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Thomas903

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  • Analysis Of Apple's Gross Margin Through The Past 4 iPhone Product Cycles [View article]
    I agree with this statement ("It is one of the best ways to tell if the company is experiencing pricing pressure"), but it is an antiseptic way of expressing the idea.

    When investors examine Apple's margins, they're looking for evidence that competition from Samsung and other Android smartphone makers is forcing down the price of iPhone.  The other half of Apple's profit margin (the cost side) is under (fairly) tight control.  Margin compression is a leading indicator that Apple's "moat" has been breached by other phone makers.

    The current article provides a useful adjustment to the cost side of the equation, so now the profit margin reveals more about Apple's competitive situation than formerly.
    Aug 20 08:44 AM | Likes Like |Link to Comment
  • Apple: A Low-Risk Bet On $130B Of Earnings Within 10 Years [View article]
    @paulsuzuki- I agree with you in theory that "one misstep or a disruptor in smartphones" could upset the iApplecart.  However, Apple introduced Mac OS in 1984, and the PC industry is still standardized on the Windows metaphor that Microsoft "borrowed" from Apple in the '90s.  And OSX computers have steadily gained market share over the past decade, due both to the OS and superior computer features and design. Later Apple introduced iPhone/iOS in 2007 and competitors copied from it (most notably Google and Samsung), and those designs (with updates) are still the industry standard. In short, Apple has dominated in the design of small computer operating systems for 30 years, and despite lots of "what-ifs" it is still setting the agenda in its market. 

    Finally, I would add that OSX and iOS are more secure than competing OS's, and in this era security is a big deal.

    In theory you are right. In practice, your assumptions are pulled out of the air and have no predictive value.  Try again in 10 years.
    Jul 18 09:21 PM | 11 Likes Like |Link to Comment
  • Kinder Morgan Insider Trading: Richard Kinder Drops $70 Million [View article]
    @Sean - Today, KMI's dividend is 5.1%. To generate $400 million in dividends annually, one would need to own shares valued at:

    $400m/0.051
    = $7.8 billion.

    On Feb. 24, Peter Kinder reports owning 231.9 million shares. Valued at today's share price ($32.35), those shares are valued at $7.5 billion -- pretty close to the required $7.8 billion. If you count dividends from Kinder's other Kinder holdings (KMP, KMR, EPB), he probably does receive more than $400 m.

    However, your comment that "this is less than dividend investment" suggests that Kinder's recent investment in KMI is no big deal. If you're holding $400 million in your hot hands, you don't put it into KMI unless you have conviction in the company's future.  And you don't continue holding $7.5 billion worth of shares, either.
    Mar 5 11:38 AM | 8 Likes Like |Link to Comment
  • Apple Outguns Intel [View article]
    @hongcarol - Great article! But you should have supplied a teaser ...

    "Just after Jobs had resigned as CEO of Apple [August 2011] ... we got to talking about why Apple is so well-positioned in the post-PC era, and this executive zeroed in on something you don’t hear too often. 'Steve Jobs told me he has 1,000 engineers working on chips,' he said. 'Getting low power and smaller is the key to everything.'"

    The article contains other comments that are bullish on Apple's future.
    http://tcrn.ch/MAmrc8
    Feb 28 12:25 PM | 3 Likes Like |Link to Comment
  • Inventory Risks Loom For Apple [View article]
    Channel inventories are positively related to the number of individual retailers selling iPhones, because each retailer needs to hold its own stock.  If nothing else, the earlier launch of iPhone in China (China Telecom, China Unicom) in 2013 NECESSARILY requires larger iPhone inventories than in 2012.

    The launch of the China Mobile iPhone this quarter will have the same effect, so Mr. Blair can update the current article to bemoan Apple's growing inventories following the April earnings report.
    Feb 22 11:03 AM | 6 Likes Like |Link to Comment
  • Samsung Is Building An Army To Fight Apple [View article]
    Final paragraph: "We, as a society, might need to start thinking of a different system to encourage innovation, one that doesn't involve decades of courtroom fights and billions of dollar spent for nothing-other than the enrichment of law firms."

