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Apple could use 'a Siri-like moment' at next week's iPhone event, Barclays says - Page 2

post #41 of 67
Quote:
Originally Posted by SpamSandwich View Post

When it's September 10 during the Apple event in California, it'll be September 11 in China, folks. There is no "China specific event". It's the same product introductions in Chinese.

 

And mirrored as well in two other cities from what I've read.

post #42 of 67
In other words, Apple needs to inflate the stock bubble.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #43 of 67
Quote:
Originally Posted by pazuzu View Post

The "Wow" will be the fingerprint recognition.

Nope. Because you're expecting it. Apple can't wow anyone because rumor sites keep stealing their thunder. Or worse: creating false expectations that were never true. Hope AppleInsider is proud of themselves.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #44 of 67
How about if companies like Apple worry about making products that please their customers (and potential customers)... and NOT Wallstreet?!?!

I'm sick of all of the news and buzz generated by the "analysts" who are "disappointed" in a company's performance because THEY think a new product launch isn't interesting enough.

Go fly a kite... and wait and see what CONSUMERS actually think.

The world would be a much better place, and our lives would be improved by much better products, if companies spent more time making sure their products excited their customers. Your stock would be worth nothing if we stopped buying your wares.

Remember that... and you'll do just fine.
post #45 of 67
Quote:
Originally Posted by jragosta View Post


Not true.

Apple exists SPECIFICALLY to increase shareholder value. Selling products is the means to accomplish that end - not the end itself.

 

And that's what's wrong with the world.  Companies spend too much time looking over their shoulders to be sure that Wallstreet approves.  It was much better when Wallstreet just watched the companies that were doing well... the companies that made good products that satisfied their customers... and rewarded them by having their stocks increase.  This business of Wallstreet calling the shots stinks.

 

 

Wallstreet doesn't make "products" that people use in their daily lives.

 

Wallstreet doesn't buy the products that companies sell.

post #46 of 67
Quote:
Originally Posted by jragosta View Post

Not true.

Apple exists SPECIFICALLY to increase shareholder value. Selling products is the means to accomplish that end - not the end itself.
Wrong and your response is what is wrong with investors today.
post #47 of 67
Quote:
Originally Posted by macaholic_1948 View Post


Wrong and your response is what is wrong with investors today.

 

With all due respect, he is correct. The purpose of a (for profit) corporation is to enhance and protect shareholder value/wealth. While Apple (and other corporations) may have other goals as well, anything in their mission statements, which contradicts their fiduciary responsibilities to shareholders, can and should be ignored.

 

Some may not like that fact. But as soon as Jobs and the other backers took Apple public, this was the deal they made... whether it was with the devil or not.

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post #48 of 67
Quote:
Originally Posted by Jag_Warrior View Post

With all due respect, he is correct. The purpose of a (for profit) corporation is to enhance and protect shareholder value/wealth. While Apple (and other corporations) may have other goals as well, anything in their mission statements, which contradicts their fiduciary responsibilities to shareholders, can and should be ignored.

Some may not like that fact. But as soon as Jobs and the other backers took Apple public, this was the deal they made... whether it was with the devil or not.

Note the term "investor".

You take a company public to see if people would like to invest in what YOU do.

Obviously there is an obligation to try and provide a return for your investors, but can you imagine if Apple tried to keep every investor happy?
post #49 of 67
Quote:
Originally Posted by iRon man View Post


Note the term "investor".

You take a company public to see if people would like to invest in what YOU do.

Obviously there is an obligation to try and provide a return for your investors, but can you imagine if Apple tried to keep every investor happy?

 

 

One takes a company public in order to raise additional funding and/or to (at least partially) cash out those who invested in the company in its private stage. And yes, it comes down to the number of people that want to invest in the company, or if they are emotional (think Facebook), they may be drawn in by a charismatic personality or hyped story. But whether it's longer term investing or shorter term, the enhancement of wealth is the primary purpose of a public corporation.

 

It really isn't about keeping people "happy". That's just an unquantifiable emotion, which changes from person to person. Return on investment is entirely quantifiable. And comparing a particular stock's return versus another stock or asset class is justified. Buying a stock based primarily on emotion or faith is usually just a good way to lose money... or forcing yourself to rely on luck.

 

I have been a fan of Apple and its products for roughly 30 years. And over that time, I've been in and out of the stock several times. But I try to maintain a wall between my Apple fandom and my assessment of the stock's future prospects. If/when I sell some or most of my AAPL shares, it will just mean that I determined that keeping the money in AAPL wouldn't provide the same level of return as some other investment.

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post #50 of 67
Quote:
Originally Posted by Jag_Warrior View Post


One takes a company public in order to raise additional funding and/or to (at least partially) cash out those who invested in the company in its private stage.

It really isn't about keeping people "happy".
Agreed, return on investment is key. I guess where I'm coming from, is how much influence can you expect from your investment in shares of the company?

If I invested in Apple it would be because I trusted the company and their ability to make good decisions, and importantly 'cause I thought I would make a good return.

I wouldn't expect them to change their decisions based on some investors wanting a bigger, cheaper, or copycat product, unless it met with their plans and overall mission statement.

A quick google search shows apple went public in 1980. How much of their failure or success can be attributed to the shareholder, or the company trying to give shareholders what they think will give more profits?

My point I guess was that it can't be that black and white. Is enhancement of shareholders wealth THE primary purpose of Apple, or is it one of a few primary purposes, or just an expected side effect of running a good profitable business?

