Apple, Inc. iPad is obliterating Samsung, Google's Android in tablet profits

135678

Comments

  • Reply 41 of 146
    qamfqamf Posts: 87member


    Surprise?  Why is this story needed, pretty obvious if you ask me.



    It could have been a lot shorter.




    But, true, at least the title and such is, the story was to long for me to read in the 3 minutes I have.



    -QAMF

  • Reply 42 of 146

    Quote:

    Originally Posted by rjc999 View Post


    Son, I've been working in the tech industry since the beginning of Silicon Valley. Come back when you understand the difference between basic research and products. What Apple does is applied technology, not basic research. Where are the papers? 


     


    Let me educate you as to what REAL Research and Development is: http://researchweb.watson.ibm.com/journal/index.html


     


    Here's another example: http://www.sri.com/


     


    Note: it doesn't count if you simply buy the finished tech (ala Siri, which was originated at SRI), as opposed to funding the research yourself with your own employees.


     


    If Apple does basic research, why do they get their speech tech from Nuance and their AI from SRI? Google hires researchers, like Ray Kurzweil, gives them resources and grants to work on projects, not products. Apple is a shell company by comparison, going to the supermarket to buy and license the technology developed by others and than prepackaged into a shiny aluminum frame. 


     


    I've give them props on design. But they don't invent technology, they package it.



     






    And yet for all of that, they still make more money on iOS users than they do off of their own Android user base (which is larger).  The difference in the Android setup now vs Windows in the 90s and early 2000s is that MS was making a ton of money off Windows and subsequently Office sales.  PC makers made money for a while until the race to the bottom wrecked all their financials.  But tons of other vendors made money too, especially software companies.  People gobbled up Windows software and it was profitable for them.


     


    With Android you have one hardware maker that is profitable and you have Google which gives away the OS but still makes less money off Android users than they do off of iOS.  App makers are not making money anywhere near the rate that one makes creating content for iOS.  An ecosystem works and has longevity not when hardware is commoditized and one or two players do well but when it creates an environment that is profitable for many.  iOS does this.  Android does not.


     


    Again, get your 1990s blinders off and realize you're not set up for a repeat of that era here.

  • Reply 43 of 146
    muppetrymuppetry Posts: 3,331member

    Quote:

    Originally Posted by RichL View Post


    Daniel last week:


     


    Quote:


    Strategy Analytics has to employ "research" to come up with this claim because Samsung doesn't actually report how many phones, smartphones, tablets, cameras or set top boxes it sells (or even the inventory numbers it ships) and doesn't report the profit share of any of these products segments.



     


     


    Daniel this week:


     


    Quote:


    Apple, Inc. iPad is obliterating Samsung, Google's Android in tablet profits



     


     


    How can you be certain that Apple is obliterating Samsung's tablet profits when Samsung doesn't report its profits per product segment? It's probably true but it would be great if you could be consistent rather than picking and choosing your side each week depending on whether the report is favorable to Apple.



     


    If you had read the article you would not need to ask that question.

  • Reply 44 of 146
    tundraboytundraboy Posts: 1,786member

    Quote:

    Originally Posted by rjc999 View Post


    Microeconomics 101, the long run in a competitive market is for prices to trend towards marginal cost.



     


    Ha ha, you take one college introductory econ course and you think you can explain everything.  The basic model of competitive markets you are using assumes certain things that aren't true in the smartphone and tablet markets.  Things like no barriers to entry, homogenous products, etc.  But most relevant to the discussion is static technology.  If technology is static and there are no barriers to entry and one firm's product is a perfect substitute for another's than sure prices drive down to marginal cost.  But we're talking about something like the market for construction sand here.


     


    You can sustain pricing above marginal cost for extended periods in the tech industry.  Just ask Microsoft to show you their financials for Windows.

  • Reply 45 of 146
    SpamSandwichSpamSandwich Posts: 33,408member
    gtr wrote: »
    Gatrorguy, KDarling, rjc999.

    Brace yourself, boys.

    You're going to have a HORRIBLE decade.

