It's not, because that would mean their primary goal is to service shareholders even if that meant the decisions were detrimental to the success of the company e.g depleting cash reserves to pay investors. The primary goal of the staff at Apple is towards the success of the company itself and shareholders come second.
But then that would not be increasing shareholder value, now would it.
Quote:
Originally Posted by Marvin
Shareholders can't exist without the company surviving so the most important goal is the success of the company.
Yes, the company must survive. But its purpose for existing and surviving is to provide a profitable return to shareholders. It achieves this by creating great (and profitable) products.
Quote:
Originally Posted by Marvin
Why does this keep coming up?
Because it is true and sometimes it must be repeated because some people don't believe it.
Quote:
Originally Posted by Marvin
How quickly do you think the most profitable company in the world is going to become unprofitable and 'soon be out of business'?
First, perhaps faster than you think if they insist on selling unprofitable products. If there focus was exclusively making the greatest products without regard to their profitability.
Quote:
Originally Posted by Marvin
It's the weirdest kind of fear-mongering clearly designed to try and encourage Apple to make bad decisions for the company to boost the profile of AAPL towards investors.
No one is "fear-mongering" here. That's a straw man.
Quote:
Originally Posted by Marvin
It's like saying McDonalds serves around 70 million people per day but y'know if tomorrow people decide they don't want a burger, they don't make any money so they need new management and should think about making a 50c burger for emerging markets. It's totally absurd reasoning.
What's absurd is your second straw man in a row.
Quote:
Originally Posted by Marvin
Apple is selling more devices than ever, they are making more profits than ever in a poor economy and more profits than any company in the world and yet people ponder about their near-term collapse. Their iPad shipments are up nearly 50% over last year. The potential iPad market is huge.
Indeed. I have not claimed otherwise. Perhaps someone else has. None of those facts, though, refute the possibility that there might be an even larger market for Apple products when different features and price points are considered.
Quote:
Originally Posted by Marvin
Who else in this industry is holding ~40% gross margins and 20-25% net margins? Likely nobody, so what's the problem? The problem is that investors are not happy with the stock price drop (which they ultimately control anyway) and in spite of the price rising from $420 to $700 in under a year under Tim's management and dropping back to $420 in under a year under Tim's management, claim that Tim is the problem and needs to either get out or do better by making cheaper, lower margin products (which is silly because it obviously makes matters worse).
Certainly investors are sometimes wrong. However, it's important to realize that a company's stock price is about the future more than the present. If investors (especially those who watch closely and have a very strong interest in an increased stock price) see a darker future for the company, they will begin to bail on the company's stock. They may be right. They may be wrong. No one can predict the future with certainty (including Apple.) So some investors may be seeing somethings now and projecting into the future a less successful Apple. For example they may be seeing early trends that look successful in the present but are only short term and actually make things worse longer term.
Either way, if you feel strongly (or "know") that Apple's stock is currently undervalued, then I suggest you buy as much as you can. You will reap the material benefits of your insight.
Quote:
Originally Posted by Marvin
If anybody has any suggestions about what they should be doing to be better than making more profit than anyone the world, I'm sure they'll be all ears. Vague suggestions like 'be more innovative', 'make a watch/TV/cheap phone' or 'give investors more money' are not good enough reasons to ensure the success of the company, which is their primary goal. They are doing a pretty awesome job at it and if people started acknowledging that, instead of spreading bad news around, then maybe the stock price would go back up.
Yes, the company must survive. But its purpose for existing and surviving is to provide a profitable return to shareholders. It achieves this by creating great (and profitable) products.
Right but the point is that the company success comes first, even if that means shareholders have to suffer in the interim. For example, it may be more beneficial for the company to leave money overseas for investment opportunities and that could come at the expense of shareholder dividends. Bringing the money home and handing it out is not their primary motive, it is to make the best decisions for the long term success of the company.
First, perhaps faster than you think if they insist on selling unprofitable products.
When did they start selling unprofitable products? Some of their gross margin drop was probably down to the iPad Mini and the iPhone 4/4S at lower prices, which is what people are suggesting they actually do more of.
No one is "fear-mongering" here. That's a straw man.
How is it not fear-mongering to use phrases that suggest the most profitable company in the world might soon be out of business? That's appropriate for a company like RIM or Nokia. Apple is so far from that, it's mind-boggling how commonly it's used.
None of those facts, though, refute the possibility that there might be an even larger market for Apple products when different features and price points are considered.
This is what it always comes down to though: market volume. Amazon has a large market volume and for some reason investors love this but their profits are non-existent. Would you rather that Apple sells 100 million iPhones per quarter and drops their gross margins down to 20%? All that's going to achieve is that when they can't hit massive volumes again, their profits will be ruined because they can't put the prices back up. Just watch what happens to Samsung. They are already struggling to maintain high margins and while they ship higher volumes than Apple, they make about half the profit. It's not going to get better than that for them.
it's important to realize that a company's stock price is about the future more than the present. If investors (especially those who watch closely and have a very strong interest in an increased stock price) see a darker future for the company, they will begin to bail on the company's stock. They may be right. They may be wrong.
That's exactly the problem though. People are making guesses about the future of a very secretive company and suggesting change needs to happen right now because the guesses about the future look like things are going bad. The people at the company know better than anyone what their long term goals and products are and a lot of them are significant shareholders in the company.
This happened to Intel recently where their shares were downgraded because people assumed they were delaying Haswell and Intel decided to speak up and say there's no problem at all and Haswell is on track. Neither Apple nor Intel has to do that. The stock market is always going to play the guesswork game, the mistake is in thinking that the companies have to acknowledge and make decisions based on it.
Either way, if you feel strongly (or "know") that Apple's stock is currently undervalued, then I suggest you buy as much as you can. You will reap the material benefits of your insight.
Given how fast the stock went up and how it came back down in roughly the same time, it looks as though it was overvalued at the time it hit its peak but it's an entirely different market from Apple's day to day operations. I don't think it's wise to stock up now for the purposes of selling at a high price in the near-term. I do think that Apple is a safe bet for the long term. I think the comments about them failing, becoming unprofitable, going out of business are just totally unlinked to the reality. Their growth is going to slow down and they will play out the current strategy, which has a long way to go and they will continue to make a lot of profit. If people want a high growth opportunity with Apple now, that's not going to happen, that opportunity has passed but it's crazy to think that it would. If people want high growth, that's what startups are for.
Apple went from near bankruptcy to where they are now in 15 years. That's a gravy train that's not coming around again. That's not to say it's downhill from here, just like it's not downhill for Microsoft. It's just steady. Look at Microsoft's stock next to Apple's. They had that massive spike too around 1999 and it settled around half that:
I reckon that will happen with Apple but I do think that it will rise from where it is now as Apple does have some growth opportunities.
edit: here's a graph overlay of AAPL (green) vs MSFT (blue):
I suspect much the same thing will happen but like I say, I don't expect it to fall as much with Apple as they still have high demand products. I could see it settling between 450-500.
Right but the point is that the company success comes first, even if that means shareholders have to suffer in the interim. For example, it may be more beneficial for the company to leave money overseas for investment opportunities and that could come at the expense of shareholder dividends. Bringing the money home and handing it out is not their primary motive, it is to make the best decisions for the long term success of the company.
I totally understand this and do not disagree.
Quote:
Originally Posted by Marvin
When did they start selling unprofitable products?
I never claimed they are. The comment was in response to "all Apple needs to do is focus on making the best products."
Quote:
Originally Posted by Marvin
How is it not fear-mongering to use phrases that suggest the most profitable company in the world might soon be out of business?
Seeing as how I did not say they "might soon be out of business" you must be referring to someone else. I simply pointed put that any business that does not focus on profitability and shareholder value (over the long term) and focused exclusively on "making the best products" would find itself unprofitable and eventually out of business.
Based on the above three items I feel you have grossly misunderstood what I have said. Whether this is intentional or not I cannot tell.
Quote:
Originally Posted by Marvin
This is what it always comes down to though: market volume. Amazon has a large market volume and for some reason investors love this but their profits are non-existent. Would you rather that Apple sells 100 million iPhones per quarter and drops their gross margins down to 20%? All that's going to achieve is that when they can't hit massive volumes again, their profits will be ruined because they can't put the prices back up. Just watch what happens to Samsung. They are already struggling to maintain high margins and while they ship higher volumes than Apple, they make about half the profit. It's not going to get better than that for them.
I would prefer that Apple pursued the most profitable course they could over the long term. Given that I do not have access to the information they surely do, it's hard for me to know exactly what that means. Do I care if their margins are lower for more revenue and more profit? I don't know. To suggest that there is no profit it in the volume market seems silly to me.