Is the primary purpose not to make good products that people want?

Quote:
If/when I sell some or most of my AAPL shares, it will just mean that I determined that keeping the money in AAPL wouldn't provide the same level of return as some other investment.

So it then means enhancement of wealth your primary purpose as an investor?

And the company has a different primary purpose of making huge profits selling great products that people want?
post #51 of 67

I better understand where you're coming from now. And I don't really disagree with your point. No, I don't believe a company should jump through hoops for (activist) investors like Icahn or anyone else. But there is an old saying, when you buy a stock, you're not (really) buying the company. Apple's stock is a good example. The company (AFAIK) is doing just fine. But the stock has been a dog since last year. And what's good for the company or its product offerings may not be good for the stock, or me as an investor. From a fundamental standpoint, the best one can do is try to assess the stock based on the company's financials. On AAPL, at least in the medium term, clearly I was wrong - my 20/20 goggles should have told me to sell in the high 600's. The only thing that makes me feel better is that I had lots (and LOTS) of company. :err:

 

But yes, my primary concern when making an investment is longer term wealth enhancement. Taking that into account, as long as my goals were in sync with the company and its goals, I would probably continue to hold. But if we fell out of sync and I believed that I could make a substantially higher return elsewhere, I would liquidate my Apple holdings and place the money in some other vehicle (whether it be another company's stock, an apartment building or whatever). But I'd still have my mouth watering for that Mac Pro that keeps dancing around in my dreams and I'd still buy myself an iPad Mini Retina for Christmas. I'd still be cheering for the company to be successful.

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post #52 of 67
Quote:
Originally Posted by Jag_Warrior View Post

With all due respect, he is correct. The purpose of a (for profit) corporation is to enhance and protect shareholder value/wealth. While Apple (and other corporations) may have other goals as well, anything in their mission statements, which contradicts their fiduciary responsibilities to shareholders, can and should be ignored.

Some may not like that fact. But as soon as Jobs and the other backers took Apple public, this was the deal they made... whether it was with the devil or not.

No. Apple was created to sell products. Now that it is a public corporation, its job is to sell products. They have a fiduciary interest to investors. That is correct. But, it's job is to sell products. That is the reason people invest ... Because they do a good job selling products to consumers profitably.

If you want to argue further, I would suggest we end up arguing whether the chicken or egg came first. It is a semantics issue at that point. And, in a public company, one can't exist without the other.

My comment also related to my perception that what is wrong with investors today is their focus on immediate return with no consideration to long-term gain.
post #53 of 67
Quote:
Originally Posted by macaholic_1948 View Post


No. Apple was created to sell products. Now that it is a public corporation, its job is to sell products. They have a fiduciary interest to investors. That is correct. But, it's job is to sell products. That is the reason people invest ... Because they do a good job selling products to consumers profitably.

If you want to argue further, I would suggest we end up arguing whether the chicken or egg came first. It is a semantics issue at that point. And, in a public company, one can't exist without the other.

My comment also related to my perception that what is wrong with investors today is their focus on immediate return with no consideration to long-term gain.

 

First, it's not that I posted that to argue with you or anyone else. Second, yes, while Apple was created to sell products, every business is created in order to sell a product or service (at a profit). Apple is hardly unique in that respect. My point is simply that Apple (and every other for-profit, public corporation) seeks (and must seek) to maximize profits as they sell those products. Why do you think Apple has virtually sealed most of its devices and makes even the RAM relatively inaccessible? Margins. If you want an iPhone with higher storage, instead of buying a 64GB chip off Amazon for about $50 and bumping up your 16GB iPhone yourself, you'll pay around $200 to go from 16GB to 64GB. The cost of smartphone memory is down to about 60¢ per gigabyte now. But that RAM premium is a major contributor to Apple's gross profit margins on iPhones of around 50%. In the last quarter of 2012, Apple had approximately 5% of the global PC market, but took 45% of the industry's profits. If they cut their prices or ran sales, wouldn't they sell more iMacs and MacBooks? Sales have been down. Wouldn't that help? No, they care about margins at least as much as volumes... probably more. So no, it's not just about "selling products". It's about selling (and marketing) those products in a way that maximizes profits. And that in itself enhances shareholder wealth. When the stock pops or drops around earnings time, notice that an increase in sales seldom makes up for a drop in margins in the eyes of the market. So they're not just trying to ship as many iPads and iPhones as they possibly can. Unlike Microsoft, BlackBerry and most of the others, you do not see fire sales for Apple products. They would rather underproduce and lose a sale than overproduce and lose margin through discounting.

 

As a shareholder, I applaud Apple's ability to sell its products at optimal profit levels. Apart from its issues in the 90's, it has been a good case study for any business school student in the way it balances meeting and managing customer expectations with maximizing profits - Ferrari would be another one. And I am not suggesting that these traders (calling themselves investors) should cause a company to change its way of doing business. Quite the contrary. But Apple's recent exercises in financial engineering (share buybacks, implementing and increasing the dividend, borrowing from the overseas cash reserves in order to get to the cash in a tax friendly way, where they choose to set up these satellite operations, etc.) have nothing to do with selling product. They have to do with maximizing profits and thereby enhancing shareholder wealth.

 

It's not really an either/or proposition and it shouldn't make Foghorn Leghorn uneasy about having to choose between giving up one of his girlfriends or her eggs to Farmer Brown. It's just a statement regarding the legal and business fact as to why the for-profit, publicly traded, corporate structure was formed to begin with.

