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Dialectical Materialist

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  • Apple's Watch Strategy Embraces The 80-20 Rule [View article]
    It is dangerously imprecise to consider the cost of the data plan in the drain on retirement unless you propose that the industrious saver would be going through his or her working years without a smart phone.

    Sorry, your model is broken.
    Apr 19, 2015. 08:34 PM | 6 Likes Like |Link to Comment
  • Apple's Watch Strategy Embraces The 80-20 Rule [View article]
    Gregg,

    I think you are touching on an area that has so many of us technophiles and gadget freaks confused. Wearable tech should be though of as "fashion tech". I have maybe been too fond of saying it lately, but that's because I don't think the message is really getting through. We can't view smart watches (and other upcoming smart accessories including shoes, clothing, and jewelry) as tiny little iPhones. They are fashion pieces alongside of their technical functions.

    Those who see Apple as a hype company whose products are built on marketing will deride this move by Apple into fashion. They may see it as the ultimate admission that the company is all style and no substance. But fashion-tech is clearly a sector with tremendous growth potential in the coming decade and it would be ridiculous for Apple not to enter the space and see where it can take things.

    When people talk about products offered by Michael Kors or Coach, they don't focus on the limitations of each product but rather on whether they have fashion appeal. Almost no one talks of hand bags in terms of specs. And everyone understands and accepts that. Why talk utility and specs? These are fashion items.

    Well now in the age of wearable tech, we are going to need to get used to thinking of every item in two ways -- both as a piece of technology, and as a piece of fashion.

    Apple clearly embraces this concept. It was no accident that their new head of retail hails from the fashion world. Apple is a design company. They understand the role fashion will play in the next phase of computing.

    This is, incidentally, why Galaxy Gear didn't stand a chance of catching on.
    Apr 19, 2015. 08:24 PM | 5 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    One could easily say "prior art" existed since the Dick Tracy comics.

    This is no one company's idea. As usual, it will come down to execution.
    Apr 19, 2015. 12:51 PM | 2 Likes Like |Link to Comment
  • Apple's Samsung Problem [View article]
    I have a 6, and I have a little bit of a bending problem, but it is usually only in the mornings, and I don't blame any of it on my phone.
    Apr 18, 2015. 08:53 PM | 2 Likes Like |Link to Comment
  • Apple's Samsung Problem [View article]
    Stephen I disagree with just about everything you said, and I'm not sure I can take your comment point for point without looking like I am trying to act superior, be a bully, or take you to task for having a different opinion than me.

    So I want to say that I agree with the goals you appear to be supporting.

    1) Companies should pay taxes. Large companies should pay a lot of taxes. This is to support the nation that made their success possible.

    Interestingly Apple is the largest corporate income tax payer in the US. In 2012 they paid $6B in taxes to the US government.

    2) CEO's should be role models. Tim Cook should do more than give 1 cent of his net worth to charity.

    Recently Tim Cook announced that after setting aside some funds to take care of his nephew's education, he'll be giving all his money away. That's right. His entire fortune will go to supporting causes he believes in. This is the kind of example of philanthropy we should expect from the richest members of our society, don't you agree?

    3) A company should be shareholder friendly.

    Apple has announced that it will continue to increase its dividend every year. Additionally they have announced the biggest stock buy back program in corporate history. Then they went on to buy back shares ahead of schedule. And they will be announcing an update to their already record setting buy back plan on April 27th.

    As a result of Apple's plans to return cash to shareholders, Apple's leaders have unlocked shareholder value. This cash return coupled with nearly flawless execution of their corporate vision has resulted in a stock that has richly rewarded long term shareholders. So when looking for companies that unlock value for their shareholders, it is hard to leave Apple off the list. They probably belong near the top of that list.

    So you see, I agree with some of the sentiments you expressed, but I strongly disagree with your assertion that Apple fails to exhibit those important qualities.

