radarthekat

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radarthekat
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  • Editorial: Apple's super obvious secret -- Services is software

    From Gene Munster: ““If I look at the broader analysis across Wall Street today, I think that there is a critical missing piece specifically about what’s the proper multiple to put on this company,” Gene Munster, Loup Ventures managing partner, told Yahoo Finance’s On The Move Wednesday. “The key distinction here is that investors typically think of this as a hardware business. Understandable, given that 80% of its revenue is hardware. But keep in mind, 35% of earnings are services-based and over the next few years, the company is progressively going to start to sell a hardware as a service.”

    Long-time AI readers will note that I’ve been pushing this line of reasoning for a few years.  I learned in my decades building software startups that venture capital typically gives a higher sales multiple to software/services businesses versus hardware/physical-product businesses, because the revenue of the former is recurring and more predictable.  Services gets around 7x revenue versus 4x for makers of physical products.  And if you look back at Apple’s valuation on a multiple of revenue basis you’ll see that it’s been valued in the 3.5-4x range for a decade (currently at 3.8x).  A decade of astounding growth; the market is simply myopic in adherence to these revenue multipliers.  Netflix, a pure services business with far less profit per share and less assurance of ever getting to a low P/E ratio, has consistently been valued up at 7x Revenue.  

    So what Munster is saying, and I’ve been saying for at least three years in comments here, is that it’s inevitable that the services side of Apple’s business, as it becomes a more significant portion of total revenue and therefore comes onto the radar of analysts and investing institutions, will get a higher valuation and will therefore raise the valuation multiple of the entire company.  This will affect P/E, but it’s not a P/E-focused valuation.  It’s about revenue; recurring, predictable revenue.  

    Watch the revenue (Price/Sales) multiple, currently at 3.79x, climb beyond 4x to something that reflects the services portion of Apple’s revenue being valued close to 7x.

    An overall valuation of 4.5x during the next year while Apple continues to work through the smartphone market slowdown gets the stock to $250.

    And then a 5x revenue valuation after that as hardware stabilizes and begins to grow again gets the stock to $277, climbing higher as services grows as a percentage of total revenue.  

    Eventually a 5.5x valuation mix, and a bit of overall revenue growth (up 15% two years from now versus today), results in a stock price of, remarkably I just did this math and the result is... $350.46.   Munster is saying $350.

    Maybe higher with buybacks and some excitement over new product categories.  And you can watch it play out simply by monitoring the Price/Sales metric under Yahoo Finance’s Apple Statistics page, or your preferred financial website that reports the same stats.  

    See you at $350! 
    colinngcornchipwatto_cobra
  • Editorial: Could Apple's lock on premium luxury be eclipsed by an era of good-enough gear?...


    IreneW said:
    elijahg said:
    elijahg said:

    danvm said:
    Johan42 said:
    Diminishing returns is here. Apple’s planned obsolescence as well. Who will prevail? The customer who has no sense will.
    You’re high. Apple devices have the longest lifespan in the business — both in official support terms (iOS), and in real world useful lifespan. My primary desktop is a 2011 iMac. I have an iphone 4s that was used as a primary device by a family member until a year or two ago and now is a backup device. What other brand has the same support and lifespan longevity? 
    My Lenovo Thinkpad T60P laptop is over 12 years old and runs like it was new -- but with a modern OS and I'm thinking swapping its main harddrive for an SSD.  How does Apple have the "longest lifespan" ?
    Same here buddy. My MacBook is from late 2008. It is 11 years old, running smoothly , and it does so looking 5 times better than your machine.
    The difference is that the good looking machine is running an old OS X 10.11 while the ugly one is capable of running the latest version of Windows 10.  Following the original post about longest lifespan, the ugly one is ahead considering it's running a modern OS.  Still, both devices are to old for modern applications.  
    Nonsense. The capabilities of a machine depends on the CPU. You cannot override CPU’s physical limitations with the OS, no matter how modern it is. Windows support of earlier machines is because those were crap in terms of security. This a just a burden on Microsoft, not progress.
    Not quite. At a cost of speed, "physical limitations" of CPUs apart from speed can oft be "overridden" with software emulation. If the CPU is 64 bit, and it's running Windows 10, it can run pretty much all modern software, albeit much more slowly than a modern CPU. Oh, and it gets security updates. 

