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  • iPhone Surging, iPad Collapsing - Apple May Be Near Its Peak [View article]
    Michael, per unit gross profit dollars on iPhone is 2x that per unit gross profit dollars on iPad. So WHO CARES about iPad cannibalization. iPad product life cycle (even though I just bought another IPad Air 2 because my wife got tiered of her IPad Mini 2) is typically longer in terms of the refresh cycle then smartphone, so the original expectations for iPad was flawed. I sit on 3 boards that now distribute board and trustee information via iPads -- there is only one laptop left, and no android tablet in sight, as every single board member uses iPads (except one old school with laptop). The invasion of iPads into enterprise market is only beginning and you are assessing the resiliency of iPad purely from a consumer point of view.

    And Michael, you said that the iPhone was peaking at the iPhone 4S, and then the iPhone 5 was disappointing, and the iPhone 5S the beginning of the end. And now the iPhone 6 is the peak. I suspect that you will be saying the same about the iPhone 8 and iPhone X (they will shift to roman numerals just to be as cool as the Super Bowl) as well. I had been waiting for the upsize in form factor and finally gave up my Sammy Galaxy S3 (I had previously had 3 generation of Sammys) for a 6+, my first iPhone, and there are plenty like me that having waiting on Apple to adopt to new form factor. This will be the Mother of All iPhone Upgrade Cycles for Apple, as it is a category extension, ... to be followed by subsequent sequels again, and again, and again. So far, far, far away from the "peak".
    Nov 18, 2014. 11:11 AM | 7 Likes Like |Link to Comment
  • Samsung Is Sinking, While Apple Garners Robust Demand In China [View article]
    standard protocol for sell-side is to set the bar reasonably high if you are negative on the name ("by going with the crowd"). similarly you want to set a low bar if you have a buy "we are more conservative than consensus but we are a bull".
    Oct 9, 2014. 09:04 AM | 1 Like Like |Link to Comment
  • Samsung Is Sinking, While Apple Garners Robust Demand In China [View article]
    MB, while you have been so focused on your short thesis on Apple, you missed the huge short opportunity on Samsung that was staring at you in the face. Given the product segments where Samsung played (both product line and geography), given its greater vulnerability of commoditization/substi... from other OEM's since on same Android OS, and given its greater vertical integration (i.e. higher fixed cost for its production plants), Samsung was the more vulnerable to all the fears that you articulated in your short thesis. In fact, if you simply substituted Samsung in your various investment rationale on Apple, you would have found yourself to have been brilliantly on point.

    Oct 8, 2014. 10:53 AM | 4 Likes Like |Link to Comment
  • Apple Set To Lose Big Time In EU State Aid Case [View article]
    in the Bloomberg or WSJ article, it also pointed out the magnitude of the exposure may be as high as Euro 211M. did you catch that amount?
    Oct 2, 2014. 03:46 PM | 1 Like Like |Link to Comment
  • Michael Blair's Incredible Journey - Apple's Blowout Launch [View article]
    Michael's main problem is that he fails to read Apple's revenue recognition policy (or that of any other distribution partners). No one recognizes revenues upon "orders", so the whole bugaboo about "pre-orders" is a red herring.

    Orders are only recognized (whether "pre", i.e. before launch, or simply an "order", i.e. after launch) upon shipment, either retail or inot channel partners, which creates a payment obligation, or for retail pick-up, which results in another payment obligation, in lieu of shipping.

    Since every single carrier in the US was out of stock for pre-orders (they set aside a certain number for online purchases, but obviosuly also needed to stock their stores) within hours of the pre-order initiation. Most carriers were quickly out-of-stock in their stores as well by end of first day but they were getting daily inventory refreshes from their distribution centers. The carriers' online stores continue to be back-ordered a couple of days to a week on the iPhone 6, and for weeks still on the iPhone 6+ (which is in much shorter supply relative to market demand).

    So sell-through is not an issue, but supply is currently the sole determinant of sales. Of course this will become less so over time as production continues to ramp and as yields improve, so that supply will evnetually catch up to demand.

    The thing is that Michael will be totally wrong but AAPL may drop 15 points if the overall market has a 15% market correciton and he will tout his short thesis call.