 

Peace and have a Merry Christmas.

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post #54 of 67
Quote:
Originally Posted by Jag_Warrior View Post

First, it's not that I posted that to argue with you or anyone else. Second, yes, while Apple was created to sell products, every business is created in order to sell a product or service (at a profit). Apple is hardly unique in that respect. My point is simply that Apple (and every other for-profit, public corporation) seeks (and must seek) to maximize profits as they sell those products. Why do you think Apple has virtually sealed most of its devices and makes even the RAM relatively inaccessible? Margins. If you want an iPhone with higher storage, instead of buying a 64GB chip off Amazon for about $50 and bumping up your 16GB iPhone yourself, you'll pay around $200 to go from 16GB to 64GB. The cost of smartphone memory is down to about 60¢ per gigabyte now. But that RAM premium is a major contributor to Apple's gross profit margins on iPhones of around 50%. In the last quarter of 2012, Apple had approximately 5% of the global PC market, but took 45% of the industry's profits. If they cut their prices or ran sales, wouldn't they sell more iMacs and MacBooks? Sales have been down. Wouldn't that help? No, they care about margins at least as much as volumes... probably more. So no, it's not just about "selling products". It's about selling (and marketing) those products in a way that maximizes profits. And that in itself enhances shareholder wealth. When the stock pops or drops around earnings time, notice that an increase in sales seldom makes up for a drop in margins in the eyes of the market. So they're not just trying to ship as many iPads and iPhones as they possibly can. Unlike Microsoft, BlackBerry and most of the others, you do not see fire sales for Apple products. They would rather underproduce and lose a sale than overproduce and lose margin through discounting.

As a shareholder, I applaud Apple's ability to sell its products at optimal profit levels. Apart from its issues in the 90's, it has been a good case study for any business school student in the way it balances meeting and managing customer expectations with maximizing profits - Ferrari would be another one. And I am not suggesting that these traders (calling themselves investors) should cause a company to change its way of doing business. Quite the contrary. But Apple's recent exercises in financial engineering (share buybacks, implementing and increasing the dividend, borrowing from the overseas cash reserves in order to get to the cash in a tax friendly way, where they choose to set up these satellite operations, etc.) have nothing to do with selling product. They have to do with maximizing profits and thereby enhancing shareholder wealth.

It's not really an either/or proposition and it shouldn't make Foghorn Leghorn uneasy about having to choose between giving up one of his girlfriends or her eggs to Farmer Brown. It's just a statement regarding the legal and business fact as to why the for-profit, publicly traded, corporate structure was formed to begin with.

Peace and have a Merry Christmas.

The question of memory pricing isn't as simple as you make it to be. Apple uses fast NAND, Android manufacturers use slow NAND. Apple uses a controller similar to that of an SSD to control that memory, and their SoC has a fast memory bus.

If you look at pricing for SD and Compact flash cards for camera, you'll see that the fast ones, needed for proper performance in many of the newest, and best cameras, is very expensive. That's the same NAND Apple is using. Check Lexar and Sandisk pricing for their high end cards. You'll be surprised.

Apple isn't making as money off this as people love to think. But in addition, companies don't give parts away at the prices they pay for it. So Samsung may use cheap NAND that costs $25, Apple uses NAND that costs $50. Larger amounts will obviously cost more. Apple could be paying close to $100 for 64GB NAND. And going by normal manufacturers markup for part pricing, that would be at least two times, and more likely three times what they pay for the parts at the consumer end price.

This is normal, and everyone does it, unless they are selling their devices at break-even, or at a loss as Amazon does, and Google is suspected of doing. Considering that only Apple and Samsung are making any real profits here, and that Samsung is the worlds largest memory supplier, including NAND, they have an advantage in pricing. Apple gets it for slightly less because they buy so much, and Samsung has internal pricing, that by law, can be as low as the lowest pricing they would charge a customer, but no lower. Considering that it's Samsung, I wouldn't be surprised if some fancy book keeping is going on there.

So while Apple may be making a bit more profit on their NAND, it's not that much more.
post #55 of 67

As I mentioned, I'm all for companies maximizing their profits - especially if I own their stock. I'm not criticizing the company for that. As a shareholder, I'm very happy about it. Apple does a very good job (probably better than any other company) of managing its supply chain in a way that component costs (and quantities) are kept to optimal levels vs. projected demand. Apple has one of the highest profit margins on hardware for any tech company. I'm happy about that too, just as I am about the $21/share gain today. Apple has amazing profit margins. So does Ferrari. So does the company that I currently work for. Maximizing profits is not a dirty term (at least not in my world). So I'm not sure why the truth of Apple's costs, pricing and profit margins is making people defensive. Again, it's a for-profit corporation, doing what for-profit corporations do - and doing a damn good job of it.

 

As for Apple's memory costs, IHI estimates that the current cost of 32GB of RAM in the iPhone 5S is $18.80. So one would assume it wouldn't be paying more than twice that for 64GB - certainly not five times that amount. IHS has the cost for 64GB of RAM in the 5S at $29 - far from $100. Brian Marshall, a senior managing director at researcher ISI Group, estimates that the mobile memory markup accounted for about one-fourth of Apple’s profit last quarter. Gene Munster of Piper Jaffray puts it at around two-fifths. (This lifted directly from a Bloomberg piece on the topic of Apple's profit margins).

 

This is the investor section of the site. Seems that people here (particularly) should be happy that Apple is kicking @$$ and taking names - not defensively blushing because it's not just a bunch of kind-hearted hippies, building computers for just enough money to buy some more parts and get some food from the local shelter.