    ;)

    Actually, it appears they thrive on negative feedback. So, for them it's going to be another banner year.
  • Reply 46 of 146

    Quote:

    Originally Posted by rjc999 View Post


     


    But the fruits are already here. The Nexus 7 2 destroys the iPad Mini. Way way better screen. More powerful. Cheaper. The only thing the iPads have going for them are the existing IOS apps market.  Honestly, if there was no iOS native apps, and all you had was a Web browser, iPad would be in deep trouble. Sooner or later the App Store's advantages in content will be eroded.


     


    .


     


     



    The Nexus 7 should be able to be a tablet that is almost a year old; however, specs are not everything.  I for one think the form factor of the Nexus 7 is horrendous.  the 16x10 ratio is great for watching a video, but not a good experience for web browsing or many apps.  I like the 16x9 for the phone because it is primarily a one handed device so taller and skinnier makes sense, but a tablet isn't a one handed device and the same form factor doesn't make sense.  The iPad mini wins on the user experience front in a big way.  It is small enough and light weight enough to be easily portable, but gives a form factor that is still useful.  As for the screen resolution, when I use my mini I don't really notice anything bad about the screen.  If I put it side by side with my wife's iPad 4 the difference is easy to notice, but when in use the screen functions just fine.

  • Reply 47 of 146


    @rjc999 ;


    Well done derailing the conversation to irrelevant inaccurate dribble. Samsung is getting their money's worth in paying you to post image

  • Reply 48 of 146
    matrix07matrix07 Posts: 1,993member
    rjc999 wrote: »
    Son, I've been working in the tech industry since the beginning of Silicon Valley.

    LOL. Then you are a "not very bright" one then.
  • Reply 49 of 146
    drblankdrblank Posts: 3,383member

    Quote:

    Originally Posted by rjc999 View Post


    If you ask why I'm here, it's because I love Apple products, but I don't like the way Apple has been running the company, under-investing, over-litigious, and fostering a cult of zealots. They could be better than that. Any company that such huge profits could be acting better. And Apple fans need to grow up and stop acting so childish. 


     


    As for Amazon, if you set their prices at the same levels as WalMart, and drop the crazy CapEx spending, their margins go up to 4%. WalMart has 3-4% margins, banks like $16 billion in profit per year. AMZN is deliberating lowering their margins so as to a) avoid taxes b) aggressively expand distribution centers and c) continue to steal customers by undercutting everyone else. They have a lot of wiggle room to restore profitability, but investors believe in what they are doing, and so continue to finance their current strategy.


     


    You could argue that if they go back to Walmart price levels, they'll lose customers, but Amazon is more than about having cheap prices, it's also the overall experience of features like Amazon Prime. Often, Amazon doesn't have the absolute cheapest price, but I still buy from them for convenience.



    Under investing?  How SHOULD they invest?  What should they invest in that they aren't doing?   Over litigious?  Well, Apple came out and they have and are spending lots of money on their iOS products which was a big departure from way smartphones and tablets were being designed.  They worked with Samsung and Google for that matter, and they are supposed to be TRUSTED business partners and then to find out that they backstab them by coming out with directly competing products to the point where a large number of consumers think that their products are the same thing and that they think they have the right to copy cat their patents?  How did Apple and Microsoft and HTC resolve their issues?  They didn't go to court, they sat down and resolved the issue like adults and as a result, they have a technology swap deal between Apple and Microsoft and HTC.  Apple TRIED to do that with Samsung, but acting like the backstabbers that they are, they didn't want to settle this dispute like professionals.  Samsung knows they are in violation and all they are trying to do is pay as little as possible.  I read an article where Samsung attorneys almost admitted they knew they were wrong.  They were making products that were about as close as one could get to copying the product and Apple's just protecting their design patents.  Yeah, it's a mess, and the legal system seems to allow these kinds of cases to drag on longer than they should and the media does their little overhyping the situation.  But Apple has a legal right, just anyone else does to take legal action against another. Sure, Apple has been sued and they have lost and won cases in the past, but if Apple is caught in violation and they can't reach an agreement with the other party, they pay what the court tells them to pay and they move on. They don't drag it out.  Personally, the eBook case is a bunch of BS. I read Jobs email they posted and Apple shouldn't be held accountable for suggesting a way to get all resellers of books in a fair playing field.  The book publishers were dumb from the get go.  They should know better.  But Amazon has a different way of pricing the products sold than Apple.


