All good points, but we need to keep in mind that there are dozens of component vendors/manufacturers involved with all of Apple?s products. They can easily spend billions for many components, billions investing in a new factory so they can try to meet growing consumer demands, and/or billions in backing R&D in conjunction with other companies for tech they want to potentially use down the road.
Then there drops in the market and changes in the market they need to contend with. Apple has no monopoly on always be successful or always having the best products on thee market. I?m not that old but I?ve seen and read about many a company falter because they didn?t invest in innovation and didn?t plan for an eventual fall from the top from an unforeseen change in the market.
Apple?s cash will grow, but so will there expenses and investments for R&D and suppliers. It?s unlikely this will be a 1:1 exchange that will keep their cash at the same level.
Is there a percentage they should spend each year just because they have the cash? And what would this percentage be of? The previous or next year?s profits or revenue?
That doesn't address the question of why Apple feels it's okay to sit on close to $30B in near liquid assets earning close to 1%. Apple is building a warchest for some undisclosed reason, but it's disappointing that they can't get a better RoR on what is essentially, shareholder money. Here's a thought: The money will be used to develop a line of humanoid cylons made to look like circa-2000s Steve complete with pot belly and Paul Bunyan beard with the requisite resurrection ship orbiting the planet.
Except that they don't spend more. Their R&D costs are extremely low. Turns out churning out a new phone every few weeks, even if it's a minor iteration and you slap somebody else's OS on it, is more expensive than releasing one phone a year. Who knew? Moreover, many of the handset manufacturers do have software. Nokia has Symbian and MeeGo. Samsung has Bada. Even HTC is rumoured to be working on its own OS. HP/Palm has PalmOS.
Your first line shows you know nothing of what you're talking about. Apple spends much more in R&D than any other tech company, by far. Just check the quarterly financial statements. And Apple was the only tech company that actually increased R&D spending during the recession of the last two years. While everyone else was hunkered down and afraid to do anything new, Apple increased its R&D so it wouldn't hit a lull in releasing new products.
I would much rather Apple keep the money for possible future uses than give it to shareholders. (Remember, if Apple gives money to shareholders, the stock price will go down by more or less the same amount, since the company is worth less, so you're not gaining anything. If you want dividends, buy Johnson & Johnson).
Your first line shows you know nothing of what you're talking about. Apple spends much more in R&D than any other tech company, by far. Just check the quarterly financial statements. And Apple was the only tech company that actually increased R&D spending during the recession of the last two years. While everyone else was hunkered down and afraid to do anything new, Apple increased its R&D so it wouldn't hit a lull in releasing new products.
I would much rather Apple keep the money for possible future uses than give it to shareholders. (Remember, if Apple gives money to shareholders, the stock price will go down by more or less the same amount, since the company is worth less, so you're not gaining anything. If you want dividends, buy Johnson & Johnson).
Actually, you may be the one that does not know what he's talking about.
Check the numbers. Apple has one of the lowest R&D as % Revenues -- perhaps even the lowest -- among major tech firms. In fact, it's off-the-charts low.
While $3.9B to secure supplies is pretty substantial, Apple is sitting on a much larger pool of short-term assets domestically. They've been talking about potential acquisitions for years as if they are stockpiling for some big buyout yet most of Apple's acquisitions have been relatively small. So, yes, a case can still be made for them to do something else with the money, not to mention that it is earning a ridiculous low return of something like 1%. With inflation at around 2.00-2.50% this year, that stockpile has essentially lost value. At least go buy something else. Apple established a Nevada-based investment firm specifically to manage the investment of that horde; I don't understand why the best they can do is barely better than a bank savings account.
How is it you are privy to the rate of return Apple makes on its investments?
Actually, you may be the one that does not know what he's talking about.
Check the numbers. Apple has one of the lowest R&D as % Revenues -- perhaps even the lowest -- among major tech firms. In fact, it's off-the-charts low.
Off the charts low but enough to redefine the MP3 music player, smartphone and tablet markets.
It may be a low percentage but it's still a lot of dollars.
So you believe the sum of the difference in profitability between Apple and its competitors is equal to the difference in R&D spending?
Also, ever notice that marketing and R&D expenses are not part of COGS and therefore not included in gross margin?
Did I say that? Apple's competitors are competing in low-margin areas in order to gain market share. Apple only sells to people who can afford to buy cutting edge products.
All good points, but we need to keep in mind that there are dozens of component vendors/manufacturers involved with all of Apple’s products. They can easily spend billions for many components, billions investing in a new factory so they can try to meet growing consumer demands, and/or billions in backing R&D in conjunction with other companies for tech they want to potentially use down the road.