Quote:
Originally Posted by Marvin
That's exactly the problem though. People are making guesses about the future of a very secretive company and suggesting change needs to happen right now because the guesses about the future look like things are going bad. The people at the company know better than anyone what their long term goals and products are and a lot of them are significant shareholders in the company.
This happened to Intel recently where their shares were downgraded because people assumed they were delaying Haswell and Intel decided to speak up and say there's no problem at all and Haswell is on track. Neither Apple nor Intel has to do that. The stock market is always going to play the guesswork game, the mistake is in thinking that the companies have to acknowledge and make decisions based on it.
Agreed. But companies make mistakes. They misread the future and the market. Some investors are simply currently saying that Apple might be doing that. If you disagree, then buy their stock.
The issue with regard to lower cost iPhone as an example has to do with the long term prospects of owning the OS platform. There's risk, for Apple, that it could get out-maneuvered by Android much as it was by Microsoft (vs. Mac). I'm not saying that is or will happen, simply that it is a risk and a real one and one to not be taken lightly. More importantly, it could be a risk whose seeds have already been planted, and you don't realize you've lost it until you're already sitting under the shade of the Android tree looking over at the iOS shrub.
I'm not actually suggesting that Apple makes it decisions based on the stock price or what some investors are suggesting. Again this seems to be a misinterpretation of what I've said.
I never claimed they are. The comment was in response to "all Apple needs to do is focus on making the best products."
Seeing as how I did not say they "might soon be out of business" you must be referring to someone else. I simply pointed put that any business that does not focus on profitability and shareholder value (over the long term) and focused exclusively on "making the best products" would find itself unprofitable and eventually out of business.
Based on the above three items I feel you have grossly misunderstood what I have said. Whether this is intentional or not I cannot tell.
I would prefer that Apple pursued the most profitable course they could over the long term. Given that I do not have access to the information they surely do, it's hard for me to know exactly what that means. Do I care if their margins are lower for more revenue and more profit? I don't know. To suggest that there is no profit it in the volume market seems silly to me.
Agreed. But companies make mistakes. They misread the future and the market. Some investors are simply currently saying that Apple might be doing that. If you disagree, then buy their stock.
The issue with regard to lower cost iPhone as an example has to do with the long term prospects of owning the OS platform. There's risk, for Apple, that it could get out-maneuvered by Android much as it was by Microsoft (vs. Mac). I'm not saying that is or will happen, simply that it is a risk and a real one and one to not be taken lightly. More importantly, it could be a risk whose seeds have already been planted, and you don't realize you've lost it until you're already sitting under the shade of the Android tree looking over at the iOS shrub.
I'm not actually suggesting that Apple makes it decisions based on the stock price or what some investors are suggesting. Again this seems to be a misinterpretation of what I've said.
The comment on Microsoft bears expanding on: Google is using exactly the same strategy: bundling their infrastructure (in MS's case it was their OS) with a very wide range of devices (which were PCs, but also various PC-compatible boards) where eventually it became imperative for developers (even Apple stalwarts like Adobe) to develop for DOS/windows first. In the meantime, Apple was collecting fat margins on their increasingly antiquated hardware (Moto 68K was really a non-starter by the time Apple was using it in Mac IIFX) and software (which did not have serious pre-emptive multitasking until OS X).
I doubt that Mr Market remembers all this (although it's acting like it does), but many of us are old enough to remember, which is why I am cautious about Apple's prospects going forward.
Right but the point is that the company success comes first, even if that means shareholders have to suffer in the interim. For example, it may be more beneficial for the company to leave money overseas for investment opportunities and that could come at the expense of shareholder dividends. Bringing the money home and handing it out is not their primary motive, it is to make the best decisions for the long term success of the company.
When did they start selling unprofitable products? Some of their gross margin drop was probably down to the iPad Mini and the iPhone 4/4S at lower prices, which is what people are suggesting they actually do more of.
How is it not fear-mongering to use phrases that suggest the most profitable company in the world might soon be out of business? That's appropriate for a company like RIM or Nokia. Apple is so far from that, it's mind-boggling how commonly it's used.
This is what it always comes down to though: market volume. Amazon has a large market volume and for some reason investors love this but their profits are non-existent. Would you rather that Apple sells 100 million iPhones per quarter and drops their gross margins down to 20%? All that's going to achieve is that when they can't hit massive volumes again, their profits will be ruined because they can't put the prices back up. Just watch what happens to Samsung. They are already struggling to maintain high margins and while they ship higher volumes than Apple, they make about half the profit. It's not going to get better than that for them.
That's exactly the problem though. People are making guesses about the future of a very secretive company and suggesting change needs to happen right now because the guesses about the future look like things are going bad. The people at the company know better than anyone what their long term goals and products are and a lot of them are significant shareholders in the company.
This happened to Intel recently where their shares were downgraded because people assumed they were delaying Haswell and Intel decided to speak up and say there's no problem at all and Haswell is on track. Neither Apple nor Intel has to do that. The stock market is always going to play the guesswork game, the mistake is in thinking that the companies have to acknowledge and make decisions based on it.
Given how fast the stock went up and how it came back down in roughly the same time, it looks as though it was overvalued at the time it hit its peak but it's an entirely different market from Apple's day to day operations. I don't think it's wise to stock up now for the purposes of selling at a high price in the near-term. I do think that Apple is a safe bet for the long term. I think the comments about them failing, becoming unprofitable, going out of business are just totally unlinked to the reality. Their growth is going to slow down and they will play out the current strategy, which has a long way to go and they will continue to make a lot of profit. If people want a high growth opportunity with Apple now, that's not going to happen, that opportunity has passed but it's crazy to think that it would. If people want high growth, that's what startups are for.
Apple went from near bankruptcy to where they are now in 15 years. That's a gravy train that's not coming around again. That's not to say it's downhill from here, just like it's not downhill for Microsoft. It's just steady. Look at Microsoft's stock next to Apple's. They had that massive spike too around 1999 and it settled around half that:
I reckon that will happen with Apple but I do think that it will rise from where it is now as Apple does have some growth opportunities.
edit: here's a graph overlay of AAPL (green) vs MSFT (blue):
I suspect much the same thing will happen but like I say, I don't expect it to fall as much with Apple as they still have high demand products. I could see it settling between 450-500.
Apple has high-demand products, but you might recall that MS did too in 1999, and still does.
I simply pointed put that any business that does not focus on profitability and shareholder value (over the long term) and focused exclusively on "making the best products" would find itself unprofitable and eventually out of business.
But you are implying this is the case with Apple. You seem to be for short term changes to prevent your implied long term outcomes, which includes going out of business. I just think even mentioning the possibility of going out of business when it comes to Apple is so far off track considering how well Apple is doing right now. I don't think it's anywhere near the time for concern over the company strategy.
To suggest that there is no profit it in the volume market seems silly to me.
It's a race to the bottom just like it is in any market and more risky if they have manufacturing issues.
The very idea of high volume suggests low price. This means Apple has to build a lower quality product as you can see comparing the iPhone and iPod Touch. The existence of a lower priced option drives people to it (e.g the iPad Mini), which lowers the average selling price. So Apple just ends up trying to sell more units for very little gain in profit if any. This dilutes their brand as a premium brand, like what happened with Sony. These days, people wouldn't care about a Sony vs a Samsung TV. That's not a good strategy for Apple and it's never been one they've followed.
I'm not suggesting they shouldn't have done the iPad Mini, I'm just saying it shows what happens aiming for volume by lowering price.
Also when we are talking about the volume market, I know it's relative but Apple sells about 100 million units per year. That seems like they are covering volume just fine.
Agreed. But companies make mistakes. They misread the future and the market. Some investors are simply currently saying that Apple might be doing that. If you disagree, then buy their stock.
It doesn't stop there though. The media blows up the hype/guesses and it triggers sell-offs and it's self-fulfilling. The sequence goes:
- investors and analysts put out negative guesses and exaggerate slowed growth
- investors start selling
- stock starts falling
- investors who haven't sold start yelling, 'Tim what are your playing at!'
The blame is being misplaced and the stock is moving mostly independently of what Apple is doing. Apple is doing exactly the same thing they've always done. They are just hitting the limits of what the market will sustain through no fault of their own.
The issue with regard to lower cost iPhone as an example has to do with the long term prospects of owning the OS platform. There's risk, for Apple, that it could get out-maneuvered by Android much as it was by Microsoft (vs. Mac). I'm not saying that is or will happen, simply that it is a risk and a real one and one to not be taken lightly. More importantly, it could be a risk whose seeds have already been planted, and you don't realize you've lost it until you're already sitting under the shade of the Android tree looking over at the iOS shrub.