    Exaggerate much?  a) "Decades" of courtroom fights and b) "Billions" spent for nothing "other than the enrichment of law firms."

    It is true that legal wrangling consumes resources, but the current "patent wars" represent a short-term phenomenon rather than a permanent state of affairs. Society doesn't need the author's recommended "different system" for patents.
    The introduction of iPhone in 2007 and other smartphones at about the same time created a new product category where patent laws had never before been applied.

    Thus, for a few years courts and the smartphone industry are experiencing a transition phase when the "rules of the road" are being established in a series of legal battles. During this precedent-setting phase, most legal battles are about more than the patent-in-suit: Today's verdict establishes guidelines and perspectives that will apply in future patent controversies, too -- controversies that may represent 10x or 100x as much economic value as the current suit. For that reason, both patent holders and patent abusers often display a spare-no-expense attitude when engaging legal talent and pursuing the appeals process.

    But that will all come to an end after a series of lawsuits and appeals have concluded in the USA and abroad. After 2015, let's say, patent rights will be better defined and understood, so courts dispense with cases more quickly and parties to patent disputes will negotiate settlements more easily.

    The legal system needs a few years to catch up with the rapid technological changes associated with the revolution in mobile computing. That does not mean the legal system is broken.
    Feb 6 01:05 PM | 1 Like Like |Link to Comment
  • Apple's Sell-Off Is An Opportunity... To Sell [View article]
    The weakness of the DCF model is that one can generate at any value for the company by varying the earnings growth rate and discount rate. Really solid reasons must be given to support any earnings growth rate or discount rate used in the model, and if you can't provide those reasons then you shouldn't use the model. Other than selecting/justifying those two rates, the DCF model is a mathematical exercise, not economic/financial analysis.

    Analysis based on assumptions like these has no value to investors: "I used my own estimates regarding dividend growth and the discount rate of 10%."
    Feb 4 11:24 AM | 1 Like Like |Link to Comment
  • Apple's China Mobile Problem [View article]
    @BillTetley - Right you were! Only 3-4 days after this article appeared in SA, China a Mobile and Apple announced the deal. The article was pure speculation.
    Dec 23 09:46 PM | Likes Like |Link to Comment
  • Proof That Pandora's Growth Is Over [View article]
    @dgulick -
    We interpret these issues differently.  If P could succeed by charging membership fees (as you say), it wouldn't have eliminated fees only seven months after instituting them.

    Most telling is your final paragraph: "Regarding growing competition, these newcomers only legitimize P's business model."  Let's get this straight: Firms prosper more when there is LESS competition, not more.  If P shareholders could choose whether to have more or less competition, they would clearly choose less.  Its growing number of competitors means that Pandora's potential market share and profit margins are both shrinking.  This is basic microeconomics.
    Dec 9 07:31 PM | 3 Likes Like |Link to Comment
  • Proof That Pandora's Growth Is Over [View article]
    @dgulick -
    Yes, P is growing like mad.  But it is only growing about 1/3rd as rapidly as a year ago.  IF that trend continues, then by late 2014 the growth rates will be in the range of 5-6%.

    .......Tot. hours ... %∆y/y ... "Active" ... %∆y/y
    ======================...
    Dec'12 ... 1.39B... 54% ... 67.1m ... +41%
    Jan'13 ... 1.39B ... 47% ... 65.6m ... +38%
    Feb'13 ... 1.38B ... 42% ...67.7m ... +37%
    > Heavy users required to subscribe.
    Mar'13 ... 1.49B ... 40% ... 69.5m ... +36%
    Apr'13 ... 1.31B ... 24% ... 70.1m ... +35%
    May'13 ... 1.35B ... 22% ... 70.8m ... +33%
    Jun'13 ... 1.25B ... 17% ... 71.1m ... +30%
    July'13 ... 1.28B ... 14% ... 71.2m ... +30%
    Aug'13 ... 1.35B ... 16% ... 72.1m ... +28%
    Sep'13 ... 1.36B ... 18% ... 72.7m ... +25%
    > Subscriptions eliminated. iTR goes mainstream.
    Oct'13 ... 1.47B ... 18% ... 70.9m ... +20%
    Nov'13 ... 1.49B ... 18% ... 72.4m ... +16%