    To increase your signal to noise ratio please go to ark.intel.com, find Intel Core Duo under Legacy Intel Processors, compare it to today’s 9th generation Intel. Then please tell us what capabilities can you implement via software emulation to make it run as 9th gen Intel !...

    A Core Duo will always run as Core Duo regardless of the OS or whatever software emulation you implement. In most cases a legacy machine will run faster under its native OS, XP Vista or whatever, not to mention also the legacy driver support. Windows 10 forums are full of people screaming because of the lack of legacy driver support and reverting back to their legacy OS for that reason. Yes you get a modern OS and most probably better security but you lose the fingerprint reader or the sound card...

    To decrease your ignorance level, please go to https://en.wikipedia.org/wiki/Emulator .

    You'll note I said 64-bit. Core Duos are not 64 bit. But in any case, it is possible for a 32-bit CPU to do 64-bit calculations, but they are much slower as they're done in software. Like I said, if an older CPU doesn't support an extension of x64 that a modern piece of software uses, the missing extension is emulated in software. It is much slower, as I said, but it allows modern software to run on older CPUs. If this wasn't the case, it would mean software would always have to be written for the lowest target CPU that the developer thinks may be used. Otherwise the software would crash as soon as an unsupported instruction was encountered. No developer would specifically target a 9th gen i9, as it would only be supported on a tiny subset of systems. 

    Driver support is a different beast entirely, that's up to the manufacturer of the peripheral on a PC. If a manufacturer keeps the peripheral updated, even a 15 year old peripheral will run just fine in Win 10. Apple supplies all the drivers for Macs and could keep old drivers updated to ensure they worked on newer OSs, so your point is moot; the same issue would not pertain to Macs.

    And to prove my point, the Church-Turing thesis corroborates exactly what I said above.
    What is the point of “emulation” in this? We are not talking about the emulation of a few missing instructions among processors of a couple of generations old, we are talking about decade old architectural differences. You cannot emulate a higher architecture in a decade-old lower architecture, that is the opposite. Theoretically you can as an undergraduate homework, or you can emulate this and that, but the industry has yet to see a “i9 emulator” for Core Duos.
    But, what is your point? Windows 10 runs on these old processors, obviously not as fast and smooth as on a modern CPU, but it works and get regular updates.
    What’s your point? Windows 10 will also run on the same generation old Mac.  Hahaha
    Dan_Dilgertenthousandthingskruegdudewatto_cobra
  • New lawsuit alleges patent infringement by all Wi-Fi-enabled Apple products

    chasm said:
    1. Eastern District of Texas, even though neither litigant lives there. So Red Rock's a patent troll.
    2. If 802.11n and later are the problem, why sue Apple? They didn't invent 802.11n. Oh wait, $$$ that's why.
    3. They already tried this scam on Samsung and it didn't fly there either.

    I think I can guess how this case will be resolved.
    This is a case of indirect infringement.  It’s Broadcom’s or whomever’s WiFi chips Apple uses who would actually be in ỉnfringement, but you go after the company that actually expresses the infringement in an end-market product and let them seek indemnitication from their supplier.  

    Also, the penalty can go up if the defendant knew there was infringement in the parts they used or if it was their specific use that triggered the infringement.  So I don’t blame the plaintive for suing Apple; I just think they are underhanded going about it in the Eastern District of Texas, where it’s judges who are friendly to their lawyer sons who in turn hire themselves out to the patent trolls.  That’s what’s going on there. 
    applesnorangesgilly33chiamuthuk_vanalingam
  • Apple wins seven-year trademark dispute over the name 'iPad'

    "failed to establish that such term had acquired distinctiveness..."

    Thats exactly the point I made back in the days of the Samsung/Apple trademark battle of 2012.  Here's my argument from back then, which may shed some light on how trademarks work...

    Apple - Apple vs Samsung (Design Patents)

    Since the Apple vs Samsung trial there has been much written about the merit of design patents.  I thought I'd provide a bit of insight here for those who might not be conversant in the topic.