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post #56 of 67
Quote:
Originally Posted by Jag_Warrior View Post

As I mentioned, I'm all for companies maximizing their profits - especially if I own their stock. I'm not criticizing the company for that. As a shareholder, I'm very happy about it. Apple does a very good job (probably better than any other company) of managing its supply chain in a way that component costs (and quantities) are kept to optimal levels vs. projected demand. Apple has one of the highest profit margins on hardware for any tech company. I'm happy about that too, just as I am about the $21/share gain today. Apple has amazing profit margins. So does Ferrari. So does the company that I currently work for. Maximizing profits is not a dirty term (at least not in my world). So I'm not sure why the truth of Apple's costs, pricing and profit margins is making people defensive. Again, it's a for-profit corporation, doing what for-profit corporations do - and doing a damn good job of it.

As for Apple's memory costs, IHI estimates that the current cost of 32GB of RAM in the iPhone 5S is $18.80. So one would assume it wouldn't be paying more than twice that for 64GB - certainly not five times that amount. IHS has the cost for 64GB of RAM in the 5S at $29 - far from $100. Brian Marshall, a senior managing director at researcher ISI Group, estimates that the mobile memory markup accounted for about one-fourth of Apple’s profit last quarter. Gene Munster of Piper Jaffray puts it at around two-fifths. (This lifted directly from a Bloomberg piece on the topic of Apple's profit margins).

This is the investor section of the site. Seems that people here (particularly) should be happy that Apple is kicking @$$ and taking names - not defensively blushing because it's not just a bunch of kind-hearted hippies, building computers for just enough money to buy some more parts and get some food from the local shelter.

I really don't care about what companies like IHI, iSupply or others estimate. They know so little about any of this that this numbers are little more than a joke in the industry.

As for Apple's margins, while they are excellent, even the financial industry thinks they should be higher. And they are high when compared to other consumer companies, but not when compared to technology companies overall. Still pretty good, but not at the top.

I was an electronics manufacturer as well, and I find that a lot of what I read as to pricing is nothing more than BS.
post #57 of 67
Quote:
Originally Posted by melgross View Post


I really don't care about what companies like IHI, iSupply or others estimate. They know so little about any of this that this numbers are little more than a joke in the industry.

As for Apple's margins, while they are excellent, even the financial industry thinks they should be higher. And they are high when compared to other consumer companies, but not when compared to technology companies overall. Still pretty good, but not at the top.

I was an electronics manufacturer as well, and I find that a lot of what I read as to pricing is nothing more than BS.

 

 

No offense intended, Mel, but if Apple is indeed, as you claim, paying nearly 500% more for RAM in its mobile devices than is being estimated by various sources, then where exactly is the company's iPhone profit margin coming from? Unless certain Apple employees lied under oath during the court proceedings against Samsung, Apple earned gross margins of 49 to 58 percent on its U.S. iPhone sales between April 2010 and the end of March 2012.

 

"So while Apple may be making a bit more profit on their NAND, it's not that much more."

 

You seem to be saying that the premium charged for installed RAM is not a major contributor to the company's profits - not the 25% contributor that Marshall estimates and certainly not the 40% that Munster estimates. OK, so how much of a contributor, if any, do you think that premium represents? And can you provide any objective or reasonably substantiated data which would support your estimate or conclusion? Other than what I read from various sources, I really don't know. But I'd be anxious to learn that what is being estimated really is wide of the mark - truly, I would. So if true, then either Apple is making/saving a mint from other components buys and/or labor costs, reporting gross margins that are not accurate (engaging in fraud) or the company has some major, high ROI sideline businesses that we don't know about.

 

My own guess, based on the reality of what is going on: I figure that whatever Apple's exact percentage markup is on RAM, it likely is quite healthy. Otherwise there would be no real reason to seal off devices or make RAM hard/impossible to get to. If you were just making chump-change off it, why bother over a few cents/GB? Is there anything wrong/criminal/immoral/unethical about doing that? No! Why are people being so defensive about it? I don't know. Maybe Ralph Nader used to be  a member here and he ruffled some feathers or something. :D

 

Merry Christmas, folks.

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post #58 of 67
Quote:
Originally Posted by Jag_Warrior View Post


No offense intended, Mel, but if Apple is indeed, as you claim, paying nearly 500% more for RAM in its mobile devices than is being estimated by various sources, then where exactly is the company's iPhone profit margin coming from? Unless certain Apple employees lied under oath during the court proceedings against Samsung, Apple earned gross margins of 49 to 58 percent on its U.S. iPhone sales between April 2010 and the end of March 2012.

"So while Apple may be making a bit more profit on their NAND, it's not that much more."

You seem to be saying that the premium charged for installed RAM is not a major contributor to the company's profits - not the 25% contributor that Marshall estimates and certainly not the 40% that Munster estimates. OK, so how much of a contributor, if any, do you think that premium represents? And can you provide any objective or reasonably substantiated data which would support your estimate or conclusion? Other than what I read from various sources, I really don't know. But I'd be anxious to learn that what is being estimated really is wide of the mark - truly, I would. So if true, then either Apple is making/saving a mint from other components buys and/or labor costs, reporting gross margins that are not accurate (engaging in fraud) or the company has some major, high ROI sideline businesses that we don't know about.

