Posts Tagged ‘iphone’

platformninenandthreequarters

There is a university, its location is not well known, maybe you travel there from platform nine and three quarters at King Cross, but it is called the School of Technology Phobia.   While we don’t know the location, it does seem likely that the University of Luddites is nearby. Graduates from the former of these institutions have been busy during the last few days, pouring their scholarly ideas across the ether. As a result, shares in Apple look like they are on helter-skelter, hurtling towards the earth.

That may be little unkind. That is to say unkind on Apple. It remains the world’s largest company and its shares did not so much as tumble, as reverse some of the stellar gains seen in recent months. But for the ladies and gentlemen whose cynicism led to the shares falls, the words are not all unkind at all.

Shares in Apple fell, and they fell quite sharply this week, as the company revealed truly stunning results. Revenue was up 112 per cent, sales into China doubled.  If the Apple share price falls after results like that, one wonders what might happen if it had an normal set of results

Apple’s problem is that it is the world’s biggest company by market cap. When you are that big it is hard to grow. Apple needs products that command high retail prices and it needs to sell them in droves. That’s why some think it will be turning to cars next, or even into the world of energy generation and storage.  The iPhone did alright in Apple’s latest quarter, in fact sales were up 35 per cent. According to the school of thought most people sign-up to, a 35 per cent rise in sales of any product is considered pretty exceptional. It is just that when it comes to Apple, it seems many analysts and investors went to a different school, the one mentioned above.

One day, but we have no idea when, smart phones will stop selling. Maybe it will occur when Moore’s Law runs out of puff, maybe it will occur when smart phones are replaced by chips that sit inside our heads. So while Apple enjoyed revenue topping £13.2 billion in its latest quarter, and its valuation to projected earnings is nothing alarming, cynics fret that one day it will run out of road.  Contrast that with Exxon Mobil, Apple’s main rival for the tile world’s largest company, it specialises in a product that the world will always want, namely oil, or so goes the argument.

As it happens, with technology advances in renewables, energy storage and synthetic oil there is no guarantee the world will always want Exxon Mobil’s core product. Apple, however, has another advantage. To explain why we need to look at psychology.

When it comes to paying for stuff, our purchases are likely to be greater if there is distance.  It also helps if things are easier.

If you were to tuck into pizza at the local Pizza café, and you were charged by the bite, you might soon get fed up. Setting aside the inconvenience, with each bite you will be thinking about the cost. So you pick you your fork, move the pizza to your mouth, and quickly tap in your pin number authorising another 30 pence. As you munch away, you will be thinking about the cost. Dan Ariely prosed the pizza idea to explain the concept of the ‘pain of paying’.

Other research shows that people who live in apartments in New York spend more on their laundry if they pay by tokens than by coins. The same psychology explains why casinos provide customers with chips – They spend more money that way.

For similar reasons, we spend more when we use a credit card than when we use cash. The lower the ‘pain of paying’, it appears the more we pay.

Now consider Apple Pay. It will be to the ‘pain of paying’, what morphine is to a headache. Apple Pay will make money for retailers, and Apple will be paid handsomely for this by them in return.

Now consider the Apple watch. It’s odd, isn’t it? When was the last time you used a pocket watch.  Wrist watches replaced pocket watches because they were more convenient. Odd then, that critics of the Apple Watch, which is after-all— a computer to sit on your wrist, don’t get why it is had advantages over a pocket smart phone. There is another benefit. As Daniel Kahneman illustrated in his book Thinking Fast and Slow, we can be quite impulsive. If spending money involves touching our wrist, and if that money is then distanced from our bank account by Apple Pay, we are likely to spend more

It is just another reason why we need to listen to graduates from the schools of technology not, technology phobia.

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What have Apple and the Duchess of Cambridge not got in common? Answer: Apple still needs a new baby. It’s the point that the markets don’t seem to get about the company. Its shares have been falling faster than a guillotine on the head of the last King of France, but the markets have been way too quick to write the company off. Yesterday saw good news from Apple as profits beat expectations and shares rose; but still the real story is being forgotten.

The company’s latest set of results were out yesterday. Profits fell to $7 billion in the latest quarter, from $9 billion in the same quarter last year. To put the numbers in perspective, profits from the equivalent quarter in 2011 were pretty much the same, but in for 2010 were only $3 billion, and just $1billion in 2009. In other words, they have risen sevenfold in four years, which some might say is impressive.

