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Individual investor; BA History. Aviation industry.
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  • IPhone 6: Rubicon's Rubicon?

    Hello there, Sapphire:

    With the rumored September 9th rollout date for Apple's iPhone 6 fast approaching, speculation is increasing on the feature set and subsequent investment implications. One possible game changing feature would be a sapphire screen. It is no secret that Apple has invested hundreds of millions with GTAT for sapphire production. Now, it could be time to play the music. Sapphire is very hard. Assuming it could reduce screen breakage substantially, it is a no-brainer for Apple and other phone manufacturers to put it to use. I have read that the loss rate on phone screens is over 20%, so sapphire could be a big money saver for consumers. You can read more about sapphire as a possible screen protector at MIT Technology Review here.

    GTAT is an obvious beneficiary to the big deal with Apple, but there are other ways to play the shift to sapphire, should the 9th bring it into fashion. Rubicon, RBCN, was one of the early leaders in commercializing sapphire, and they have a lot of expertise and production capability. Like GTAT, they have a high percentage of their float sold short. Unlike GTAT, they have little to no debt and close to $2 a share in cash. RBCN, in the mid $6 range, currently sells for around 80% of book value. They were thriving coming out of the great recession, but they have been faltering for the last couple of years. In fact, it is hard to imagine RBCN's business getting much worse. Things have been bleak for investors lately.

    Rubicon 5 yr chart

    It is important to realize that sapphire has other uses, from LED lighting chips to specialized semiconductors, and that is where RBCN has done most of their business in the past. However, synthetic sapphire's unique attributes are bringing it to new venues: watches, jewelry, military uses, and many other applications. Apple could be expanding their line into wearables and sapphire may play a large role in their plans. In the past, when Apple has commercialized new applications, they have been quickly copied by competitors. Whether we are talking about chips inside the phones, or even screen resolutions, or a number of other innovations--when Apple leads, others follow. Sapphire production will be strained if Apple starts a new trend on the 9th, and RBCN is perfectly situated to benefit, whether it is the object of a buyout, or they are the default supplier. Rubicon is an obvious source for many of the phone/smartwatch manufacturers to turn to for competitive products.

    So will the 9th be Rubicon's Rubicon?

    RBCN's extraordinarily low valuation and very high short position could result in a very dramatic increase in price! One press announcement or SEC form could set off a massive short squeeze. The 9th could be a key catalyst. I believe that Apple will provide game changing uses of sapphire, and Rubicon will cross over into a new era! The risks are numerous in any technology company, and I certainly would consider this a small and speculative opportunity--not a time to swing for the fence! However, RBCN is so cheap at these levels, your losses are likely limited. The book value is just over $8 a share, so hopefully it provides a decent margin of safety. Happy hunting!

    Tags: RBCNQ, AAPL, Sapphire
    Aug 27 9:20 AM | Link | 10 Comments
  • Steve Jobs Was Wrong!

    Apple Conference Call

    4Q 2010- Steve Jobs speaking: "we think the current crop of seven-inch tablets are going to be DOA, Dead on Arrival. Their manufacturers will learn the painful lesson that their tablets are too small and increase the size next year, thereby abandoning both customers and developers who jumped on the seven-inch bandwagon with an orphan product." Jobs went on to quip that unless the little tablets included sandpaper to reduce the size of customers' fingers, they wouldn't sell.

    Tired of the "Jobs Wouldn't Have Done This" Line

    I don't know about you, but I am tired of hearing this argument. Jobs made a lot of mistakes. Every time Apple is attacked by a negative blogger, we hear that Apple is DOA now that Jobs is no longer calling the shots. However, when I look over Apple's recent products, they appear to be Apple's best, and by a large margin. If anything, mid 2010 to very early 2012 seemed to have a lack of innovative new products. The Ipad 2 and the 4S were about it. While Jobs could have had a big input on the design of the mini, the 5, and the rest of the new products, most of them have about a year without any input from him. Jobs had that artistic and creative flair, but this quality can lead to problems. For instance, he was reportedly obsessed with the "perfect product." That mentality can and obviously did lead to excellence, yet it can also reject a lot of wonderful ideas, and I think the seven inch tablet is a great example. He did a few things right, too. The biggest were inventing the current smartphone and tablet markets (as we now know them). Recent estimates by Gartner were a total of about 800 million sales in 2012, growing to about 1.2 billion in 2013! Apple is in sort of a good spot. The "Apple is DOA" crowd is horribly mistaken in my opinion. In fact, Apple is sitting in the perfect spot--best in breed in one of the highest consumer growth markets we have ever seen. It dwarfs automobiles, light bulbs, and most other innovations in pure numbers. (It took light bulbs a much longer time to grow).

    The Perfect Tablet

    Many years ago, when I imagined what I thought the perfect future computing device would be, I pictured something like the mini. I called it an MID--a mobile internet device. However, the mini is much better than what I pictured. I have used it, and I have seen several others use it, and people absolutely love this form factor! My favorite quote was from a reviewer at the Register. Trying to be objective and not wanting to sound like a cultist, he quipped: "Call a doctor because - God forgive me for writing this - I love this tablet. Apple says: 'You won't be able to put it down.' Bang on." If you haven't experienced it, check it out. The full size iPad does have many advantages over its little brother, but the kid can play, and he has a number of advantages over his brother. Compact, sleek, fast (yes, it seems faster than the 4th Gen iPad on many tasks), and it just fits your hand. Perfect comes to mind. The fuss about the display is contrived and overdone. When a lower PPI is reviewed in full 1080P laptops, the display is called awesome. In fact, I'm not sure most people over the age of 40 could even see the difference without magnification. This is a great product. Remember, the key advantage of the iPad is size. The mini trumps it. I can think of a number of reasons why this form factor could be Apple's biggest volume product in the years ahead. I think Apple will sell hundreds of millions. It is emerging market cheap. It is a great invitation into IOS and other services. It is the perfect size for many businesses--from waitresses to doctors to store clerks--this thing has incredible potential. I expect the mini to be a major hit. Sorry, Steve.