My own guess, based on the reality of what is going on: I figure that whatever Apple's exact percentage markup is on RAM, it likely is quite healthy. Otherwise there would be no real reason to seal off devices or make RAM hard/impossible to get to. If you were just making chump-change off it, why bother over a few cents/GB? Is there anything wrong/criminal/immoral/unethical about doing that? No! Why are people being so defensive about it? I don't know. Maybe Ralph Nader used to be  a member here and he ruffled some feathers or something. 1biggrin.gif

Merry Christmas, folks.

I'd have to look to see whether I said it here earlier, but normal markup for parts in manufacturing are between two and three times. This is what every manufacturer does. It's standard.

If parts to manufacture a product come to $200, we can expect that to sell for $600, maybe more. But I don't rely on what those companies say, because they get it wrong so often. We read about Apple. Asking very high profits on some items because of memory, or some such thing. But none of these companies actually know what Apple pays for it, or even in some cases, exactly what parts they are using. Often, parts, including memory has numbers on it that doesn't exactly match the manufacturer's designations, meaning that they are parts specific to Apple. Once you see that, all gets are off.

I can tell you that if you go to Anandtech, you will sometimes see in his reviews that the memory buss speeds, and the speeds of the RAM and NAND are mentioned as being substantially faster than that I'd Android devices. It's obviously faster devices that Apple is buying, and therefor at higher prices. iSupply, and these other companies seem to assume that Apple is buying the same memory as everyone else, including the memory in substantially cheaper devices. Ever think of why those devices are so much cheaper? One reason is that some companies are forgoing profits, and another is that they use cheaper parts.

A 64GB compact Flash card from Lexar, Sandisk and others can cost $300 for the fastest speeds. These prices aren't unusual. Why shouldn't Apple charge the same thing?
post #59 of 67
Quote:
Originally Posted by melgross View Post
A 64GB compact Flash card from Lexar, Sandisk and others can cost $300 for the fastest speeds. These prices aren't unusual. Why shouldn't Apple charge the same thing?

 

I'm not aware that I have ever suggested that they should not. So, I continue to be completely baffled as to why people are being so defensive about Apple's profit margins. This simply supports my original point that the primary purpose of the corporate structure (whether it's Apple, Google, Microsoft or Ford Motor Company) is to enhance shareholder value... profits. The Econ 101 supply & demand lesson is that pricing strategies typically follow charging what the market will bear. And Apple, like Ferrari and certain high end retailers, seemingly has a greater interest in margins than volumes. Amazon, for instance, has quite the opposite approach.

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post #60 of 67
Quote:
Originally Posted by Jag_Warrior View Post

This simply supports my original point that the primary purpose of the corporate structure (whether it's Apple, Google, Microsoft or Ford Motor Company) is to enhance shareholder value... profits.

No no no no no...

I thought this was covered earlier?

It cannot be the (one and only) primary purpose.

From what seems obvious about apple, they value a good product above shareholder profits?
post #61 of 67
Quote:
Originally Posted by iRon man View Post


No no no no no...

I thought this was covered earlier?

It cannot be the (one and only) primary purpose.

From what seems obvious about apple, they value a good product above shareholder profits?

 

It appears that is a question. I would say that Apple has a well deserved reputation for producing well designed, higher quality computer and consumer products and for delivering a high level of customer service. And it does these things at a very comfortable profit margin. These things are not mutually exclusive, as some seem to be suggesting. Unlike Amazon, Apple does not sacrifice margins in order to capture market share. Apple has some low volume products (Mac Pro), but I'm not aware of any low margin products. Do you know of any??? I had an Apple printer in the early 90's. I thought it was a really good product. Why can't I buy an Apple brand printer now? I mean, just because the printer business is low margin and commoditized, shouldn't Apple just be focused on getting its customers the best printers possible? I've burned through two printers in the past year. Why doesn't Apple show HP and Lexmark how it's done? Given the choice of selling printers at a loss, it's more likely that Tim Cook and Peter Oppenheimer would just take stacks of $100's outside the big mothership HQ and set them on fire.

 

I have no doubt at all (because I have already seen it) that if there is a "good" product, but one which no longer generates acceptable profit margins, Apple will kill it faster than a fat kid can eat a chocolate cupcake.

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post #62 of 67
Quote:
Originally Posted by Jag_Warrior View Post

I'm not aware that I have ever suggested that they should not. So, I continue to be completely baffled as to why people are being so defensive about Apple's profit margins. This simply supports my original point that the primary purpose of the corporate structure (whether it's Apple, Google, Microsoft or Ford Motor Company) is to enhance shareholder value... profits. The Econ 101 supply & demand lesson is that pricing strategies typically follow charging what the market will bear. And Apple, like Ferrari and certain high end retailers, seemingly has a greater interest in margins than volumes. Amazon, for instance, has quite the opposite approach.

Again, you're pretending that this is almost all profit, when it isn't. So, it's fine to say that you don't mind that it's almost all profit, when it isn't almost all profit.

I was a partner in a professional audio manufacturing concern. I designed products. When you look at parts cost, you are only looking at a small portion of the costs, often one of the smallest parts. Most products are priced at between 2.5 and 3.5 times the parts cost. That's just to get good, but not exceptional, margins.

We've had these discussions over the years here.

There are so many costs involved in running a company, that they can easily be twice the cost of the parts that go into a product. So we charge that much more to break even, and make a profit. If Apple pays $100 for that NAND, not the $18 some of these moronic companies state, and charge $300, that's about right for a good 20% profit margin. How often have Samsung's mobile devices been said to resemble toy quality? Many times. Google makes no profit on the Nexus, and Amazon takes a loss.