It was a similar story with sales, but if anything a tad better. Sales rose 1 per cent on the same quarter in 2012, and have risen by more than 400 per cent over the last four years.

But the markets don’t care about all that. What they care about is whether the company did better than expected, and on this occasion it did. It was down to the iPhone. It sold no less than 31.2 million units of the old girl in the quarter (compared with 26 million this time last year), a record for that particular three month period, in fact.

Sales of the iPad were down, and so were sales of the Mac, although in the case of the latter, the fall was not as great as that seen by the overall PC market.

Apple’s problem is that it is now operating in mature, or at least mature(ish), markets. When smart phones or tablets become commodities, margins will fall – it’s simple economics.

The company’s boss Tim Cook said: “I don’t subscribe to the common view that the higher-end smartphone market has hit its peak.” He added: “We saw very strong sales in many of the emerging markets.” And indeed sales into India, Turkey and the Philippines rose substantially. (As an aside, note that bit about sales to the Philippines rising. It is a different story altogether but worth mentioning at this point that at the moment the Philippines is one of the hottest markets in the world, from an investor’s point of view.)

But the real point is that Apple has proven itself to be the master of disruptive technology. It did it with the iPod, iPhone and iPad. When it comes to established markets it is just another player. Okay, it’s one with very pretty products, and maybe an important player, but Apple has no inalienable reason to outsell, say, Samsung in its key markets.

Apple’s big test lies ahead. The key for the company lies not with tweaking existing products, but disrupting markets with new products, such as smart watches or TV players.

Mr Cook also said: “Our focus is always on new products and services,” and “We are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014.”

So how about that? – laser focused, no less. Let’s hope that the new products are not laser discs.

© Investment & Business News 2013

Hiatus. Sometimes we enter a kind of interim stage. And when that happens, it is human nature to see this as somehow significant. In truth it is as significant as a stopped clock telling us the time.

Google is in at the moment. Sure, its tax affairs are not in with politicians, and the holier than thou media. But this has nothing to do with Google being evil, or amoral, and it has everything to do with globalisation and technology, which makes it hard for governments to act unilaterally.

And with Apple’s share price having fallen sharply over the last year – from $702 in September to $450 at the time of writing – and with Google’s having risen – from $647 in November to $867 at the time of writing – their fortunes have been in stark contrast.

Apple’s market cap is now $423 billion; Google’s $288 billion. The gap appears to be closing.

Google has its glasses, its driverless cars, its new Motorola phone – talk has it that the phone will know when you are driving, know when it in your pocket. There is no talk of it being able to tell you whether someone of the opposite sex fancies you however – which may be a major oversight by Google.

Apple has… well, there will be a new iPhone and iPad, but there’s not much happening.

It appears that the number of Android Apps is set to overtake the number of Apple apps too. So far 50 billion apps have been downloaded for the Apple products; 48 billion for Androids. Apple reckons it is seeing around 2 billion downloads a month. Google says it is seeing around 2.5 billion a month. Analysts reckon total downloads for the Google family will surpass Apple downloads this year.

Apple’s shares are trading at a pe ratio of just 10.76. Google shares at 26. No wondering – let the facts speak for themselves.

Poor old Apple! It is hard to see how it can make do with a mere 2 billion downloads a month

Google is an exciting company, and it may well see its extraordinary growth rate continue for some time. But the markets may be writing off Apple far too soon.

Apple is not good at hiatus moments. Apple went from almost bust to becoming the world’s biggest company by market cap via disruptive technology. With its iPod, iPhone and iPad Apple invented a market place, or at the very least (in the case of the iPod) turned a niche market with a specialist following into a mass market.

Right now, the state of technology is such that we are in an in-between stage. We are awaiting the next phase in the evolution of technology. In nature evolution does not work at a steady pace, it often works in fits and starts, it is like that in business too.

To write off Apple now, at this in-between stage, is simply absurd. Its smart watch or TV player may or may not change the world, but until we know more, we cannot say whether Apple has lost its innovative edge.

As for downloads being a miserly 2 billion a month, don’t analysts have iPhones? Don’t they know that Apple tries to impose some form of quality control on its apps? Don’t they know that in the Apple market the onus is on quality over quantity? Apps downloads may be fewer, but are existing Apple apps used more or less than Android apps, do you think?

© Investment & Business News 2013

And so Apple is no longer number one. Its market cap dropped to a trivial, an almost insignificant $387 billion yesterday. Why there are simply loads of companies worth more than that – for one there is ExxonMobil, which is worth a full $7 billion more than Apple at the moment, and for another there is…well…maybe that is all there is. Okay Apple is number two in the league of the world’s biggest companies. Not that bad.

