Timeline Strategy Consulting

Amazon, Apple Stock Going Vertical: This Never Ends Well

AMZN may be overvalued, but time will tell that AAPL is not.

If Apple posts a highly-reasonable EPS of $2.10 for their FY10 Q1, which ends in December, that will reset their trailing full year earnings to $6.61. They will also post a $3.5 billion addition of cash and equivalents to the balance sheet, meaning that they hold $40 billion or so in cash - equivalent to 18% of their $180 billion market cap.

During some period in the future, $205 will look very cheap, if you have the stomach to deal with the stock's oscillations and the market's corrections here and there.

And, a detail. The company you refer to as 'Price Line' is either 'priceline' or 'Priceline'. Details matter when you are writing and you should attempt to get them right.

Media Outlets Benefiting from Michael Jackson's Death

What I would like from this article is some quantitative estimate of how much revenue or profit this brings any of these media players.

My particular bias is Apple, so how about an estimate of how many downloads this event triggered on iTunes? It should be rather easy to quantitate.

Candidates to Replace GM, Citigroup in the Dow

Apple's products 'faddish'? My definition of 'faddish' would be GM, cranking out endless undesirable combinations of models that require heavy discounts and incentives to sell, all to meet the cost accountant's model of 100% factory capacity utilization.

Remember that Apple pioneered desktop computing and operating systems. It was the logical successor to the Silicon Valley garage ideal in the vein of Hewlett and Packard.

Apple had hard hard times, but unlike GM, revitalized itself by adapting its business model to reflect the changing way that customers consume media. In doing so, it created a second act that rivals any in business. And, this second act also has allowed Apple to return to its first act, which is computing and software for the masses.

And now it has completely revolutionized mobile computing.

Maybe you should ask your grandkids.

Cramer's Mad Money - Hey Apple: Chips Are Not a Commodity (4/30/09)

Consider the context in which Apple operates. If they lack the capacity to design and fabricate their own chips, then they either: (1) subject themselves to whims of market pricing, long lead times, process runs of millions and millions of units; or (2) partner with, and pre-pay, a supplier who will dedicate capacity to Apple's specific needs.

Either way, they are effectively held hostage by chipmaking capacity, which is theoretically able to be purchased by any company. In that sense it is a commodity.

Apple is thinking many years ahead with this move. The basis of their strategy is that the separation between semiconductor and device manufacturers hurts product development cycles, as the device manufacturers are subject to the above dynamics. They will be able to design, produce, and test chips with extremely fast turnaround, and greatly speed the development cycle.

This will turn out to be a big deal.

iTunes' Inevitable Price Increase

Sorry, meant ChadS....


On Apr 08 12:06 PM TimboM wrote:

> Hey User 391365, do you think that your view of strategy may be biased
> toward, oh I don't know, the frugal end of the music market? The
> only clue I have is, you know, your word selection, including:<br/>
>
> "affordable"
> "low prices"
> "best prices"
> "prices are better"
> "outstanding deals"
> "under $3"
> "promotions"
> "save a lot"
> and lastly
> frugalgadgetsdotcom
>
> I'm sure that Apple appreciates the advice about how they should
> race to the bottom but I doubt that they will take it.
>
> Plus, let me ask who will win the music war. The company that has
> sold 150 million mobile music devices, including 20 million phones
> and at least 15 million more gaming devices, or the company that
> makes the.......Kindle.
>
> Did you think this stuff through at all?

iTunes' Inevitable Price Increase

Hey User 391365, do you think that your view of strategy may be biased toward, oh I don't know, the frugal end of the music market? The only clue I have is, you know, your word selection, including:

"affordable"
"low prices"
"best prices"
"prices are better"
"outstanding deals"
"under $3"
"promotions"
"save a lot"
and lastly
frugalgadgetsdotcom

I'm sure that Apple appreciates the advice about how they should race to the bottom but I doubt that they will take it.

Plus, let me ask who will win the music war. The company that has sold 150 million mobile music devices, including 20 million phones and at least 15 million more gaming devices, or the company that makes the.......Kindle.

Did you think this stuff through at all?

iTunes' Inevitable Price Increase

Hey Cetin,

Yeah, the program that has introduced, to Apple, 100 million consumers that would otherwise not have any exposure to Apple, doesn't contribute anything. Yeah, the program that allows synching for 20 million iPhones doesn't mean anything. Yeah, the program that allows HD Video downloads and provides the anchor to all Apple content doesn't contribute anything. Um, it's the software stupid. Even if one calculation shows that iTunes is not profitable (which I would highly dispute) what is the options value of the consumers who use iTunes to buy Apple stuff?