     


    But Samsung acted like a bunch of immature, controlling, self indulgent idiots, as did Google.  Samsung, being a big component supplier, should not be selling components to companies and then turning around and competing with their component customers.  I guess the TV industry set that business practice a long time ago when TV mfg would make TVs with their own name on it and then supply monitors to other companies.  It's a way these components mfg control the entire industry.  to me, that's called conflict of interest.  Samsung has been caught several times with price fixing and what they are doing IS conflict of interest in my book and should be shunned.  Apple lost a lot of business to Samsung when they started to market products that looked almost identical to Apple's products.  And you are calling Apple childish?  Sorry, Samsung is in the wrong.


     


    4%?  I don't know how Amazon does business with any detail, but they are working on a 27% gross margin, at least according to their financials. But they spend ZERO on R&D.  It's kind of funny how a company can have an electronic devices with an OS and software that they sell and spend NOTHING on R&D for that product.  So, who's doing the actual development?  

  • Reply 50 of 146
    muppetrymuppetry Posts: 3,331member

    Quote:

    Originally Posted by rjc999 View Post




    Quote:

    Originally Posted by matrix07 View Post





    This post is full of shift it stinks. Comes back when you understand tech *much* better. If Samsung is so great, why they didn't make an iPad before an iPad? Remember, the first Galaxy Tab only used a phone OS. Why did they need Apple to show the way? (The first Galaxy phone was also more than 2 years after an iPhone..)

    In fact, why did everyone need Apple to show them the way?


    Son, I've been working in the tech industry since the beginning of Silicon Valley. Come back when you understand the difference between basic research and products. What Apple does is applied technology, not basic research. Where are the papers? 


     


    Let me educate you as to what REAL Research and Development is: http://researchweb.watson.ibm.com/journal/index.html


     


    Here's another example: http://www.sri.com/


     


    Note: it doesn't count if you simply buy the finished tech (ala Siri, which was originated at SRI), as opposed to funding the research yourself with your own employees.


     


    If Apple does basic research, why do they get their speech tech from Nuance and their AI from SRI? Google hires researchers, like Ray Kurzweil, gives them resources and grants to work on projects, not products. Apple is a shell company by comparison, going to the supermarket to buy and license the technology developed by others and than prepackaged into a shiny aluminum frame. 


     


    I've give them props on design. But they don't invent technology, they package it.



     


    It's not clear from your posts that you really understand how basic research leads to finished products.


     


    The breadth of the technological challenges that enables the manufacture of devices such as the iPhone and iPad is huge - far greater than in the traditional computer industry where the design constraints were relatively minimal. Some of those technologies are well established, such as chip development and fabrication, and are ticking along just fine. Others are less mature. None of the companies that I'm aware of are active in all those areas, and it would make little sense for them to spread themselves that thin. Apple appears to focus its R&D efforts on those areas that are not already being driven by others, or where it is being driven in the wrong direction.


     


    Are you really citing Apple's lack of publications as an indication that they are not doing R&D? With some notable exceptions, commercial manufacturing entities rarely publish since there is no commercial advantage in doing so. The basic research often comes out of Universities and other research institutions, whose metric for success (and continued funding) is publications. The manufacturing companies are mostly working in directed R&D, and instead they patent when they develop something useful. Apple has arrived at a blend of in-house R&D (hardware design, software, UI, chip/board design, thermal transport, material science to name a few) combined with highly effective integration with cutting-edge components (chips, screens, batteries) from the big players and new technologies that they buy or partner with.


     


    It is demonstrably an effective strategy - one that, for example, allowed them to redefine the smartphone market from scratch while the existing cell phone heavyweights looked on in complete incomprehension. That other companies have followed their lead is not surprising, but with all the resources and expertise out there the results have been spectacularly poor. Sure - they started building smartphones that either resembled iPhones or looked like cheap copies, and they tweaked around with Android to add the odd feature that iOS lacked and then made a big deal of it, but basically they displayed zero imagination.