So Apple gets compared to these companies, and vast profits are assumed in some places, but it's not true. So when Anandtech reviews these products and notes that Apple's storage subsystem is much faster than that of any Android or Win Phone device, and has a greater memory bandwidth, with faster NAND, and a drive controller, which these other devices don't use, as they use the simple, and slower interface that USB memory sticks use, you can see that Apple has a more expensive system in place, and it shows in the performance.

So when these companies take Apple's products apart and comment on the parts, esp. the parts with exclusive Apple numbers, they just show their ignorance. Unfortunately, as usual, Apple refuses to take part in the games they play, so some people, such as yourself, believe what you read from them, thinking that they must be totally objective and knowledgable, when they are neither.
post #63 of 67
Quote:
Originally Posted by Jag_Warrior View Post


No offense intended, Mel, but if Apple is indeed, as you claim, paying nearly 500% more for RAM in its mobile devices than is being estimated by various sources, then where exactly is the company's iPhone profit margin coming from? Unless certain Apple employees lied under oath during the court proceedings against Samsung, Apple earned gross margins of 49 to 58 percent on its U.S. iPhone sales between April 2010 and the end of March 2012.

"So while Apple may be making a bit more profit on their NAND, it's not that much more."

You seem to be saying that the premium charged for installed RAM is not a major contributor to the company's profits - not the 25% contributor that Marshall estimates and certainly not the 40% that Munster estimates. OK, so how much of a contributor, if any, do you think that premium represents? And can you provide any objective or reasonably substantiated data which would support your estimate or conclusion? Other than what I read from various sources, I really don't know. But I'd be anxious to learn that what is being estimated really is wide of the mark - truly, I would. So if true, then either Apple is making/saving a mint from other components buys and/or labor costs, reporting gross margins that are not accurate (engaging in fraud) or the company has some major, high ROI sideline businesses that we don't know about.

My own guess, based on the reality of what is going on: I figure that whatever Apple's exact percentage markup is on RAM, it likely is quite healthy. Otherwise there would be no real reason to seal off devices or make RAM hard/impossible to get to. If you were just making chump-change off it, why bother over a few cents/GB? Is there anything wrong/criminal/immoral/unethical about doing that? No! Why are people being so defensive about it? I don't know. Maybe Ralph Nader used to be  a member here and he ruffled some feathers or something. 1biggrin.gif

Merry Christmas, folks.

You mistake gross margins for profit. Don't do that. Their profit on these phones is closer to 20%, which is certainly good, but not up to industrial standards, such as Cisco routers, with a 60% gross margin, and a 35% profit. Or Microsoft's gross margins of 78% and 27% profit, which would have been even higher if it were not for the huge losses from the XBox and Bing operations, plus the losing Surface and Win Phone areas.

So Apple makes a good profit. One that is envied by other companies whose sales are predicated in making cheaper products over all, but their profits aren't THAT high, even for the iPhone.
post #64 of 67
Quote:
Originally Posted by melgross View Post


Again, you're pretending that this is almost all profit, when it isn't. So, it's fine to say that you don't mind that it's almost all profit, when it isn't almost all profit.

 

Absolutely no where did I say or suggest that Apple's pricing on ANYTHING constituted "almost all profit." Mel, you're now creating strawmen and forming their (your) arguments as mine. If that is your (mis)interpretation of what I believe or have said here, then I am led to believe that with this error in judgment, you may also be making errors in estimating what Apple does or does not pay for this, that or the other thing.

 

What exactly has been said by me (not some alternate, make-believe version of me) that you are disputing?

 

Do you dispute this?

The Econ 101 supply & demand lesson is that pricing strategies typically follow charging what the market will bear.

 

Do you dispute this?

Apple, like Ferrari and certain high end retailers, seemingly has a greater interest in margins than volumes. Amazon, for instance, has quite the opposite approach.

 

Do you dispute this?

I figure that whatever Apple's exact percentage markup is on RAM, it likely is quite healthy.

 

In reporting earnings and especially during the court trial, are you saying that Apple and its employees committed perjury when they detailed profit margins under oath???

 

I'll say again: believe me, I really mean no offense toward you. But whether you have worked in the computer industry for a day or a decade, what objective evidence have you provided that suggests that you really know what Apple pays for components any more than the people at IHS or ISI Group??? You said that you don't care what anyone else says... apparently you know more than they do and your estimates are closer to the mark than Gene Munster's or Brian Marshall's estimates. I'm sorry, but despite your claims of industry experience, I have no real reason to believe that you know any more, and possibly not as much, about Apple's component costs as the analysts. That's not a poke at you - it's just that short of some objective, verifiable data being delivered by you, I have no reason to believe you over them. Why would I? I hope you understand that. And that you've attempted to inaccurately twist my words and beliefs... ya know, that doesn't help either. Demonstrating that one has an agenda tends to make people a bit suspicious.

 

Mel, may I ask you something of a personal nature? I am a strong believer in capitalism and market based pricing. To me, the word "profits" is not a dirty word. From my time in banking to the restructuring-focused work I do now for manufacturing based companies, the pursuit of profits (whether through increased pricing or mitigation of costs/losses/expenses) has been my career mission. You seem to be going to great lengths here to downplay Apple's (already publicly stated) profit margins. Why is that? Do you think that profits are something that one should be ashamed of? Do you feel that if it's shown that Apple does indeed have a "healthy profit margin" on RAM and other components, it's a suggestion that they are gouging their customers? Is that it? I really am a bit confused about this level of defensiveness.

