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Dialectical Materialist

Dialectical Materialist
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  • Apple Earnings Call: Under The Radar Gems [View article]
    dezee, my argument for the watch is that it makes a good thing (Apple Pay) that much better. I do not expect everyone to use Apple Pay, nor do I expect every iPhone user to buy the watch.

    But it is clear to me that Apple Pay is gaining momentum. And it is easy to see why. It is a frictionless form of payment in every sense of the word. Vendors know that the easier it is to pay for something, the more sales you make. Shoppers know that the worst part of shopping is waiting in line. These factors combined will pretty much ensure that Apple Pay will be huge in the coming years. And there will be other non Apple versions of the same thing that will also become more popular than they are today. Some of them will be good and some not so much.

    The interesting thing about Apple Pay and the Apple Watch to me is that the Watch does not sell Apple Pay but rather the reverse. If you are going to wear a Watch, it will need to do a few things in a way that is an improvement over just carrying a phone. And Apple Pay is clearly one of those things. I think using Apple Pay with the Watch may very well prove to be the killer app that drives people to adopt the watch.
    May 12, 2015. 10:58 AM | 2 Likes Like |Link to Comment
  • Here's Why Apple Is Weak Since Earnings [View article]

    Assume a base of 400 million phones (just as a thought experiment). Apple sells 130 million iPhones in 2 qtrs but only, say 100 million of them are iPhone 6/6+. If 20 million were switchers, "20%" of the installed base would be 80 million that "upgraded". This would leave a pool of 320 million potential upgraders.

    If you used voodoo math and added the new purchases to the installed base (as in your example), then 20% would be .2*530 million = 106 million. This would mean of the original base, only 294 million potential upgraders would exist.

    So you are right that the number can be calculated in such a way as to mislead. But since the number is so small, even if you make bad assumptions about the way the stat is calculated, it leaves you with hundreds of millions more potential buyers.

    Why haven't these buyers upgraded? Some never will. They either can't afford to, don't want to (next phone will be Android, for example) or the phone that is being counted in the installed base is a hand me down that simply will never be upgraded.

    But of the pool of potential upgrades, most haven't because they are in the S-cycle. The 4s sales were huge, then this wave hit again with the 5s. The 6s has a huge installed base of potential upgraders.

    It is no surprise the 6/6+ has captured only a small percentage of the base (however it is calculated). It would be folly to think this represents anything other than the wave of upgrades that will hit next fall on the S-cycle.
    May 12, 2015. 01:45 AM | 3 Likes Like |Link to Comment
  • Apple Stock: Affirming My $140 Target By The End Of May [View article]
    Moxi, I see what you are saying. Thanks for clarifying,

    Nevertheless, I think the observation is not as important as you seem to think. Of course iPhone 6 sales will peter out. They always do. They peter out most sharply just before the release of the next product.

    It is hard to make a compelling case that Apple is in trouble because more people bought iPhones in q1 than they did in q2.

    As for Samsung, it is good for them to sell more phones, but this is typical for this time of year for them is it not? And in any case:

    "In Q1, Samsung regained its position as the No. 1 smartphone vendor worldwide. Samsung shipped 83.2 million smartphone units, compared with Apple's 61.2 million units. But Apple's average sales price for the iPhone was $665, vs. $198 for Samsung's handsets, including feature phones."

    Read More At Investor's Business Daily:

    These are not really comparable sales, are they?
    May 11, 2015. 10:58 PM | 1 Like Like |Link to Comment
  • Apple Stock: Affirming My $140 Target By The End Of May [View article]
    "You want to compare numbers from a year ago and that makes zero sense to me."

    Moxi, if this seems confusing to you, you may lack business experience. I produce financial reports for my clients and if I ever told them that their revenue or net income was declining because I was comparing it to the previous quarter, they would probably laugh at me (and possibly cancel my contract). In order to know if their business is improving or declining, they want to know how they are doing compared to the same period of the previous year.

    This is a common notion. Unemployment and housing are both seasonally adjusted as well. Why? Because consecutive changes are misleading. The only proper way to grasp how these things are changing is to compare as directly as possible to the same period one year ago.

    Do you think that Disney World looks at October ticket sales and compares them to September? What would such a decline tell them? That they were losing business? No, they compare this October to last October. Every business I can think of looks at sales this way. It is the only meaningful way to examine business activity.