    I agree with author's sentitment that I actually carefully read MW's posting, and chip in my 1c for his click view, in order to fully assess his short thesis. While he is generally wrong, in my own opinion, in how he interprets different information, I nevertheless find value in the raw data tha the cites. however, in this instance, he is simply confused about how "pre-orders" inter-play with shipments and retail sales. Pre-orders (which is only to retail consumers via online store) is simply a metric to guage consumer interest and demand for a new model, while revenues in the near-term is going to be entirely driven by ability of AAPL's supply chain to deliver supply.
    Oct 1, 2014. 02:59 PM | 8 Likes Like |Link to Comment
  • The Lower-Spec Apple iPhone 6 Can Outperform Other Phones [View article]
    Wait, my wife tells me that my butt is too fat and flat, maybe I wont be able to bend the new 6+ that I am back-ordered on. Finally I have some advantage over those young hunks with their supposed perfect butts (according to my wife). Actually, now that I think about it, I've cracked the screen on my two Samsung Galaxy S3's 6 times, and at 4 of those was because I sat on the phone in my back pocket and the screen was too thin. I even had to change my unlock pattern so that I could enter it over the uncracked portion of the screen. So maybe my butt isn't that flat after all. Oh well, I guess i have to get one of those nerd belt holsters to strap on my iPhone 6+,...but I've waited forever to convert to iOS when they would finally give me a larger screen. There's probably a zillion folks like me who will have to learn to deal with it. I could buy AppleCare and let Apple make even more money off of me. I can afford to give back a little after my AAPL position has doubled in the past couple of years.
    Sep 24, 2014. 09:44 PM | 4 Likes Like |Link to Comment
  • NTELOS - Don't Fall For The Yield, Sprint Contract A Risk With 50% Downside Potential In Share Price And Dividend Cut Likely [View article]
    they have a 1 1/2-2 year build on the TD/FD-LTE network, after which will be a lull in growth capex, as they now will have access to Sprint's 800 Mhz which will free up capacity by using 800mhz for coverage needs. There will be significant FCF after that period so it becomes a capital allocation question and largely influenced by Quadrangle, the large PE shop that is the control shareholder. If it doens't see the immediate prospect for a roll up with Sprint at that time, when Sprint itself will have out run its own capex surge, then Quadrangle will be looking to exit via the public shares and reviving a healthy dividend pay out will serve its purpose to have the stock valuation capitalize on the dividend stream.
    Sep 19, 2014. 08:24 AM | Likes Like |Link to Comment
  • Sprint: Claure Off To A Good Start, But The Road To Recovery Is Long And Uncertain [View article]
    Hescomngsoon, unfortunately lack of 800mhz is the issue in that until the completion of Network Vision, that 800mhz was NEVER deployed on the CDMA network, and until handsets starting a year ago with Galaxy S4, none of the existing entire subscriber base could use it. so classic chicken and egg issue: until there was network that deployed the spectrum, then of little use, and once deployed, still of little use until the migration and turnover of handsets that can use the frequency band. iPhone 5S/5C didnt support 800Mhz LTE nor 2.5ghz for TDLTE (it did support 8000mhz CDMA voice), iPhone 5 or 4S didn't support anything other than 1.9ghz CDMA and data on EVDO (no LTE).

    New iPhone 6/6+ supports across all 3 bands fro both CDMA and both FD-LTE and TD-LTE. Galaxy S5 now supports same, presumably Note 4 does too.

    FCC analysis published in its order rejecting the TMobile USA nad ATT merger concluded that it takes 7x the cell site for the same coverage and in-building penetration as 850mhz. Which if you look at the cellsite counts between Sprint and T/VZ, you will note that it isnt close.

    So my dear friend, 800mhz is very much the issue in terms of coverage. The other issue was that Sprint had no high capacity backhaul since it was relying on Clearwire to off-load broad band data (dumb assumption). The vendor choices are split by region - and you can argue that Lucent Alcatel may be better than Samsung, or Ericsson, or vice versa, but that ship long sailed.
    Sep 18, 2014. 12:44 PM | 1 Like Like |Link to Comment
  • Sprint: Claure Off To A Good Start, But The Road To Recovery Is Long And Uncertain [View article]
    It's really pretty straight forward, both tmus and sprint have deficient networks because riding at 1.9ghz and lack of low band for both RF signal propagation for competitive coverage and in-building penetration. This is made even worse because Sprint employs CDMA which controls power it put as a means of allowing simultaneous signals, each with a "code" tag, to co-exist on the same frequency. However this means that the cell literally "shrinks" in the face of cell congestion which further exacerbates the frequency issue. Verizon solves this by employing 1.9 ghz for capacity as overlay on its original 850 MHz channels. sprint has now deployed 1 CDMA carrier nationwide on 800mhz for HD Voice and is building out 5x5 FD-LTE on its remaining 800mhz as part of its Spark tri-band LTE service along with massive bandwidth employing 2.5ghz for capacity (read "speed"). However it will take upwards of 3 years for the installed base to take advantage of Sprint's tri-band network -- iPhone 6/6+ For example to support Sprint's tri band network to benefit from both the low band coverage advantage and the high band speed/capacity.