Its share price has done a pretty good impression of crashing over the last year or so, however. Not so long ago, shares were close to $700, now they are down to $402.

The latest falls in its share price were put down to an announcement that Cirrus Logic, which gets around 90 per cent of its revenue from Apple via the supply of audio chips, has seen a big build-up in its inventory.

Apple’s problem is regression to the mean. The issues and requirements of the smart phone and tablet world are well understood. Apple’s products are good, but so too are Samsung’s, HTC’s and even Sony’s. The latest move by Facebook into this field may yet prove to be another challenge for Apple.

Apple is just one of many players. A good player, granted; its products still look good. But why, just why, in such a competitive market should Apple outperform rivals?

Apple’s strength lies in disruptive technology. Or maybe that is not quite right. Its strength is to take existing technology that looks quite ordinary, add its designer expertise, and transform the market, completely disrupting the status quo.

It has done this with MP3 players, smart phones and touch screen computers/consumer electronics.

The company’s p/e ratio is 9.13. If you were to subtract its cash holdings from market cap (not unreasonable as it only needs a fraction of its money to function as a going concern) its p/e is nearer six.

If you believe that the age of disruptive new technologies in the world of consumer tech is over, then maybe, just maybe, the Apple share price is about right.

But frankly, the idea that we are not going to see any more disruption in the world of consumer tech hardware is absurd. In valuing Apple so low, the analysts are more akin to luddites, or techno fools.

©2013 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

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According to the latest global information technology report from the World Economic Forum, Finland leads the world in terms of networked readiness.

Singapore is in second slot, then Sweden, then Netherlands, Norway, Switzerland, followed by little old Blighty.

Or maybe it would be more accurate to say big old Blighty. After all, it is the first country on the networked readiness index with a population in excess of 20 million. In fact a quick back of an envelope calculation (or is that front of an iPhone calculation?) reveals that the entire population of all the countries combined which feature higher up the list than the UK is less than the population of England.

In short, the UK has a greater degree of IT readiness than any other member of the G8.

For what it’s worth, behind the UK on the index is Denmark, then the US, then Taiwan. China is in 58th spot.

But this leaves some questions. According g to Bilbao-Osorio, Senior Economist, Global Competitiveness and Benchmarking Network, World Economic Forum, and co-editor of the report: “ICT’s role in supporting economic growth and the creation of high-quality jobs has never come under such scrutiny. Despite initial concerns that ICT would hasten the deployment of resources towards developing countries, the benefits of ICT are now widely recognized as an important way for companies and economies to optimize productivity, free up resources and boost innovation and job creation.” But if that is so, why is it that the UK, despite its lofty position in the index, lags so far behind its most G7 countries for productivity?

“This analysis shows how matching investments in ICT with investment in skills and innovation can help economies cross a ‘magic threshold’, beyond which return on investment increases significantly,” said Bruno Lanvin, Executive Director e-Lab INSEAD. If that is so, why is the UK’s economic performance so dire?

“Digitization created 6 million jobs and added US$ 193 billion to the global economy in 2011. Although in aggregate positive, the impact of digitization is not uniform across sectors and economies – it creates and destroys jobs,” said Bahjat El-Darwiche, Partner at Booz & Company and sponsors of the Report. He added that: “Policymakers wishing to accentuate the positive impact of digitization need to understand these different effects if they wish to act as digital market makers in their economies.” Well maybe he is right. Digitisation does create jobs, but it destroys them too.

That is not to say that digitisation is a bad thing – of course it isn’t – but it is dangerous, and it is uncertain how the global economy will react to the effect of digitisation. But let’s say digitisation will lead to a rise in productivity and productive capacity. A way has to be found for ensuring the profits trickle down into the pockets of consumers, or demand will lag behind capacity. Ways have to be found to get demand to rise, or all that potential may create economic depression.

©2013 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

192

It doesn’t look like the back of a bus, but the iPhone’s posterior is not exactly its best side. But there could be good news for bum lovers, not to mention the Apple share price – perhaps.

The company has patented a wraparound style AMOLED display. So what does that mean in pounds shillings and pence? It means that Apple could be using the technology it has patented to make an iPhone that is virtually all screen.