     


    Which leads to the first fundamental problem with your position - if research is all that matters and if Apple were not doing enough - how did they manage to redefine and dominate the smartphone market for as long as they have? They had already done it before remember, with the iPod, and now they have done it again with the iPad. Blind luck again? Or just being better than everyone else at figuring out how to use existing technology, develop what they need, and design better products? Just how much of Apple's cash it should invest in R&D to maximise efficiency is probably a tough question that Apple management spend much time deliberating, and I'm puzzled that you would imagine that you know better than they do. It continues to baffle me that those who continually predict Apple's imminent demise don't learn from repeatedly being wrong.


     


    The second problem is your conviction that profit is not the ultimate goal. It's a free market, and the primary commercial goal is to maximize profit, so one prices accordingly. If Apple estimated that lower prices would raise their profits do you think that they would not lower prices? If other companies produce competitive products then that will drive down the price of Apple products, just like we see Microsoft, HP and others cut their prices when their products don't sell in the face of competition from Apple. 

  • Reply 51 of 146
    tallest skiltallest skil Posts: 43,399member
    rjc999 wrote: »
    You can talk all you want about Microsoft's margins, but Microsoft was selling Windows for less than 10% of the cost of a PC.

    Yeah, see, about that… When you're building an evil monopolistic empire more powerful than cocaine laced with heroin, you tend to be okay with selling things cheaply.
    The massive progress in GPUs and CPUs was the result of hyper-competition in the PC market

    So where is that today?
    …Apple is now benefitting from, standing on the shoulders of all of that progress.

    Oh, shut up. You know they make their own chips, right?
    If you walked into a PC shop in the 90s or early 00s, you'd see the same bewildering array of name and no-name PCs, from big brands and from uber-cheap Asian manufacturers. They'd all have roughly similar specs, and they'd all be dirt cheap, and they'd all be obsolete in a few months or a year. What's happening in Android is no different than what happened with the PC.  

    That's comforting: knowing Android will soon be a no-name product. It's already rendering devices worthless three months after purchase!
    But the fruits are already here. The Nexus 7 2 destroys the iPad Mini. Way way better screen. More powerful. Cheaper.

    What's this? A product eleven months after the launch of another has… better specs? Holy frick. Note that the Nexus 7 2 doesn't hold a candle in actual usability speed, by the way. Also, this same thing happened with the iPad and iPhone. Note that no one cares about those "killer" models anymore, either.
    The only thing the iPads have going for them are the existing IOS apps market.  Honestly, if there was no iOS native apps, and all you had was a Web browser, iPad would be in deep trouble. Sooner or later the App Store's advantages in content will be eroded.

    Good thing that this is the stupidest supposition we've seen on this website in several years, huh? Takes something of a genius to create something so mind-numbingly idiotic, I'd guess.
    Remember how people used to whine about buying a Mac because it couldn't run their favorite Windows application?

    No, because people weren't idiots back then. They're not idiots now, either.
    It is unstoppable.

    Wanna bet.
  • Reply 52 of 146
    rjc999 wrote: »
    The way I look at it, every year, PC capabilities went up, and prices stayed the same or got lower.  You can talk all you want about Microsoft's margins, but Microsoft was selling Windows for less than 10% of the cost of a PC. The massive progress in GPUs and CPUs was the result of hyper-competition in the PC market and the legacy of that was billions plowed into semiconductor processes that Apple is now benefitting from, standing on the shoulders of all of that progress. The PowerVR GPUs in Ax chips are derived from desktop GPUs that went up against the heavy hitters of NVidia and ATI and failed, and so they pivoted to mobile where the tile-based-deferred-renderer architecture works much better from an efficiency standpoint.

    If you walked into a PC shop in the 90s or early 00s, you'd see the same bewildering array of name and no-name PCs, from big brands and from uber-cheap Asian manufacturers. They'd all have roughly similar specs, and they'd all be dirt cheap, and they'd all be obsolete in a few months or a year. What's happening in Android is no different than what happened with the PC.  

    The PC got commodified and vendors could only compete on price and specs. You see the same with Android, except they're also trying to "skin" things to differentiate, which Microsoft limited or prohibited for Windows. 

