Author Topic: AAPL - Apple Inc.  (Read 1612303 times)

Olmsted

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Re: AAPL - Apple Inc.
« Reply #290 on: September 11, 2012, 12:00:45 PM »
OK, let me repeat - Amazon is selling devices at or below cost, they are selling many books at below cost too. So what are they subsidizing their losses in these two areas with? Apps? Music? They don't sell that many prime subscriptions.

Amazon is the proverbial company being run at zero margin to maximize market share.  Great for consumers.  Normally not so great for stockholders (though the price can stay wacky for a while).  Horrible for everyone they compete with - Barnes & Noble, Best Buy, Netflix, etc... and Apple?  We shall see.

I sold my Apple after the Samsung pop.  There are cheaper things out there, growth should level off soon, and I am not willing to bet that they will be able to maintain their margins.  They might, they might not, but I do not have an edge anymore and therefore chose to let someone else figure that out.
« Last Edit: September 19, 2012, 12:48:26 PM by Olmsted »


txlaw

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Re: AAPL - Apple Inc.
« Reply #291 on: September 11, 2012, 12:01:54 PM »
http://www.nbcnews.com/technology/gadgetbox/amazon-will-sell-ad-free-kindle-fire-hd-extra-15-987503

AMZN is going to allow buyers to get rid of special offers for $15. 

I think even the most die hard Apple fans will probably realize that this assault by Bezos poses a threat to AAPL's gross margins on the iPad.
Everything is a threat to Apple. The Kindle is probably even a  threat to Amazon's own profit margins. They're trying to subsidize the device by selling content. But then, they're selling books below their cost.

Amazon is selling the Kindle Fire at or close to cost because the device is just a means to utilize content, which drives the use of AMZN assets. 

Amazon has a subscriber base because they offer awesome content and services at the lowest cost.  Prime and the release of new Kindle devices solidifies the relationship between current AMZN customers and makes it very likely that prospective "retail subscribers" sign up.  This is phenomenal for consumers.  And it means that one ought not to count on high gross margins for AAPL devices. 

Now let's see what types of services Apple starts to roll out and how popular they become.  Apparently, they are working on a Spotify competitor.  I'd love to see AMZN buy Spotify.

OK, let me repeat - Amazon is selling devices at or below cost, they are selling many books at below cost too. So what are they subsidizing their losses in these two areas with? Apps? Music? They don't sell that many prime subscriptions.

Selling devices at or below cost doesn't matter to AMZN.  And, btw, even if they are selling below cost, does that change the thesis on gross margin decline for iPads?  My answer is "no."

Do you really believe AMZN is selling all of its books below cost?  Publishers accuse them of doing this.  I believe what's actually happening is that there are large parts of the catalogs they buy access to that get subsidized by the better selling titles.  As long as the publishers control large catalogs of content that consists of both great and crappy titles, that's how it's going to be for Amazon.

But look, I'd love to hear from people in the publishing industry.  I know at least some board members have indicated that that's the business they're in.

Amazon's playing the long game.  Take a look at their revenue growth.  They're creating a relationship with consumers that will make them the Walmart/Costco of the new generation.

txlaw

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Re: AAPL - Apple Inc.
« Reply #292 on: September 11, 2012, 12:04:40 PM »
OK, let me repeat - Amazon is selling devices at or below cost, they are selling many books at below cost too. So what are they subsidizing their losses in these two areas with? Apps? Music? They don't sell that many prime subscriptions.

Amazon is the proverbial company being run at zero margin to maximize market share.  Great for consumers.  Normally not so great for stockholders (though the price can stay wacky for a while).  Horrible for everyone they compete with - Barnes & Noble, Best Buy, Netflix, etc... and Apple?  We shall see.

I sold my Apple after the Samsung pop.  There are cheaper things out there, growth should level off soon, and I am not willing to be that they will be able to maintain their margins.  They might, they might not, but I do not have an edge anymore and therefore chose to let someone else figure that out.

Personally, I would not own AMZN at this price.

However, I believe Bezos has learned from the Costco model.  Run at margins well below what you could probably sustain in order to rapidly increase revenue growth and build a huge moat.

valueInv

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Re: AAPL - Apple Inc.
« Reply #293 on: September 11, 2012, 12:53:20 PM »
http://www.nbcnews.com/technology/gadgetbox/amazon-will-sell-ad-free-kindle-fire-hd-extra-15-987503

AMZN is going to allow buyers to get rid of special offers for $15. 

I think even the most die hard Apple fans will probably realize that this assault by Bezos poses a threat to AAPL's gross margins on the iPad.

Everything is a threat to Apple. The Kindle is probably even a  threat to Amazon's own profit margins. They're trying to subsidize the device by selling content. But then, they're selling books below their cost.