 

As a consumer, I purchase what works best for me at the lowest price possible. But as a shareholder or owner of an asset, I support profit enhancement, as long as it does not jeopardize longer term growth. How I could be any clearer about my (actual) beliefs, I do not know.

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post #65 of 67
Quote:
Originally Posted by melgross View Post


You mistake gross margins for profit. Don't do that. Their profit on these phones is closer to 20%, which is certainly good, but not up to industrial standards, such as Cisco routers, with a 60% gross margin, and a 35% profit. Or Microsoft's gross margins of 78% and 27% profit, which would have been even higher if it were not for the huge losses from the XBox and Bing operations, plus the losing Surface and Win Phone areas.

So Apple makes a good profit. One that is envied by other companies whose sales are predicated in making cheaper products over all, but their profits aren't THAT high, even for the iPhone.

 

I appreciate that, Mel. But I think I proved that I had a pretty decent handle on the difference between gross and net when the nice people at the Darden School of Business handed me my MBA a couple decades ago (my, how time flies). As a matter of fact, when I sold my first steer at auction and my dad handed me the net profits, and I had been shopping for a new 10-speed bike based on the gross, that cemented it as well as anything. ;) 

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post #66 of 67
Quote:
Originally Posted by Jag_Warrior View Post

Absolutely no where did I say or suggest that Apple's pricing on ANYTHING constituted "almost all profit." Mel, you're now creating strawmen and forming their (your) arguments as mine. If that is your (mis)interpretation of what I believe or have said here, then I am led to believe that with this error in judgment, you may also be making errors in estimating what Apple does or does not pay for this, that or the other thing.

What exactly has been said by me (not some alternate, make-believe version of me) that you are disputing?

Do you dispute this?
The Econ 101 supply & demand lesson is that pricing strategies typically follow charging what the market will bear.

Do you dispute this?
Apple, like Ferrari and certain high end retailers, seemingly has a greater interest in margins than volumes. Amazon, for instance, has quite the opposite approach.

Do you dispute this?
I figure that whatever Apple's exact percentage markup is on RAM, it likely is quite healthy.

In reporting earnings and especially during the court trial, are you saying that Apple and its employees committed perjury when they detailed profit margins under oath???

I'll say again: believe me, I really mean no offense toward you. But whether you have worked in the computer industry for a day or a decade, what objective evidence have you provided that suggests that you really know what Apple pays for components any more than the people at IHS or ISI Group??? You said that you don't care what anyone else says... apparently you know more than they do and your estimates are closer to the mark than Gene Munster's or Brian Marshall's estimates. I'm sorry, but despite your claims of industry experience, I have no real reason to believe that you know any more, and possibly not as much, about Apple's component costs as the analysts. That's not a poke at you - it's just that short of some objective, verifiable data being delivered by you, I have no reason to believe you over them. Why would I? I hope you understand that. And that you've attempted to inaccurately twist my words and beliefs... ya know, that doesn't help either. Demonstrating that one has an agenda tends to make people a bit suspicious.

Mel, may I ask you something of a personal nature? I am a strong believer in capitalism and market based pricing. To me, the word "profits" is not a dirty word. From my time in banking to the restructuring-focused work I do now for manufacturing based companies, the pursuit of profits (whether through increased pricing or mitigation of costs/losses/expenses) has been my career mission. You seem to be going to great lengths here to downplay Apple's (already publicly stated) profit margins. Why is that? Do you think that profits are something that one should be ashamed of? Do you feel that if it's shown that Apple does indeed have a "healthy profit margin" on RAM and other components, it's a suggestion that they are gouging their customers? Is that it? I really am a bit confused about this level of defensiveness.

As a consumer, I purchase what works best for me at the lowest price possible. But as a shareholder or owner of an asset, I support profit enhancement, as long as it does not jeopardize longer term growth. How I could be any clearer about my (actual) beliefs, I do not know.

You misunderstand what you said. You are claiming that Apple paid $18 for memory, and is charging $300. That means that you saying that they are charging so much for that memory, that they are making almost all profit from that memory, and we were talking about their memory pricing, and then you brought up their gross margins on the phone. I'm not making anything up, just talking about what YOU said.

I'm saying that the $18 number is wrong, and that from my knowledge of what they use, and what that costs, they are paying around $100 for it, and that charging $300 is perfectly normal. If you can prove otherwise, then I will agree that I've been wrong. But iSupply's numbers do not constitute proof.

Do I believe that companies charge what the market will bear? Not all companies practice that pricing strategy. Not in the way you seem to think. That is, charge the highest price they believe people will pay, regardless of costs. In luxury markets, where goods and pricing have little relation to each other, then definitely that is what is done. But in most other areas, it's not so simple. If Apple followed that idea in its entirety, they might charge over $1,000 for the basic iPhone, even with the same cost structure. Clearly, that's not being done. Apple's pricing relates to its costs. Can they charge enough to make a good profit? Sure they can. And they do. Is that profit excessive? No, it's not. Is it out of line with other successful companies? No, again, it's not. When Rim was doing well, their gross margins were over 60%. Was that too high? No. I don't see the point you're trying to make here, as Apple doesn't charge luxury pricing. Do they look at what they think customers will be willing to pay for a product, and make a product that will fit within that pricing model? I would imagine they do. Do they then double the price and make ridiculous margins as manufacturers of some luxury goods do? No, they don't.