    No time to quibble about whether Apple is a green company. I think I covered enough points for now.
    Apr 18, 2015. 08:42 PM | 5 Likes Like |Link to Comment
  • Apple's Samsung Problem [View article]
    I think the S6 is poised to be a huge success, and it should cause some re-thinking on the part of certain AAPL bears. Here's why:

    Among some bears there has been a long held contention that the smart phone market is becoming rapidly saturated and indeed the high end is pretty well at the end of its growth. Taking this as a given, you can make an argument that Apple will be facing increasing difficult times growing the market for their high priced phones.

    But Apple just sold 74 million iPhones last quarter. And now some say the S6 is poised to sell tens of millions as well. It puts a bullet through the notion that the high end of the market is not as healthy as it ever was. If Samsung's luxury phone sets a news sales record to join Apple's sales record from last quarter, what does this say about the high end of the market?

    Does it say that smart phones are becoming a commodity? Does it say that the high end is saturated? Does it say that everyone who wants an expensive smart phone already has one? Of course not.

    So I for one am pleased both that Samsung is actively engaged in the kind of competition that results improvements from its competitors and that they may sell a record number of these phones. Long live the luxury smart phone market.
    Apr 18, 2015. 08:19 PM | 4 Likes Like |Link to Comment
  • Apple's Samsung Problem [View article]
    Stephen, I think it is interesting that Apple changed CFO's and added a founding member of Blackrock to their board. At the time of these changes, we started seeing unprecedented moves for Apple. They took on debt to leverage foreign cash, for example.

    Over the past couple years they have gradually expanded their strategies for managing their cash pile. Creative stuff like selling bonds in Euros are things that never could have taken place in the Jobs era.

    As they move forward, I expect Apple to get more and more creative with its cash pile. They have some very smart and experienced money managers now to help guide the folks who are more knowledgable about Apple as a company than they are about managing huge sums of money. The progress is likely to be slow. And that is probably a good thing. You want to make your moves carefully when you are managing over $150B. But I think more aggressive moves will be coming.

    Apple doesn't always get it right the first time. In fact they usually don't. But one of their most valuable qualities is that they are constantly seeking to improve. This applies to their cash management as much as it does any of their products.

    The problem of how best to use what was $178B at the end of their last quarter is one that many companies would love to have.

    Etrade got cute with their capital and thought they would goose their returns in the MBS market back in 2008. That mistake nearly sent them into bankruptcy. Apple will not be making the same mistake. They will make small and smart moves which over time improve their return on capital while ensuring the return of capital.
    Apr 18, 2015. 11:19 AM | 2 Likes Like |Link to Comment
  • Why Netflix's Insane Valuation Actually Makes Sense [View article]
    I love Netflix the service. And I was an early bull on the stock. I loved it at $20 and rode it up to almost $100 if I recall.

    But I am bearish on the stock at this level. The company is great. Their market opportunity is great. But I am unconvinced that margins can be improved drastically. As Bezos said, "Your margin is my opportunity."

    When Netflix did battle with Blockbuster it faced a slow moving battleship of a company that was saddled with $1B in debt in an era of much higher interest rates than at present. Brick and mortar is an apt description for Blockbuster because they could not stay afloat. Hastings said as much. They practiced a scorched earth campaign with them, slashing prices and watching Blockbuster race them toward zero. A company with a lot of debt and a dying business model can not successfully pivot to a new paradigm and engage in a price war with a nimble startup. Netflix 1, Blockbuster 0.

    (Interestingly NFLX had no debt back in those days.)

    But Netflix has a whole new class of competitor when it comes to streaming. Amazon is willing to keep their margins razor thin indefinitely. Meanwhile the content companies like Disney will insist on getting paid. And Apple and Google and Facebook are all willing to open their checkbooks if it means acquiring a differentiating feature.

    Netflix is not going to go under any time soon. But I don't see how they have a lot of leverage to improve margins. Differentiating content is expensive and subscriber churn becomes an issue if the subscription fee gets too high.
    Apr 17, 2015. 01:06 AM | 1 Like Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    18214212,

    I agree with you. I don't know of any evidence that supports the idea that people are trying to hoard Apple Watches or snatch them up for resale. There are some on ebay, but there is some of just about anything on ebay so that doesn't mean much.