Then there drops in the market and changes in the market they need to contend with. Apple has no monopoly on always be successful or always having the best products on thee market. I’m not that old but I’ve seen and read about many a company falter because they didn’t invest in innovation and didn’t plan for an eventual fall from the top from an unforeseen change in the market.
Apple’s cash will grow, but so will there expenses and investments for R&D and suppliers. It’s unlikely this will be a 1:1 exchange that will keep their cash at the same level.
Is there a percentage they should spend each year just because they have the cash? And what would this percentage be of? The previous or next year’s profits or revenue?
Yes Apple has multiple vendors and manufacturers to contend with but they seem to use their cash to ensure demand only for critical components they expect to be in short supply. A few years ago, it was NAND, now it appears to be touch panels. They also do huge volume buys without prepayments to get the best pricing for many components.
One thing that you mentioned that is frequently overlooked is that Apple not only buys production lines but appears to assist with capitalization for new factories. This is also a good use of their cash since it gives them the equivalent of their own self-owned production lines without the negatives of staffing and maintaining their own factories.
I don't think Apple should commit to spending a certain amount of cash "just because". I'd just really like to know what the goal is - just being a nosey investor, I guess. I am pretty sure Apple intends making a big play somewhere based on Steve's own words from the October 2010 conference call:
Quote:
“We’d like to continue to keep our powder dry,” said Chief Executive Officer Steve Jobs, after joining an earnings conference call for the first time in two years, when asked whether Cupertino, California-based Apple would use the cash for a stock buyback or dividend. “We strongly believe that one or more very strategic opportunities may come along.”
Yes Apple has multiple vendors and manufacturers to contend with but they seem to use their cash to ensure demand only for critical components they expect to be in short supply. A few years ago, it was NAND, now it appears to be touch panels. They also do huge volume buys without prepayments to get the best pricing for many components.
One thing that you mentioned that is frequently overlooked is that Apple not only buys production lines but appears to assist with capitalization for new factories. This is also a good use of their cash since it gives them the equivalent of their own self-owned production lines without the negatives of staffing and maintaining their own factories.
Apple is actually doing its competition a favor: It?s constraining the number of products they can build that nobody wants to buy.
Quote:
I wonder how many people on public assistance (e.g. food stamps) have ditched their cable bills?
shoot, I remember watching a segment on the news and behind the reporter people were coming out of a Toys for Tot's distribution center for poor/disadvantaged families with donated gifts yaking away on their iPhone's... simply unbelievable.
Haha - round and round we go... Windows "won" due to a bunch of complex circumstances from early Apple incompetence to illegal Microsoft practices that got them little more than a slap on the wrist.
Why do you think Apple is going whole hog in the space that will replace traditional personal computers - mobile computing?
And why do you think they are kicking the crap out of everyone? What is happening with iOS is what could have happened with the Mac had Apple maintained their proper focus. Then again, Jobs probably needed his "exile" at NeXT to prepare him for where we are today. The Mac just wasn't mean to dominate...
As for Android - I doubt Apple minds Android at all. In fact, I would imagine they are thrilled with Android. It allows those that focus to the extreme on "market share" and "monopoly" to remain distracted while Apple extracts all the profit. Google did the biggest favor they could have by giving away Android - they ensured a high market share and an excellent deflection of "monopoly" talk from those who would rather whine than buckle down and compete through innovation.
Yup, you can keep pointing to the past, but iOS devices will supplant all traditional personal computer sales within a couple of years. I don't remember where I saw it or I would like to it, but mobile devices are already outselling traditional desktop computers. It won't be long before iOS as a single category does the same.
iOS is truly the realization of the old Apple slogan "Computers for the rest of us". You can scoff all you want - it won't matter
Nice red herring. iOS has no dependency on the XServe.
Not to say Apple doesn't have a huge gap in their server strategy. I was hoping they would have announced some deal bundling Mac OSX Server with VMware or something by now.
Comments
All good points, but we need to keep in mind that there are dozens of component vendors/manufacturers involved with all of Apple?s products. They can easily spend billions for many components, billions investing in a new factory so they can try to meet growing consumer demands, and/or billions in backing R&D in conjunction with other companies for tech they want to potentially use down the road.
Then there drops in the market and changes in the market they need to contend with. Apple has no monopoly on always be successful or always having the best products on thee market. I?m not that old but I?ve seen and read about many a company falter because they didn?t invest in innovation and didn?t plan for an eventual fall from the top from an unforeseen change in the market.
