May 11 1:10 PM | Link | 1 Comment
  • TIVO And Apple "TV" Aka "Home Entertainment System"

    Today's remote controls are stone age, Most of them are way too complicated, obtuse in what each button is supposed to control, and unreadable in a dimly lit room. No two remotes are alike. Mistakes lead to a loud blast of obnoxious noise and/or bring frustration as part of the recovery process.

    We are delivered content that we do not need or want to pay for. The content overload makes it very difficult to find the content you do want to watch if you only knew it was there. Without a spin forward feature we are blasted with commercials which in my book makes TV unwatchable. The exception being when you have no choice and/or desperate as in an airport waiting lounge. We have no option to opt out of ads in exchange for an appropriate fee.

    We want the content we want when we want it and there is a huge untapped market for this. TIVO addresses many of these needs but they too provide a simple minded remote that is hard to use and unseeable in a dimly lit room. Yes they can help you find programs but it is a very primitive and user unfriendly. Typing in a search term on the remote resembles use of the phone keyboard to enter information.

    It is hard to believe we are still putting up with this after all these years especially given the wealth of potential technology alternatives all around us.

    Apple could easily and cost effectively enter the TV market and have a huge impact by buying TIVO and making the remote control and existing DVR much more user friendly and operable by Siri requests. Some form of the iPad is the ideal platform for the remote and It may require no more than the addition of an Ap designed for the purpose. The DVR server could take many forms including a MAC in the living room or a system with built in modular DVD player (for future upgrades) and a sophisticated amplifier for the sound system. That would greatly reduce the wiring nightmare.

    Most important Apple can easily have a huge impact on making content easy to find by multiple methods including the use of Siri. This would include content that has yet to be recorded and content that is already on the DVR server. Identified future content could be easily added to the record list.

    TIVO's stream already allows the transfer of whatever content is on the DVR server to iPad for remote viewing on an airplane or in an airplane lounge, or whatever. Apple could make that process even simpler and more automatic.

    Over time Apple can opportunistically add their magic in bringing new high definition video displays and sound systems to the consumer in a complementary fashion.

    All of this will add to their clout in bringing media companies on board. Yes this is the hard part but with the "Apple Home Entertainment" system deployed in millions of homes worldwide, the media companies will ask to be on board. At that point the challenge will be a price negotiation.

    And of course Apple could easily invent their own TIVO equivalent and go from there, however TIVO has a lot enforceable patents in place and buying them may be a better choice for many reasons.

    I would submit that the Apple "TIVO equivalent" box with iPad remote can go into the field anytime between now and the holiday season. You have to believe Apple already has this capability on the shelf. In addition, Apple iOS already has all kinds of content providers via Aps and via iTunes. It would be a slam dunk out of the box success. Internet access provides Hulu, Netflix, Al Jazera, and some PBS while existing iOS aps provide dozens of additional video sources. It is a question of putting together the automated on-line smart programming guide as the next step.

    Enhanced living room gaming capability can be added at the drop of a hat. Ditto on the streaming of different programs and/or games to different parts of the house.

    When user friendly smart video content management with server storage is demonstrated customers will come. When the content providers see the customer base grow and what a success this combination brings they will come as well. They quite frankly want to preserve the status quo but have blinders on to the potential Aereos that will undermine the traditional business model. Better to get on board with Apple where they will not be ripped off totally ala the music industry 10 years ago.

    Disclosure: I am long AAPL.

    May 08 8:30 PM | Link | Comment!
  • Why Is Apple's Stock Buyback One Of Apple's Next Big Things?

    Apple $60B share buyback plan is the largest ever in corporate history and represents 15% of the outstanding shares. Apple also far from the first reputable American company to borrow money in order to buy its stock back - see Microsoft and Cisco actions over the last several years.

    One of the next big things is how much money Apple is going make by buying its depressed stock back with borrowed money at the current low interest rates. The stock will appreciate way more than the interest paid and as an additional benefit, dividend payments will go down due to the reduced number of shares to pay dividends on.

    The very presence of a buyback is inherently likely to raise the stock price. If the stock float is reduced by 15%, there is that much less stock available for investors to buy. Given that you have the same number of investors who want to hold the same number of shares, this means that the price per share of stock will have to go up by 15%. Another way of saying this is that the stock will have to go up by 15% to maintain the same market cap due to the buyback alone. This ignores any benefit

    Interested investors may want to read this article from Saturday's Barrons which characterizes the new effective dividend rate as 8%. They get to number by assuming the buyback will be extended over the next 3 year authorization period. They submit that the effective increase in stock valuation caused by the buyback is equivalent to 5%/year and adding this to new the actual dividend rate you get to an effective 8% net gain per year:

    For Patient Bulls, Apple's Day Will Come Again

    Borrowing money to complete the buyback is much more tax efficient than repatriating offshore cash due to America' stone age tax system, especially at today's low interest rates.

    America's tax system unfortunately indirectly pays American companies not to bring cash home to fund US business expansions, new factories and new jobs. If an American company brings money home for any purpose, even investment in American jobs, they will be taxed on it whereas if the leave the money offshore, no taxes are due.

    On the good side of still having humongous amounts of offshore cash, Apple has lots of money to fund offshore retail stores, manufacturing operations, data centers etc.

    Disclosure: I am long AAPL.

    Apr 29 10:59 AM | Link | Comment!
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