KenC

Four Reasons to Avoid Apple

You said, "The iPod market is gone." but undermine yourself when you say, "if you want an iPod, you buy an iPhone" Either way, you buy an Apple product, how is that a reason to avoid Apple?

You said, "The iPhone market is terrible: crowded, very intense competition, profit margins squeezed. We do not believe Apple will be able to sustain profit margins in some European countries for so long" and you undermine that by saying, "we do not believe Apple's competitors will improve for some years to come since companies such as Research in Motion (RIMM), Nokia (NOK) or even HTC have done a lousy job of trying to follow up Apple". So, while the market is crowded, you don't think Apple's competitors will improve for years, so what is there to fear?

As for profit margins, do you KNOW what margins Apple has on the iPhone? Gross margins are about 70%! How are they going to be squeezed? They have more room to adjust prices down than any of their competition! Their competition will be bankrupt before Apple doesn't make a profit on the iPhone.

You said, "Mac sales: The company did actually very well in our opinion, but again we consider the price of those great products very high and there will be a profit margin squeeze going forward" Macs have always been expensive. Why are they going to be squeezed now, after so many decades? There's no rationale behind your suppositions.

You said, "Probably the most important matter to be considered mid to long term: we do not believe in companies without visionaries" So, other than Apple, what companies are you invested in that have comparable visionaries? Any? What do you know about Steve that we don't know?

Your four points are poorly supported, and in fact, have very little basis in fact.

10 Reasons Not to Buy Apple

You wrote: <<1. Highly competitive markets
The chart below shows Apple's (AAPL) revenue share according to product. All of Apple’s product lines are in highly competitive markets and subject to rapid technological change and aggressive pricing.>>

Yes, and what tech companies don't compete in highly competitive markets? Wouldn't it be better to say that Apple has ALWAYS competed in highly competitive markets and has carved out a successful niche in all of them? They are at the forefront of rapid technological change and have been driving aggressive pricing where they have pricing power, like in iPods and iPhones, iTunes and the AppStore.

You wrote: <<2. Lower margin
Business Week reported on June 19, 2009 that the cost of components for Apple’s iPhone 3G is $179.16, while its retail price starts at $199. >>

This illustrates that you don't even know that the iPhone is subsidized, and is Apple's highest margin product!

You wrote: <<3. iPhone relies on single carrier>>

Uhm, room for growth?

You wrote: <<4. No room to grow for wireless market
In the US, 90% of Americans eligible to use a cell phone already have an account. There is simply no meaningful growth in this market sector.>>

Yeah, and there was no room to grow when Apple entered this sector two years ago, and look at how they've grown! You need to stop overgeneralizing and look at specific sectors that Apple is targeting. They are targeting smartphones, not the general cellphone market.

You wrote: <<5. No room for iPod growth>>

Apple is evolving the market from pure music players to include game players and cameras and whatever else they can think of. There's plenty of room for growth if you look at what the iPod touch can do.

You wrote: <<6. Wrong market target>>
And, what is the right market target? The one Dell is in? Why is BB trying to expand into the consumer space? And, pc share stats are skewed by the proliferation of cheap netbooks. You need to segment the pc market to those areas Apple actually competes in to show that their market share is declining.

You wrote: <<7. Heavy investment needed for Mac stores>>
Yes, and Apple has about $30B in cash that they can spend. As an investor, would you rather they not have stores?

You wrote: <<8. Steve’s health
It’s the process, not the pocketbook, according to the management consultancy Booz Allen. Without Steve Jobs, no matter how much more money Apple spends in R&D, there are unlikely to be more many new, revolutionary products coming to market from Apple soon.>>

Of all the companies out there, Apple may have the strongest corporate culture of all. They have internalized "the process", so that all the top execs from Cook to Ives to Shiller know it. Why should any investor rely upon your unsubstantiated conclusion that there won't be any more new and revolutionary products?

