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Timothy Perdian
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Investing in stocks or twenty years, undergraduate degrees in Englis and Genetics from the University of Wisconsin. M.A. in Creative writing from University of Wisconsin-Milwaukee. And a Doctor of Chiropractic degree from NCC. Post graduate Certificates in Worker's Compensation (California),... More
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  • Problems For Apple TV On The Verizon Horizon?

    Problems for Apple TV on the Verizon Horizon?

    Talking about another unsolved problem for Apple is very sad. To many of the "Apple Faithful" the company's demise continues apace. Since Jobs passed, the iPhone 4s has been the only product worthy of the company he first built and then rebuilt after the "sugar water" salesman drove it to near bankruptcy.

    The next big thing was to be Apple TV. Jobs reportedly said jubilantly before he died: "I cracked it". This gave hope to the masses that the cable companies could be bypassed and that a customized internet experience would be available for everyone interested. Everyone who has cable, satellite or phone company TV gets a 1000 or more channels and maybe they watch 5 regularly.

    Currently Americans are becoming sadly and slowly aware that, like health care, their internet connections are the slowest and most costly in the developed world. Our health care costs twice as much as French health care that is better and free to the patient. French doctors go to your home at no cost. It is the same with cell, internet and TV services. Even South Korea has a far better internet experience than the United States. You can download a two-hour movie with no problems.

    Our cable and internet companies are all monopolies. They have an incentive to keep the politicians out of their monopoly, and provide the worst "acceptable" service so politicians don't hear about it and they max-out their profit.

    Netflix has been reporting for years that Comcast, AT&T U-Verse, Verizon FIOS and Time Warner Cable have been slowing their download speeds. Currently a stunning court victory by Verizon that many believe has opened the door to an end for "Net Neutrality" has let to scattered reports of internet download slowdowns throughout Verizon's "territory". I have FIOS and use Apple TV. Prior to the court decision Apple TV worked just fine. Personally I find Apple's decision to keep shows that I buy on their servers reprehensible. When I want to watch I movie or TV show I own I have to again and again download it from Apple's servers. That is workable and worth paying for-as long as the downloads work. Recently it has been just frustrating to use Apple TV. One show downloads slowly but consistently. The next takes 20 minutes to start and then the next pauses right in the middle for no reason other than FIOS is slowing the internet connection.

    I thought I was imagining things when the internet connection suddenly slowed after the court decision, but reports about this "phenomenon" are coming from all over about FIOS. Apparently Verizon is experimenting with slowing down connections to see the reaction from consumers. If they get away with it they probably will first ask Apple and Netflix for money to speed up their downloads and then ask the consumer to pay for a higher download rate to receive the downloads. They want to take a bite out of both ends. It is never enough for a monopoly. This strategy can easily be forced on the consumer by slowing download speeds and giving the alternative of downloading the same product at a much higher speed from Verizon or whichever provide controls the pipes.

    As it stands now that has made my Apple TV all but unusable. I certainly won't buy anything else from Apple's iTunes and wait 20 minutes for it to begin to download. I can barely watch the shows I already own.

    This is clearly a big problem for Apple that they need to address on a National level. The US is not even in the top ten of global download speeds. As of November 2013 it was ranked 31. Now with the monopolies who provide internet service able to slow the internet at will it is likely to get much worse.

    Apple has the money and the clout to influence National Policy. It is about time they started looking out for their customers and their share holders. The future of Apple TV is at risk. The dream if the highly anticipated iTV may never become a reality. Possible solutions are to be discussed in the next article.

    If the internet monopolies are free to manipulate download speeds, they will become "partner" in any and every product sold on the internet. Hollywood, Apple, Netflix and others ought to be on high alert.

    Clearly this has already impacted iTunes. Why buy video from Apple if it will take an unreasonable time to download? People buy movies and TV shows to unwind. If the experience is stressful they will be less inclined to buy. I know I am buying nothing on iTunes until the download situation is resolved.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Feb 20 4:57 PM | Link | 2 Comments
  • Tim Cook Faces Waterloo As Apple Reports Earnings

    While the stock and the company are different entities, a CEO cannot see the price of his company's stock cut in half without hearing footsteps. And those footsteps are of a new CEO waiting to take his job. Tim Cook is popular with the Apple (NASDAQ:AAPL) faithful. However, the unfaithful are making noises about replacing him. While Apple remains one of the most profitable companies in the S&P, growth has stopped or rapidly decelerated for all the main products, the iPod, the iPhone, the iPad and the Mac. Mistakes like Mapplegate have not been handled well. Large investors see smoke and they think fire: fire Tim Cook.

    Tim Cook is human, he knows what is going on. It is relatively easy for a CEO to cook the books by shifting costs forward, sales backwards and stuffing the channel. My guess is Tim Cook will not risk another miss. Apple has beat Wall Street's estimates only one time since Steve Job's died. His death resulted in a billion dollars worth of positive press. That jump started sales. However, lower forward guidance with decreasing margins and sales seems inevitable. That will sink the stock to cyclical lows.

    Since Tim Cook became the CEO expectations have been high and have not been met. The iPhone 5 puzzled and disappointed those who wanted a larger phone and confounded non-power users buy its only incremental improvements over the 4s. Power users loved the speed and slightly bigger screen, but for the 95 percent of average cell phone users those changes were no big deal.