Amazon is selling the Kindle Fire at or close to cost because the device is just a means to utilize content, which drives the use of AMZN assets. 

Amazon has a subscriber base because they offer awesome content and services at the lowest cost.  Prime and the release of new Kindle devices solidifies the relationship between current AMZN customers and makes it very likely that prospective "retail subscribers" sign up.  This is phenomenal for consumers.  And it means that one ought not to count on high gross margins for AAPL devices. 

Now let's see what types of services Apple starts to roll out and how popular they become.  Apparently, they are working on a Spotify competitor.  I'd love to see AMZN buy Spotify.

OK, let me repeat - Amazon is selling devices at or below cost, they are selling many books at below cost too. So what are they subsidizing their losses in these two areas with? Apps? Music? They don't sell that many prime subscriptions.

Selling devices at or below cost doesn't matter to AMZN.  And, btw, even if they are selling below cost, does that change the thesis on gross margin decline for iPads?  My answer is "no."

Do you really believe AMZN is selling all of its books below cost?  Publishers accuse them of doing this.  I believe what's actually happening is that there are large parts of the catalogs they buy access to that get subsidized by the better selling titles.  As long as the publishers control large catalogs of content that consists of both great and crappy titles, that's how it's going to be for Amazon.

But look, I'd love to hear from people in the publishing industry.  I know at least some board members have indicated that that's the business they're in.

Amazon's playing the long game.  Take a look at their revenue growth.  They're creating a relationship with consumers that will make them the Walmart/Costco of the new generation.

So, they're looking to drop their profits further?

http://www.readwriteweb.com/archives/the-difference-between-apple-amazon-in-one-chart.php

txlaw

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Re: AAPL - Apple Inc.
« Reply #294 on: September 11, 2012, 01:01:04 PM »
http://www.nbcnews.com/technology/gadgetbox/amazon-will-sell-ad-free-kindle-fire-hd-extra-15-987503

AMZN is going to allow buyers to get rid of special offers for $15. 

I think even the most die hard Apple fans will probably realize that this assault by Bezos poses a threat to AAPL's gross margins on the iPad.

Everything is a threat to Apple. The Kindle is probably even a  threat to Amazon's own profit margins. They're trying to subsidize the device by selling content. But then, they're selling books below their cost.

Amazon is selling the Kindle Fire at or close to cost because the device is just a means to utilize content, which drives the use of AMZN assets. 

Amazon has a subscriber base because they offer awesome content and services at the lowest cost.  Prime and the release of new Kindle devices solidifies the relationship between current AMZN customers and makes it very likely that prospective "retail subscribers" sign up.  This is phenomenal for consumers.  And it means that one ought not to count on high gross margins for AAPL devices. 

Now let's see what types of services Apple starts to roll out and how popular they become.  Apparently, they are working on a Spotify competitor.  I'd love to see AMZN buy Spotify.

OK, let me repeat - Amazon is selling devices at or below cost, they are selling many books at below cost too. So what are they subsidizing their losses in these two areas with? Apps? Music? They don't sell that many prime subscriptions.

Selling devices at or below cost doesn't matter to AMZN.  And, btw, even if they are selling below cost, does that change the thesis on gross margin decline for iPads?  My answer is "no."

Do you really believe AMZN is selling all of its books below cost?  Publishers accuse them of doing this.  I believe what's actually happening is that there are large parts of the catalogs they buy access to that get subsidized by the better selling titles.  As long as the publishers control large catalogs of content that consists of both great and crappy titles, that's how it's going to be for Amazon.

But look, I'd love to hear from people in the publishing industry.  I know at least some board members have indicated that that's the business they're in.

Amazon's playing the long game.  Take a look at their revenue growth.  They're creating a relationship with consumers that will make them the Walmart/Costco of the new generation.

So, they're looking to drop their profits further?

http://www.readwriteweb.com/archives/the-difference-between-apple-amazon-in-one-chart.php

From that article:

Obviously, if short-term profit is all that matters, Apple is winning by a mile. Apple has generated more than $73 billion of profit over the span of this chart, while Amazon is around $2 billion. Some of that has to do with the relative size of the companies; Apple is about three times bigger, sales-wise. But Apple's approach is still dramatically more profitable on a relative basis.

That said, there's also merit to Amazon's approach. By pricing its devices lower, it's potentially bringing its technologies to more people in different economic positions. Apple has lowered its pricing premium significantly over the years, but there are still potentially millions of people who could justify buying a $200 Kindle Fire but not a $400 iPad. Apple is now expected to launch a smaller, cheaper iPad, something it once suggested it wouldn't do - an action attributable in part to Amazon's success.

Will Amazon's approach ever lead to substantial profits? If Apple and Google are driving media and app prices lower, that leaves less room for Amazon to profit in the future. But Amazon is a multifaceted machine, ranging from digital media sales to paper-towel delivery. It's possible that getting customers all-in on Amazon's digital and Prime services will eventually lead to greater profits across the board.