Apple?s cash will grow, but so will there expenses and investments for R&D and suppliers. It?s unlikely this will be a 1:1 exchange that will keep their cash at the same level.
Is there a percentage they should spend each year just because they have the cash? And what would this percentage be of? The previous or next year?s profits or revenue?
That doesn't address the question of why Apple feels it's okay to sit on close to $30B in near liquid assets earning close to 1%. Apple is building a warchest for some undisclosed reason, but it's disappointing that they can't get a better RoR on what is essentially, shareholder money. Here's a thought: The money will be used to develop a line of humanoid cylons made to look like circa-2000s Steve complete with pot belly and Paul Bunyan beard with the requisite resurrection ship orbiting the planet.
Except that they don't spend more. Their R&D costs are extremely low. Turns out churning out a new phone every few weeks, even if it's a minor iteration and you slap somebody else's OS on it, is more expensive than releasing one phone a year. Who knew? Moreover, many of the handset manufacturers do have software. Nokia has Symbian and MeeGo. Samsung has Bada. Even HTC is rumoured to be working on its own OS. HP/Palm has PalmOS.
Your first line shows you know nothing of what you're talking about. Apple spends much more in R&D than any other tech company, by far. Just check the quarterly financial statements. And Apple was the only tech company that actually increased R&D spending during the recession of the last two years. While everyone else was hunkered down and afraid to do anything new, Apple increased its R&D so it wouldn't hit a lull in releasing new products.
I would much rather Apple keep the money for possible future uses than give it to shareholders. (Remember, if Apple gives money to shareholders, the stock price will go down by more or less the same amount, since the company is worth less, so you're not gaining anything. If you want dividends, buy Johnson & Johnson).
Your first line shows you know nothing of what you're talking about. Apple spends much more in R&D than any other tech company, by far. Just check the quarterly financial statements. And Apple was the only tech company that actually increased R&D spending during the recession of the last two years. While everyone else was hunkered down and afraid to do anything new, Apple increased its R&D so it wouldn't hit a lull in releasing new products.
I would much rather Apple keep the money for possible future uses than give it to shareholders. (Remember, if Apple gives money to shareholders, the stock price will go down by more or less the same amount, since the company is worth less, so you're not gaining anything. If you want dividends, buy Johnson & Johnson).
Actually, you may be the one that does not know what he's talking about.
Check the numbers. Apple has one of the lowest R&D as % Revenues -- perhaps even the lowest -- among major tech firms. In fact, it's off-the-charts low.
While $3.9B to secure supplies is pretty substantial, Apple is sitting on a much larger pool of short-term assets domestically. They've been talking about potential acquisitions for years as if they are stockpiling for some big buyout yet most of Apple's acquisitions have been relatively small. So, yes, a case can still be made for them to do something else with the money, not to mention that it is earning a ridiculous low return of something like 1%. With inflation at around 2.00-2.50% this year, that stockpile has essentially lost value. At least go buy something else. Apple established a Nevada-based investment firm specifically to manage the investment of that horde; I don't understand why the best they can do is barely better than a bank savings account.
How is it you are privy to the rate of return Apple makes on its investments?
Actually, you may be the one that does not know what he's talking about.
Check the numbers. Apple has one of the lowest R&D as % Revenues -- perhaps even the lowest -- among major tech firms. In fact, it's off-the-charts low.
Off the charts low but enough to redefine the MP3 music player, smartphone and tablet markets.
It may be a low percentage but it's still a lot of dollars.
Off the charts low but enough to redefine the MP3 music player, smartphone and tablet markets.
It may be a low percentage but it's still a lot of dollars.
The conversation was about the amount, not the effectiveness. I was simply pointing out the actual data.
Of course Apple is more effective in its R&D spending. Way more effective. No surprises there.
Btw, the MP3 player was the result of an acquisition.
So you believe the sum of the difference in profitability between Apple and its competitors is equal to the difference in R&D spending?
Also, ever notice that marketing and R&D expenses are not part of COGS and therefore not included in gross margin?
Did I say that? Apple's competitors are competing in low-margin areas in order to gain market share. Apple only sells to people who can afford to buy cutting edge products.
All good points, but we need to keep in mind that there are dozens of component vendors/manufacturers involved with all of Apple’s products. They can easily spend billions for many components, billions investing in a new factory so they can try to meet growing consumer demands, and/or billions in backing R&D in conjunction with other companies for tech they want to potentially use down the road.
Then there drops in the market and changes in the market they need to contend with. Apple has no monopoly on always be successful or always having the best products on thee market. I’m not that old but I’ve seen and read about many a company falter because they didn’t invest in innovation and didn’t plan for an eventual fall from the top from an unforeseen change in the market.
