let's remember also that as Jobs matured into his role as CEO he drove pulling in the best executives he could find and invite to fall in love with Apple. This was inportant because he seemed to recognize where he needed expertise he did not have, or was not interested in cultivating. Each one of these officers brought incredible strengths to Apple, and working together as a team allowed them to complement each others' weaknesses as well. There is an interesting blend of driven and pragmatic, visionary and tactical skill sets in the Apple executive team - and I believe that's deliberate. If Jobs was as anal about whom he hired and for what traits and skills as he was about product (and there is every indication he was), then the Apple executive team is one of, if not the strongest in the consumer electronics industry.
Apple has demonstrated that they are willing to make mistakes, learn from them and move forward in their product lines, and I think the same could be said for it's executive team as well. It's an organic structure that evolves and changes. Ron Johnson was brought in (for example) to drive the retail strategy and produced a game-changing approach that is in most marketing textbooks now. As it matured, Ron looked for the next challenge and found it in turning around JC Penny. He is not needed to build retail for Apple anymore - it's a mature model. What's needed now is someone who can solidify the retail operations and streamline them. Thus a different skill set and approach.
Each executive that departs signals the evolution of that aspect of Apple operations. And there are executives out there that would give their eye-teeth to be part of that action. Not because it is a cushy position - because all indications are that it is anything but - but because it offers the kind of executive challenges that build reputations.
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Wall Street doesn't seem to see Apple in any dominant position in the smartphone industry. Apple doesn't seem to be be priced that way at all. It wouldn't have a constantly shrinking P/E if that were true. Wall Street seems to be betting that Android will triumph in the long-term by building cheap and disposable smartphone devices. I don't think that Wall Street sees Apple's cash bargaining power as much of an advantage since consumers overall are still buying Android smartphones in greater quantity than iPhones because there are many more cheaper (with lower quality) smartphones available. I don't think that Wall Street is concerned about device quality since the faster a device breaks, another device gets sold in its place causing a faster turnover.
Despite Android OS being what a appears to be a very poor financial model, Android is being favored as the winning mobile OS. Amazon is seen as the dominant online retail sales company and is valued as such. Apple doesn't appear to have the value that Amazon has so Apple surely isn't valued as having the dominant mobile OS (The iPhone makes up over 50% of Apple's revenue). Many of you think that Apple has all these advantages, but Wall Street clearly doesn't see these advantages otherwise the P/E would be much higher and the share price wouldn't continue to lag as it has.
Anyway, this is how I see it since Apple's shares are still being held at that $400 mark even after those quick four million iPhone 4S unit sales which would likely have countered any iPhone earnings "miss".
Samsung executives must be reading this article wondering how they could possibly compete.
Unless Samsung are selling parts to Apple at below cost to manufacture, they can beat Apples prices for components. They can supply themselves with the best possible components at the best possible prices.
Thinking that one of the Chaebols would match Apple on efficiency and streamlined supply chain is laughable. There may be divisions of Samsung that run very efficiently but there is no way they're getting that entire compnay as integrated as Apple has become. The Chaebol structure just doesn't allow for it.
Also, it isn't as easy for Samsung's components divisions to produce parts for other Samsung divisions cheaper than they would for Apple as it seems. They still need to cover their R&D costs. They still need to recognize what is more profitable, selling millions of components to Apple or selling within the company and hope that the end device makes the margins they'd forego. Eventually the CFO and president of the components divisions need to stand up and defend their decisions to the chief leadership. Unless a Samsung device, with lower volumes, can make enough margin to make up for the revenues an Apple deal would garner then Apple will still be king with Samsung.
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Microsoft's culture is antithetical to someone like Ron Johnson, based on his background and experience. The Culture there blocks effective decisionmaking, personal ownership of both successes and failures, and the very thing Ron is strongest in: retail delivery. JC Penny is an aging retail brand struggling to keep up with Amazon, Target and other more nimble and forward-looking retail solutions - exactly the kind of challenge Ron would relish. The fact that he comes in as CEO (which of course would not have happened at Microsoft) of the company doesn't hurt either. Turning around the JC Penny brand, on top of building out Apple's successful retail operations fits with his profile perfectly.