    But the fruits are already here. The Nexus 7 2 destroys the iPad Mini. Way way better screen. More powerful. Cheaper. The only thing the iPads have going for them are the existing IOS apps market.  Honestly, if there was no iOS native apps, and all you had was a Web browser, iPad would be in deep trouble. Sooner or later the App Store's advantages in content will be eroded.

    It's pretty simple. Apple has little competitive differentiation when it comes to hardware technology. Everything they use is bought and licensed from the same Asian manufacturers -- screens, ARM cores, GPUs, sensors, et al.  They have only two defenses against the pressures to commoditize: 1) iOS and 2) try to sue competitors.

    As Microsoft proved in the 90s, path dependency in operating systems is a powerful factor in maintaining market share. The first mover advantage and existing apps provide powerful consumer incentives to "opt in" to where the greatest number of apps are. Remember how people used to whine about buying a Mac because it couldn't run their favorite Windows application? Apple had to fight tremendously against that to convince people they could find alternatives on OSX. 

    Now Apple is in the boat that Microsoft was. A familiar whine is people discussing Android is "I can't find my app on Google Play", and Google will have to continue to work to showing there are indeed alternatives. 

    What the downfall of Microsoft has shown is that, although it is difficult to unseat competitor with a large software ecosystem, it can be done. 


    The reality is, mobile computing is going to be commoditized just like PCs were, just like TVs were, just like cars were. It is unstoppable.
    Yes the PC has commoditized but you forgot one key thing. Apple is dominating profits in the PC business as well while HP and Dell are looking to get out of the business. Apple makes more in the PC business than the next 5 competitors combined!!!
  • Reply 53 of 146
    It all seems very interesting, however... I have yet to hear one hedge fund manager say that Apple has some sort of advantage over other smartphone companies. In fact, they claim the reason why they all dumped Apple is because Apple seems weak and vulnerable as a company. Most claim that the competition is too great for Apple to overcome and any cheap Android smartphone is just as good as a high-end iPhone. I've heard them repeat this mantra over and over again. Now they're claiming that Apple's market cap is far too high and that the company has reached its limit so the share price will not rise much higher than it is now. The hedge fund managers believe that Apple should have been able to crush its rivals but missed its chance and now it's too late. Wall Street never considers things such as high-quality or customer service being worth anything and only bulk sales matters. Bulk sales matters because it's the chief factor behind gaining market share.

    I'm not trying to dispute Dediu's numbers as he seems to work very hard at what he does. I'm only saying his view of Apple is almost the exact opposite of how Wall Street and the tech industry at large, views Apple. I don't really understand the discrepancy of Apple's valuation on Wall Street to the reality of profits and margins, but I certainly know that the discrepancy does exist. Apple is not valued as a Tesla, Netflix or LinkedIn-style company. Not even close. Dediu puts a lot of emphasis on the iOS ecosystem and services as being some sort of deep and strong moat. The hedge fund managers say the iOS moat is extremely shallow and pretty much ineffective. So, who should I believe? I would think the big money guys would be the ones to know the best or are they really just too stupid to understand what Apple has because they're minds are too simplistic.

    I realize that Apple is again the most valuable company by market cap even after an absolutely horrible nine months or so and Apple has supposedly been written off as a top tech company by nearly everyone. I honestly can't explain it but it just seems as though something isn't adding up. It isn't likely that a company is failing with a more than $400 billion market cap and $145 billion in reserve cash. So many things I read and hear just don't make a lot of sense.

    One thing I don't like about those hedge fund managers is that they usually favor companies that make cheap, low-quality products and I don't get that at all. Why would they want to push that sort of stuff on consumers. I'm sure they're only out to make quick money and don't care about the consequences of their choices. The SEC really needs to regulate hedge funds to keep them in check.
  • Reply 54 of 146
    drblankdrblank Posts: 3,383member

    Quote:

    Originally Posted by rjc999 View Post


     


    Ok, that new Mac Pro is fscking sweet and I want one, but really, this is not what I'd call R&D. It's design and product development. You know who's doing R&D? Samsung. They're figuring out how to manufacture flexible displays.  IBM is dropping huge sums in Lithium-Air batteries. 


     


    If we're going to have radically breakthroughs in the next generation of devices, we need radically better battery, or radically more durable, or radically more powerful, or with much faster networks. There are companies dumping tons of money into researching these things.