Apple’s cash will grow, but so will there expenses and investments for R&D and suppliers. It’s unlikely this will be a 1:1 exchange that will keep their cash at the same level.
Is there a percentage they should spend each year just because they have the cash? And what would this percentage be of? The previous or next year’s profits or revenue?
Yes Apple has multiple vendors and manufacturers to contend with but they seem to use their cash to ensure demand only for critical components they expect to be in short supply. A few years ago, it was NAND, now it appears to be touch panels. They also do huge volume buys without prepayments to get the best pricing for many components.
One thing that you mentioned that is frequently overlooked is that Apple not only buys production lines but appears to assist with capitalization for new factories. This is also a good use of their cash since it gives them the equivalent of their own self-owned production lines without the negatives of staffing and maintaining their own factories.
I don't think Apple should commit to spending a certain amount of cash "just because". I'd just really like to know what the goal is - just being a nosey investor, I guess. I am pretty sure Apple intends making a big play somewhere based on Steve's own words from the October 2010 conference call:
“We’d like to continue to keep our powder dry,” said Chief Executive Officer Steve Jobs, after joining an earnings conference call for the first time in two years, when asked whether Cupertino, California-based Apple would use the cash for a stock buyback or dividend. “We strongly believe that one or more very strategic opportunities may come along.”
http://www.bloomberg.com/news/2010-1...ture-bets.html
He could be talking about some of the deals we've seen but they just don't seem to have the scale that statement implied.
Yes Apple has multiple vendors and manufacturers to contend with but they seem to use their cash to ensure demand only for critical components they expect to be in short supply. A few years ago, it was NAND, now it appears to be touch panels. They also do huge volume buys without prepayments to get the best pricing for many components.
One thing that you mentioned that is frequently overlooked is that Apple not only buys production lines but appears to assist with capitalization for new factories. This is also a good use of their cash since it gives them the equivalent of their own self-owned production lines without the negatives of staffing and maintaining their own factories.
Great observations!
Stop and think about where that profit comes from....
By creating products that people are willing to seek out and pay a premium for?
Posts like that make Android users laugh.
Because "Android Users" are really crying on the inside?
Why can't Apple fans simply enjoy their products without devoting so much energy to dissing others?
I dunno, one could ask the same of "Android Users" that regularly troll these forums. Why are they on an Apple fan site exactly?
Is the product experience itself that uninteresting?
Yours sure as hell must be for you to be on an Apple fan site posting away!
Apple is actually doing its competition a favor: It?s constraining the number of products they can build that nobody wants to buy.
I wonder how many people on public assistance (e.g. food stamps) have ditched their cable bills?
shoot, I remember watching a segment on the news and behind the reporter people were coming out of a Toys for Tot's distribution center for poor/disadvantaged families with donated gifts yaking away on their iPhone's... simply unbelievable.
Btw, the MP3 player was the result of an acquisition.
Actually, it was the result of a partnership. They never did acquire PortalPlayer
iPads and Macs are quickly being adopted in mission critical tasks.
Evidently, not everyone needs a Bentley.
Haha - round and round we go... Windows "won" due to a bunch of complex circumstances from early Apple incompetence to illegal Microsoft practices that got them little more than a slap on the wrist.
Why do you think Apple is going whole hog in the space that will replace traditional personal computers - mobile computing?
And why do you think they are kicking the crap out of everyone? What is happening with iOS is what could have happened with the Mac had Apple maintained their proper focus. Then again, Jobs probably needed his "exile" at NeXT to prepare him for where we are today. The Mac just wasn't mean to dominate...
As for Android - I doubt Apple minds Android at all. In fact, I would imagine they are thrilled with Android. It allows those that focus to the extreme on "market share" and "monopoly" to remain distracted while Apple extracts all the profit. Google did the biggest favor they could have by giving away Android - they ensured a high market share and an excellent deflection of "monopoly" talk from those who would rather whine than buckle down and compete through innovation.
Yup, you can keep pointing to the past, but iOS devices will supplant all traditional personal computer sales within a couple of years. I don't remember where I saw it or I would like to it, but mobile devices are already outselling traditional desktop computers. It won't be long before iOS as a single category does the same.
iOS is truly the realization of the old Apple slogan "Computers for the rest of us". You can scoff all you want - it won't matter
Mission critical? Not without the XServe!
Nice red herring. iOS has no dependency on the XServe.
Not to say Apple doesn't have a huge gap in their server strategy. I was hoping they would have announced some deal bundling Mac OSX Server with VMware or something by now.