    So what should investors do? Those who sold Apple near the top can get ready to buy shares at 350 that yield 3 percent. This would enable them to double there shares sold at 700 and to double the yield. That is a great deal. But for new investors does the falling knife keep slicing through bank accounts? All stocks go through cycles. Even the great Warren Buffet's Berkshire Hathaway stock has been cut in half a couple of times. Apple is clearly a company that is in crises mode. I explained why in the link article. However, catalysts like an increased dividend, a new CEO, a new product, simply a larger phone, and a phablet are just around the corner. Of course I don't know this. I am expressing an opinion based on years of following Apple and other stocks.

    Finally if Apple dips to 350 in trading after the earnings report it would seem to be a good buy for long term investors. Short term, who knows. For option traders, selling the 2015 January 350 put for 75 dollars gets you into the stock at a price of 275 if you are put the stock. The dividend would be a healthy 3.85 percent with a realistic possibility of an increase down the road. Given this even after bad earnings Apple may finally be cheap enough for conservative investors to look at closely, who know maybe Warren Buffett will back up the truck.

    Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: Note my last article on Apple received over 14,000 page views and 100+ comments. I think this article is timely and makes a strong case for a reasonable approach to buying stock. Thank you for your consideration.

    Tags: AAPL, long-ideas
    Apr 23 1:03 PM | Link | Comment!
  • J. C. Penney Struggles As Ron Johnson Era Ends After Failure To Turn A Profit

    Ron Johnson, J. C. Penney's (NYSE:JCP) former CEO, was hailed as a savior when he was brought over from Apple's (NASDAQ:AAPL) retail division to head J. C. Penney. He was expected to turn the ho hum retailer into a special place to shop. Like Montgomery Wards and Sears and Roebucks, J. C. Penney was a house hold name in the 50's and 60's. America was in full bloom, the working class had money and needed stuff. All three retailers catered to middle America. The Archie Bunkers of the day could be found shopping for socks, ladders and shirts, Edith for clothes for her kids-rarely for herself. Unfortunately the big box chains and the internet have sucked sales away from these stores. Their customer base has shrunk and most of the working middle class are now the working poor. J. C. Penney's shoppers have really been a vanishing demographic growing both poorer and smaller.

    Ron Johnson was suppose to magically turn this trend around. Apple store were destinations, places people like to go. If he could do the same for Penney's, the once proud brand could reemerge as a marketing giant. Johnson was fired and replaced by J. C. Penney's Myrun Ullman. Ullman was the CEO prior to Johnson's move from Apple.

    But was this asking the impossible? Looking at successful clothes/accessory retailers like Lulemons (NASDAQ:LULU), Urban Outfitters (NASDAQ:URBN), Anthropologie, Coach (NYSE:COH), Tiffany and Co. (NYSE:TIF), Michael Kors (NYSE:KORS), none of them are role models for J. C. Penney. All of them appeal to targeted demographics. J. C. Penney has more in common with Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) than it does with Coach or True Religion (NASDAQ:TRLG).

    Johnson lowered prices and increased the clutter of J. C. Penney. You could hardly turn around in the store without running into a rack of shirts or pants. Costco and Wal-Mart use their leverage to force wholesalers to sell them goods cheaply. J. C. Penney probably doesn't have the volume to compete with the big box retailers. As a chiropractor I sold low back braces. The price I paid wholesale for the braces was more than Wal-Mart's retail price. It is hard to compete when one store can get sell the same item for lower prices than your store can buy them wholesale. That in a nutshell is what J. C. Penney has to overcome. The only way to make to make J. C. Penney a viable competitor was to either specialize in items where they could sell the clothes at higher margin than Wal-Mart or to make shopping at J. C. Penney a positive delightful experience that would make up for the slightly higher costs.

    This could have been done by turning J. C. Penney into a working man's Louis Vuitton type collection of brands. Selling clothes and accessories by various designers at prices comparable to the generic big boxes by creating stores within the store might have worked. If Ron Johnson could have changed the mix at J. C. Penney so that higher margin designer items were sold along with J. C. Penney branded necessities and made the store an inviting and comfortable place to shop he might have been able to create a niche between the gross and ugly big box stores and the elegant but costly Lulemons, Coach and Anthropologie lines. However it would have take a retail genius to do so. Given that it is hard to see how J. C. Penney can survive let alone grow in today's retail world. Total sales were down more than 28% last year. The company is trying to monetize real estate assets by selling them and leasing them back. That is never a good sign. Currently about one third of the float is sold short and unless the economy improves, Mr. Ullman comes up with some great ideas and shoppers return to the malls in droves JCP is unlikely to see a higher price for its stock until it shows a profit and earnings growth. The stock is dangerous to hold here and if you are long hedging with a few puts might be prudent.

    Unfortunately Mr. Johnson was not able to work his Apple magic at J. C. Penney. He is not alone.

    Apple exectuives have had trouble taking their talents to other companies. Ron Johnson was obviously not the person to turn around the venerable J. C. Penney stores. The reason for this may not be that complicated. At Apple executives were valued for their ability to implement Steve Job's concepts and to keep him from going to far outside the box. At their new jobs the nascent CEOs were in a position where they were expected to push the envelope. In other words the new CEO's were hired to do the opposite of what they had been rewarded for doing at Apple. Given that the failure of most Apple transfers is not so mysterious.

    Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Apr 16 2:15 PM | Link | Comment!
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