     


    Apple isn't. Apple is a buyer. They buy the fruits of the raw R&D done by other players, and design a pleasant case to fit it into. The idea of Apple being a chip fab is something that appeals to me. Intel, TSMC, et al, need competition. The idea of Apple researching battery chemistry appeals to me, because they have a concrete application for it that should drive it.


     


    Here's the question: Since Apple is so dependent on Samsung and Sharp, and Japan Display, and others,  but they have a huge arsenal at their command, which they could use to develop technology that no one else has or could buy, why aren't they?



    Apple does have several display related patents BTW.   Some types of research is beyond their core competencies.  It's all about managing resources.  For MOST companies, they usually set a specific percentage of their revenue stream towards R&D, and with that money they have to spend it on what's going to yield worthwhile technology.  Apple tends to focus on the meat and guts of what they do and need and if they don't have the expertise and that expertise is found elsewhere then they will either work with that company and try to improve the technology together or maybe coming up with their own patents in the process, OR they will buy the company, much like they've done with small companies like Anobit.  Apple doesn't want to spread themselves too thin, they can't afford to do that. They have to figure out what makes the most sense.  Apple has the money to buy their own chip mfg plants, but does it' make sense to find the talent to run it, and to continually dumping money into that as they have to constantly update mfg equipment every so often and the plants have get shut down during the upgrading process.  If Apple wanted to make their processors, they would probably have to make several plants.  One to ramp up for production, and then another to take over with the latest process, etc.  Does Apple want to spend the money doing that when it's not their core competency or do they want to partner with someone that does have that core competency.  It's easy to say just build mfg plants when they have buckets of cash, but to put it into action when they don't have chip mfg experts on staff, that whole thing is a VERY different line of business than what they are used to.  First they have to attract the talent to manage that endeavor and that alone could take years to get the personnel involved before they press the button to start building a fab plant.  Seriously, it's not so easy to do.  So why not rely on others where that is their core competency.  




    They already have several thousand engineering positions with very little physical space to put these people already for the things they already have in development. They are already experiencing growing pains.  Plus, bringing all of the money from Ireland costs them a LOT of money in taxes to do that.  They'd lose about 35% in paying taxes to move that money into the US.  How would you like to sell a bunch of products in one country, pay the appropriate taxes in that country and then have to pay another 35% of that money to just simply move it into the US?  Have you ever travelled to Europe? How much cash do you bring with you going back and forth to Europe and the US?  How would you like it if you had to pay 35% of all of money you have in the bank just because you crossed from one country to another?  That would suck. That's why most traveller's don't bring that much cash in their pocket.  That's why Apple is trying to have the Feds lower the amount of money they would have to pay just to move profits they made in another country into the US.  They aren't the only ones that have this same problem that put money in Ireland.  It's a common and legal way of managing money.


     


    Currently right now, Apple has about $110 Billion in short term and long term investments.  Plus they just racked up some debt so they can pay shareholders some more dividends, buyback stock.

  • Reply 55 of 146
    drblankdrblank Posts: 3,383member

    Quote:

    Originally Posted by AppleTechSpot View Post





    Yes the PC has commoditized but you forgot one key thing. Apple is dominating profits in the PC business as well while HP and Dell are looking to get out of the business. Apple makes more in the PC business than the next 5 competitors combined!!!


    That's because they know what they are doing when it comes to managing their business.  Apple can't help it if other companies are complete idiots and make too many products and waste their money buying other companies that don't pan out.  That's why Apple didn't buy Palm, Autonomy, Wyse and other companies that were too expensive with little chance for a return on their investment.    I would rather buy some little hole in the wall company like Anobit than Palm.  Palm was a HUGE mistake for HP, so was Autonomy.  But they wasted their money anyway.  Not Apple's fault.

  • Reply 56 of 146
    customtbcustomtb Posts: 345member
    tundraboy wrote: »
    Ha ha, you take one college introductory econ course and you think you can explain everything.  The basic model of competitive markets you are using assumes certain things that aren't true in the smartphone and tablet markets.  Things like no barriers to entry, homogenous products, etc.  But most relevant to the discussion is static technology.  If technology is static and there are no barriers to entry and one firm's product is a perfect substitute for another's than sure prices drive down to marginal cost.  But we're talking about something like the market for construction sand here.