    What I notice is that since April the relationship has reversed between total listener hours and the number of active listeners.  If listener hours grow more rapidly than active listeners, then P is gaining traction with casual users.  After March, however, listener hours have not grown as rapidly as active user numbers.  That suggests casual listeners are migrating away from Pandora.  The chart suggests that this development can be explained by P's imposition of subscriber fees.  P recently removed those fees, so in November total hours again grew slightly faster than active users.  But the experience strongly suggests that membership fees will not be an option going forward.  Pandora depends on ad revenue for its survival.

    Growing competition (Apple, Google, Spotify, etc.) is one thing standing in the way.  A second is that Pandora has little expertise or infrastructure in place for selling ads in local markets.  A recent survey found that most radio listeners still prefer traditional commercial radio and that local advertisers prefer commercial radio stations for their ads.  It has even less ability to sell ads in overseas markets.

    I am not debating whether Pandora's algorithm is superior to those of competitors, but a superior technology does not always translate to a successful business model or a sound investment.
    Dec 9 10:43 AM | 2 Likes Like |Link to Comment
  • Fighting Apple Is Like Fighting The Fed [View article]
    @Bill Maruer - You note that Apple "can't use foreign cash for [its] buyback and dividend."

    An an alternative, could Apple establish an overseas investment fund overseas and use its foreign earnings invest in AAPL shares?  That would allow Apple, as investor, to generate income from dividends and capital gains on the shares that it holds. 

    That wouldn't reduce the number of shares outstanding or trigger an immediate increase in AAPL's EPS.  However, the overseas investment fund would generate earnings on its AAPL portfolio, and those earnings would gradually contribute to EPS.

    Thanks for sharing your insights.
    Nov 20 09:16 PM | Likes Like |Link to Comment
  • Intel Vindicated, Very Competitive With Apple's A7 [View article]
    I appreciate the facts and analysis presented in the article.  However, it was written from the perspective of an engineer: Which processor is faster? Which processor consumes less power?

    These are important metrics, but are not related in to their everyday use in tablets and smartphones, where they are seldom called upon to perform at their full potential.

    For example, consider the chart comparing power consumption between the A7 and A6 processors of Apple. The A7 is much faster than the A6, uses less power than the A6 for the first 10 seconds, and uses far more power than the A6 after 10 seconds.  The impression I get from the chart is that the A7 will exhaust the battery far more quickly than the A6.

    But it doesn't, because in actual practice neither the A7 or the A6 typically run at full speed for extended periods.  So the iPhone 5s is far faster and more powerful than the iPhone 5, and its battery lasts just as long.

    I don't intend this as a criticism of the current article or its author, but of comparisons that use metrics focused entirely on the "ability to perform" side of the equation while completely ignoring the "desired performance" side.

    Apple's success is built on focusing on the needs of consumers rather than on the metrics of interest to engineers.  Engineers should take the hint and compare processors in the relevant operating range rather than under extreme conditions.  Such tests can provide far more insight about which technologies are likely to prevail in the marketplace.
    Nov 19 12:00 PM | 1 Like Like |Link to Comment
  • Apple's Italian Tax Woes Are Just The Tip Of The Iceberg [View article]
    The laws described here are equivalent to tariffs on Italian/French imports, and it appears they are targeted on mobile computing and complementary industries.

    Apart from the transfer of corporate cash to government coffers, the taxes will provide modest profit boosts to Italian/French companies competing with Silicon Valley. By taxing imports, however, it will also increase the cost of mobile computing for consumers and business in Italy/France. So their lives will be less satisfying and their economies will be less robust.
    Nov 17 07:11 PM | 1 Like Like |Link to Comment
  • Pandora Metrics Continue To Deceive [View article]
    @dgulick - I am a new investor in P, and after your comment was able to track down earlier reports on listener hours, etc.  However, listener behavior is (according to P) highly seasonal and P's website only provides metrics going back to December '12, so it is difficult to interpret the impact of iTR on P's business with the data posted at P's website.

