SiliconValleyJoe

Dell's Lack of Innovation Disappoints

There are no surprises here. Dell is specifically a hardware manufacturer. It is narrower than H-P, IBM and Sony and Hitachi. H-P and IBM have software expertise and knows to build its own OS and software application suites for business use. Sony makes consumer electronics and owns entertainment media. Hitachi makes consumer electronics and appliances.

Dell has tightly focused itself on making PC before branching out into services but purchasing other firms. Until it can develop software prowess to add value to its hardware, it must rely heavily on others for software and it can only compete on price. We all know how PC builders compete on price, it is a maddening race to being near-free.

Dell was never a technology innovator. Dell was just a PC maker that hit on a business model that worked for a time. It never adapted, never looked forward and became complacent. It is paying the price now.

A Worm in the Apple?

I know nothing about Bollinger Band. I do have questions regarding your claim.

"...hit a new high on less than exciting news and a less than exciting economy..."
True in general, but how does that apply to Apple? It must be losing money? Losing sales? Lowering revenue? Lowering gross margin? Bad quarterly?

"...Apples computer sales are soft..."
Can you quantify this with sales figures?

"... the iPod has no exciting new models..."
So, iPod Touch is not new and not attracting buyers?

"...iPhone seems to have a new competitor coming on the market every week..."
And, how does that quantifiably support your position? In numerical terms?

"...Verizon has also been doing a very good job of showing..."
Please explain how Verizon, whose net technology is US only, whose net does not allow talk and surf is quantifiably, with specific numbers, supporting your position?

"...many small reasons to make the case..."
Please share those many small reason showing Apple has topped out?

I am eager to learn if you are willing to teach with some concrete data.

Thank you.
Joe


On Nov 20 05:00 PM Techtrader10 wrote:

> While I have never used the Bollinger Band theory, I do understand
> what the author is saying about the magazine cover. Its the kiss
> of death for a stock. For those of you who are not supersticious,
> there is no need to worry. For those of us that have seen it happen
> too many times in the past the cover and story comes at a time when
> the stock has hit a new high on less than exciting news and a less
> than exciting economy. Apples computer sales are soft, the iPod
> has no exciting new models, and the iPhone seems to have a new competitor
> coming on the market every week. Verizon has also been doing a very
> good job of showing people why they should be using a smart phone
> on their system and not ATT (the carrier for the iPhone). So no
> one compelling reason to say Apple has topped out, but many small
> reasons to make the case. As we all know stock price is a function
> of anticipation. Look at the stock market since March, stocks have
> priced in an economic recovery which has yet to show it self. While
> I currently have no position in Apple, long or short, I suggest people
> still long the stock do as the author of this article suggests, look
> into ways to protect your positions in the stock.

Apple to Open 50 More Stores - Let's Be Careful, Steve

The author is confusing business concerns with personal brand related issues. As a consumer, do you want exclusivity? Or do you want easy access to one-on-one support and training?

If it is easy to walk into a store to receive high quality assistance, training and do research on new products and make purchases, does that quality of service help a brand? Or does staying aloft and making access challenging and exclusive more beneficial to a brand?

In terms of business concerns, there are more neighborhood Apple stores than "flagship" or "significant" stores. Neighborhood stores are generally smaller and simpler with relatively lower investments in fancy architecture and fancy decor. The cost of such stores is in staffing. This keeps overhead low and focuses the cost on what is important, the highly trained staff. Apple did not receive high return per square foot by decking out every store with meaningless flashy junk. Not all 50 will be significant stores. Apple also did not say 50 is firm. It plans to open between 20 and 50. That is a wide range and Apple can adapt to changing business environment by opening 10 if it so chooses.

The article raises a couple of interesting issues but failed to explore either.

Quest for the Droid Crowds: Not So Epic

Looking back at the days of DOS vs. Apple, we actually have a sort of reversed similarities.

DOS was a simple operating system then. I could slap together a box using parts bought from a Mom and Pop on Castro in Mtn. View, install DOS and off I go. Applications all learned to run on DOS, it was easy for me to code an application in BASIC for my own use. That application can be traded to others or sold to run on other DOS machines. That is not happening today for an average consumer using Android devices. For a developer however, there are some interesting similarities.

iPhone OS is stable and tested. It is powerful underneath. As a developer, just like an earlier DOS developer, I can code to one OS that reaches out to 30+ million users and growing. If just 2% of those buy my product, that is 600K buyers.