    You can sustain pricing above marginal cost for extended periods in the tech industry.  Just ask Microsoft to show you their financials for Windows.

    He is right in one respect.... Android phone makers will compete by lowering prices towards marginal cost and no profit. Samsung is enjoying the ride for now but...
  • Reply 57 of 146
    ash471ash471 Posts: 705member

    Quote:

    Originally Posted by rjc999 View Post


    For 20 years people shipped PCs with razor thin margins and almost no one made money except for Dell/HP/IBM selling into the enterprise market. You can keep pushing the narrative that profit == success, but eventually computing platforms get commoditized. There used to be a number of successful, vertically integrated Unix vendors, in fact, more vertically integrated than Apple, because they actually made their own CPUs, motherboards, storage, everything. They all got crushed by "unprofitable" Linux.


     


    Microeconomics 101, the long run in a competitive market is for prices to trend towards marginal cost. The writing is on the wall and Wall Street knows it. It's absurd the way people cheerlead overpaying super-high margins to Apple, who then doesn't even reinvest the profits back into innovation, but is sitting on the cash, distributing it to investors, or buying back stock. This might sound great for investors, but it doesn't sound good for consumers.


     


    Is this really what you want, to pay a 39% margin? Do you want into a car dealership and negotiate with the sales agent to pay MSRP or above?


     


    Competition is supposed to drive down prices, if you're deliberating cheering for one company to win everything and set monopoly prices, you're a moron.



    You assume incorrectly that Apple's high margins means low value to the customer.  You assume wrong.  Apple can provide more value and have a higher margin than its competitors by having a better design and by controlling costs.  There are many ways to do this, but the most obvious way is by having higher volume. The cost per part goes down but the value per part stays the same.  


    When the iPad came out, everyone was shocked that it was only $500.  In fact I bought a bunch of Apple stock the month after the iPad announcement because I trusted that Apple was confident it could make a good margin while still providing such great value.  Here we are 3 years later and you're bitching that a $500 iPad is a rip off for customers?  


    You missed the point of the article.  The point of the article is that Samsung is not making money on its tablets.  Companies that don't make money on a product eventually stop selling it.

  • Reply 58 of 146
    ash471ash471 Posts: 705member

    Quote:

    Originally Posted by CustomTB View Post





    He is right in one respect.... Android phone makers will compete by lowering prices towards marginal cost and no profit. Samsung is enjoying the ride for now but...


    In a healthy market, the margin continually decreases, but the market leaders continue to make a profit because volumes are increasing.  Commodities are low margin because they are high volume.  


    Samsung is not "enjoying this ride" because they are not profitable.  The data for Samsung looks horrible.  If Apple only has half of the tablet market, then the other half of the tablet market has as much volume as Apple......but they aren't making any money.  The idea behind lowering your price to take market is that when you do get the market you'll be as profitable as the market leader.  That doesn't appear to be the case.  The only way any of these Android manufacturers are going to get to profitability is by consolidation in the non-Apple market.  That means there are going to be some losers amongst Samsung, Microsoft, Google, Amazon, etc.


    My bet is Amazon will win.  They can sell their device at break even or a loss because they make money from selling content.  Microsoft is in the worst position.  I don't even know why they tried. MS isn't in a position to win no matter what they do or how good their device is.

  • Reply 59 of 146
    jungmarkjungmark Posts: 6,882member
    I hate reading stupid comments. Bye bye Rjc999.
  • Reply 60 of 146
    ash471ash471 Posts: 705member

    Quote:

    Originally Posted by AppleTechSpot View Post





    Yes the PC has commoditized but you forgot one key thing. Apple is dominating profits in the PC business as well while HP and Dell are looking to get out of the business. Apple makes more in the PC business than the next 5 competitors combined!!!


    Nice argument!


    The technology pundits seem to have a problem with conflating units sold and profitability. Or as this article points out, it's even worse with tablets; the pundits are conflating channel inventory and profitability.

Sign In or Register to comment.