The Windows comparison has been mentioned in the past and I still think it's a different situation with this. Apple will have sold over 550 million iOS devices by now. Android is at over 750 million. Android will be getting installed into all sorts of things so the OS will spread further. It will grow faster but there's a limit to the market that can buy the phones:
I guess eventually smartphones will make up the entire volume and Apple might end up with less than 10% like with the desktop OS but what's the implication of that? It's not going to mean less software support because we are talking about hundreds of millions of people. It's going to have no effect unless people stop buying Apple's products. That can only happen if the competition starts building better products and they can't because they don't have an integrated eco-system. If one manufacturer tries to do it, they fragment the OS. Even now, we can see modern hardware running Android with laggy interfaces at price points competing with Apple.
Apple planned this for years and I think they nailed it big time. I really don't see them having problems maintaining a healthy marketshare. They don't need to have a 50/50 split with Android of the entire market. Apple alone can't ship 800 million premium devices in a year. That's never going to happen and it doesn't have to. If they tried, all they'd do is kill their margins and saturate the market. They can do 200m, maybe 300m - in fact that might happen this year. They shipped 70+million in Q1 so it'll be somewhere in between, which is massive growth over last year.
They have a good balance between the profit and the volume and I think if they just stick to this strategy, they won't have problems for a very long time.
I'm not. Maybe you're inferring that from what I said. I was replying (if you look back) to a poster who seemed to be implying that that was all Apple needed to do (i.e., focus on making the bets products.)
Quote:
Originally Posted by Marvin
You seem to be for short term changes to prevent your implied long term outcomes, which includes going out of business. I just think even mentioning the possibility of going out of business when it comes to Apple is so far off track considering how well Apple is doing right now.
Again, this is your inference. I'm going to discontinue our discussion if this continues. If you look back at the context of my original comments (i.e., a response to a specific post) I think you'll see that your interpretation of my comments is a bit off.
Quote:
Originally Posted by Marvin
The very idea of high volume suggests low price. This means Apple has to build a lower quality product as you can see comparing the iPhone and iPod Touch. The existence of a lower priced option drives people to it (e.g the iPad Mini), which lowers the average selling price. So Apple just ends up trying to sell more units for very little gain in profit if any. This dilutes their brand as a premium brand, like what happened with Sony. These days, people wouldn't care about a Sony vs a Samsung TV. That's not a good strategy for Apple and it's never been one they've followed.
Mostly right, but not completely. Yes the volume/mass market does require lower price points. I doubt seriously that Apple would sell products that make them no profit (as your 4th sentence implies.) In fact there is an issue of price elasticity of demand that factors into all of this. Finally I disagree with what killed Sony and am doubtful Apple will suffer the same fate (at least for the same reasons.)
Quote:
Originally Posted by Marvin
Also when we are talking about the volume market, I know it's relative but Apple sells about 100 million units per year. That seems like they are covering volume just fine.
That depends on how big the market is now doesn't it? Which product are you referring to?
Quote:
Originally Posted by Marvin
Also when we are talking about the volume market, I know it's relative but Apple sells about 100 million units per year. That seems like they are covering volume just fine.
It doesn't stop there though. The media blows up the hype/guesses and it triggers sell-offs and it's self-fulfilling. The sequence goes:
- investors and analysts put out negative guesses and exaggerate slowed growth
- investors start selling
- stock starts falling
- investors who haven't sold start yelling, 'Tim what are your playing at!'
The blame is being misplaced and the stock is moving mostly independently of what Apple is doing. Apple is doing exactly the same thing they've always done. They are just hitting the limits of what the market will sustain through no fault of their own.
I understand your analysis of the situation. A couple of points here though:
- You're begging the question on point 1.
- Regarding "Apple is doing exactly the same thing they've always done" your assuming that this is not the issue leading to a lower stock price. To give a rather extreme example to make the point more clear: Buggy whip makers kept "doing exactly the same thing they've always done" all the way to bankruptcy.
- If they are "hitting the limits of what the market will sustain" then they probably ought to be considering whether they should be doing exactly what they've always done. If the market conditions are changing, then Apple may need to change also. For example, if their goal is to always be in the business of high margin software/hardware products and things like smart phones are starting to go commodity, then Apple must adapt. If they want to continue to be in the smart phone business and that business is changing (and looks like it is), they may need to adjust their product strategy.
Quote:
Originally Posted by Marvin
The Windows comparison has been mentioned in the past and I still think it's a different situation with this. Apple will have sold over 550 million iOS devices by now. Android is at over 750 million. Android will be getting installed into all sorts of things so the OS will spread further. It will grow faster but there's a limit to the market that can buy the phones:
So your 100M (out of 700M) suddenly doesn't look so much like the "volume" part of the market.
Quote:
Originally Posted by Marvin
I guess eventually smartphones will make up the entire volume...
You can guess that's what will happen and you will have about a 99% chance of being right. This is the pattern of the market. The (luxury) products of yesterday/yesteryear are the commonplace products for everyone today.
Quote:
Originally Posted by Marvin
...and Apple might end up with less than 10% like with the desktop OS but what's the implication of that? It's not going to mean less software support because we are talking about hundreds of millions of people. It's going to have no effect unless people stop buying Apple's products.
Actually that could happen. I suspect it is much easier for people to switch phones (even smart phones) that to have switched PCs.
Quote:
Originally Posted by Marvin
Apple planned this for years and I think they nailed it big time. I really don't see them having problems maintaining a healthy marketshare. They don't need to have a 50/50 split with Android of the entire market. Apple alone can't ship 800 million premium devices in a year. That's never going to happen and it doesn't have to. If they tried, all they'd do is kill their margins and saturate the market. They can do 200m, maybe 300m - in fact that might happen this year. They shipped 70+million in Q1 so it'll be somewhere in between, which is massive growth over last year.
They have a good balance between the profit and the volume and I think if they just stick to this strategy, they won't have problems for a very long time.
Yep. Maybe you're right. In fact you probably are. Many markets tend to settle in at a natural number of competitors (often 3-5) with 2-3 being dominant and a handful of much smaller ones. This may happen for many many years with the smart phone market until something disruptive comes along.
Regarding "Apple is doing exactly the same thing they've always done" your assuming that this is not the issue leading to a lower stock price. To give a rather extreme example to make the point more clear: Buggy whip makers kept "doing exactly the same thing they've always done" all the way to bankruptcy.
There it is again with the examples of bankruptcy, even if it is labelled as extreme. Apple has not directly caused the fluctuation in the stock price. It went up as fast as it went down. The entire industry didn't change in the single year and a half that happened. The stock change was obviously just the market figuring out Apple's true long term value and it seems to be holding at a market cap higher than any other company. Maybe it'll keep sliding if the numbers are down when they report them in 2 weeks but I doubt they will be.
If they are "hitting the limits of what the market will sustain" then they probably ought to be considering whether they should be doing exactly what they've always done. If the market conditions are changing, then Apple may need to change also. For example, if their goal is to always be in the business of high margin software/hardware products and things like smart phones are starting to go commodity, then Apple must adapt. If they want to continue to be in the smart phone business and that business is changing (and looks like it is), they may need to adjust their product strategy.
It is possible though to maintain a steady marketshare. They can continue to be in the smartphone business without growth. Like Microsoft isn't growing in desktop marketshare but they don't need to. RIM/Blackberry has managed to stay in business with a steady share of the market.
So your 100M (out of 700M) suddenly doesn't look so much like the "volume" part of the market.
It's 135m and it is high volume even relative to the 700m. This is the same thing people focus on with Windows. The operating system share is split between many manufacturers and Android is even free. In terms of hardware, which is where Apple makes the profit, they are doing really well. Only Samsung and Nokia outsell Apple in mobile. I'd say coming in behind Nokia puts them in the volume market and Nokia has shown that they have nothing to come back with so they are dead in the water. Their share will continue to drop to the benefit of Android devices and Apple.
Actually that could happen. I suspect it is much easier for people to switch phones (even smart phones) that to have switched PCs.
It could but Apple keeps an eye on this. Schiller even said recently more people were switching from Android to iOS than the other way round. Most of Android's growth comes from people ditching Blackberry and Nokia and Apple's and Android's growth pretty much mirrors the decline of the dying brands.
Little to no gain in profit is what I was saying, not no profit.
Still, you're making an assumption here. Do a little reading on the price-elasticity of demand to understand the other possibilities.
Quote:
Originally Posted by Marvin
There it is again with the examples of bankruptcy, even if it is labelled as extreme.
I think you need to chill a bit. It was offered as an example. Sheesh.
Quote:
Originally Posted by Marvin
Apple has not directly caused the fluctuation in the stock price. It went up as fast as it went down. The entire industry didn't change in the single year and a half that happened.
Maybe. Maybe not.