    Among Apple's assertions in its lawsuit was that Samsung copied elements of the iPhone and iPad for which Apple holds several patents.  These particular patents are known as design patents.  It seems a lot of folks don't take these patents seriously and go as far as to suggest that they should not exist.  There is a good reason why they do exist, but to explain this we have to begin with a bit of a side trip and requires that we speak about trademark law.  Bear with me on this and hopefully I'll be able to clarify the purpose of design patents and provide some insights into the Apple versus Samsung trial.

    Most people are familiar with the idea of a trademark.  By way of example, Kellogg, the cereal maker, has a trademark on Tony the Tiger and fought a battle with Exxon over Kellogs' claim that the use of an unnamed tiger in Exxon's advertising violates Kellogg's trademark for Tony the Tiger.  Why?  For 30 years, Exxon used its tiger character exclusively to promote its gasoline blend, but then, in the 1990's began using it to sell food. Kellogg said consumers are confused by the similarity between the cartoon tigers and may conclude that Kellogg is somehow behind soda, coffee and other items for sale at Exxon's TigerMart stores.  The case went back and forth for several years, with Exxon initially winning the case, but ultimately losing on appeal.  This case would not seem extraordinary to most people as most folks understand the concept of protecting a unique trademark like Kellogg's Tony the Tiger character.

    Now let's look at another case, one that comes closer to the Apple vs Samsung case, but still an application of trademark law.  This case is Ferrari vs Robert's Replicas.  Back in the 1980's Robert's Replica's was in the business of manufacturing fiberglass kits that replicated the exterior features of Ferrari's Daytona Spyder and Testarossa automobiles. Roberts' copies were called the Miami Spyder and the Miami Coupe, respectively.  Ferrari brought suit against Roberts in March 1988 alleging trademark infringement. 

    Here's what this case was about:  After Ferrari vehicles have been on the market for a number of years, the design of those vehicles acquires what's called "secondary meaning", a concept at the heart of trademark law.  Secondary meaning refers to an association of a design, like the design of a Ferrari vehicle, with quality and craftsmanship or other positive attributes one might associate with the Ferrari brand.  After a design has acquired secondary meaning, trademark law can be applied to protect the company from those who would copy its designs and use them to promote their own products.  Robert's copying of Ferrari's iconic designs could confuse the public and dilute the strength of Ferrari's brand.  Just the presence of large numbers of replicas would dilute Ferrari's image of exclusivity, causing financial harm to Ferrari.  Trademark law, under the concept of secondary meaning, protected Ferrari.  The courts ruled in favor of Ferrari in this case and enjoined Roberts from producing the Miami Spyder and the Miami Coupe.

    But how does this relate to design patent law? 

    The problem with using trademark law to protect a company's designs (under trademark law a product design or package design is referred to as "trade dress") is that a product has to be on the market for a long time before its design acquires secondary meaning (i.e. before the design becomes iconic and is seen by consumers as representative of the company behind the product). When competitors come in immediately after a new product design is introduced and copy it, as is the assertion in the Apple vs Samsung case, the originator of the design doesn't have the luxury of time needed for its product design to acquire secondary meaning in the eyes of consumers.  Consumers immediately see the same design from multiple companies and so don't grow to associate the design with the company that originated that design.

    This is where design patents come in. Where trademark protection of an iconic product design has no expiration, it takes time for a new product to acquire that protection (as stated above). A design patent offers immediate protection of a new and novel design and for a period of 14 years thereafter, giving a company protection of its original designs until they acquire secondary meaning in the market and therefore protection under trademark law. So the design patent serves a valuable function for companies like Ferrari, and Apple.

     

    randominternetpersonPickUrPoisonMacProjony0
  • Video: Everything to expect at Apple's upcoming March 25th event

    jdw said:
    Thank you for the video. It does though make me wonder why would I need an Apple "credit card."  Sure it might come with perks like 3% off Apple hardware (ha ha, probably not), but what would make an Apple credit card so much better than any other plastic card we already have filling our wallets?  Isn't Apple Pay all about getting rid of the plastic?
    The card doesn’t have to be physical.  Apple might be taking the position that replacing your existing bank or credit card provider removes one more entity where your info can be hacked.  Apple positioning themselves as an end-to-end provider implies only one entity, and that entity being a huge tech company that knows a lot more about electronic security that even the biggest banks.  That’s debatable; I’m just saying that might be the stance Apple takes on the matter.  
    dewmeHenryDJP