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More On Realistic Views of Apple and the Undervaluation of Google
In continuing with what appears to be one of the very, very few voice
that look at the mobile computing wars from an empirical perspective I
will update readers on the price action in Apple and why I feel that the
market may be getting wise to what BoomBustBloggers have known since
last year. I want to make it clear that this is in no way to be
considered investment advice or a recommendation. It is simply a
reflection of my thoughts and ruminations on the mobile computer space
and the relative prospects of the front leaders therein. On March 16th, I
posted Shorting Apple and Why Software Developers Can Make More Money On Android
wherein I discussed the suitability of shorting(putting) Apple stock
with tight stops. This, or course was in direct contradiction to the
recommendation of Goldman Sachs who has a $430 target on the company.
See Taking The Challenge To Goldman Sach’s Apple Proclamation One Step Further and Is It Now Common Knowledge That Goldman’s Investment Advice Sucks!
I followed up the next day with Note For The Few Realistic Apple Bears…
Shortly thereafter the trade was stopped out with a roughly 31% gain.
I have put a similar position back in this morning. Let’s take a look
at the divergent price action between the two mobile computing war front runners.
Apple has had the expected effervescent launch to its iPad 2 last
week, which was tarred some in Asia by the trifecta calamity Japan’s
earthquake, resultant tsunami, and consequent nuclear reactor near
meltdowns – still going on. The problems Apple face go farther than a
mere temporary (or not so) hampering of the Japanese market to the new
iPad 2. Apple is relying on the iPad 2 to diversify its current ~65-70%+
concentration of profits in its highly successful iPhone product line.
Any disruption in the selling of iPad 2s gives Google’s Android tablet
products more room to expand and capture market share. From CNBC:
The iPad 2 battery, which IHS iSuppli
said is “unusually thin”, is manufactured by Apple Japan, an Apple
subsidiary, and likely requires advanced manufacturing technologies
that reside in the country.
“Logistical disruptions may mean
that Apple could have difficulties obtaining this battery, and it may
not be able to secure supply from an external, non-Japanese source,”
the report said.
Production at many Japanese
manufacturing facilities has come to a halt following Friday’s 9.0
earthquake and subsequent tsunami, which has left more than 5,600
people dead and destroyed swaths of the country.
Toshiba,
which is one of the companies that produces the NAND flash memory used
in the iPad 2 according to IHS iSuppli’s research, briefly shut down a
flash memory manufacturing facility in Japan and warned it could face
hurdles distributing its products.
Suppliers of other components whose
factories weren’t damaged are likely to be affected by logistical
issues, such as difficulties procuring raw materials and shipping
finished products, the report said.
Apple launched the iPad 2 in the
United States last week to strong demand, with many stores selling out
of the device and analysts estimating that the company sold 1 million
units during the debut weekend.
The current wait time for an iPad ordered online is 4-5 weeks.
Within 4-5 weeks, Samsung should be launching its 10 inc Tab product
which arguably the most competent threat to Apple’s iPad 2 to date, and
only the 2nd of over 3 dozen tablet-specialized “Honeycomb” devices to
ship in the next quarter or two. From As The Tablet Margin Crunching Parade Marches On, Consumers Benefit From The Cheapest Prices Of The Best Products:
Even without the launch of these higher end specialized products,
Android 2.x tablets are already flooding the retail markets. Here is a
page from Sear’s website after typing in the term “tablet”… Click to
enlarge.
These are not just the junk tablets often pushed over from the
wholesale Chinese shops either. Included for $300 and change is the
Viewsonic 10″ tablet which can dual boot Windows 7 and Android, and its
cousin the pure Android 10″ tablet. With a software upgrade to versions
2.2 to 3.0, this tablet mirrors the much more expensive Motorola Xoom
and Samsung Tab and can run neck and neck if not beat the iPad 2 at
nearly all function – yet it is priced less than the current iPad 1.
Yes, all available from Sears. Remember my admonitions concerning margin
compression – these prices are, and will continue, to drop like rocks.
- The Tablet Pricing Wars Have Commenced, Targeting Apple’s iPad 2 Which Is Not Even For Sale Yet…
- Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof!
So, as the iPad 2 enjoys one to one and a half month delays, these
Android tablets will continue to sell and occupy mindshare that probably
would have gone to Apple. If Apple does not succeed in diversifying its
profit base farther, it will be left vulnerable. The Japanese incident
is a perfect example. The two popular mobile products that are grown
(ever so slightly) market share are very vulnerable to happenstance
disruptions. Google actually benefits from this by building a very
diversified base of vendors from every hardware corner imaginable, many
of which may not be as effected as Apple who has sole sourced certain
components. In the meantime Google Is Said to Test Mobile-Payment System With VeriFone – Bloomberg.
If Google is successful in cornering this market, it simply adds to the
ubiquity of Android as it will surely be built into the OS. Do remember
how quickly Android has risen from near zero to pole position in terms
of market share.