Thinking that one of the Chaebols would match Apple on efficiency and streamlined supply chain is laughable. There may be divisions of Samsung that run very efficiently but there is no way they're getting that entire compnay as integrated as Apple has become. The Chaebol structure just doesn't allow for it.
Also, it isn't as easy for Samsung's components divisions to produce parts for other Samsung divisions cheaper than they would for Apple as it seems. They still need to cover their R&D costs. They still need to recognize what is more profitable, selling millions of components to Apple or selling within the company and hope that the end device makes the margins they'd forego. Eventually the CFO and president of the components divisions need to stand up and defend their decisions to the chief leadership. Unless a Samsung device, with lower volumes, can make enough margin to make up for the revenues an Apple deal would garner then Apple will still be king with Samsung.
1) And as I understand it different divisions are responsible for their own sales so taking from one to make the other look better is poor business that does nothing for your bottom line.
2) Samsung is being held up by its smartphone KIRFS of the iPhone do they are doing something "right" even if not in the right. We'll see in a year if that strategy will have been a good idea or just a shortsighted effort like Acer with netbooks.
Thinking that one of the Chaebols would match Apple on efficiency and streamlined supply chain is laughable. There may be divisions of Samsung that run very efficiently but there is no way they're getting that entire compnay as integrated as Apple has become. The Chaebol structure just doesn't allow for it.
You would think that divisions within a company would work together to become more competitive.
Then you look at Sony and wonder why you ever thought such a stupid thing.
Apple doesn't gouge as tablet and phone prices show. Apple doesn't cook the books. Apple isn't running a scam as they have actual product that you can touch. According to the article, at least one company didn't work with Apple because "Apple?s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins". In other words, you would have lower prices.
Other than those things, Apple's just like Enron.
AFAiK, the only real similarity is that each seeks to create supply imbalances and thereby derive profits. Neither company is unique, however, at least not in that regard. The tactic has been used by large companies in the past as well.
75% profit on the iPhone4S is a gigantic premium. So that notion isn't erased at all.
J.
You overlook the fact that Apple commands huge subsidies from carriers (apparently up to 40%) which reduces the cost to the consumers often to below Android equivalents.
Apple is now undercutting Android with their 0$ deposit entry point for iPhone 3GS and $99 for iPhone 4.
But that would free up manufacturing capacity for Apple's competitors to use.
Better to discourage competition by using their market power to erect barriers to entry.
Exactly. Why spend money to build the building, etc, when you just buy the product and cause a supply shortage for your competitors. Also, by having several suppliers, Apple have the power to leverage down the prices due to competition. Apple has never had a problem dropping a suppler due to finding a lower priced and better quality supplier or because of a change in technology. In fact I remember when Apple dropped a suppler for the iPOD (I believe) when Apple heard that the suppler was going to make a similar item and market it themselves. The suppler lost the contract and now is probably doing very poorly because of their mistake.
This is also why Apple doesn't buy rivals, especially companies like Palm. Instead, if the company is failing, the talented employees often seek employment at Apple, rather then Apple buying the whole company. This way the get the assets and don't worry about the liabilities that come with a whole company purchase. I can't recall a single time where Apple has bought a failing company. (OK, maybe Next Computer)
This is also why Apple doesn't buy rivals, especially companies like Palm. Instead, if the company is failing, the talented employees often seek employment at Apple, rather then Apple buying the whole company.
And Apple doesn't have to pay as much as others for the majority of the talent due to their mindshare and position. Though personally if given a choice of working at Apple or MS (both highly successful and profitable) and MS was paying $20k more a year, I'd still go with Apple because the stress of going back to Windows as my work PC is worth $20k.