    Disclosure: I am long AAPL.

    Tags: AAPL
    Nov 09 4:43 PM | Link | 3 Comments
  • Apple's Future: The Big Picture


    With everyone guessing Apple's numbers for this quarter, it is easy to fixate on the wrong spots. I think we need to keep the big picture in mind--that Apple has introduced more new and innovative products than at any point in their history. As to earnings, let's sober up with a couple of thoughts: Apple discussed an inventory blip in last qtr's CC for both Iphones and Ipads. Iphone sales were hurt by inventory build in the preceding qtr and Ipad sales were helped by inventory build in the last qtr. They implied that roughly 1 million Ipads sold in this (4thFY) qtr would show in last (3rdFY)qtr. At the rollout, Cook said they sold their 100 millionth Ipad about Oct 9th. So, according to my math they sold about 15.5 to 16 million Ipads. In reality, that is about 16 million last (3rdFY) qtr and 16.5-17 million this (4thFY) qtr, but the number reported will likely be 15.5+. People don't listen, so expectations are way too high on Ipads, I suspect. On Iphone, last qtr was understated and I expect a small upside surprise on 4 and 4S, but 5 sales are the big unknown. With only a few days of shipping, Apple could credit anywhere from a couple of million to 10 million. If you look at Apple's PR about 2 million selling in the first 24 hours, they point out that many of the 2 million won't ship until October! So, the 5 number could be much lower than 5-10 million. They had the orders, but they had not shipped them yet. The important point to me is that Apple is sold out and you know they were planning on selling a whole lot more than the 4S. I suspect they will sell an unbelievable amount in the current (1QFY) qtr. Macs have been badly outdated, except for the new laptops, so Mac sales will be hurt by the slow update on the Minis and IMacs, I suspect. Overall, I expect them to modestly beat their guidance. However, the 5 numbers could make a huge difference either way. They always guide very low, and with all of the new products I expect a very conservative number.

    What is Important Now?

    Last quarter's earnings take on less significance because the 4th quarter is now the distant past. Why? We have the Iphone 5, along with new and lower prices on the 4 and 4S. Think back to last year for perspective. The market and economy were terribly gloomy. All Apple had was the 4S, and the Ipad 2, and it was six months old. The Iphone 4S was a huge letdown to Wall Street and the stock imploded. Needless to say, the 4S did much better than Wall Street thought (warning for those trashing the Ipad Mini), and in my opinion, the Iphone 5 is the biggest generational jump ever, in terms of performance. 100% on graphics and CPU and 8-20X on LTE data speeds. It is thinner, lighter, and has a better screen. This year we also have new and very innovative laptops, with all models recently updated. We have very new and very innovative IMacs, along with updated Minis. We have a brand new IPad with double the performance of the March '12 model! Quick, but Apple has to keep their "foot on the gas" to stay ahead! This one is the sleeper, folks. If the A6x has twice the performance in graphics and CPU tasks, it is way ahead of all competition! The CPU is very competitive, but the graphics will mop the floor with the very best competitors, likely outperforming the Tegra 3 in the Surface Tablet by way over 100% in many benchmarks. The A6 already outperforms it dramatically, and the A6X is a big jump from there. You can read my blog on the A6 for more information. The IPad mini will sell extremely well. It is a wonderful addition for many applications, but it fits a niche. Apple has this figured out already, folks. I think it may cannibalize more Ipod touch sales than Ipad sales. Apple's stable of new products puts them in a fantastic position for the next couple of quarters. IOS software has a tremendous history and ecosystem, and it is much more stable than both Android and W8.


    Consensus earnings numbers for the current FY are about $54 dollars per share. Assuming a net cash level of $150 a share in the middle of the year, and backing the cash out of the price, Apple is selling for about $465 as I write this blog. That gives us a PE of about 8.67! I believe that Apple will earn much closer to $60 a share in this fiscal year, and that gives us a PE of about 7.75. Strange but true. I would focus on the big picture.


    In 2007, there was neither a tablet nor smartphone market. Apple essentially created both markets since then. Remarkable! They are best in breed. Very rough estimates for smartphone sales in 2015, just over two years from now, are 1 billion per year, with a continuing high growth rate. Tablet sales are forecast to be around 250 million per year in 2015. Apple has put itself in a position to be the market leader for 1.25 billion devices a year in the next two+ years. At an ASP of just $400, that is a $500 billion market, annually! When you think back to Wal-Mart during the 80s, or McDonald's during 60's, or Coke during the 50s, their stories could not have been anywhere close to as good! Don't miss the forest for the trees, and don't fixate on earnings tomorrow! Happy Hunting.

    Disclosure: I am long AAPL.

    Tags: AAPL
    Oct 24 1:46 PM | Link | 2 Comments
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  • Funny, $RBCN has >$2 a sh in cash, no debt, and still in business, yet GTAT has brought them down to less than GTATs Mkt Cap!
    Oct 7, 2014
  • IPhone 6: Rubicon's Rubicon? $RBCN, $GTATQ, $AAPL
    Aug 27, 2014
  • I think it is a matter of time on $RBCN. $AAPL opens new markets for tech. RBCN is selling less than book...takeout?
    Aug 26, 2014
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