In contrast, coding for MOT Droid, HTC, LG, and whoever else wants in, is akin to writing code to run on AIX, HP-UX, Linux, System 7, OS/X, Windows, Chrome! I have to adapt my work to run on all platforms and their many versions. The investment in hardware and software configuration issues will be huge. Unless millions are rolling in, I will just stick to the one OS that makes me the most money with the least demand on my resources and that would be iPhone OS for now.

Just like long ago when DOS developers simply developed for DOS because it was guaranteed a captive buyer population. If anyone wants to look for meaningful resemblance of present and past events, this is it.

Quest for the Droid Crowds: Not So Epic

No, would not work again. A bit of historical perspective is in order, from an old engineer that worked in the valley when DEC, Data General, Amdahl and Rolm were still around.

Back then, IBM (GOOG), a well known and respected company did DOS (Android) before selling (free license) it to MSFT (MOT). This is analogous to today but all similarities end beyond this point.

Back then, DOS (Android) was dirt cheap and hardware could be home-built. Today, Android is free but Droid is not cheap and Droid hardware cannot be home-built. Average consumer cannot build a "Home Droid" and install Android to run for peanuts. Commercial Droid hardware requires a plan and the associated positives and negatives. Huge difference!

Back then, consumers knew little about personal computing (cell phone). Today, a whole generation can scarcely live without personal mobile computing devices (iPhone, Droids, Pre, Storms, etc). People have the means and the knowledge to pick and choose.

Back then, Apple was a local kid around the block. Today, Apple is an international corporation. Just look at the French Apple Store launch today. The number of people in line is a surprise!
www.youtube.com/watch?...

Back then, IBM (GOOG) had its tentacles in nearly all corporations and mid to larger businesses. DOS (Android), even after MSFT (MOT) took over, already had a ready-made and the *only* large customer base (VZN subscribers). Today, GOOG is not a business service provider, it has no lock on buyers. Apple has $30+ Billion in cash, beats the entire recession with continuously increasing sales and profit margins, and equals GOOG in engineering capabilities. MOT is a late-comer not known for its product strategy and has no locked-in buyers. VZN does not have a monopoly on cell phone subscribers. ATT also can boast 80 million subscribers and most importantly, iPhone is sold worldwide.

If you carefully parse the historical facts, it is easy to see the two events are totally different. If you only look at the surface, then it is easy to claim all sorts of "similarities".


On Nov 07 02:23 PM tripleblack wrote:

> LOL, reminds me of the early PC vs Mac days...
>
> But then it was all about price and how "wild west" it was running
> DOS from tiny MicroSoft.
>
> Lets try that:
>
> "DROID from tiny Motorola..."
>
> Hey, could work. Same principle.

Motorola's Droid Comes in Peace - For Now

Verizon's current network technology (CDMA) is incompatible with the iPhone (GSM). Apple has no plans to make a CDMA iPhone just for Verizon. Until LTE comes out, iPhone cannot and will not show up on Verizon network.

GSM, for now, is still widely available around the world so our iPhones work overseas. There are 4 Billion plus users. CDMA is not going away but still lags GSM in its worldwide reach with around 500 million users. Will your Droid work when you leave the US? That is something to know if you travel overseas.

The hope is that companies will converge to LTE in the next two to three years. If that happens, then it will make sense for Apple to ship a LTE-capable phone that can run on ATT and Verizon.


On Nov 06 04:30 PM sheldon1 wrote:

> Verizon needs to stop looking for an IPHONE KILLER. The IPHONE is
> not their enemy. Its ATT! The way for Verizon to counter the success
> of ATT is the add the IPHONE to its product line. I am a Verizon
> customer, I want the IPHONE but hate as many others, ATT's poor service.
> If Verizon sold the IPHONE, first they would bring the ATT customers
> back, and then they would take the market. Its so simple focus on
> the problem.

Apple Hits 100,000 iPhone Apps: Is the Choice Worth the Cost?

It is correct to point out that quantity does not equal quality. It is incorrect and illogical to point out that smaller quantity trumps larger quantity because the larger quantity has a higher percentage of useless units without any further support.

First, what is meant by useless? Who defines it and precisely how many are there?

Second, can anyone here guarantee that when PalmOS and when Android both reach 100,000 applications that there will be 0% or "significantly less" junk applications than what is currently in the Apple AppStore?

Is there some "magical power" or special policies that will make Android applications that much better than AppStore when it reaches 100,000? If not, how does one switch from a debate over "quantity" to "quality" when "quality" cannot be guaranteed for either sides? Where is the ground for making that comparison?