Apple is the best example of efficiency in world, also it is dictating new models in commerce. They do not have to manufacture everything, and that is part of the efficiency, Let the suppliers invest in the technology and manpower to keep producing those parts while apple focus on the marketing and the creation of new and improved products while manufacturing what needs to be under their strict watch in order to keep quality, innovation and obviously, very strong profits.
Apple only manufactures what their executives know they need to control, and if they want control of something that they don't have, they just simple use a few billions to buy.
As long as Apple can keep that efficiency, the growth will not miss a bit, even without Steve, as a matter of fact, it could be otherwise, a new steve or steves will appear taking apple to even new highs..
because the stress of going back to Windows as my work PC is worth $20k.
I interviewed at Google but wasn't real excited about the position until they told me they were moving all new hires to Macbook Pros. The pay sucked though and ultimately the extra $20k I got by going elsewhere won out. Not I'm stuck with a PC at work. \
Their biggest success was a brief period when they were able to charge California distributors over $1000.00/Megawatt-hour for electricity because they had cornered the market.
"A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price.[6][7] Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value."
Lock down the supply. Brilliant. The Hunt Brothers did it with Silver in the 1980's and made a fortune.
Except that was to artificially increase prices. Apple does this to lower prices. In other words, they are using this power for good (from a consumers perspective).
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Maybe it's because of the challenge that Penney offers. Johnson left Target to join Apple, so general retailing is familiar ground to him. As an industry, soft goods retailing is ripe for further disruption, and who better to lead that movement than someone like Johnson, with experience in leading change.
With more than $81.6 billion in cash as of last quarter, Apple has room to flex its weight by negotiating cash deals and bulk pre-payments...Apple is planning to spend...$24 billion in prepayments to suppliers, according to the report.
If these numbers are correct, I hope Apple never does stock buybacks or dividends. That cash is needed to maintain this competitive edge.
Also, just thinking about spending $24 billion... anything over $1000 makes my legs wobbly.
Really? No-one gets credit? What are you basing that on? When I worked for a company sourcing from China and Vietnam I got between 30-90 days from all my major suppliers.
Agreed. The notion that everyone pays upfront is totally wrong.
Comments
let's remember also that as Jobs matured into his role as CEO he drove pulling in the best executives he could find and invite to fall in love with Apple. This was inportant because he seemed to recognize where he needed expertise he did not have, or was not interested in cultivating. Each one of these officers brought incredible strengths to Apple, and working together as a team allowed them to complement each others' weaknesses as well. There is an interesting blend of driven and pragmatic, visionary and tactical skill sets in the Apple executive team - and I believe that's deliberate. If Jobs was as anal about whom he hired and for what traits and skills as he was about product (and there is every indication he was), then the Apple executive team is one of, if not the strongest in the consumer electronics industry.
Apple has demonstrated that they are willing to make mistakes, learn from them and move forward in their product lines, and I think the same could be said for it's executive team as well. It's an organic structure that evolves and changes. Ron Johnson was brought in (for example) to drive the retail strategy and produced a game-changing approach that is in most marketing textbooks now. As it matured, Ron looked for the next challenge and found it in turning around JC Penny. He is not needed to build retail for Apple anymore - it's a mature model. What's needed now is someone who can solidify the retail operations and streamline them. Thus a different skill set and approach.
Each executive that departs signals the evolution of that aspect of Apple operations. And there are executives out there that would give their eye-teeth to be part of that action. Not because it is a cushy position - because all indications are that it is anything but - but because it offers the kind of executive challenges that build reputations.
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Despite Android OS being what a appears to be a very poor financial model, Android is being favored as the winning mobile OS. Amazon is seen as the dominant online retail sales company and is valued as such. Apple doesn't appear to have the value that Amazon has so Apple surely isn't valued as having the dominant mobile OS (The iPhone makes up over 50% of Apple's revenue). Many of you think that Apple has all these advantages, but Wall Street clearly doesn't see these advantages otherwise the P/E would be much higher and the share price wouldn't continue to lag as it has.
Anyway, this is how I see it since Apple's shares are still being held at that $400 mark even after those quick four million iPhone 4S unit sales which would likely have countered any iPhone earnings "miss".
