Author Topic: AAPL - Apple Inc.  (Read 1612222 times)

hellsten

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Re: AAPL - Apple Inc.
« Reply #660 on: November 18, 2012, 08:33:59 AM »
My take on Apple's moat:

- Great products

Not a long-lived moat. Competition will adapt. See what Microsoft is doing.

- Network effect (iTunes, AppStore, iCloud, multiple devices that are synced with each other)

Not a moat in my case. Like most consumers?, I don't care if I loose my iOS apps or games. Most games are trivial and I loose interest in them in a couple of days or weeks. iTunes works on PCs.

What happened to Commodore, Nintendo and Atari (who all had the best content at the time) can happen to Apple.

http://www.onlineeconomy.org/how-strong-are-apple%E2%80%99s-iphone-network-effects

Apple has a narrow moat with developers (and designers) who like to develop for iOS because of various reasons. Developers can easily switch to another platform.

- Enterprise market

Nonexistent moat. People and enterprises care if they loose something like Adobe Photoshop, Microsoft Office, or all their corporate data. Microsoft is lightyears ahead of Apple in the enterprise market:
http://articles.businessinsider.com/2010-02-10/tech/29961217_1

Buffett should have bought MSFT instead of IBM.

- Design culture (Jonathan Ive and his design team)
http://www.businessinsider.com/meet-the-members-of-apples-elite-industrial-design-team-2012-8?op=1

Narrow moat, i.e. not a long-lived moat. See what Microsoft and Nokia are doing.

You could also argue Apple has copied great design ideas from others:
http://www.cultofmac.com/188753/the-braun-products-that-inspired-apples-iconic-designs-gallery/
http://simonphillips.com.au/apple-vs-braun

- Engineering culture
http://www.businessinsider.com/management-lessons-i-learned-working-at-apple-2010-7?op=1

Narrow moat. HP or DELL could never create iOS, an iPhone, or an iPad because of the internal bureaucracy and culture. However, Microsoft and Google can.

- Apple fans

Very narrow moat. People who like design would never own a DELL or HP computer.

- Unix

Very narrow moat. Engineers like OSX because it's Unix based. However, most users are not engineers. OSX can run the latest open source software, which is not always the case with MSFT.

Engineers can switch to whatever they like the most (Linux / Android). Switching is easy for an engineer.


To summarize, I don't see any long-lasting moat, just great products and momentum. This article pretty accurately reflects my thoughts on Apple, Microsoft and Google:
http://articles.businessinsider.com/2012-03-05/research/31123118_1_ios-android-platform/2

And yes, I own almost every Apple product that exists :) I'm just waiting for someone to design better hardware and software.


valueInv

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Re: AAPL - Apple Inc.
« Reply #661 on: November 18, 2012, 09:05:48 AM »
I wouldn't hitch my horse on valueinv's commentary.  He knows nothing about investing or growth stock behaviour.  You blindly siding with him makes you look even more naive. 

Uccmal, majority of my portfolio looks just like yours and of other investors:
Long AIG, BAC, Berk, FFH, LUK, WFC, etc.

If I know nothing about investing, by association, neither do you  ;D ;D ;D

The choice you're offering to people is not between my analysis and yours but between analysis and generalizations. For some reason, you can't tell the difference between the two.

My analysis could well be wrong or even subject to the impact of unpredictable events, but I believe that over the long term and over multiple investments, I will be better off than if I were using generalizations. Generalizations force you to use top down thinking, analysis allows for bottom up also. I prefer the latter.
« Last Edit: November 18, 2012, 09:35:33 AM by valueInv »

valueInv

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Re: AAPL - Apple Inc.
« Reply #662 on: November 18, 2012, 09:34:49 AM »
To those who are more knowledgeable - how will Apple respond to Android taking market share? Will they slash prices or be happy being a niche product?
They are more likely to be happy being a niche product. The entire company, business model and culture is built around creating premium products and charging a higher price for it. They are somewhat similar to BMW. Sure, Toyota sells more cars but BMW is playing a different game. One of the reasons why I hold Apple instead of HTC or Amazon is because of this very reason. They are not going to sell products at cost or subject themselves to destructive price wars.

There are more options to the market share question than meets the eye. Any market consists of multiple price segments. Typically, Apple enters the market at a high price segment. All the growth you see is within that segment, as that is the only segment being served. Competitors introduce "me too" products but Apple continues to dominate. Competitors start dropping prices and as a result, start addressing lower price segments which are much bigger than the higher price segments that Apple is addressing. Soon, Apple is looking bad from the market share perspective even though it is doing well in the price segments it competes in. The overall marketshare drop is not from Apple selling fewer devices but from competitors quickly addressing bigger price segments that Apple is not entering. If you look at the the US smartphone market, where Apple addresses more price segments ($0, $99, $200+) due to operator subsidies, Appel's marketshare actually increased slightly this year. However, in Europe operators don't subsidize phones to the same extent and even a 3GS costs more than 500 Euros in many countries. Combine that with more people moving to lower price segments due to the financial crisis, Apple's marketshare takes a bigger hit over there. A similar situation in highly populated emerging countries where the lower price segments are much, much larger than the higher price segments.

Apple has found ways around this in the past - they introduce new form factors and device tiers that address the lower price segments. For example, the classic iPod was supplemented by the mini, shuffle, etc. These address different use cases, so someone who owns a classic might also buy a nano for the gym - so it helps lower cannibalization, provide overall increase in profits and reduces the hit on gross margins.