    For those interested in seeing the numbers in one place, here are the most recent 11 monthly reports from P (investor.pandora.com/...

    .......Tot. hours ... %∆y/y ... "Active" ... %∆y/y
    ----------------------...
    Dec'12 ... 1.39B... 54% ... 67.1m ... +41%
    Jan'13 ... 1.39B ... 47% ... 65.6m ... +38%
    Feb'13 ... 1.38B ... 42% ...67.7m ... +37%
    > Heavy users required to subscribe.
    Mar'13 ... 1.49B ... 40% ... 69.5m ... +36%
    Apr'13 ... 1.31B ... 24% ... 70.1m ... +35%
    May'13 ... 1.35B ... 22% ... 70.8m ... +33%
    Jun'13 ... 1.25B ... 17% ... 71.1m ... +30%
    July'13 ... 1.28B ... 14% ... 71.2m ... +30%
    Aug'13 ... 1.35B ... 16% ... 72.1m ... +28%
    Sep'13 ... 1.36B ... 18% ... 72.7m ... +25%
    > Subscriptions eliminated.  iTR goes mainstream.
    Oct'13 ... 1.47B ... 18% ... 70.9m ... +20%

    Observations suggested by the data and by comments from P's management: 

    1- A year ago, P was experiencing growth of about 50% year-over-year in listener hours.  Mainly as a result of capping listener hours (and implementing subscription fees), y-o-y growth fell to about 1/3 that rate (about 15-16-17% growth).

    2- Growth in total listening hours has historically exceeded growth in the number of "active" listeners by a significant margin (see Dec.'12-Feb.13). That means P was continually attracting new customers to its brand.  Recently, however, listening hours is growing at about the same rate as active users, so P is has been successful in attracting new customers.

    > If the % growth figures (listening hours, active users) decline as rapidly over the coming 10 months as they've fallen over the past 10, by next August they will be about 0%.

    3- Trends since March '13 suggest that the heaviest users of P --- offices and retail stores who stream the service on all day --- are apparently reluctant (or unwilling) to pay subscription fees.  Because multiple people share P's broadcasts in commercial settings, the number of people listening has been impacted relatively more than the number of listening hours or active users reflected in P's metrics. (The number of people listening -- rather than hours of music streamed or the number of active accounts --is the key metric for advertisers.)

    4- The hit to P's financial results from eliminating the 40-hour limit isn't immediately observable in P's financial reports, since revenues are still being received from those who subscribed in spring-summer.  When their subscriptions are up, P revenue will drop below current levels.

    5- Prior to the advent of iTR, most paying subscribers of P's services were iOS users, while Android users were less likely to subscribe to P (source: press release of Oct. 28).  Thus, iTR poses a greater threat to P's revenues than is reflected in hours of music streamed.  (The shift in P's audience reduces the usefulness of P's metrics for interpreting its business prospects.)  Also, the typical Android user spends less in general, which makes him/her less appealing for advertisers.

    6- In recent weeks, a growing number of companies (apart from Apple) have said they will begin streaming online radio to compete with P.  Google is the most notable.  These new operators may cause P's listener metrics to decline further in coming months.

    7- The removal of the 40-hour limit in September (after implementing that limit only 6 months earlier) signals concern by P's management that iTR will attract listeners away from P.  Yet, at the same time they were doing that, P was telling reporters and stock analysts that iTR was actually good for P's business.  This double-speak does not give me confidence that P's management is shooting straight with shareholders.
    Nov 7 12:15 PM | 1 Like Like |Link to Comment
  • Pandora Metrics Continue To Deceive [View article]
    @tenplustwo - The fact that Pandora posted out-of-date listener metrics signals that company officials, themselves, view recent listening trends in a negative light.
    Nov 5 07:59 PM | Likes Like |Link to Comment
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