Quote:
Originally Posted by Marvin
The stock change was obviously just the market figuring out Apple's true long term value and it seems to be holding at a market cap higher than any other company.
So what is your issue here then?
Quote:
Originally Posted by Marvin
It is possible though to maintain a steady marketshare. They can continue to be in the smartphone business without growth.
Of course. Obviously. No question. I have not claimed otherwise. You appear to be arguing against points that I haven't made.
Quote:
Originally Posted by Marvin
It's 135m and it is high volume even relative to the 700m.
Well since we're dealing in rather subjective and vague terms like "high volume" I'll just let you have this point even though this "high volume" appear to mathematically only appear to be a smallish (20%) percentage.
Quote:
Originally Posted by Marvin
It could but Apple keeps an eye on this.
I'm sure they do. If they didn't, I'd short them now!
The stock change was obviously just the market figuring out Apple's true long term value and it seems to be holding at a market cap higher than any other company.
So what is your issue here then?
The issue is the (possibly subconscious) negativity. You can see it all the way through the comments people make about the stock drop (on other sites too) as if somehow Apple is to blame for this. Here's another recent article that demonstrates it:
You are saying that you're not pointing to Apple's impending demise but you keep using phrases and examples that point to potential bankruptcy or going of business or not making any profit and needing to make changes like going after high volume. I can understand using these things merely as examples but why use them unless you are implying that they somehow apply to Apple's current situation? There seems to be a strange way of thinking that's taken over because of the massive drop and somehow people have forgotten the massive gain that preceded it. Nobody seems to question why the stock goes up so quickly but when it goes down, something needs to be done about it.
Do you acknowledge that Apple is currently the most profitable company in the history of the world and that suggestions of bankruptcy or unprofitability are not near-term possibilities and in light if this, do you acknowledge that there is no need for them to change their business strategy?
Well since we're dealing in rather subjective and vague terms like "high volume" I'll just let you have this point even though this "high volume" appear to mathematically only appear to be a smallish (20%) percentage.
I misread the chart earlier, Apple is 2nd, Nokia is 3rd:
Samsung is the only manufacturer ahead of Apple in shipments with 30% of the market. If you don't think 20% is high volume, then Samsung with 30% can't be either so no manufacturer is shipping in high volumes. Given that the terms are all relative, someone has to be shipping in high volumes so like I say, I'd describe Apple's ~20% share as high volume.
If you expect Apple to outsell all Android device manufacturers combined with only premium products in order to be considered a high volume seller, I'd say that's a bit unrealistic.
Tim Cook addressed the issue of volume specifically:
"The CEO told shareholders that his company could press "a button or two" that would have Apple make the most products in a particular category. But that "wouldn't be good for Apple," he said."
Apple has high-demand products, but you might recall that MS did too in 1999, and still does.
Microsoft had a P/E of 100 or so in 1999, then dropped in half to 50 P/E, then grew into that valuation over a decade by growing earnings leaving the stock price flat. There is no parallel with Apple that currently has a 6 P/E ex-cash.
Microsoft had a P/E of 100 or so in 1999, then dropped in half to 50 P/E, then grew into that valuation over a decade by growing earnings leaving the stock price flat. There is no parallel with Apple that currently has a 6 P/E ex-cash.
Yes, you are right, but there is a (scary, for apple holders) parallel: The way you are describing the process (with which I agree), in effect the MS valuation post the 2x drop was essentially correct (in fact, somewhat high), which is why the price stayed flat.
Yes, you are right, but there is a (scary, for apple holders) parallel: The way you are describing the process (with which I agree), in effect the MS valuation post the 2x drop was essentially correct (in fact, somewhat high), which is why the price stayed flat.
No - the 50 P/E was in no way a good valuation of Microsoft after the dot com crash, which is why shareholders got 0% return over the next 12 years after that - the company had to grow into the valuation.
If Apple does the same thing over the next 12 years, the cash horde will be way more than the stock price and the P/E will be effectively zero or better. If you want to show a parallel you are going to have to work harder to show it.
No - the 50 P/E was in no way a good valuation of Microsoft after the dot com crash, which is why shareholders got 0% return over the next 12 years after that - the company had to grow into the valuation.
If Apple does the same thing over the next 12 years, the cash horde will be way more than the stock price and the P/E will be effectively zero or better. If you want to show a parallel you are going to have to work harder to show it.
a. MSFT hit bottom at the end of 2000, from which point on its adjusted (for splits and dividends) return through yesterday has been close to a factor 2, SPY (S&P with dividends reinvested, similarly adjusted) is up by almost exactly 50%. So, MSFT was, if anything, undervalued at its 50 P/E, by around 30%. If you multiply AAPLE stock price by 1.3, you will get around 610, which would not be viewed as grossly undervalued.
b. At the time MSFT was dominant in desktop OS, servers, and Office, and also in the new business of smartphones (Windows mobile was dominant), and all of those markets were growing quickly. MSFT had (and still has) massive profit margins in all of those business, and was about to release the Xbox, which became quite successful. Not so different from Apple.
exactly. Even Dell has a higher P/E than Apple right now. Its all market manipulation. The big funds want a higher ownership% of Apple. They were sick when Apple ran up to 700 yet they only owned about 60% of the shares. In contrast the funds own 86% of Google. They are really trying to scare the private investor away and buy their shares for cheap.
"The funds"? Which funds? Pension funds, which have YOUR money in it? They could not manipulate the price of a can of soda. Almost all of the S&P is owned by mutual and pension funds (both of which are pools of individual investors), so go take a chill pill.
a. MSFT hit bottom at the end of 2000, from which point on its adjusted (for splits and dividends) return through yesterday has been close to a factor 2, SPY (S&P with dividends reinvested, similarly adjusted) is up by almost exactly 50%. So, MSFT was, if anything, undervalued at its 50 P/E, by around 30%. If you multiply AAPLE stock price by 1.3, you will get around 610, which would not be viewed as grossly undervalued.
Microsoft has been flat, those wiggles don't count. If you managed to buy when it spiked down exactly at the right time in 2000, and sold last year when it was at its high, you could have gotten good return (not a 50% return though), but that would have been luck. Mostly it is the same price as now as it was in 2000.
And you didn't address the fact that Apple has a P/E of 6, not 50. How exactly do you propose that the situation is the same over the next 10 years?
Microsoft has been flat, those wiggles don't count. If you managed to buy when it spiked down exactly at the right time in 2000, and sold last year when it was at its high, you could have gotten good return (not a 50% return though), but that would have been luck. Mostly it is the same price as now as it was in 2000.
And you didn't address the fact that Apple has a P/E of 6, not 50. How exactly do you propose that the situation is the same over the next 10 years?
What? Look at ADJUSTED return. As for the P/E, I am not comparing the statistics of MSFT and AAPL. The point of what I am saying is that MSFT was reasonably fairly valued in 2001, and it is quite likely that so is AAPL now. As for why the MSFT P/E was 50 vs AAPL's 6 -- same reason GOOG has a higher P/E than AAPL: MSFT was perceived at the time as untouchable in their core markets (OS, Office suite), while AAPL's lead in phones is viewed as quite precarious.
Hedge funds. Same hedge funds that can buy 50-1 margin.
Just look at Yahoo finance, and see who the major holders of AAPL are. Jeez. And no, hedge funds cannot buy 50-1, and the big ones (e.g. Einhorn's Greenlight Capital) are not levered at all.
Key word is HOLDERS. The hedge funds are buying and selling everyday and are not HOLDING. They are also hedging with options. I'm pretty sure hedge funds can buy stock at 20-1 or 30-1 ratio. Apple averages about 18 million shares sold a day. Do you really think all those are mutual fund transations????
That's almost 10x more transactions than Google. If you dont think there is short term price manipulation with Apple than you are naive.
Google's float is a quarter of Apple's, their daily volume is about a seventh of Apple's, so yes AAPL is more actively traded, but in actuality Apple has much lower insititutional ownership (64% vs 85% for Google), which explains the remaining factor of two (insitutions generally buy and hold). A lot of the volume in any stock is marketmaking transactions (basically very high frequency traders trading amongst themselves) -- these will affect the price variation minute-to-minute, but not long term trends. Very high frequency traders can use high leverage (not 20-1, but maybe 5-1), people who hold overnight do not. So no, there is no manipulation, just the market losing confidence in Apple's management (I hope the management will prove them wrong, but my hope is not increasing). Why do you think anyone would want to manipulate the price of Apple, in preference to, say, Google, or Exxon-Mobil?
What? Look at ADJUSTED return. As for the P/E, I am not comparing the statistics of MSFT and AAPL. The point of what I am saying is that MSFT was reasonably fairly valued in 2001, and it is quite likely that so is AAPL now. As for why the MSFT P/E was 50 vs AAPL's 6 -- same reason GOOG has a higher P/E than AAPL: MSFT was perceived at the time as untouchable in their core markets (OS, Office suite), while AAPL's lead in phones is viewed as quite precarious.