You wrote:<<9. Unclear future strategy
The next big thing in consumer electronics seems to be in home digital entertainment. With iPhone, Apple is moving into communications. I doubt iPhone could be a central control for home entertainment systems.>>

Wow, you are clueless. The iPhone AND its descendents, are the most likely devices that will be the central control for home entertainment.

You wrote: <<10. SEC investigation
Apple’s past stock option practices and the restatement of financial statements may result in additional litigation against the company.>>

The SEC investigation of Apple's stock option grants is CLOSED.

I am thinking of writing an article on ONE REASON NOT TO READ HAO JIN's posts: 1. Total lack of clear thinking.

Smartphones: It's the Software, Stupid!

I thought MS inked LG to an exclusive development deal announced at WoMoCo? Shouldn't you have pointed that out?

www.nytimes.com/2009/0...

You wrote, "Historically, in electronics LG has copied its larger longtime rival. LG has done Windows Mobile and Symbian phones, and someday will do Android too. Still, LG seems even less committed to first-class software for its phones, and thus unique devices (like the LG Lotus) languish for lack of connectivity with applications and other devices"

The Ongoing Smartphone Revolution

"The second buyout should be Nintendo buying RIM. Once again a perfect fit. "

Please explain the "perfect fit" in detail.

You know, the less you write, the less likely people are to think you a fool.

The Ongoing Smartphone Revolution

Bruce said, "Apple (highly profitable) should buy Sony (currently making massive losses). This is such a brilliant fit at so many levels that you wonder why it hasn’t already happened. Apple would bring their software and sexy design to Sony products. And in return Apple would become a world class consumer electronics company overnight. "

Wow, are you just trying to save Howard Stringer's bacon, or what? Sony already has "sexy design", and Apple is already a "world class consumer electronics company". Can you explain any of the technological or product mix "fit" that makes you think this is "brilliant"?

The Ongoing Smartphone Revolution

Bruce says, "But they have the potential to steamroller over everyone. The Zune is a great bit of kit but, relatively, it is a commercial failure. What gives Microsoft the capacity to come out of their corner fighting is Xbox Live, a mobile version of this would give AppStore more than a run for the money. And if I know this then so does Microsoft. Meanwhile they are still third overall in the smartphone market with 12.5% of handsets, so they have something to build on."

Oi, there's that word "potential" again. Wow, someone thinks the Zune is a "great bit of kit". Wow. Boggles the mind. Oh, sure, specs look good, but execution was lousy. Oh, just what we all need, more points. And, are you so sure a mobile version of X Live will give the AppStore "more than a run for the money", I mean, just about every MS backed music service killed the iTunes Music Store, right?

As for MS's market share. You do realize that their share is falling rapidly, and will fall even faster when Palm goes WebOS, and HTC continues to gravitate to Android, and Motorola goes toward Android. I mean, if Android is so great, how can that be good for MS? I mean, didn't they pay a huge amount of money to get LG on board? I thought they were supposed to get paid for their mobile OS, not pay!

The Ongoing Smartphone Revolution

Bruce said, "Android has more potential in that it is already better and it is open source (unlike the proprietary Apple) so could very well be taken up by the big Chinese, Korean and Taiwanese handset manufacturers"

Can you backtrack and provide the evidence that Android is "already better", and what exactly is so great about open source, and how is that benefitting users? I mean how is Linux doing on the desktop? Why isn't LiMo doing better then? Symbian has gone open source, and they have a head start with its existing relationships with 3 of the largest mfrs already.

The Ongoing Smartphone Revolution

Bruce wrote, "If I were in the market right now, I would want a Google Android device. The combination of features and benefits puts it at the top of the heap. Unfortunately Google, for all their technical brilliance, are very bad at marketing. So Apple, who are absolutely brilliant at marketing, continue to outperform with their inferior iPhone. But such is the intensity of this war that Apple are playing catch up with a downloadable upgrade for existing iPhone users that brings in 100 (yes 100) new feature"

So, we have a HTC G1, and other Android devices rumored to be coming. What is it about the buggy G1 that "puts it at the top of the heap?"

