No the Stock dropped because it's a large expenditure. Any company in Apples position would have yielded the same effect. People are reading too much into this from Wallstreet. . .
Remember Apple had roughly 63 Million in profits 2002...Universal Music Group had 500Million. Do the math.
Those who invested in Apple invested in an innovative computer company. If these folks wanted to invest in the music business, they would have purchased stock in a music company, or a company with large holdings in the music industry. If we "do the math," Apple suddenly becomes a company whose primary source of revenue and profit is in the music industry. Computers would be secondary, and the business focus would shift. Apple's future would be more tied to how well they do in music.
Such a prospect does not sit well with stockholders. The whole foundation for their investment would suddenly be something referred to as a dying industry. There is no guarantee that Apple can "fix" the problem with their music service. It's just an idea that sounds good at this point. Only time will tell if it can save an industry. There may be $500 million profit one year, but most expect to see such profits steadily erode. If this happens, Apple is left holding the bag, as the saying goes.
The stockholder's meeting will be interesting indeed.
Those who invested in Apple invested in an innovative computer company. If these folks wanted to invest in the music business, they would have purchased stock in a music company, or a company with large holdings in the music industry.
That's false. If you were to poll a majority of Investors they would most likely tell you they invest in companies who are most likely to give them a good return on their money. Do they care how the company providing said returns generates them is a non issue as long as the returns are sustainable. The focus is on the profts ..not the product.
Quote:
If we "do the math," Apple suddenly becomes a company whose primary source of revenue and profit is in the music industry. Computers would be secondary, and the business focus would shift. Apple's future would be more tied to how well they do in music.
You can look at that optimistically or pessimistically. Should Apple be able generate great profit from the UMG purchase then it would affect their computer side in a positive way. More money for R&D more money for strategic acquisitions. Less dependency on higher margin products like Powermacs. Apple's future is inextricably tied to how well they do in areas "other" than computers. They need to find something in which they can spin yarn into gold.
Quote:
Such a prospect does not sit well with stockholders. The whole foundation for their investment would suddenly be something referred to as a dying industry. There is no guarantee that Apple can "fix" the problem with their music service. It's just an idea that sounds good at this point. Only time will tell if it can save an industry. There may be $500 million profit one year, but most expect to see such profits steadily erode. If this happens, Apple is left holding the bag, as the saying goes.
It shouldn't sit well with stockholders until they understand the potential of Apples ownership of UMG and their Music Service. Money talks here...they'll be focused on ROI. The Music Industry is far from dying but it does need a shot in the arm. Apple can easily pitch this as being on the Groundfloor of an Elevator headed for profits that simply aren't possible with the current course that Apple is on. I beg to differ. The whole purpose of Music Downloads is maximizing profit. There is no physical data to warehouse or ship. You only need lock that Data down in a sufficient manner and produce a compelling product. The profit potential is huge.
There are so many ways to make money with a deal like this. Tie ins with Apple, Pixar and whoever else that rubs shoulders with Apple. First to market with a compelling product wins.
I understand what you are saying. Between the two of us, we likely cover the extremes of opinion on this topic. It will be interesting to see what happens. If Apple does buy UMB, I hope your optimistic view holds true. I believe it could be a great thing, but I also believe it could be a disaster.
I do disagree with you on investments. While many people may not care how a company uses it resources to make a profit, many others do care about which market sector they invest in. They have confidence in one sector, and bad feelings about another. I believe the music industry is one sector a fair number of investors want to avoid.
I'm a music lover but even I am not buying music like I used to. Part of it is my music tastes have changed but another part is DVDs by comparison are so damn compelling. The Gladiator and LotR EE DVDs just wowed me with their extras and production info. CDs look pedestrian by comparison. Something needs to change. CDs need to become "hip" again or something.
I don't believe Apple will be able to put this deal together but I do believe we may eventually see Apple come through if their Music Service proves to be successful.
I'm really hoping that Apple can develop a new revenue stream that brings profits to them that they haven't seen in years. This would hopefully allow them to lower Hardware costs fueling more sales. Somebody wake me up LOL
I found something on The Register much like the Apple - Universal deal, and it had the same effect. Share price dropped to a record low. It seems that investors may like some diversity, such as Apple with their iPod and music service. They even like conglomerates with many diverse businesses. But investors may not like a company pulled in two different directions, with two very different businesses of about the same size competing for attention and resources. Just a thought from reading the article.
In summary, Sega's currently planned merge with gambling machine manufacturer Sammy caused its stock to hit a record low. Now a suggested merger with Namco, another game company, caused its shares to rise. Here is one paragraph from the Register article.