Adjusted for what? That chart is already adjusted for stock splits.
And I think that you just admitted that there is no parallel between current day Apple and 2000 Microsoft, if Apple stock is flat of the next 10 years it will be for totally different reasons.
Comments
Quote:
Originally Posted by Marvin
It's not, because that would mean their primary goal is to service shareholders even if that meant the decisions were detrimental to the success of the company e.g depleting cash reserves to pay investors. The primary goal of the staff at Apple is towards the success of the company itself and shareholders come second.
But then that would not be increasing shareholder value, now would it.
Quote:
Originally Posted by Marvin
Shareholders can't exist without the company surviving so the most important goal is the success of the company.
Yes, the company must survive. But its purpose for existing and surviving is to provide a profitable return to shareholders. It achieves this by creating great (and profitable) products.
Quote:
Originally Posted by Marvin
Why does this keep coming up?
Because it is true and sometimes it must be repeated because some people don't believe it.
Quote:
Originally Posted by Marvin
How quickly do you think the most profitable company in the world is going to become unprofitable and 'soon be out of business'?
First, perhaps faster than you think if they insist on selling unprofitable products. If there focus was exclusively making the greatest products without regard to their profitability.
Quote:
Originally Posted by Marvin
It's the weirdest kind of fear-mongering clearly designed to try and encourage Apple to make bad decisions for the company to boost the profile of AAPL towards investors.
No one is "fear-mongering" here. That's a straw man.
Quote:
Originally Posted by Marvin
It's like saying McDonalds serves around 70 million people per day but y'know if tomorrow people decide they don't want a burger, they don't make any money so they need new management and should think about making a 50c burger for emerging markets. It's totally absurd reasoning.
What's absurd is your second straw man in a row.
Quote:
Originally Posted by Marvin
Apple is selling more devices than ever, they are making more profits than ever in a poor economy and more profits than any company in the world and yet people ponder about their near-term collapse. Their iPad shipments are up nearly 50% over last year. The potential iPad market is huge.
Indeed. I have not claimed otherwise. Perhaps someone else has. None of those facts, though, refute the possibility that there might be an even larger market for Apple products when different features and price points are considered.
Quote:
Originally Posted by Marvin
Who else in this industry is holding ~40% gross margins and 20-25% net margins? Likely nobody, so what's the problem? The problem is that investors are not happy with the stock price drop (which they ultimately control anyway) and in spite of the price rising from $420 to $700 in under a year under Tim's management and dropping back to $420 in under a year under Tim's management, claim that Tim is the problem and needs to either get out or do better by making cheaper, lower margin products (which is silly because it obviously makes matters worse).
Certainly investors are sometimes wrong. However, it's important to realize that a company's stock price is about the future more than the present. If investors (especially those who watch closely and have a very strong interest in an increased stock price) see a darker future for the company, they will begin to bail on the company's stock. They may be right. They may be wrong. No one can predict the future with certainty (including Apple.) So some investors may be seeing somethings now and projecting into the future a less successful Apple. For example they may be seeing early trends that look successful in the present but are only short term and actually make things worse longer term.
Either way, if you feel strongly (or "know") that Apple's stock is currently undervalued, then I suggest you buy as much as you can. You will reap the material benefits of your insight.
Quote:
Originally Posted by Marvin
If anybody has any suggestions about what they should be doing to be better than making more profit than anyone the world, I'm sure they'll be all ears. Vague suggestions like 'be more innovative', 'make a watch/TV/cheap phone' or 'give investors more money' are not good enough reasons to ensure the success of the company, which is their primary goal. They are doing a pretty awesome job at it and if people started acknowledging that, instead of spreading bad news around, then maybe the stock price would go back up.
You must be ranting against someone else here.
Right but the point is that the company success comes first, even if that means shareholders have to suffer in the interim. For example, it may be more beneficial for the company to leave money overseas for investment opportunities and that could come at the expense of shareholder dividends. Bringing the money home and handing it out is not their primary motive, it is to make the best decisions for the long term success of the company.
When did they start selling unprofitable products? Some of their gross margin drop was probably down to the iPad Mini and the iPhone 4/4S at lower prices, which is what people are suggesting they actually do more of.
How is it not fear-mongering to use phrases that suggest the most profitable company in the world might soon be out of business? That's appropriate for a company like RIM or Nokia. Apple is so far from that, it's mind-boggling how commonly it's used.
This is what it always comes down to though: market volume. Amazon has a large market volume and for some reason investors love this but their profits are non-existent. Would you rather that Apple sells 100 million iPhones per quarter and drops their gross margins down to 20%? All that's going to achieve is that when they can't hit massive volumes again, their profits will be ruined because they can't put the prices back up. Just watch what happens to Samsung. They are already struggling to maintain high margins and while they ship higher volumes than Apple, they make about half the profit. It's not going to get better than that for them.
That's exactly the problem though. People are making guesses about the future of a very secretive company and suggesting change needs to happen right now because the guesses about the future look like things are going bad. The people at the company know better than anyone what their long term goals and products are and a lot of them are significant shareholders in the company.
This happened to Intel recently where their shares were downgraded because people assumed they were delaying Haswell and Intel decided to speak up and say there's no problem at all and Haswell is on track. Neither Apple nor Intel has to do that. The stock market is always going to play the guesswork game, the mistake is in thinking that the companies have to acknowledge and make decisions based on it.
Given how fast the stock went up and how it came back down in roughly the same time, it looks as though it was overvalued at the time it hit its peak but it's an entirely different market from Apple's day to day operations. I don't think it's wise to stock up now for the purposes of selling at a high price in the near-term. I do think that Apple is a safe bet for the long term. I think the comments about them failing, becoming unprofitable, going out of business are just totally unlinked to the reality. Their growth is going to slow down and they will play out the current strategy, which has a long way to go and they will continue to make a lot of profit. If people want a high growth opportunity with Apple now, that's not going to happen, that opportunity has passed but it's crazy to think that it would. If people want high growth, that's what startups are for.
Apple went from near bankruptcy to where they are now in 15 years. That's a gravy train that's not coming around again. That's not to say it's downhill from here, just like it's not downhill for Microsoft. It's just steady. Look at Microsoft's stock next to Apple's. They had that massive spike too around 1999 and it settled around half that:
http://www.google.co.uk/finance?client=ob&q=NASDAQ:MSFT
http://www.google.co.uk/finance?client=ob&q=NASDAQ:AAPL
I reckon that will happen with Apple but I do think that it will rise from where it is now as Apple does have some growth opportunities.
edit: here's a graph overlay of AAPL (green) vs MSFT (blue):
I suspect much the same thing will happen but like I say, I don't expect it to fall as much with Apple as they still have high demand products. I could see it settling between 450-500.
Quote:
Originally Posted by Marvin
Right but the point is that the company success comes first, even if that means shareholders have to suffer in the interim. For example, it may be more beneficial for the company to leave money overseas for investment opportunities and that could come at the expense of shareholder dividends. Bringing the money home and handing it out is not their primary motive, it is to make the best decisions for the long term success of the company.
I totally understand this and do not disagree.
Quote:
Originally Posted by Marvin
When did they start selling unprofitable products?
I never claimed they are. The comment was in response to "all Apple needs to do is focus on making the best products."
Quote:
Originally Posted by Marvin
How is it not fear-mongering to use phrases that suggest the most profitable company in the world might soon be out of business?
Seeing as how I did not say they "might soon be out of business" you must be referring to someone else. I simply pointed put that any business that does not focus on profitability and shareholder value (over the long term) and focused exclusively on "making the best products" would find itself unprofitable and eventually out of business.
Based on the above three items I feel you have grossly misunderstood what I have said. Whether this is intentional or not I cannot tell.
Quote:
Originally Posted by Marvin
This is what it always comes down to though: market volume. Amazon has a large market volume and for some reason investors love this but their profits are non-existent. Would you rather that Apple sells 100 million iPhones per quarter and drops their gross margins down to 20%? All that's going to achieve is that when they can't hit massive volumes again, their profits will be ruined because they can't put the prices back up. Just watch what happens to Samsung. They are already struggling to maintain high margins and while they ship higher volumes than Apple, they make about half the profit. It's not going to get better than that for them.
I would prefer that Apple pursued the most profitable course they could over the long term. Given that I do not have access to the information they surely do, it's hard for me to know exactly what that means. Do I care if their margins are lower for more revenue and more profit? I don't know. To suggest that there is no profit it in the volume market seems silly to me.