    It is well documented, however, that this is common with iPhones. So the idea that Apple wouldn't allow it doesn't cover all the bases. Apple did release the 5s in China at the same time as the rest of the world, no doubt in part to try and discourage this kind of behavior. But when they were unable to sell the iPhone 6 in China at the same time as the US (apparently because of a regulatory delay), the activity resumed. There are pictures and videos of people being busted trying to smuggle iPhone 6's into China for resale (at a huge markup).

    So the grey market for new Apple products does exist. But I agree with you that there is no convincing evidence that there is a grey market for Apple Watches.

    As to the actual number of pre-orders of the Watch, no one but Apple really knows.
    Apr 16, 2015. 09:15 PM | Likes Like |Link to Comment
  • Why Netflix's Insane Valuation Actually Makes Sense [View article]
    TiantongQ, I find the idea of watching television how you describe nauseating, but I have to admit it sounds like something that would be very popular among the younger crowd.

    If you look at a site like SoundCloud, most songs that people post have messages enabled, and the comments appear at the portion of the song they are tagged to.

    It isn't a stretch to imagine a video version of the same thing, where certain comments or chats are enabled and appear alongside of the content.

    There is already "live tweeting" a show, in which (in case this is new to anyone like it was to me) a person tweets, "I'll be live tweeting such-and-such show at 8:00 EDT." Others can watch that episode at the same time, and follow along on twitter with others watching the same show. They make wise cracks about characters or scenes and talk about how much they want to see this guy get his, or whatever.

    To a great many people who don't do social media much or at all (like many of us older folks) this behavior is either unknown or seems bizarre. But it is how the younger generation behaves. They may not live tweet very often, but they understand that it is a way to enjoy content with a social media spin.

    I had never thought about Netflix adding social. The idea is unsettling.
    Apr 16, 2015. 07:56 PM | 1 Like Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    The odd thing about "bought for resale" idea as a way of explaining away early sales is that you can not re-sell anything that does not have demand, and you can not resell anything for a profit unless the item has enough demand to satisfy your markup.

    So if indeed a lot of sales are by those interested in reselling at a higher price, that's actually a bullish indicator for demand, not a bearish one. Case in point, the iPhone scalping that takes place in China.
    Apr 16, 2015. 07:04 PM | 2 Likes Like |Link to Comment
  • Apple Watch Pre-Order Sellout: Have The Pundits Underestimated Apple Again? [View article]
    45Cal, some would take offense to the omission of beer from your list. Me, I like you're list but can do without chocolate.
    Apr 15, 2015. 09:51 PM | 1 Like Like |Link to Comment
  • Netflix: Street Applauds Disastrous Financial Results [View article]
    Oh, man, is it? I have been trying to remain insolvent all this time. I am getting pretty good at it too!
    Apr 15, 2015. 08:03 PM | 10 Likes Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]
    lolszewski,

    It is clearly not a representative sample. I don't think there is a debate about that. But it is a data point, and there can be some extrapolation.

    And let's remember that this is not the author's methodology, it belongs to the company that announced the figures.

    I don't know how Slice produced its final numbers, but they have some other data to fall back on. For example, they know how many big screen TV's were bought by their members, and they can compare this to what we know about total big screen TV sales. They can do the same for shoes, or barbecues, or anything else.

    So Slice almost definitely has a good idea of how representative their group tends to be. It's possibly that they see their members buying about 1% of total tech items in the country. If that were the case, they could multiply their results by 100 and come up with a rough approximation of US orders.

    There is a wide margin of error, but the data is not as useless as you claim.
    Apr 15, 2015. 10:32 AM | 3 Likes Like |Link to Comment
  • Apple Watch: Understanding Early Sales Data [View article]
    KenC and JMM,

    Thanks for your smart replies. I'm still working out what I think about this new sector and certainly can't claim to have it all figured out. I bet Apple has a pretty good idea where they are going with this, though.

    It will be fun to watch how things unfold.
    Apr 14, 2015. 06:17 PM | 4 Likes Like |Link to Comment
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