radarthekat

Let's review again how venture capitalists value a growing business.  

Typically, product companies with growth potential are valued at 4x revenues.  Certainly Apple, with a history of innovation and profit dominance in each major market it enters and the potential to disrupt additional new markets with class-leading products, deserves a near 4x revenue multiple.  

Service businesses, with recurring revenue streams from subscription revenue or other types of service revenue that are seen as recurring and growing, are valued at 7x revenues.  This year approximately 15-20% of Apple's revenue will be software and services.  

It would not, therefore, be unreasonable for the company's overall valuation relative to revenue to fall somewhere between 4-4.8x.

Apple is currently valued at 3.46x revenue.

An expansion to 4.2x would lift the stock about 20%, to approximately $175.  At that price it's earnings ratio, base upon 2017 estimated earnings, would be a hair under 20x, a fair valuation relative to the 30x earnings multiple assigned to GOOGL, for example. 

The real reason Facial Recognition won't replace TouchId is that facial recognition, as developed by Emotient and Faceshift, is simply not the technology used for biometrics.  It's in the name itself, which I continually try to educate the AI staffers on.  Facial recognition, as implied by the word Facial, is recognition of facial features and expressions.  Perfect for an application such as Faceshift developed.  When you want to map facial features, like smiling, crinkled eyes, eyebrow movements, from a human subject onto an animated avatar inside a game, for example, the technology does not need to identify who you are; it merely needs to map the human facial features it sees onto the avatar.    So that's what 'Facial Recognition' does, and no more. 

Also mentioned in the article is the term 'face detection.'  Again, while this is an important technology on its own, it's not all that is required for biometric identification, though it's often a subset of the process.  Face detection is simply the process of identifying, and sometimes tracking, a human face within a scene.  It typically uses Fourier transforms and blurring alogorithms to detect patterns of eyes, nose, mouth, even at somewhat oblique angles.  But face detection also doesn't specifically identify an individual.  That's the job of...

Face Recognition.  Face recognition technology often begins with face detection algorithms, so that any faces that appear in a scene, in the view of a video camera, can be detected and captured.  Face recognition might then also employ facial recognition algorithms (but not necessarily) to identify specific facial expressions on the detected faces.  But then Face Recognition adds a further, crucial step, applying algorithms not needed by Face Detection or Facial Recognition systems to match specific aspects and calculations made against each face against results stored in a database.  This allows the face recognition system to perform its primary task, that of biometric identification, a task that is specifically NOT part of the definition of Face Detection or of Facial Recognition. 

See why I've been nitpicking the terminology all these past months?  

I still say Apple will leave self-driving tech to the car makers.  Limits Apple's liability in the area I think they will actually pursue, described in a previous post of mine...

I've grappled with the dichotomy presented by the need to protect intellectual property versus the scourge that the non-practicing entity lawsuits represent.  

Perhaps the answer is to limit the royalties that can be demanded from patents that are not being applied (non-practicing) versus those that are applied in some product or service.  This would give greater protection and rewards to those who own patents and are using the patented technology in their products, because damage from infringement is higher versus damage to a non-practicing patent holder.  If you've gone through the expense of utilizing a patented process or mechanism, then you should be compensated greater when someone infringes that patent.  But if you haven't, and therefore also haven't brought a new product or service to market that allows society to benefit from the invention, then perhaps you shouldn't receive the same compensation for infringement.

There's perhaps a bit of precedent here in the  FRAND royalty calculations for patents that are considered standards essential.  The whole notion of SEP is that there's a greater good to society to allow multiple parties to utilize an invention as part of a standard and therefore it should be affordable for all to utilize the patented invention.  Same here.  Patented inventions that are sat upon don't benefit society, so there should be incentive to get those inventions into use.  

To give time for a new patent holder to develop products and services around a patented invention, perhaps the first few years after the patent is granted, it can be exempt from the rules I'm suggesting here.  The current status quo would remain in effect.  But after, say, three years, if you haven't shown that the patent is being developed into a product or service, then licensing limitations go into effect so that the amount you may charge for your invention will be limited, ala FRAND-type pricing guidelines.  So, if you don't intend to utilize a patented invention, either accept the lower royalty rates so that others can utilize it, or sell the patent to a company that will utilize it and therefore retain full royalty and infringement power over it.

I'd be interested in comments and feedback on this suggested approach, and to hear whether an approach of this type has ever been proposed.

jbdragon said:

3 billion for Beats I thought was way to much money!!! Maybe that'll pay off, but in general why pay a bunch of money for a company if you can do it on your own and build it up on your own? Some many big company's have Google or Microsoft acquired for a lot of money where they ended up losing a bunch of money on in the end. Why should Apple fork out a bunch of money to get Netflix? Apple already gets a cut from them and others every month when people sign up to the service though Apple. How many times now have Analysts been wrong? I've lost track. Sometimes you'll be right just because the odds are in your favor more then anything. Been wrong so many times, something at some time will be right. Why wold Apple want to buy Tesla? I don't thing and never have though Apple would ever want to get into making CARS. They want to be in the center of the car, and we have CarPlay for that. Maybe they want to get into some type of system for Self Driving Cars where they sell that tech to other company's to use in their own cars. Who knows! Just because Apple has money doesn't mean they need to buy over priced company's that may or may not at some point pay off.

The Beats deal has likely nearly paid for itself merely on Beats hardware sales.  That's a high margin product line that Apple was acting as a distributor for, with Beats having been sold in Apple stores.  Owning Beats gets Apple those margins on every sale, including the sales through Apple stores (bricks and online) and also through every other outlet where Beats are sold, which likely include a good number of Apple reseller partners.  It's not so much a matter of Apple bringing Beats global distribution, as Beats already had that, but rather Apple profiting off every Beats hardware sale where they hadn't previously.  

Plus the music industry talent and connections, and that talent's experience in the streaming segment.

Plus the value of having bought those products and talent off the market, so that they can no longer be scooped up by one of Apple's adversaries.

Not difficult at all to have justified the Beats acquisition.