Quote:
Originally Posted by Marvin
That's exactly the problem though. People are making guesses about the future of a very secretive company and suggesting change needs to happen right now because the guesses about the future look like things are going bad. The people at the company know better than anyone what their long term goals and products are and a lot of them are significant shareholders in the company.
This happened to Intel recently where their shares were downgraded because people assumed they were delaying Haswell and Intel decided to speak up and say there's no problem at all and Haswell is on track. Neither Apple nor Intel has to do that. The stock market is always going to play the guesswork game, the mistake is in thinking that the companies have to acknowledge and make decisions based on it.
Agreed. But companies make mistakes. They misread the future and the market. Some investors are simply currently saying that Apple might be doing that. If you disagree, then buy their stock.
The issue with regard to lower cost iPhone as an example has to do with the long term prospects of owning the OS platform. There's risk, for Apple, that it could get out-maneuvered by Android much as it was by Microsoft (vs. Mac). I'm not saying that is or will happen, simply that it is a risk and a real one and one to not be taken lightly. More importantly, it could be a risk whose seeds have already been planted, and you don't realize you've lost it until you're already sitting under the shade of the Android tree looking over at the iOS shrub.
I'm not actually suggesting that Apple makes it decisions based on the stock price or what some investors are suggesting. Again this seems to be a misinterpretation of what I've said.
Quote:
Originally Posted by MJ1970
I totally understand this and do not disagree.
I never claimed they are. The comment was in response to "all Apple needs to do is focus on making the best products."
Seeing as how I did not say they "might soon be out of business" you must be referring to someone else. I simply pointed put that any business that does not focus on profitability and shareholder value (over the long term) and focused exclusively on "making the best products" would find itself unprofitable and eventually out of business.
Based on the above three items I feel you have grossly misunderstood what I have said. Whether this is intentional or not I cannot tell.
I would prefer that Apple pursued the most profitable course they could over the long term. Given that I do not have access to the information they surely do, it's hard for me to know exactly what that means. Do I care if their margins are lower for more revenue and more profit? I don't know. To suggest that there is no profit it in the volume market seems silly to me.
Agreed. But companies make mistakes. They misread the future and the market. Some investors are simply currently saying that Apple might be doing that. If you disagree, then buy their stock.
The issue with regard to lower cost iPhone as an example has to do with the long term prospects of owning the OS platform. There's risk, for Apple, that it could get out-maneuvered by Android much as it was by Microsoft (vs. Mac). I'm not saying that is or will happen, simply that it is a risk and a real one and one to not be taken lightly. More importantly, it could be a risk whose seeds have already been planted, and you don't realize you've lost it until you're already sitting under the shade of the Android tree looking over at the iOS shrub.
I'm not actually suggesting that Apple makes it decisions based on the stock price or what some investors are suggesting. Again this seems to be a misinterpretation of what I've said.
The comment on Microsoft bears expanding on: Google is using exactly the same strategy: bundling their infrastructure (in MS's case it was their OS) with a very wide range of devices (which were PCs, but also various PC-compatible boards) where eventually it became imperative for developers (even Apple stalwarts like Adobe) to develop for DOS/windows first. In the meantime, Apple was collecting fat margins on their increasingly antiquated hardware (Moto 68K was really a non-starter by the time Apple was using it in Mac IIFX) and software (which did not have serious pre-emptive multitasking until OS X).
I doubt that Mr Market remembers all this (although it's acting like it does), but many of us are old enough to remember, which is why I am cautious about Apple's prospects going forward.
Quote:
Originally Posted by Marvin
Right but the point is that the company success comes first, even if that means shareholders have to suffer in the interim. For example, it may be more beneficial for the company to leave money overseas for investment opportunities and that could come at the expense of shareholder dividends. Bringing the money home and handing it out is not their primary motive, it is to make the best decisions for the long term success of the company.
When did they start selling unprofitable products? Some of their gross margin drop was probably down to the iPad Mini and the iPhone 4/4S at lower prices, which is what people are suggesting they actually do more of.
How is it not fear-mongering to use phrases that suggest the most profitable company in the world might soon be out of business? That's appropriate for a company like RIM or Nokia. Apple is so far from that, it's mind-boggling how commonly it's used.
This is what it always comes down to though: market volume. Amazon has a large market volume and for some reason investors love this but their profits are non-existent. Would you rather that Apple sells 100 million iPhones per quarter and drops their gross margins down to 20%? All that's going to achieve is that when they can't hit massive volumes again, their profits will be ruined because they can't put the prices back up. Just watch what happens to Samsung. They are already struggling to maintain high margins and while they ship higher volumes than Apple, they make about half the profit. It's not going to get better than that for them.
That's exactly the problem though. People are making guesses about the future of a very secretive company and suggesting change needs to happen right now because the guesses about the future look like things are going bad. The people at the company know better than anyone what their long term goals and products are and a lot of them are significant shareholders in the company.
This happened to Intel recently where their shares were downgraded because people assumed they were delaying Haswell and Intel decided to speak up and say there's no problem at all and Haswell is on track. Neither Apple nor Intel has to do that. The stock market is always going to play the guesswork game, the mistake is in thinking that the companies have to acknowledge and make decisions based on it.
Given how fast the stock went up and how it came back down in roughly the same time, it looks as though it was overvalued at the time it hit its peak but it's an entirely different market from Apple's day to day operations. I don't think it's wise to stock up now for the purposes of selling at a high price in the near-term. I do think that Apple is a safe bet for the long term. I think the comments about them failing, becoming unprofitable, going out of business are just totally unlinked to the reality. Their growth is going to slow down and they will play out the current strategy, which has a long way to go and they will continue to make a lot of profit. If people want a high growth opportunity with Apple now, that's not going to happen, that opportunity has passed but it's crazy to think that it would. If people want high growth, that's what startups are for.
Apple went from near bankruptcy to where they are now in 15 years. That's a gravy train that's not coming around again. That's not to say it's downhill from here, just like it's not downhill for Microsoft. It's just steady. Look at Microsoft's stock next to Apple's. They had that massive spike too around 1999 and it settled around half that:
http://www.google.co.uk/finance?client=ob&q=NASDAQ:MSFT
http://www.google.co.uk/finance?client=ob&q=NASDAQ:AAPL
I reckon that will happen with Apple but I do think that it will rise from where it is now as Apple does have some growth opportunities.
edit: here's a graph overlay of AAPL (green) vs MSFT (blue):
I suspect much the same thing will happen but like I say, I don't expect it to fall as much with Apple as they still have high demand products. I could see it settling between 450-500.
Apple has high-demand products, but you might recall that MS did too in 1999, and still does.
Ok, I see what you're saying with that.
But you are implying this is the case with Apple. You seem to be for short term changes to prevent your implied long term outcomes, which includes going out of business. I just think even mentioning the possibility of going out of business when it comes to Apple is so far off track considering how well Apple is doing right now. I don't think it's anywhere near the time for concern over the company strategy.
It's a race to the bottom just like it is in any market and more risky if they have manufacturing issues.
The very idea of high volume suggests low price. This means Apple has to build a lower quality product as you can see comparing the iPhone and iPod Touch. The existence of a lower priced option drives people to it (e.g the iPad Mini), which lowers the average selling price. So Apple just ends up trying to sell more units for very little gain in profit if any. This dilutes their brand as a premium brand, like what happened with Sony. These days, people wouldn't care about a Sony vs a Samsung TV. That's not a good strategy for Apple and it's never been one they've followed.
I'm not suggesting they shouldn't have done the iPad Mini, I'm just saying it shows what happens aiming for volume by lowering price.
Also when we are talking about the volume market, I know it's relative but Apple sells about 100 million units per year. That seems like they are covering volume just fine.
It doesn't stop there though. The media blows up the hype/guesses and it triggers sell-offs and it's self-fulfilling. The sequence goes:
- investors and analysts put out negative guesses and exaggerate slowed growth
- investors start selling
- stock starts falling
- investors who haven't sold start yelling, 'Tim what are your playing at!'
The blame is being misplaced and the stock is moving mostly independently of what Apple is doing. Apple is doing exactly the same thing they've always done. They are just hitting the limits of what the market will sustain through no fault of their own.
The Windows comparison has been mentioned in the past and I still think it's a different situation with this. Apple will have sold over 550 million iOS devices by now. Android is at over 750 million. Android will be getting installed into all sorts of things so the OS will spread further. It will grow faster but there's a limit to the market that can buy the phones:
http://www.engadget.com/2013/01/25/global-mobile-phone-shipments-2012/
I guess eventually smartphones will make up the entire volume and Apple might end up with less than 10% like with the desktop OS but what's the implication of that? It's not going to mean less software support because we are talking about hundreds of millions of people. It's going to have no effect unless people stop buying Apple's products. That can only happen if the competition starts building better products and they can't because they don't have an integrated eco-system. If one manufacturer tries to do it, they fragment the OS. Even now, we can see modern hardware running Android with laggy interfaces at price points competing with Apple.