Samsung executives must be reading this article wondering how they could possibly compete.
Unless Samsung are selling parts to Apple at below cost to manufacture, they can beat Apples prices for components. They can supply themselves with the best possible components at the best possible prices.
Thinking that one of the Chaebols would match Apple on efficiency and streamlined supply chain is laughable. There may be divisions of Samsung that run very efficiently but there is no way they're getting that entire compnay as integrated as Apple has become. The Chaebol structure just doesn't allow for it.
Also, it isn't as easy for Samsung's components divisions to produce parts for other Samsung divisions cheaper than they would for Apple as it seems. They still need to cover their R&D costs. They still need to recognize what is more profitable, selling millions of components to Apple or selling within the company and hope that the end device makes the margins they'd forego. Eventually the CFO and president of the components divisions need to stand up and defend their decisions to the chief leadership. Unless a Samsung device, with lower volumes, can make enough margin to make up for the revenues an Apple deal would garner then Apple will still be king with Samsung.
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Microsoft's culture is antithetical to someone like Ron Johnson, based on his background and experience. The Culture there blocks effective decisionmaking, personal ownership of both successes and failures, and the very thing Ron is strongest in: retail delivery. JC Penny is an aging retail brand struggling to keep up with Amazon, Target and other more nimble and forward-looking retail solutions - exactly the kind of challenge Ron would relish. The fact that he comes in as CEO (which of course would not have happened at Microsoft) of the company doesn't hurt either. Turning around the JC Penny brand, on top of building out Apple's successful retail operations fits with his profile perfectly.
Thinking that one of the Chaebols would match Apple on efficiency and streamlined supply chain is laughable. There may be divisions of Samsung that run very efficiently but there is no way they're getting that entire compnay as integrated as Apple has become. The Chaebol structure just doesn't allow for it.
Also, it isn't as easy for Samsung's components divisions to produce parts for other Samsung divisions cheaper than they would for Apple as it seems. They still need to cover their R&D costs. They still need to recognize what is more profitable, selling millions of components to Apple or selling within the company and hope that the end device makes the margins they'd forego. Eventually the CFO and president of the components divisions need to stand up and defend their decisions to the chief leadership. Unless a Samsung device, with lower volumes, can make enough margin to make up for the revenues an Apple deal would garner then Apple will still be king with Samsung.
1) And as I understand it different divisions are responsible for their own sales so taking from one to make the other look better is poor business that does nothing for your bottom line.
2) Samsung is being held up by its smartphone KIRFS of the iPhone do they are doing something "right" even if not in the right. We'll see in a year if that strategy will have been a good idea or just a shortsighted effort like Acer with netbooks.
Thinking that one of the Chaebols would match Apple on efficiency and streamlined supply chain is laughable. There may be divisions of Samsung that run very efficiently but there is no way they're getting that entire compnay as integrated as Apple has become. The Chaebol structure just doesn't allow for it.
You would think that divisions within a company would work together to become more competitive.
Then you look at Sony and wonder why you ever thought such a stupid thing.
Apple doesn't gouge as tablet and phone prices show. Apple doesn't cook the books. Apple isn't running a scam as they have actual product that you can touch. According to the article, at least one company didn't work with Apple because "Apple?s bargaining tactics tend to exert downward pressure on prices, leading to lower profits and margins". In other words, you would have lower prices.
Other than those things, Apple's just like Enron.
AFAiK, the only real similarity is that each seeks to create supply imbalances and thereby derive profits. Neither company is unique, however, at least not in that regard. The tactic has been used by large companies in the past as well.
75% profit on the iPhone4S is a gigantic premium. So that notion isn't erased at all.
J.
You overlook the fact that Apple commands huge subsidies from carriers (apparently up to 40%) which reduces the cost to the consumers often to below Android equivalents.
Apple is now undercutting Android with their 0$ deposit entry point for iPhone 3GS and $99 for iPhone 4.