The quantity argument sounds silly because quantity does not equal quality. The quality argument also sounds silly because no one has a way to guarantee better quality in any case.

This whole Android vs. iPhone debate based on quantity and quality of applications is meaningless, don't you think?

Apple Hits 100,000 iPhone Apps: Is the Choice Worth the Cost?

I do not understand the consumer choice reference. How is Apple limiting consumer choices when it is one of many players in the field? Consumer can freely choose from Motorola, Nokia, RIM, Sony-Ericsson, Palm, HTC and whoever cares to make a smartphone. The choices are overwhelming.

Google's Android vs. Apple: History Repeats Itself

Please study, learn and know your history.

Apple did not "lose" in the "90's". Apple did not make "bad products" in the "90's". You are at least 12 years off. Apple "lost" way before the "90's". If anything, Apple's revival started in the 90's right after Jobs returned.

The first Apple computer was built from scratch. It had its own operating system, however primitive at the time. Apple was the first to use a windows approach to its UI. Apple was the first to pay attention to human-machine interactions in its commercial product. Apple's UI was always and still is the easiest to use. That is the reason it survived to this day. So "bad" is a relative term. Your bad is my good. My bad is your good.

DOS was an IBM product that Gates bought to start his Microsoft. DOS then became Windows after a convoluted situation between Apple and Gates. DOS was cheap and ran on PC and PC parts were cheap and I was building PC's left and right for myself with a meager $200 investments. So "cheap" won the day.

At the time, late 70's and early 80's, consumers were not computer users and few could or wanted to own home computers. Businesses picked up on DOS due to its cheap pricing and that got them locked onto the Windows bandwagon. Once that happened, developers swarmed to DOS and Windows and the rest is history.

So please get your history straight even when this is a place that allows any of us to post any and all of what we want.

On Oct 29 04:39 AM parv wrote:

> apple will lose if it makes bad products with expensive prices. It
> lost the pc wars because of bad products in the 1990s and expensive
> prices. So far the iphone has been a good product with reasonable
> prices (as compared with its rivals).
>
> Why couldn't one argue that Android is like Linux and the iPhone
> is like windows? And what has happened there?

Why Apple Is Worth $80

Unfortunately, like Kramer and Scott, the author of this analysis also based his numbers on his own opinion. Regardless of what mathematical models one chooses, Guesses-in-and-Guesses... It is an interesting but pointless exercise.

If one wants to model growth out 2 to 5 to 10 or 15 years, one cannot simply play with guesses. If it were that simple, we would be predicting all sorts of world events by now.

Many factors will influence how AAPL will fare in a year or two or beyond. These factors are beyond just a simple single "growth percentage" because many real world conditions can impact growth. The factors require a deeper understanding of the entire field in which Apple and its competitors are playing.
Better to use these factors to derive the input that we can use. At least then we can clearly articulate what the assumptions are, why we make them and what the limitations of our assumptions are. From there, one can better understand what factors can cause AAPL to come crashing down and what factors may cause it to continue rising and all that subject to some well understood and well stated initial conditions and limitations. Even then, one has to constantly adjust the models by updating, removing or adding factors and regularly update the associations between these factors. Their evolving relationships can impact the output. The world is not static.
Without a dynamic model that includes meaningful factors,
one can only do
"Guesses in and Guesses out".

Motorola Droid: A Promising iPhone Challenger

If I remember correctly, the progressions is as follows:
2007 - iPhone
2008 - iPhone 3G, SDK, App Store.
2009 - iPhone 3G S with new capabilities.

How is it iPhone is in Fat and Happy mode and how does it mean innovation has stopped?

A lot of companies are still making devices to match iPhone capabilities or best it, so they are innovating? While they are fighting to catch up? Strange.

How Apple's Market Share Will Propel Stock to $500, Part 1

Great point about strangeness of AAPL's "pop and drop". I think most people get their "advice" online or from analysts and they act accordingly when buying or selling. Traders, on the other hand, do not care.

For analysts and many bloggers lacking the necessary technical background, it is difficult to understand Apple. They think an OS is an OS, right? PalmOS (Linux) can multi-task and iPhone OS (Unix) cannot, right? They mix UI with OS capabilities. They think Word and Excel are as good as everything can possibly get. They think that Windows 7 is the best and everything is "saturated" and "old" and what else is possible? They have been so enamored and so well trained on existing technologies, everything else looks strange. How can a 3% or 9% compete against 97% or 91%? Why buy Apple when a cheap Windows PC will suffice? Some even claim that Cloud Computing will make OS obsolete? Wow! That is the expertise of an analyst.