Apple planned this for years and I think they nailed it big time. I really don't see them having problems maintaining a healthy marketshare. They don't need to have a 50/50 split with Android of the entire market. Apple alone can't ship 800 million premium devices in a year. That's never going to happen and it doesn't have to. If they tried, all they'd do is kill their margins and saturate the market. They can do 200m, maybe 300m - in fact that might happen this year. They shipped 70+million in Q1 so it'll be somewhere in between, which is massive growth over last year.
They have a good balance between the profit and the volume and I think if they just stick to this strategy, they won't have problems for a very long time.
Quote:
Originally Posted by Marvin
But you are implying this is the case with Apple.
I'm not. Maybe you're inferring that from what I said. I was replying (if you look back) to a poster who seemed to be implying that that was all Apple needed to do (i.e., focus on making the bets products.)
Quote:
Originally Posted by Marvin
You seem to be for short term changes to prevent your implied long term outcomes, which includes going out of business. I just think even mentioning the possibility of going out of business when it comes to Apple is so far off track considering how well Apple is doing right now.
Again, this is your inference. I'm going to discontinue our discussion if this continues. If you look back at the context of my original comments (i.e., a response to a specific post) I think you'll see that your interpretation of my comments is a bit off.
Quote:
Originally Posted by Marvin
The very idea of high volume suggests low price. This means Apple has to build a lower quality product as you can see comparing the iPhone and iPod Touch. The existence of a lower priced option drives people to it (e.g the iPad Mini), which lowers the average selling price. So Apple just ends up trying to sell more units for very little gain in profit if any. This dilutes their brand as a premium brand, like what happened with Sony. These days, people wouldn't care about a Sony vs a Samsung TV. That's not a good strategy for Apple and it's never been one they've followed.
Mostly right, but not completely. Yes the volume/mass market does require lower price points. I doubt seriously that Apple would sell products that make them no profit (as your 4th sentence implies.) In fact there is an issue of price elasticity of demand that factors into all of this. Finally I disagree with what killed Sony and am doubtful Apple will suffer the same fate (at least for the same reasons.)
Quote:
Originally Posted by Marvin
Also when we are talking about the volume market, I know it's relative but Apple sells about 100 million units per year. That seems like they are covering volume just fine.
That depends on how big the market is now doesn't it? Which product are you referring to?
Quote:
Originally Posted by Marvin
Also when we are talking about the volume market, I know it's relative but Apple sells about 100 million units per year. That seems like they are covering volume just fine.
It doesn't stop there though. The media blows up the hype/guesses and it triggers sell-offs and it's self-fulfilling. The sequence goes:
- investors and analysts put out negative guesses and exaggerate slowed growth
- investors start selling
- stock starts falling
- investors who haven't sold start yelling, 'Tim what are your playing at!'
The blame is being misplaced and the stock is moving mostly independently of what Apple is doing. Apple is doing exactly the same thing they've always done. They are just hitting the limits of what the market will sustain through no fault of their own.
I understand your analysis of the situation. A couple of points here though:
- You're begging the question on point 1.
- Regarding "Apple is doing exactly the same thing they've always done" your assuming that this is not the issue leading to a lower stock price. To give a rather extreme example to make the point more clear: Buggy whip makers kept "doing exactly the same thing they've always done" all the way to bankruptcy.
- If they are "hitting the limits of what the market will sustain" then they probably ought to be considering whether they should be doing exactly what they've always done. If the market conditions are changing, then Apple may need to change also. For example, if their goal is to always be in the business of high margin software/hardware products and things like smart phones are starting to go commodity, then Apple must adapt. If they want to continue to be in the smart phone business and that business is changing (and looks like it is), they may need to adjust their product strategy.
Quote:
Originally Posted by Marvin
The Windows comparison has been mentioned in the past and I still think it's a different situation with this. Apple will have sold over 550 million iOS devices by now. Android is at over 750 million. Android will be getting installed into all sorts of things so the OS will spread further. It will grow faster but there's a limit to the market that can buy the phones:
http://www.engadget.com/2013/01/25/global-mobile-phone-shipments-2012/
So your 100M (out of 700M) suddenly doesn't look so much like the "volume" part of the market.
Quote:
Originally Posted by Marvin
I guess eventually smartphones will make up the entire volume...
You can guess that's what will happen and you will have about a 99% chance of being right. This is the pattern of the market. The (luxury) products of yesterday/yesteryear are the commonplace products for everyone today.
Quote:
Originally Posted by Marvin
...and Apple might end up with less than 10% like with the desktop OS but what's the implication of that? It's not going to mean less software support because we are talking about hundreds of millions of people. It's going to have no effect unless people stop buying Apple's products.
Actually that could happen. I suspect it is much easier for people to switch phones (even smart phones) that to have switched PCs.
Quote:
Originally Posted by Marvin
Apple planned this for years and I think they nailed it big time. I really don't see them having problems maintaining a healthy marketshare. They don't need to have a 50/50 split with Android of the entire market. Apple alone can't ship 800 million premium devices in a year. That's never going to happen and it doesn't have to. If they tried, all they'd do is kill their margins and saturate the market. They can do 200m, maybe 300m - in fact that might happen this year. They shipped 70+million in Q1 so it'll be somewhere in between, which is massive growth over last year.
They have a good balance between the profit and the volume and I think if they just stick to this strategy, they won't have problems for a very long time.
Yep. Maybe you're right. In fact you probably are. Many markets tend to settle in at a natural number of competitors (often 3-5) with 2-3 being dominant and a handful of much smaller ones. This may happen for many many years with the smart phone market until something disruptive comes along.
Little to no gain in profit is what I was saying, not no profit.
There it is again with the examples of bankruptcy, even if it is labelled as extreme. Apple has not directly caused the fluctuation in the stock price. It went up as fast as it went down. The entire industry didn't change in the single year and a half that happened. The stock change was obviously just the market figuring out Apple's true long term value and it seems to be holding at a market cap higher than any other company. Maybe it'll keep sliding if the numbers are down when they report them in 2 weeks but I doubt they will be.
It is possible though to maintain a steady marketshare. They can continue to be in the smartphone business without growth. Like Microsoft isn't growing in desktop marketshare but they don't need to. RIM/Blackberry has managed to stay in business with a steady share of the market.
It's 135m and it is high volume even relative to the 700m. This is the same thing people focus on with Windows. The operating system share is split between many manufacturers and Android is even free. In terms of hardware, which is where Apple makes the profit, they are doing really well. Only Samsung and Nokia outsell Apple in mobile. I'd say coming in behind Nokia puts them in the volume market and Nokia has shown that they have nothing to come back with so they are dead in the water. Their share will continue to drop to the benefit of Android devices and Apple.
It could but Apple keeps an eye on this. Schiller even said recently more people were switching from Android to iOS than the other way round. Most of Android's growth comes from people ditching Blackberry and Nokia and Apple's and Android's growth pretty much mirrors the decline of the dying brands.
Quote:
Originally Posted by Marvin
Little to no gain in profit is what I was saying, not no profit.
Still, you're making an assumption here. Do a little reading on the price-elasticity of demand to understand the other possibilities.
Quote:
Originally Posted by Marvin
There it is again with the examples of bankruptcy, even if it is labelled as extreme.
Quote:
Originally Posted by Marvin
Apple has not directly caused the fluctuation in the stock price. It went up as fast as it went down. The entire industry didn't change in the single year and a half that happened.
Maybe. Maybe not.
Quote:
Originally Posted by Marvin
The stock change was obviously just the market figuring out Apple's true long term value and it seems to be holding at a market cap higher than any other company.
So what is your issue here then?
Quote:
Originally Posted by Marvin
It is possible though to maintain a steady marketshare. They can continue to be in the smartphone business without growth.
Of course. Obviously. No question. I have not claimed otherwise. You appear to be arguing against points that I haven't made.
Quote:
Originally Posted by Marvin
It's 135m and it is high volume even relative to the 700m.
Well since we're dealing in rather subjective and vague terms like "high volume" I'll just let you have this point even though this "high volume" appear to mathematically only appear to be a smallish (20%) percentage.
Quote:
Originally Posted by Marvin
It could but Apple keeps an eye on this.
I'm sure they do. If they didn't, I'd short them now!