0$ deposit seems pretty cheap to me!
But that would free up manufacturing capacity for Apple's competitors to use.
Better to discourage competition by using their market power to erect barriers to entry.
Exactly. Why spend money to build the building, etc, when you just buy the product and cause a supply shortage for your competitors. Also, by having several suppliers, Apple have the power to leverage down the prices due to competition. Apple has never had a problem dropping a suppler due to finding a lower priced and better quality supplier or because of a change in technology. In fact I remember when Apple dropped a suppler for the iPOD (I believe) when Apple heard that the suppler was going to make a similar item and market it themselves. The suppler lost the contract and now is probably doing very poorly because of their mistake.
This is also why Apple doesn't buy rivals, especially companies like Palm. Instead, if the company is failing, the talented employees often seek employment at Apple, rather then Apple buying the whole company. This way the get the assets and don't worry about the liabilities that come with a whole company purchase. I can't recall a single time where Apple has bought a failing company. (OK, maybe Next Computer)
This is also why Apple doesn't buy rivals, especially companies like Palm. Instead, if the company is failing, the talented employees often seek employment at Apple, rather then Apple buying the whole company.
And Apple doesn't have to pay as much as others for the majority of the talent due to their mindshare and position. Though personally if given a choice of working at Apple or MS (both highly successful and profitable) and MS was paying $20k more a year, I'd still go with Apple because the stress of going back to Windows as my work PC is worth $20k.
Apple only manufactures what their executives know they need to control, and if they want control of something that they don't have, they just simple use a few billions to buy.
As long as Apple can keep that efficiency, the growth will not miss a bit, even without Steve, as a matter of fact, it could be otherwise, a new steve or steves will appear taking apple to even new highs..
George
because the stress of going back to Windows as my work PC is worth $20k.
I interviewed at Google but wasn't real excited about the position until they told me they were moving all new hires to Macbook Pros. The pay sucked though and ultimately the extra $20k I got by going elsewhere won out. Not I'm stuck with a PC at work.
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Challenge??
That was Enron's game.
Their biggest success was a brief period when they were able to charge California distributors over $1000.00/Megawatt-hour for electricity because they had cornered the market.
"A demand supply gap was created by energy companies, mainly Enron, to create an artificial shortage. Energy traders took power plants offline for maintenance in days of peak demand to increase the price.[6][7] Traders were thus able to sell power at premium prices, sometimes up to a factor of 20 times its normal value."
Lock down the supply. Brilliant. The Hunt Brothers did it with Silver in the 1980's and made a fortune.
Except that was to artificially increase prices. Apple does this to lower prices. In other words, they are using this power for good (from a consumers perspective).
Well said. On a side note I was glad to see Ron go to JCP and not the likes of Microsoft. I wonder if that was a non compete, loyalty or what?
Maybe it's because of the challenge that Penney offers. Johnson left Target to join Apple, so general retailing is familiar ground to him. As an industry, soft goods retailing is ripe for further disruption, and who better to lead that movement than someone like Johnson, with experience in leading change.
With more than $81.6 billion in cash as of last quarter, Apple has room to flex its weight by negotiating cash deals and bulk pre-payments...Apple is planning to spend...$24 billion in prepayments to suppliers, according to the report.
If these numbers are correct, I hope Apple never does stock buybacks or dividends. That cash is needed to maintain this competitive edge.
Also, just thinking about spending $24 billion... anything over $1000 makes my legs wobbly.
If these numbers are correct, I hope Apple never does stock buybacks or dividends. That cash is needed to maintain this competitive edge.
Also, just thinking about spending $24 billion... anything over $1000 makes my legs wobbly.
You have to remember that $1000 at Apple will be like buying toothpicks to us. Pennies.
Pretty sure $24B was enough to make some people at Apple wretch, though.
Really? No-one gets credit? What are you basing that on? When I worked for a company sourcing from China and Vietnam I got between 30-90 days from all my major suppliers.
Agreed. The notion that everyone pays upfront is totally wrong.