    Each of Sprint and the majors such as T and VZ will have largely the same 40K-55K cell site foot print, with the principal difference that Sprint only has half the subs running over a similar sized network (fixed costs are largely governed by the number of cell sites) and until its 800 MHz is totally deployed for both CDMA voice and LTE broadband, and it has an installed base of handsets that can take advantage of the 800mhz, then Sprint will have a perceived poorer quality network. But once that network is seasoned and mature, Sprint should have a richer network experience and more competitive prices, along with improved churn, and the resulting operating leverage should drive comparable margins.

    That's the bull case. The bear case is that Sprint could never manage out of its own way and it always pissed away or under-utilised the strategic advantages of its spectrum position in order to compete more effectively. I am in the bull camp because the network can be fixed as you throw resources at it, and eventually the consumer himself will determine that the value proposition is compelling,
    Sep 16, 2014. 11:55 AM | 2 Likes Like |Link to Comment
  • Netflix: Key Points The Bears Miss [View article]
    Subs=paid circulation=ability to monetize. The Blacklist for example, owned by Sony Columbia, distributed via first broadcast window on NBC (owned by Comcast), available On-Demand for rolling 4-5 episodes via MVPD's, streamed exclusively for catch-up TV during same season on Hulu (owned by Disney, Fox, NBC Universal), and streamed eXCLusively for back seasons on first SVOD window to Netflix. Sony could have put the content on its own ad supported Crackle streaming service but that service has no audience or circulation and last year' stop-rated prime time dramatic series would be drastically under-monetized on Crackle that Sony owns rather than on Netflix. In addition, as demonstrated with Breaking Bad,Walking Dead, and Mad Men for AMC Networks, netflix's Streaming while back seasons acts as effective promotional vehicle for serialized drama to promote this year's new season to monetize current period eye-balls. It's an evolving Eco-system that works well for all the participants.

    jM confuses ownership, which is merely a financing mechanism, with strategic ability to monetize. Netflix does "own" its differentiation content during exclusive licensing window. Owning it for a subsequent run during non-exclusive catalog syndication is meaningless for netlfix's ability to leverage first run streaming audience to grow its subscriber base.
    Sep 1, 2014. 09:28 AM | 2 Likes Like |Link to Comment
  • Netflix: Key Points The Bears Miss [View article]
    I have never debated valuation concern. Since I went long at 1x revenues and had to start taking down or otherwise hedging out at 4.5x revenues. I have debated illogic of "accounting concerns" by folks that know little of accounting. Or concerns of FCF which if you applied during the first 30 years of the MVPD industry would have missed out on probably $150B of value creation. One of the most insightful comments I heard once from a Buffet lieutenant about a client who's company was oft-criticized for lack of FCF ( for growth capex rather than maintenance capex), "you have one of those great businesses that offers great organic growth investment opportunities. Our problem is not to find businesses to generate cash but to find ones that offer attractive reinvestment returns."

    Anyway, I have largely commented on industrial logic and competition and the financial attributes of SVOD biz. For some reason some think that this is few places in media programming landscape where if one channel is successful than all others must fail or would only be satisfied if the incumbent is destroyed. It's like if CBS is successful all the other networks might as well roll over and plan for their own demise.

    Good luck with your short. I am glad it is over valuation concerns or some assessment of an imminent event catalyst rather than some uninvestable concept "OMG they are just a middlemen".
    Aug 31, 2014. 01:04 PM | Likes Like |Link to Comment
  • Box office debate: Secular decline or smashing 2015 on tap? [View news story]
    Andrew, excellent. In theater exhibition is audience paid infomercial to market subsequent monetization opportunities.

    Even with the occasional John Carter (I think I was the only person on this planet that liked that movie and hope for a sequel), the studios biz model still seems to work.