They are playing at numbers and not understanding how consumers are, and will be, using technologies. They do not understand how advances in CPU power, size and speed and advances in software can carry consumer and business technologies forward. They do not know that software and OS as they are today are actually quite old. They do not know that over the next 5 to 15 years, small companies and hopefully some larger corporations, will have opportunities to make quantum leaps on computing capabilities that can solve even more real world problems down to the individual consumer level.

If those screaming the loudest do not understand the "products" or the "solutions", and they do not understand the limitations of today, how can they clearly understand or appreciate strategies put forth by Apple or Nokia or Microsoft or RIM? How will they know what changes are meaningful and to foresee what is possible in the future? Where is the vision? So they write what they know and people pay to invest with such advice.

The bet is not just on Apple or Microsoft. The bet is also not on the next 24 months or even 48 months. The bet is on who is expending the resources now on the right research to put together the right set of integrated solutions that will take all of us into a new age of personal computing 60 months from now. Who has the integration, the mutually supportive and interlocking components, the ecosystem, if you will, that will carry all of us smoothly into this new future. Whoever does this is going to dominate the mind share of consumers and will in turn be dominant in sales.

My bet, for now, is on Apple because it is hungry, its footprint is tiny and it is fearless when it comes to innovation and it has a war chest to back up its research. Most importantly, its research often turns into real products that solve real problems for real people.

How Apple's Market Share Will Propel Stock to $500, Part 1

Just for fun, it would have been nice to see some concrete justification for the $500 figure. One can easily come up with three scenarios (best, average, worst) using appropriate numbers and compute the company's value and then apply whatever P/E (non-GAPP) as appropriate. I have not done this yet using this quarter's numbers but it seems improbable that Apple can reach $500 in one or two years.

A poster asks a good question regarding Apple's focus on high-end market. How can Apple possibly grow beyond 10% or 20% of the market? I do not believe that market share numbers are more important than sustainable profitable growth. There is a difference. I also do not believe Apple is focusing on the "high end" because it already sells machines costing $999 a piece.

Apple's strategy is not about focusing on high-end. Apple's strategy is to avoid competing on price alone. It wants to add significant value to its offering. That is the key difference. Apple trickles its technologies and innovation through its product line over time but one pays for such technologies, it is not for free.

Other corporations use whatever Microsoft offers and slaps together a box to sell based on price. They do not focus enough on value-added offering. PC's are now a dime a dozen and it is a noisy field. Hard to differentiate and garner attention.

How Apple's Market Share Will Propel Stock to $500, Part 1

There are reasons why so many are focusing in Apple.

Instead of knowing what it wants to do and deciding on how to get there, Microsoft sees what others do and simply copies or buys.

Apple takes something in existence (MP3, cell phones, PC) and applies innovations and hard work to make it significantly better. From personal computer operating system to pro-sumer software suites (iLife, iWork) to iPod and iPhone.

Microsoft sees what others are doing and then tries to copy and do the same. From Windows to Zune to Bing to Windows 7 to its clapping new stores. Copying or buying to do the same things are not interesting to most people. So people talk about the 3% innovator while tolerating the 97% behemoth.

Jobs and Woz worked with their fingers and created the machine and the software to start their business. Gates bought DOS from IBM and went from there. Apple founders actually built their first product and business from scratch, much like the pioneers of H-P. Gates took DOS off IBM's hands and was just doing business. Big differences in how they started and the corporate culture and strategy show this history clearly to this day.

Yes, we look to Apple for innovation now because Microsoft has spent years jamming whatever it wishes down our throats. We still cater to and must support Windows because it still has the 97% market share and thus the purchasing power that feeds our company's sales. We are also now developing products for the 3% Apple and begin to focus our innovative energy on the Apple version. Who won't?

Can Apple Be a $300 Stock?

I know nothing about whether AAPL will reach $300. I will say that expecting OS/X to reach 25% in a year is unnecessary and unrealistic.

OS/X currently has a tiny share of the entire PC market. With better informed consumers, it will continue to make sales when people consider their choices. I will say that as along as Apple continues to sell Macs and the iPhones at a sustained profitable rate, it will remain a profitable company.

As for iPhone, 35% is also unnecessary and unrealistic. The reason is that the "smartphone" market is changing and the volume is rising. With RIM giving phones away for free and various vendors offering every stripes under the Sun, iPhone will not jump to 35% so quickly. As long as it continues to increase market shares, it will do Apple good.

It is more important to have profitable growth than focusing on market share. Market share is misleading and can skew a strategy.