Oh, btw, are you a marketing consultant, because the above implies that perhaps, you are fishing for a marketing job with Google. Google has shown some brilliance in the area of search software. They have not shown any hardware brilliance.

Please recite all those things that are "inferior" about the iPhone, and please do not mention the camera. Noone buys a cell for its camera.

You write as if you believe Apple's latest OS is somehow a response to Google's Android? How do you know this? Do you mean that Apple held an unusual presentation that it has not held exactly at this time last year? Do you mean that Apple has offered to release a new OS in the Summer, something it has never done before? Where is there evidence that Apple's latest release is anything but what they planned years ago in their approach to the smartphone market?

The Ongoing Smartphone Revolution

Bruce said, " And they are developing at a frightening pace where something six months old can easily be obsolete."

The beauty of the new model in smartphones, as epitomized by the iPhone is that it's a blank canvas. It can constantly be updated. An EDGE iPhone that is 20 months old can still have all the application goodness that the latest 3G iPhone has. It is not obsolete in any way.

The Ongoing Smartphone Revolution

Bruce said, "Like anywhere I am on the face of planet earth I can use my phone to record events as a movie (in full colour and with sound) and within just a few seconds I can make that movie available to the whole world’s population"

Wow, are you in marketing, cause you know hyperbole, like it's going out of style. One, you can't do this "anywhere..on the face of planet earth". Two, a video clip is NOT a "movie". Three, what do you define as "full colour", because no one would describe the color gamut of a cellphone clip anywhere near the color gamut of a "movie". Four, "within just a few seconds", are you kidding? Uploading video over a cell network takes more than "just a few seconds". Five, sadly, the "whole world's population" does not have net access.

That was just the beginning of this long bit of gibberish.

The Ongoing Smartphone Revolution

WOW! There is so much wrong with this, one hardly knows where to begin!

Smartphone Update: 2008 Q4 Market Share

Apple has more than one product, it has millions of products. If you look at the iPhone and touch as blank slates, and realize that everyone can customize their iPhone and touches with what apps they want and need, Apple has offered millions of different products, at a few price points..

The Battle Lines Are Drawn in the War for Mobile Developers

The article raises an interesting question, where will developers go, and then all the comments talk about where the users will go. Okay, so they're related.

I would say that the article doesn't develop the various choices very much, but what really struck me is the total non-comment about device fragmentation. Sure there are lots of WinMo users, but they are on dozens of devices, as MS is so happy to tell us. Dozens of devices all with different configurations and specs. Any developer who is considering a platform to develop on is going to look at installed base by how many iterations of an app he will have to develop. If he develops for OS X, there's essentially one config, though the iPod touch is missing a couple things like camera, mic, etc. If he develops for WinMo, there are so many possible combinations of OS, cpu, gpu, screensize, etc., etc., etc.. This is a key consideration and totally unaddressed by the author.

Look Who's Talking About Smart Phones

Sure, Dell has had their PDA, fail. They had their Ditty, fail. They can combine their PDA with their Ditty and put a phone on top. Lemme see, you think it's going to succeed? Have you even looked at what HP is doing? They just put their name on a HTC, kind of how they used to put their name on an iPod. They have almost no traction in smartphones, and you think Dell will?

Dell needs to stick with their knitting. They need to fix their core business before they go traipsing into new areas just because some consultants told them to do it.

Fourth Quarter Sees Decline in Cell Phone Shipments

Actually, not "believed", it's a fact. Just listen to the conference call. Or, read it here on the seekingalpha website. Apple sold 4.9M iPhones the previous quarter, and 4.65M this past quarter. Why wasn't it 4.4M? They drew down inventories 250k, as mentioned in the last conference call. Thus, the sell-thru was 250k higher. It's all mentioned in the conference call.

So, you would compared sequentially, 4.9M to 4.65M.