    And the evidence you have been shown is very clear. Apple sold 38 million more iPhones in the first two quarters of 2015 compared to the same time last year.

    The comparison may not make sense to you, but that is not the comparison's fault. That is simply the only sensible way to examine this data.

    Look at Samsung versus 2014. You may be able to say the same thing you are saying now in a way that actually says what you want it to.
    May 11, 2015. 10:31 PM | 5 Likes Like |Link to Comment
  • Apple Earnings Call: Under The Radar Gems [View article]
    Dezee, did I say everyone will be using Apple Pay? Of course not.

    And you could make an argument that pulling out your wallet is easier than pulling out your phone. But you don't need to pull out your watch. Those using Apple Pay with the Watch don't need to pull out anything.

    Still, not everyone will use Apple Pay. Some people enjoy making everyone behind them wait while they fumble around with their purse.
    May 11, 2015. 04:46 PM | 2 Likes Like |Link to Comment
  • Significant R&D Increase Suggests Apple Is Working On Something Big [View article]
    I think it is hard to say for sure what the margin would be on a self driving electric car. Wear and tear is less in an electric motor than in a combustion engine, and wear and tear from a computer driven vehicle should be less than an average human, since the car can be designed to drive in ways that promote component longevity. We can't know what materials will be used in such a vehicle. All we can say now is that current automobiles with decades of legacy design baggage and a well established ecosystem of middlemen have a certain cost to build and a certain price. If Apple (or anyone else) can redesign personal transportation in such a way as to meaningfully impact the cost of production, margins could be improved. The only way to find meaningful efficiencies is to throw out all the assumptions about what a car is and redesign everything from the ground up. Interestingly, this is exactly how Apple would approach a car.

    I doubt a car would have margins comparable to the iPhone, but the addressable market is much larger as well. And the price is higher. It is conceivable Apple could net more money from a car than it currently does from its iPhone line.

    But we can't lose site of the fact that if Apple does move into transportation, it will be as another point on the spectrum of personal devices. You might call your car over to pick you up using your watch. Your phone may serve as the navigator. A car will be part of a new mobile paradigm, not just a car.
    May 11, 2015. 02:32 PM | Likes Like |Link to Comment
  • European Commission Trying To Take A Bite Out Of Apple - Should Investors Worry? [View article]
    I think what Google is doing in education is awesome. I hope they help educate lots of young folks so they can grow up and get good jobs and buy MacBooks.
    May 11, 2015. 02:03 PM | 4 Likes Like |Link to Comment
  • China Mobile Is A Game Changer For Apple [View article]
    Well in any case the numbers involved are small compared to the size of the total buyback, so it was really only a minor consideration anyway.

    The important thing is that the buyback is huge and will noticeably reduce the float.
    May 10, 2015. 08:41 PM | 2 Likes Like |Link to Comment
  • Significant R&D Increase Suggests Apple Is Working On Something Big [View article]

    I also think Apple's understanding of the Chinese market may be coming into play here. If they are interested in helping to solve the world's pollution problems, China is a great nut to crack. And providing low emission vehicles to the growing middle class in China would be an economic and socio political coup d'etat.

    Additionally, when one thinks about all the computer chips which now exist in the modern automobile, it seems ripe for a company that can design both the silicon and software from the ground up. The gas powered car is not really a computer on wheels, but the electric (self driving) car certainly could be.

    Given Apple's interest in disruption and Jonny Ives interest in design, the car market seems like a very real possibility for Apple. And what is a self driving car but a robot with transport capacity, which opens up a whole world of robotic assistants.
    May 10, 2015. 02:46 PM | 2 Likes Like |Link to Comment
  • Apple Earnings Call: Under The Radar Gems [View article]

    I set up Apple Pay with a couple of my credit cards a few months ago. One of my bank cards didn't work. So instead, Bank of America got all my Apple Pay transactions.

    The other day, after making a payment online, I logged off the site of the card that had not accepted Apple Pay. They had a splash screen informing me that my card is now compatible with Apple Pay. They seemed very eager to make sure people knew this.

    It's clear where the momentum is.