The issue is the (possibly subconscious) negativity. You can see it all the way through the comments people make about the stock drop (on other sites too) as if somehow Apple is to blame for this. Here's another recent article that demonstrates it:
http://www.forbes.com/sites/greatspeculations/2013/04/10/disappointing-sales-at-foxconn-fail-to-bruise-apple-stock-for-now/
You are saying that you're not pointing to Apple's impending demise but you keep using phrases and examples that point to potential bankruptcy or going of business or not making any profit and needing to make changes like going after high volume. I can understand using these things merely as examples but why use them unless you are implying that they somehow apply to Apple's current situation? There seems to be a strange way of thinking that's taken over because of the massive drop and somehow people have forgotten the massive gain that preceded it. Nobody seems to question why the stock goes up so quickly but when it goes down, something needs to be done about it.
Do you acknowledge that Apple is currently the most profitable company in the history of the world and that suggestions of bankruptcy or unprofitability are not near-term possibilities and in light if this, do you acknowledge that there is no need for them to change their business strategy?
I misread the chart earlier, Apple is 2nd, Nokia is 3rd:
http://www.engadget.com/2013/01/25/global-mobile-phone-shipments-2012/
Samsung is the only manufacturer ahead of Apple in shipments with 30% of the market. If you don't think 20% is high volume, then Samsung with 30% can't be either so no manufacturer is shipping in high volumes. Given that the terms are all relative, someone has to be shipping in high volumes so like I say, I'd describe Apple's ~20% share as high volume.
If you expect Apple to outsell all Android device manufacturers combined with only premium products in order to be considered a high volume seller, I'd say that's a bit unrealistic.
Tim Cook addressed the issue of volume specifically:
http://appleinsider.com/articles/13/02/27/apple-ceo-tim-cook-on-android-growth-success-is-not-making-the-most
"The CEO told shareholders that his company could press "a button or two" that would have Apple make the most products in a particular category. But that "wouldn't be good for Apple," he said."
Quote:
Originally Posted by igriv
Apple has high-demand products, but you might recall that MS did too in 1999, and still does.
Microsoft had a P/E of 100 or so in 1999, then dropped in half to 50 P/E, then grew into that valuation over a decade by growing earnings leaving the stock price flat. There is no parallel with Apple that currently has a 6 P/E ex-cash.
Quote:
Originally Posted by e1618978
Microsoft had a P/E of 100 or so in 1999, then dropped in half to 50 P/E, then grew into that valuation over a decade by growing earnings leaving the stock price flat. There is no parallel with Apple that currently has a 6 P/E ex-cash.
Yes, you are right, but there is a (scary, for apple holders) parallel: The way you are describing the process (with which I agree), in effect the MS valuation post the 2x drop was essentially correct (in fact, somewhat high), which is why the price stayed flat.
Quote:
Originally Posted by igriv
Yes, you are right, but there is a (scary, for apple holders) parallel: The way you are describing the process (with which I agree), in effect the MS valuation post the 2x drop was essentially correct (in fact, somewhat high), which is why the price stayed flat.
No - the 50 P/E was in no way a good valuation of Microsoft after the dot com crash, which is why shareholders got 0% return over the next 12 years after that - the company had to grow into the valuation.
If Apple does the same thing over the next 12 years, the cash horde will be way more than the stock price and the P/E will be effectively zero or better. If you want to show a parallel you are going to have to work harder to show it.
Quote:
Originally Posted by e1618978
No - the 50 P/E was in no way a good valuation of Microsoft after the dot com crash, which is why shareholders got 0% return over the next 12 years after that - the company had to grow into the valuation.
If Apple does the same thing over the next 12 years, the cash horde will be way more than the stock price and the P/E will be effectively zero or better. If you want to show a parallel you are going to have to work harder to show it.
a. MSFT hit bottom at the end of 2000, from which point on its adjusted (for splits and dividends) return through yesterday has been close to a factor 2, SPY (S&P with dividends reinvested, similarly adjusted) is up by almost exactly 50%. So, MSFT was, if anything, undervalued at its 50 P/E, by around 30%. If you multiply AAPLE stock price by 1.3, you will get around 610, which would not be viewed as grossly undervalued.
b. At the time MSFT was dominant in desktop OS, servers, and Office, and also in the new business of smartphones (Windows mobile was dominant), and all of those markets were growing quickly. MSFT had (and still has) massive profit margins in all of those business, and was about to release the Xbox, which became quite successful. Not so different from Apple.
Quote:
Originally Posted by sog35
exactly. Even Dell has a higher P/E than Apple right now. Its all market manipulation. The big funds want a higher ownership% of Apple. They were sick when Apple ran up to 700 yet they only owned about 60% of the shares. In contrast the funds own 86% of Google. They are really trying to scare the private investor away and buy their shares for cheap.
"The funds"? Which funds? Pension funds, which have YOUR money in it? They could not manipulate the price of a can of soda. Almost all of the S&P is owned by mutual and pension funds (both of which are pools of individual investors), so go take a chill pill.
Quote:
Originally Posted by igriv
a. MSFT hit bottom at the end of 2000, from which point on its adjusted (for splits and dividends) return through yesterday has been close to a factor 2, SPY (S&P with dividends reinvested, similarly adjusted) is up by almost exactly 50%. So, MSFT was, if anything, undervalued at its 50 P/E, by around 30%. If you multiply AAPLE stock price by 1.3, you will get around 610, which would not be viewed as grossly undervalued.
http://finance.yahoo.com/echarts?s=MSFT+Interactive#symbol=msft;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Microsoft has been flat, those wiggles don't count. If you managed to buy when it spiked down exactly at the right time in 2000, and sold last year when it was at its high, you could have gotten good return (not a 50% return though), but that would have been luck. Mostly it is the same price as now as it was in 2000.
And you didn't address the fact that Apple has a P/E of 6, not 50. How exactly do you propose that the situation is the same over the next 10 years?
Quote:
Originally Posted by e1618978
http://finance.yahoo.com/echarts?s=MSFT+Interactive#symbol=msft;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Microsoft has been flat, those wiggles don't count. If you managed to buy when it spiked down exactly at the right time in 2000, and sold last year when it was at its high, you could have gotten good return (not a 50% return though), but that would have been luck. Mostly it is the same price as now as it was in 2000.
And you didn't address the fact that Apple has a P/E of 6, not 50. How exactly do you propose that the situation is the same over the next 10 years?
What? Look at ADJUSTED return. As for the P/E, I am not comparing the statistics of MSFT and AAPL. The point of what I am saying is that MSFT was reasonably fairly valued in 2001, and it is quite likely that so is AAPL now. As for why the MSFT P/E was 50 vs AAPL's 6 -- same reason GOOG has a higher P/E than AAPL: MSFT was perceived at the time as untouchable in their core markets (OS, Office suite), while AAPL's lead in phones is viewed as quite precarious.
Quote:
Originally Posted by sog35
Hedge funds. Same hedge funds that can buy 50-1 margin.
Just look at Yahoo finance, and see who the major holders of AAPL are. Jeez. And no, hedge funds cannot buy 50-1, and the big ones (e.g. Einhorn's Greenlight Capital) are not levered at all.
Quote:
Originally Posted by sog35
Key word is HOLDERS. The hedge funds are buying and selling everyday and are not HOLDING. They are also hedging with options. I'm pretty sure hedge funds can buy stock at 20-1 or 30-1 ratio. Apple averages about 18 million shares sold a day. Do you really think all those are mutual fund transations????
That's almost 10x more transactions than Google. If you dont think there is short term price manipulation with Apple than you are naive.
Google's float is a quarter of Apple's, their daily volume is about a seventh of Apple's, so yes AAPL is more actively traded, but in actuality Apple has much lower insititutional ownership (64% vs 85% for Google), which explains the remaining factor of two (insitutions generally buy and hold). A lot of the volume in any stock is marketmaking transactions (basically very high frequency traders trading amongst themselves) -- these will affect the price variation minute-to-minute, but not long term trends. Very high frequency traders can use high leverage (not 20-1, but maybe 5-1), people who hold overnight do not. So no, there is no manipulation, just the market losing confidence in Apple's management (I hope the management will prove them wrong, but my hope is not increasing). Why do you think anyone would want to manipulate the price of Apple, in preference to, say, Google, or Exxon-Mobil?
Quote:
Originally Posted by igriv
What? Look at ADJUSTED return. As for the P/E, I am not comparing the statistics of MSFT and AAPL. The point of what I am saying is that MSFT was reasonably fairly valued in 2001, and it is quite likely that so is AAPL now. As for why the MSFT P/E was 50 vs AAPL's 6 -- same reason GOOG has a higher P/E than AAPL: MSFT was perceived at the time as untouchable in their core markets (OS, Office suite), while AAPL's lead in phones is viewed as quite precarious.
Adjusted for what? That chart is already adjusted for stock splits.
And I think that you just admitted that there is no parallel between current day Apple and 2000 Microsoft, if Apple stock is flat of the next 10 years it will be for totally different reasons.