Another question: Could competition from Amazon force Apple to lower its prices, potentially at the expense of its profit margins? Perhaps, over the long term, on some models.
« Last Edit: September 11, 2012, 01:15:19 PM by txlaw »

Olmsted

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Re: AAPL - Apple Inc.
« Reply #295 on: September 11, 2012, 01:20:29 PM »
Personally, I would not own AMZN at this price.

However, I believe Bezos has learned from the Costco model.  Run at margins well below what you could probably sustain in order to rapidly increase revenue growth and build a huge moat.

Yes, I understand that that is the bull explanation for Amazon long-term.  It makes some sense.  And it very well could work out that way.  Shareholders have to trust that management will switch from go-go expansion mode to hang-out-behind-the-moat-raise-margins-and-generate-cash mode.


valueInv

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Re: AAPL - Apple Inc.
« Reply #297 on: September 11, 2012, 06:16:58 PM »

Obviously, if short-term profit is all that matters, Apple is winning by a mile.
I have held AAPL for more than 10 years. They have been far more consistent with their profits during that period than Amazon.

 Apple is now expected to launch a smaller, cheaper iPad, something it once suggested it wouldn't do - an action attributable in part to Amazon's success.
Yeah, right:

http://www.engadget.com/2012/08/03/eddy-cue-wanted-7-inch-ipad/

But Amazon is a multifaceted machine, ranging from digital media sales to paper-towel delivery. It's possible that getting customers all-in on Amazon's digital and Prime services will eventually lead to greater profits across the board.
That strategy certainly hasn't been working. Take a look at recent financials. Here's the other thing. They are going to have to pay sales tax in the future and they're promised many states to open up fulfillment centers and hire people. All this while they're planning to move to more digital goods from physical goods. That should juice up profits plenty  ;)

Another question: Could competition from Amazon force Apple to lower its prices, potentially at the expense of its profit margins? Perhaps, over the long term, on some models.

Tell me how as the appearance of me too competitor products affects the margins of:
iPods
Macs (2nd Steve Jobs era)
iPhones

We should have about 10 years worth of history on this.

VAL9000

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Re: AAPL - Apple Inc.
« Reply #298 on: September 11, 2012, 07:34:30 PM »
txlaw,

I think your Costco analogy is interesting..  My own twist to this is that Amazon is incredibly aware of the damage that they did to significant chunks of the retail industry.  Knowing how fragile business models can be, they are making a proactive bid to be the leaders in the business that will put them out of business.   Amazon has historically done plenty of business selling books, CD's, and DVD's.  They see where content is going and are working hard to maintain/obtain mindshare as the location of choice to buy this media in its latest incarnation.  The threat 5-10 years down the line?  3D printing could seriously damage the physical goods business.  Of course, 3D printing is also primarily a content problem (after the messy physical bit gets sorted out).  Very prescient of AMZN & Co to be heading this direction today.

valueInv,

Just because AAPL is a good business, doesn't mean that other businesses (e.g. AMZN, GOOG) are not also good businesses.  They could just be different and in different stages.  Just think about how absolutely stupid the world said you were for buying stock in AAPL 10 years ago.  Today you have reaped the benefits of making a very wise and very bold choice.  Don't you also think that it's sensible to apply the same model of forward thinking to businesses that may not look like home runs today, but have a shot at becoming "the next Apple" in their respective segments?  Even where these segments overlap with Apple?  That's certainly what I'm thinking when I see interesting technology.  Not sure if others agree on that.  I think it's fair to say that Apple is "the next Apple", too.  There are certainly enough consumer electronics product categories that would benefit from Apple's attention.

I want to add that I can see how it might be frustrating as an Apple shareholder on this board.  Unfortunately for you, it seems that most people here enjoy rooting for the underdog (which used to mean rooting for Apple).  Now that Apple is top dog, it seems that there is a consensus that Apple must fall.  Which may not ever happen.  Anyway, I just wanted to clarify that I think Apple is a phenomenal business and that all of their investors should be proud of their gains.  Apple shares aren't for me, but that's more of a preference in taste than a belief that their business is going to flounder.


Olmsted

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Re: AAPL - Apple Inc.
« Reply #299 on: September 11, 2012, 08:52:56 PM »
I think a lot of individuals here like "rooting for the underdog" because the risk-reward can be good (though to be fair, I think a lot of investors' utility is derived at least partly from a feeling of having 'outsmarted' the consensus, as opposed to being a function of returns only).  Top dog Apple may do really well, probably will continue to actually.  But the bet is different now than it was even a year ago.  It takes a lot more to "move the needle."  That doesn't mean predicting Apple's imminent decline - far from it - it just means there may be more attractive bets elsewhere.