Oh, by the way, everyone who sells the same tracks followed suit with price increases. Even though they don't have the market share or the intuitive interface of iTunes, they followed Apple because why would a company sell something for less than the market will bear?

The Short Case for Amazon.com

Actually, that Buffett line sums up the appeal of Amazon perfectly.

If you want to avoid big losses, get out of an investment before the stampede for the door.

And, in the case of Amazon, if you want big gains, get into the investment before others realize its value.

I realize that the fundamentals would lead you to believe that AMZN should be trading lower. But investors are paying extra for a disrputive force. Amazon will be a disruptor regardless of the macroeconomy, and that's what investors are paying for.

Like I told you in your last article about shorting AMZN, you can't fight the market. You can't just be 'short' a stock like you can be 'long' on a stock. You need to put a stake in the ground, preferably when the stock is at its highest point. AMZN is certainly not there yet, with the government action that will be taken in the next 2 weeks.

If there is a time to short AMZN, it may be in the dead of summer when the holiday seasons bookends their quarters, and when people are not as interested in buying stuff because there are other things to do.

Why I Remain Short Amazon

You don't have the best timing, do you?

I mean, I realize what you are saying.....but you are fighting the market, which is rule #1. As in, don't fight the market.

You use a lot of flowery words and fundamentals to justify your position. Don't. There is zero correlation between degree of performance and this stock price. The market asked, "Profit?", Amazon said, "Yes!" and the rest was history.

Take your lumps and move on. Don't keep trying to justify an indefensible position.

Is Netflix the Next Apple?

Hey stockdoc06: I suggest that you revisit Apple's efforts to gain control of the living room. They haven't taken off just yet but they will. I think that you are mistaking that Apple ALLOWS use of a small playback device with them REQUIRING use of a small device.

Apple has made a lot of movements toward this with AppleTV, Cinema Displays, using your laptop as a media center, etc. If the content is coming via broadband, I don't know why I would favor anyone from the traditional TV segment, or even Netflix.

It's also hard to call what Apple has done with music a 'mistake'. You may not like it, artists may not like it, labels may not like it - but it speaks for itself with the financial results.


On Jan 19 09:48 AM stockdoc06 wrote:

> Movies are different than music and AAPL does not have nearly the
> advantage they had in music. AAPL's music rise was driven by a highly
> desirable playback device and DRM that forced you to use iTunes to
> buy music for your iPod. With the movement to eliminate DRM music
> will be purchased as a commodity through iTunes, Amazon, WalMart,
> etc where artists will once again be able to control price and demand
> their terms be met, though the iPod device still seems to be the
> preferred playback device for now.
>
> Despite the ability to play movies on a 2" iPod screen, the preferred
> playback device for movies is a TV, a business APPL knows nothing
> about, has no advantage, and it would foolish to try to enter the
> TV business unless they come up with 3D without the glasses. The
> interface may eventually be the TV itself (as LG, I believe, just
> announced) but there are also established 3rd party players already
> (Xbox, playstation, Tivo, Nintendo, Apple, etc) where no one has
> a clear advantage. Netflix has been working to establish relationships
> with as many of these as possible to capture as many TV's as possible.
> So rather than Xbox negotiating with Paramount Studios for distribution
> rights, Netflix does the negotiating and distributes throughout their
> platform. Time will tell if Netlfix manages the relationships well
> enough to make a little for themselves but disuade the 3rd parties
> from going it alone without the Netflix toll road, but I think they
> will learn from Apple's mistake of dictating to artists and consumers
> how the relationship will work.

Is Netflix the Next Apple?

One problem - not insurmountable, but a challenge nonetheless - with this idea is distribution. Everyone in the United States has postal service, but not everyone has broadband with enough capacity to deliver a movie quickly.

If I were Netflix I would figure out a very precise way to understand those broadband demographics, and drive them if possible.

By the way, why can't Apple be the next Apple? As you point out, they understand content, they have an increasing number of videos available over iTunes, and you know that their users generally do have the broadband pipe to get them quickly. And, Apple also has the Apple TV product as a media hub.

I say it's unclear who will win but Apple will be in the mix.

Walmart Moves Its Music Forward

Ya mean I can git my Toby Keith through that wire that come inna my computer? Well coat me in grits and deep fry me, ya just made Cooter a happy man!

All kidding aside, I doubt that this will do anything great for WalMart or the overall quality of music. That's just a hunch and I have no supporting information.