    Folks who have not used Apple Pay may not understand. But use it once and you get it. Contactless payment is how we'll all be paying for things in the coming years. And Apple Pay (now with the watch) makes this ridiculously easy.
    May 10, 2015. 02:01 PM | 1 Like Like |Link to Comment
  • Here's Why Apple Is Weak Since Earnings [View article]
    Here's how many Macs Apple sold in the first two qtrs of each year going back to 2010

    2010... 6.3 million
    2011... 7.9 million
    2012... 9.2 million
    2013... 8.0 million
    2014... 8.8 million
    2015. 10.0 million

    There was a spike in 2012, but the trend shows pretty clear growth. Sales are up 59% since 2010 and 13.6% in the last year. Not sure how this can reasonably be defined as "stagnant".

    Here's the same category using trailing 4 qtrs

    2010... 12.0 million
    2011... 15.2 million
    2012... 18.1 million
    2013... 17.0 million
    2014... 17.2 million
    2015... 19.5 million

    Again, it shows up 62% since 2010 and up 13.4% YoY. The data is pretty clear that Mac sales are not stagnating.

    You can say whatever you want about how the trend line will be broken or what will happen in the future, but you can not reasonably characterize the present state of Mac sales as "stagnating".
    May 10, 2015. 01:28 PM | 5 Likes Like |Link to Comment
  • Here's Why Apple Is Weak Since Earnings [View article]

    There is actually a lot more disagreement here than you think.

    You say if companies aren't making money, they will increase the price. That is not true. In commodity markets, they can not afford to raise the price. Chrome books, like net books, are a race to the bottom. The biggest companies like Samsung will hang on in an effort to force other companies out of the market. These other companies won't "raise prices". They'll just go under. Do remember Gateway computers?

    Market share doesn't matter if you are making no (or almost no) money. The only way to keep a business alive is to make profits. I know in the era of Amazon, this sounds like nonsense, but it isn't. Eventually profits are King.

    I agree with you that the winner here is Google and not the vendors selling these devices. They can afford not to make money on the front end because they make it up on the back end. Google is a company that makes money selling ad space. The larger their platform for selling clicks to advertisers, the better position they are in.

    I never argued, nor do I believe that "Android will go out of business." I don't even know what that sentence means.

    But as far as Apple goes, it is actually selling more computers year over year. And as it is the only one making any real profit per unit, it is coming to dominate the computer space. Other vendors sell more, but Apple is making a very large slice of the profit pie. So inexpensive thin clients are not a threat to them. Google can dominate the low end of the market at the expense of the hardware manufacturers, and this doesn't hurt Apple one bit.
    May 9, 2015. 06:48 PM | 2 Likes Like |Link to Comment
  • Apple's Search Opportunity [View article]
    Seeking Alpha has said that it is working on an "ignore" function. I expect that will change the Seeking Alpha experience greatly. I can't wait.
    May 9, 2015. 04:41 PM | 3 Likes Like |Link to Comment
  • Here's Why Apple Is Weak Since Earnings [View article]
    That sounded more snippy than I wanted it to. The last question should read, "Do you understand why I think that is important?"
    May 9, 2015. 02:53 AM | 1 Like Like |Link to Comment
  • Apple Inc.'s 30 Year Bond Issue: Good Value, Not Great Value [View article]

    I won't pretend I know as much about the topic as you do. I'm not even in the same ballpark. But Apple has a huge cash pile. It is taking on debt to leverage those foreign reserves. And it still has way more cash than debt.

    It is hard for me to think that only having $100b net "cash" is really a risk.

    Some folks argue they should be putting that money to work, but I think most of those people don't really appreciate how much money $100b is. Apple makes its strategic acquisitions at the dollar store. To spend this money on a huge takeover just to spend it would be money wasted. And any other strategic use of its cash like investing for return instead of capital preservation would carry its own risks.

    Buying back its own undervalued stock makes a great deal of sense. Is the stock undervalued? Well the average purchase price of buybacks to date is $85, so I think the answer so far is clearly yes. They could implement the last third of the buyback at 150 and the average price would still be below 110.

    What is the alternative? Repatriate the funds to buy back stock without debt and take a 26%+ hit in taxes? Doesn't sound smart. Should they sit on $194 billion in case they hit rough waters? That sounds excessive to me.

    What would you like to see Apple do with the money? I'm asking because you obviously know a lot about debt markets and you clearly have a view of the issue that I have no experience with.
    May 9, 2015. 02:50 AM | 3 Likes Like |Link to Comment