This is the same strategy Apple is following with the iPad mini. The smaller device addresses many use cases better than the bigger one (Gaming, books, mobility, etc). Also, it allows Apple to compete in a new price segment without a massive hit on GMs(there is going some hit initially due to manufacturing yields).  Overall, they should make more money from iPads next year over this year.

There are rumors (from WSJ) that they will follow the same strategy with the iPhone.

Apple is not playing a marketshare/commoditization/price war game but a price segmentation game. This is what most people fail to get when they look at Apple's marketshare numbers.


P.S. Uccmal, this is an analysis.

Palantir

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Re: AAPL - Apple Inc.
« Reply #663 on: November 18, 2012, 01:25:45 PM »
The overall marketshare drop is not from Apple selling fewer devices but from competitors quickly addressing bigger price segments that Apple is not entering. If you look at the the US smartphone market, where Apple addresses more price segments ($0, $99, $200+) due to operator subsidies, Appel's marketshare actually increased slightly this year.

This is a very good point, and not something I thought about. So essentially it is only competing against the high end products from Android, like say the GS3, rather than the full range.

Even in the lower price range, they sell the premium product. (iPod Shuffle, which is twice the cost of comparable small MP3 players).
« Last Edit: November 18, 2012, 01:28:13 PM by Palantir »
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Uccmal

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Re: AAPL - Apple Inc.
« Reply #664 on: November 18, 2012, 01:27:17 PM »
I wouldn't hitch my horse on valueinv's commentary.  He knows nothing about investing or growth stock behaviour.  You blindly siding with him makes you look even more naive. 

Uccmal, majority of my portfolio looks just like yours and of other investors:
Long AIG, BAC, Berk, FFH, LUK, WFC, etc.

If I know nothing about investing, by association, neither do you  ;D ;D ;D

The choice you're offering to people is not between my analysis and yours but between analysis and generalizations. For some reason, you can't tell the difference between the two.

My analysis could well be wrong or even subject to the impact of unpredictable events, but I believe that over the long term and over multiple investments, I will be better off than if I were using generalizations. Generalizations force you to use top down thinking, analysis allows for bottom up also. I prefer the latter.

lol, Valueinv, I have done in depth analysis to come up with normalized earnings on a BAc thread, old  FFh threads, SSW thread, and a few others posted here and on the old board.

Apple defies bottom up analysis as it requires too many flights of fancy.  Put another way, normalizing margins and earnings on Apple products, and perhaps the wireless industry as a whole doesn't paint a nice picture at all. 

And the majority of your portfolio (or mine) looks nothing like most retail investors, mutual funds, or etfs  ;)

Who else in the world holds 1/2 their portfolio in (formerly) disdained US financials?  lol.

GARP tending toward value


hardincap

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Re: AAPL - Apple Inc.
« Reply #666 on: November 19, 2012, 06:10:26 AM »
Uccmal, you sound very much like the guy who ridiculed Michael Burry online for buying Apple stock and other tech investments many years back.

It might also surprise you that Henry Singleton of Teledyne, whom Warren Buffett counts as one of the greatest investors and businessman of all time, also invested in Apple in a big way back in the day.

I wouldn't hitch my horse on valueinv's commentary.  He knows nothing about investing or growth stock behaviour.  You blindly siding with him makes you look even more naive. 

Uccmal, majority of my portfolio looks just like yours and of other investors:
Long AIG, BAC, Berk, FFH, LUK, WFC, etc.

If I know nothing about investing, by association, neither do you  ;D ;D ;D

The choice you're offering to people is not between my analysis and yours but between analysis and generalizations. For some reason, you can't tell the difference between the two.

My analysis could well be wrong or even subject to the impact of unpredictable events, but I believe that over the long term and over multiple investments, I will be better off than if I were using generalizations. Generalizations force you to use top down thinking, analysis allows for bottom up also. I prefer the latter.

lol, Valueinv, I have done in depth analysis to come up with normalized earnings on a BAc thread, old  FFh threads, SSW thread, and a few others posted here and on the old board.

Apple defies bottom up analysis as it requires too many flights of fancy.  Put another way, normalizing margins and earnings on Apple products, and perhaps the wireless industry as a whole doesn't paint a nice picture at all. 

And the majority of your portfolio (or mine) looks nothing like most retail investors, mutual funds, or etfs  ;)

Who else in the world holds 1/2 their portfolio in (formerly) disdained US financials?  lol.
« Last Edit: November 19, 2012, 06:13:40 AM by hardincap »

tooskinneejs

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Re: AAPL - Apple Inc.
« Reply #667 on: November 20, 2012, 07:29:29 AM »
For those who think Apple will forever reign supreme, take a look at these phone and tablet devices being developed by a consortium of Japanese companies - the models are about as thick as a US dime (see video):

http://www.huffingtonpost.com/2012/11/19/japan-display-innovation-vehicles_n_2161224.html


rimm_never_sleeps

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Re: AAPL - Apple Inc.
« Reply #668 on: November 20, 2012, 07:55:47 AM »
japan is known for incredible technology feats that fail miserably with consumers. japan inc. has totally missed the smartphone mega trend. as for apple, it's not an expensive stock. the expectations aren't that high for it. it just has to grow earnings at 5% to 10% rates per annum to justify the p/e, which is lower than a market multiple when you account for the cash. it's not some bubble stock. it's not a bubble concept stock. it does not have to "reign supreme" forever. it just has to basically do what most good companies do, grow earnings at close to 10% a year.
« Last Edit: November 20, 2012, 08:36:56 AM by rimm_never_sleeps »

valueInv

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