I certainly don't agree with your comparison of Apple to Ferrari. If you want to make that comparison, you should make it to the Vertu Line Nokia put out, with its mid range phone electronics in nice, but not great, cases selling for $3,000 to over $6,000. That was a luxury phone line, with very high profits, and very low sales. That can be compared to Ferrari. Apple sells well over 100 million phones a year, saying they chase profits instead of sales is absurd!

I already told you what their markup is, approximately. And yes, it is healthy, just like everyone else's markup who isn't selling their product for no profit or is willing to take a loss. You can bet that Samsung makes a healthy markup on their own memory going into their own phones, even if their phones are accused of being cheaply made.

I'm not saying that Apple is misreporting anything. I'm only saying that these other companies are using generic numbers for generic parts. I'm not the only one to accuse them of that. Apple, and other large producers buy parts in large quantities, but every manufacturer of note makes sure that their procurement process is secret. None of these companies have Ny idea what is paid for any of these parts by any company whose products they disassemble. They are just guessing, based on so e generic numbers they know about some generic parts. Apple could be paying more, or less than their numbers, but they don't know that.

When I read the reviews by a respected site, such as Anandtech, and they talk about this, it's not hard to make an educated guess as to what's actually happening here, despite what iSupply, and others, say just from a dissembled device sitting on the table. Perhaps those companies should buy the test equipment, and hire the engineers to test these device's performance themselves before they quote numbers they don't know anything about. These, remember, are marketing companies. They have no particular expertise in these matters. Know how people are always putting analyst's down as not knowing anything? Well, those are the same people making these statements about parts pricing.

I suppose it doesn't really matter who you want to believe. It doesn't really matter to me either I suppose. I'm just using the results of testing done by a very well known, and respected site to help refute the notion that Apple is using NAND that cheap, and the same as other phones, whose performance in that area have been shown to be markedly inferior.

You can find out what high performance NAND costs yourself, if you want to, and looking at high performance memory cards is an easy way to see how much a manufacturer charges for it in a real product. If you are the kind of person who likes to think that everyone is being ripped off by every manufacturer who makes a good product that costs more, even if you like their profits from an investor's standpoint, then I can't change that.

My agenda is only to point out that these companies know little more than what they want to project. Again, these are marketing companies. They are also in the business of selling reports to companies. In other words they are small versions of Gardner and IDC. And we see how often they get things right, almost never. So no, I'm not impressed with what they do. But if you want to believe them, then it's obvious that I'm not going to change your mind.

I have not said a single word that downplays Apple's profit margins. I have thousands of Apple shares, and I hope they do as well as possible. On the other hand, you are saying, that while you think it's ok, Apple is charging (much?) more than others for NAND. I'm saying that they are not. This seems to be the only real part of our dispute here.
post #67 of 67
Quote:
Originally Posted by melgross View Post

A 64GB compact Flash card from Lexar, Sandisk and others can cost $300 for the fastest speeds.

 

 

Quote:
Originally Posted by Jag_Warrior View Post
And can you provide any objective or reasonably substantiated data which would support your estimate or conclusion? Other than what I read from various sources, I really don't know.

 

My own guess, based on the reality of what is going on: I figure that whatever Apple's exact percentage markup is on RAM, it likely is quite healthy.

 

For the record, I am not Brian Marshall posting under a screen name. I am also not Gene Munster. So no, in fact (and not fantasy), I did not claim any such thing regarding $18 for RAM. Credit was given to both of Munster and Marshall, and to Bloomberg, for the original figures referenced early on in my posts. So I've felt no need to claim that Apple spends any specific figure for RAM or anything else. When I say, I don't know, that is exactly what I mean. Only someone attempting to be intentionally dense would not get that by now. Seriously! What I have said, and do believe, is that Apple likely does make a healthy profit - and I do agree with both Munster and Marshall (though I don't know which, if either, is closer to the mark) on this point. Further, the only person who has repeatedly referenced this $300 figure is some guy named Mel Gross, who has demonstrated a curious habit of claiming that anything referenced in a post becomes the words and beliefs of the original poster. Unfortunately, because of his demonstrated lack of comprehensive abilities and tendency to claim that people have said or believe things that they have not and do not, he has little credibility in my view on this particular topic.

 

As I have now stated on more than a few occasions, I, personally, am not privy to the prices that Apple pays for components. And despite his "years of experience" doing whatever (could be assembling HeathKits, for all I know), there is still no evidence that this Mel Gross person is doing anything but making up fictional numbers and claiming them to be more accurate than those provided by analysts. And even though I was born at night... it was not last night. So I would not be prone to take the word of some anonymous poster on a chat site over those of reputable, though not infallible, analysts. They certainly could be wide of the mark. But unlike him, their numbers do have to play into the aggregate, while his do not seem to add up. According to this individual (I guess when I was impersonating Brian Marshall), I allegedly estimated that installed RAM sales contributed roughly 25% to the company's profits for the referenced quarter, and when I was impersonating Gene Munster, I put the contribution at roughly 40%. And I suppose when I was testifying in court, I put Apple's gross margins at 49 to 58 percent on its U.S. iPhone sales between April 2010 and the end of March 2012. I am clearly a busy and very talented character, capable of being many faces to many people. I once parallel parked a train. My 2 cents is worth 37 dollars and change. I am... the most interesting man in the world. I don't always drink beer. But when I do, I drink Budweiser. Stay thirsty, my friends.

 

In any following replies, I'll be curious to know what else I have said (that I didn't really say) and what else I believe (that I don't really believe).

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