"Namco's play appears to be based on making the news of a possible Sega merger public in order to gauge investor and analyst opinion; and so far the response has been largely positive, with shares in both Namco and Sega making gains on the Tokyo stock exchange today following the news. In contrast, the news of the Sammy merger pushed shares of both Sega and Sammy to record lows."
Comments
Originally posted by hmurchison
No the Stock dropped because it's a large expenditure. Any company in Apples position would have yielded the same effect. People are reading too much into this from Wallstreet. . .
Remember Apple had roughly 63 Million in profits 2002...Universal Music Group had 500Million. Do the math.
Those who invested in Apple invested in an innovative computer company. If these folks wanted to invest in the music business, they would have purchased stock in a music company, or a company with large holdings in the music industry. If we "do the math," Apple suddenly becomes a company whose primary source of revenue and profit is in the music industry. Computers would be secondary, and the business focus would shift. Apple's future would be more tied to how well they do in music.
Such a prospect does not sit well with stockholders. The whole foundation for their investment would suddenly be something referred to as a dying industry. There is no guarantee that Apple can "fix" the problem with their music service. It's just an idea that sounds good at this point. Only time will tell if it can save an industry. There may be $500 million profit one year, but most expect to see such profits steadily erode. If this happens, Apple is left holding the bag, as the saying goes.
The stockholder's meeting will be interesting indeed.
Those who invested in Apple invested in an innovative computer company. If these folks wanted to invest in the music business, they would have purchased stock in a music company, or a company with large holdings in the music industry.
That's false. If you were to poll a majority of Investors they would most likely tell you they invest in companies who are most likely to give them a good return on their money. Do they care how the company providing said returns generates them is a non issue as long as the returns are sustainable. The focus is on the profts ..not the product.
If we "do the math," Apple suddenly becomes a company whose primary source of revenue and profit is in the music industry. Computers would be secondary, and the business focus would shift. Apple's future would be more tied to how well they do in music.
You can look at that optimistically or pessimistically. Should Apple be able generate great profit from the UMG purchase then it would affect their computer side in a positive way. More money for R&D more money for strategic acquisitions. Less dependency on higher margin products like Powermacs. Apple's future is inextricably tied to how well they do in areas "other" than computers. They need to find something in which they can spin yarn into gold.
Such a prospect does not sit well with stockholders. The whole foundation for their investment would suddenly be something referred to as a dying industry. There is no guarantee that Apple can "fix" the problem with their music service. It's just an idea that sounds good at this point. Only time will tell if it can save an industry. There may be $500 million profit one year, but most expect to see such profits steadily erode. If this happens, Apple is left holding the bag, as the saying goes.
It shouldn't sit well with stockholders until they understand the potential of Apples ownership of UMG and their Music Service. Money talks here...they'll be focused on ROI. The Music Industry is far from dying but it does need a shot in the arm. Apple can easily pitch this as being on the Groundfloor of an Elevator headed for profits that simply aren't possible with the current course that Apple is on. I beg to differ. The whole purpose of Music Downloads is maximizing profit. There is no physical data to warehouse or ship. You only need lock that Data down in a sufficient manner and produce a compelling product. The profit potential is huge.
There are so many ways to make money with a deal like this. Tie ins with Apple, Pixar and whoever else that rubs shoulders with Apple. First to market with a compelling product wins.
I understand what you are saying. Between the two of us, we likely cover the extremes of opinion on this topic. It will be interesting to see what happens. If Apple does buy UMB, I hope your optimistic view holds true. I believe it could be a great thing, but I also believe it could be a disaster.
I do disagree with you on investments. While many people may not care how a company uses it resources to make a profit, many others do care about which market sector they invest in. They have confidence in one sector, and bad feelings about another. I believe the music industry is one sector a fair number of investors want to avoid.
I'm a music lover but even I am not buying music like I used to. Part of it is my music tastes have changed but another part is DVDs by comparison are so damn compelling. The Gladiator and LotR EE DVDs just wowed me with their extras and production info. CDs look pedestrian by comparison. Something needs to change. CDs need to become "hip" again or something.
I don't believe Apple will be able to put this deal together but I do believe we may eventually see Apple come through if their Music Service proves to be successful.
I'm really hoping that Apple can develop a new revenue stream that brings profits to them that they haven't seen in years. This would hopefully allow them to lower Hardware costs fueling more sales. Somebody wake me up LOL
In summary, Sega's currently planned merge with gambling machine manufacturer Sammy caused its stock to hit a record low. Now a suggested merger with Namco, another game company, caused its shares to rise. Here is one paragraph from the Register article.
"Namco's play appears to be based on making the news of a possible Sega merger public in order to gauge investor and analyst opinion; and so far the response has been largely positive, with shares in both Namco and Sega making gains on the Tokyo stock exchange today following the news. In contrast, the news of the Sammy merger pushed shares of both Sega and Sammy to record lows."