The patent is apparently quite detailed, and refers to removable caps that could allow more than one device to be linked together and a method for being able to tell if the user is just handling the device – picking it up for example – or actually trying to use it. See: Apple Patents iPhone With Wraparound Display, Including Designs That Plug Together Voltron-Style

It all boils down to disruptive technology and regression to the mean. The smart phones and tablets are beginning to look like commodities. The products in this market place are looking a touch samey. It is hard for Apple to see its growth trajectory continue in such a market place, hence recent falls in the company’s share price.

In such a market place, why should Apple do that much better than anyone else? Does it have an inherent reason for making better commodities than, say, Samsung or HTC? Regression to the mean always sets in eventually. There are no secrets that can be kept forever. Apple has no secret in the way it is run. Others can duplicate its model. In the long run Apple will be average, and in the very long run – just like most other companies that once seemed invincible – Apple will look ordinary.

The question is: how long is that date away? Will it be here this decade, this half of this century, or not for a very long time?

What Apple does have going for it is lots and lots of money, and a culture that is very good at creating design. Its design culture may not give Apple that great an advantage in the smart phone business right now, but it may come in handy when we see the next wave of disruptive technology.

Apple is good at combining design with disruptive technology. And quite frankly a wraparound display seems pretty disruptive, and pretty radical if the design is right. And well-designed radical ideas can change the world, and can create growth that even shareholders in Apple could love.

©2013 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

So what do you think will happen in 2013?

Setting aside Galbraith’s comment about the only redeemable benefit of economic forecasting being that it makes astrology look respectable, here are some thoughts for you to ponder.

Zombies may be in the news in the summer. A new film is coming out called World War Z, starring Brad Pitt. It is about zombies. In 2012 zombies were in the business pages too. There are households, many of whom are stuck in forbearance; around 5.8 per cent of home owners, according to the FSA. There are zombie businesses kept alive by rock bottom interest rates, and banks terrified to value their assets in accordance with what the markets think they are worth. If banks did revalue their assets in accordance with market values, and applied what’s called mark to market accounting, we could see another banking crisis. So either the markets are wrong, and banks are merely refusing to let their hysteria reflect valuations, or banks are pretty close to becoming zombies – if they are not already, that is.

Meanwhile, the poor old can is already starting to look very beaten up. Yesterday, US members of the House of Representatives kicked the can down the road. They voted to raise some taxes, but delayed deciding about spending cuts for two months. Next, they have to agree on the US debt ceiling. If they don’t, the US government will have to default. They probably will, and it probably won’t, but the wire will get a visit as the US economy goes down to it, and the can will get kicked some more.

In Europe, politicians will do much the same thing – that is to say at the last minute agree to various rescue schemes, but only as temporary measures while they consider at their leisure what to do to fix underlying challenges. They will never decide of course, but they will have lots of late night emergency meetings.  The German Constitutional Court will have to decide whether various new schemes are legal under German law, and will finally announce provisional approval of the latest German backed rescue scheme, but say it needs more time to decide for sure.

So is there a word to describe US and EU governments that just delay the real decision making process, and apply sticking plasters? Well how about this word: zombies.

One prediction for the year ahead is that as World War Z is released we will see a barrage of media comment, and indeed cartoons, comparing the economy with that film.

Also in 2013, governments and central banks in the US, Japan and the UK will decide it is time to target nominal GDP rather than inflation. The result will be more QE. Sterling may come under pressure, especially against the euro, although the Bank of England may well say this is a good thing. Holiday makers won’t be too chuffed, however.

Many will forecast a return to double digit inflation, a or even hyperinflation, but in reality, QE will lead to modest rises in inflation, and by the end of 2013, despite more QE, UK inflation will be lower than at the end of 2012. (CPI Inflation was 2.7 per cent in November 2012).

On the back of QE, gold will probably do well, and oil will oscillate. But there are signs that China may be getting over its so-called soft landing, and growth may be higher in 2013. This may be enough to push up oil.

Finally, in the world of tech, LinkedIn will see profits double again as they did last year, Facebook will see its shares pick up and return to the IPO price, as the company begins to find ways to monetise its huge user base. Apple may take a knock in the smart phone business as the likes of Samsung and HTC see sales rise.  But it will announce its iTV player, and this will prove to be as big a deal as when the company revealed the iPhone. Shares will surge and Apple will be the world’s first company to be valued in excess of one trillion US dollars.

Sales at Amazon will rise, as new owners of its Kindle Fire start buying more from Amazon and less from traditional retailers. Amazon will appear to be on course to become the world’s largest retailer. And finally, IBM will see its best year in terms of share price growth, for many years.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here