    The multiplex can turn its inventory to move to the hot product, IMAX is evolving its biz model to reduce the single film reliance risk. Movies are so expensive that I only go if differentiated with the IMAX experience.
    Aug 29, 2014. 04:27 PM | Likes Like |Link to Comment
  • Netflix: Key Points The Bears Miss [View article]

    every single programming network is a "middleman" in that it underwrites content that are produced via auction by dynamic groups of free agents called writers, directors, producers, actors, and financiers. every single movie theater is a "middleman" but no studio can get to its audience without going through that gate-keeper. every studio that has vertically integrated in the past also divested the middleman because they couldn't optimize the middleman's profit stream if it was held captive to one studio. They then have to find distribution for their audience either through MVPD's or over the air affilaites.

    when a programming network underwrites the financing of a project, by committing to buy certain number of episodes (they always lock-up future options, which passes through the contracts that locks-up the talent too), that "middleman" enjoys ownership economics of both upside and downside because the content is licensed exclusively to that network during the relevant window.

    you probably read too much of Rocco Pendola's inane "middleman" prejudice (who then loved Pandora even though that was teh ultimate commoditized "middleman" since it's all non-exclusive licenses in the music space) at a weak moment.

    the whole crux of commerce is full of "middlemen" -- the issue is whether it is commoditized or differentiated and what are barriers to entry for competitors. The cable business is a "middlemen" but in the 80's/90's John Malone leveraged his local monopoly power and industry scale to act as a "gatekeeper" and extracted/extorted equity stakes in any new programming network that needed distribution.

    You dont think every artistic team with a project wouldn't want to pitch HBO, but even if HBO turns it down, they's also pitched Showtime, AMC, starz, Netflix, TNT, and whatever. And there are plenty of successes of those where HBO turned down that became Mad Men successes elsewhere. So none of the "middleman" have a monopoly on talent or the ability to pick. Yes Microsoft and Google have oodles of money, but the folks that brought you computer glasses, driverless cars, and the Windows blue screen, necessarily demonstrates any skill set to "green light" the right projects or demonstrate any inclination of the arrogance to think that they would. Even Amazon is doing a mathematical model by sprinkling pixie dust in many different places by only funding pilots and then to let crowdsourcing to pick (trying to apply the Bachelor logic to underwriting shows) -- I personally think it is a low cost way designed not to fail and it would never attract the established talent that can market their projects to the networks and studios -- essentially it is targeted to projects that can't find any other way of funding.

    Anyway, you got me riled up again on the "middleman" thesis which I have heard used indiscriminantly ad nauseum.
    Aug 27, 2014. 06:28 PM | 2 Likes Like |Link to Comment
  • Netflix: Key Points The Bears Miss [View article]
    Sake, I know you are fan of the DVD b mail service, and I am still a subscriber even though I haven't returned my red envelope sitting on my desk for over a year now. I keep it purely for the option value of needing to find something that is a bit esoteric that is in back catalog (recent releases, i have infinite PPV options) which I cant find anywhere else.

    However, the DVD service only has content that is actually on DVD's -- that pretty much excludes all same season content (such as on Hulu or other originals on Showtime, HBO, Starz, basic cable or most of Netflix, except HOC). The monetization strategies of studios (both theatrical and television) are also evolving such that in the future there may be reduced appetite for putting content on DVD's except the most popular content. I personally think the service is a great niche service (particularly for rural delivery where the nearest theater is 25 miles away and the nearest RedBox kiosk about same distance and so long as USPS offers universal delivery, there is no lower cost delivery system). But the numbers tell the story of a slowly shrinking cash cow so no one is going to capitalize that revenue stream at 4x-5x revenues (8x-10x EBIT) because it is a shrinking biz.
    Aug 26, 2014. 09:35 AM | Likes Like |Link to Comment
  • Netflix: Key Points The Bears Miss [View article]
    If streaming is such a lousy business then why is Netflix and Hulu and whoever from the impending competition that somehow destroy the incumbents. Where exactly do these bogie man competitors buy their content pretty much everything is locked up in both the studio output side and the serial drama segment through 2017/2018. Where exactly is the point of entry?

    Don't you think that Disney as one of the largest global media conglomerates in the world and who have multiple platforms raining from ESPN, ABC, Disney, and also already owns 25% of Hulu, decided to go all-in and distribute its content EXCLUSIVELY in SVOD via Netflix (and preferred licensee in other parts of the world). Do you think that the brass at Disney are a bunch of idiots or maybe they actually believe that Netflix is the best way to monetize their content given its distribution breadth. Disney locked up exclusive for all its studio output for 5+ years until past 2021.

    sO streaming can't be both a crappy business and one where everyone wants to get into. If HBO or AMC are both 30% margin businesses, Netflix business is easily higher margin and larger market opportunity, because precisely because Netflix can enjoy operating leverage that the other linear guys can't
    Aug 25, 2014. 10:32 PM | Likes Like |Link to Comment