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Applocrat
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an individual investor doing his level best to remain solvent and reasonable.
  • Why Apple Is Cheering Samsung And Amazon On. 0 comments
    Apr 27, 2012 8:18 PM

    Pundits, bloggers and analysts want nothing better than to convince Apple investors to live in fear of bogey men. As with any such scare tactic this works better when your target is in the dark and you illuminate only what you choose.

    Samsung, allegedly casts a foreboding shadow, but despite their impressive sales, Apple is gaining in nearly every market where Samsung is already an entrenched player even though Apple is a relative late-comer to many of these markets, especially Asia.

    The Shadow shrinks even more when we glance at the profits, despite Samsung's record growth; they pocketed less money than Apple chose to squirrel away into its cash horde last quarter.Apple's gross margins were 47 percent this recent quarter: more than double their "rival's"

    The profit margin advantage can and is leveraged into further innovation, product development and marketing. Without an enormous increase in profitably, there is no way Samsung can even keep pace with Apple.

    And Apple is not only entrenched in the market place they are entrenched in the psyche of the global consumer. It is often piously opined that Apple must constantly innovate; in essence if they stop running full-tilt they will be passed by in the blink of an eye.

    Experienced runners know that you can slow down when you have a lead. I am not saying that Apple should or will slacken the pace. They should be especially aggressive now to solidify their place in the ASJ era. But to be perfectly honest, the public loves the company so much and they have so much cash on the books, that if anyone can afford a mistake it is Apple. I doubt they will make one, but they can afford it.

    The most significant thing to bear in mind is that Apple desperately WANTS its rivals to succeed at this juncture. Apple is often supply constrained, or close to it. Without someone sharing the load, Apple would soon be crushed under the weight of its own out-sized success.

    Without anyone else in the mix Apple would be prone to all the maladies of absolute power:corruption, sloth, ignorance, and pride. On a more practical level, the justice department would surely sink its teeth into any company with that much control over so many markets. Some have suggested that Apple release a mini-tablet to crush Amazon's Kindle Fire. I imagine that if you caught him in a candid moment Tim Cook would be a huge Kindle fan. For two quarters both products have flourished amicably. Their feature sets and target audiences are distinct enough to allow this to continue indefinitely.

    And yet the Kindle Fire is similar enough to the Ipad to keep anti-trust worries at bay. By cornering the high end and aspirational segments of the markets they enter, Apple makes the best of its would be rivals. They become sponges for excess demand, motivations to spur on innovation, and a handy defense against any anti-trust worries.

    Don't be afraid of the dark! The truth is no one loves the warmth and light kindled by their competitors more than Apple.

    Disclosure: I am long AAPL, GOOG.

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