. In 7 quarters, Android went from last place to first place –
WORLDWIDE! Expect the same to happen in the tablet space where
competition is even worse and the Android camp has a much larger stable
of much more capable competitors ready to jump out of the gate as the
iPad has only one year head start as compared to the iPhone’s 3 year
head start. Does the market see this? At the money, front month puts
jumped 41% while Apple fell faster and farther than Google during the
market rout, and gained less, slower during the government pump up.
I am slowly gathering puts on Apple again, with tight trailings, of
course. Apple’s situation may not become apparent immediately, but it is
definitely in more of a competitive bind than many are letting on. I
have been clamoring that Apple’s margins will get chopped by Android’s
commoditizng the smartphone space – both on the lower and and the
higher end. See Apple on the Margin
and my on air proclamation just hours before Apple released earnings
and declared – surprise, surprise – a drop in margins. Go to 3:40 in the
video…
I have been clamoring that Apple’s margins will get chopped by
Android’s commoditizng the smartphone space – both on the lower and and
the higher end. See Apple on the Margin
and my on air proclamation just hours before Apple released earnings
and declared – surprise, surprise – a drop in margins. Go to 3:40 in the
video…
More reading:
- The Potential Equity Investments Most Likely To Prosper From the Google/Apple/Microsoft Mobile Computing Battle
- The Nokia/Microsoft Alliance & Android’s Commoditization Of The Mobile Computing Platform…
- Apple Gears Up To Combat The Margin Compression That Apparently Only It, Google & Reggie Middleton Sees Coming
- Will Google Win The Mobile Computing War? Let’s Walk Through Where They Stand Now & How To Value Them
- Sony Bites The Bullet & Joins The Android Camp, Adding Its Entire Suite of PSOne Games To The Android Platform
- If You Need More Proof Of Apple’s Inability To Keep Up With Google’s Android & Over 100 Other Android Hardware Vendors…
Subscribers are reminded to review the Apple iPhone Profit Margin Scenario Analysis Model as well as review the Apple Earnings Guidance Analysis
document that details how Apple’s management expertly manages sell side
earnings expectations, and consequently their share price.
Non-subscription readers should reference How
Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall
Street Will Enable This Without Sheeple Investor’s Having a Clue and then compare and contrast to Will Google Win The Mobile Computing War? Let’s Walk Through Where They Stand Now & How To Value Them.
- advertisements -
Moronic discussion of Nothing.
Yes 52 check this out, i was there 7/29/73 http://www.thegardentapes.co.uk/tgt.html
Reggie, dude...ok you are a genius.
Just admit it...you have lost the AAPL rally all these years and you're now freaking out.
How many more articles do we have to read about this. Just accept the fact that Apple is a great company and innovator and respect the accomplishments.
Of course at some point APPL will head south..but this is a normal market reaction after lokd rallies...
Just think: more and more people, especially younger generation ones all over the world want Apple products. And the are (and will) pay a premium for them. Plain and simple.
You are correct. I remember an interview several years ago where Steve Jobs was basically asked how long Apple's luck would hold out. He replied that their success was due to the fact that the management team knows what they are doing. Outside of IBM, no other tech company executes up and down the line like Apple.
Google is chock full of really smart people. Unfortunately these geniuses can't manage their way out of a wet paper bag. The revenue from the ads is so easy and automatic, they get credit for business acumen that isn't there.
Roger, IBM is a dinosaur, a great company to short IMO. These techno-idiots want to 'sequence' traffic lights so that they (try) to run you through on green without (they hope) you not having to stop.
So let's get this straight: IBM want to install the dumbest (time rule based) tin machine on the planet, to 'regulate' the flow of the most super-intelligent organ (the human brain) in the known Universe. The traffic light takes free flow traffic back 2 steps and they think trying to install free flow lights by sequencing is 1 step ahead and a work of genius!!!!
And get this IBM are working on a traffic light that switches off your engine while you're stopped (because they've installed a fuking light) to "save petrol".
IBM are absolute retards
Reggie much admire your thoroughly researched fundamentals but as i've already pointed out it makes no/little difference to actual share prices... i'll bet you $20 (donate to charity of winners choice) that Apple and Googles share price will decline almost identically in 12 months AND another $10 that Google will be the better one to short (ie. it'll lose more) ...i'm basing that on Apple selling hardware as well as software giving extra profits, a pillow to cushion the price crunch that's coming
We are about to celebrate the 25th anniversaries of the IPO's for Microsoft and Oracle.
The market cap of Microsoft was $41 billion.
When I look at Facebook's assumed cap of $165 billion, I'd say there's a bubble out there somewhere.
As far as androids go, the tech world is the world of youth and I'd like to know your opinion of the social acceptance of androids by kids. To me sneakers are sneakers but if you wear the wrong pair at the wrong place you'll likely either get them stolen, ruined or laughed at.
Cool kids, the kids who move the pack and create the upward social mobility of successful friendships only want Apple as far as I can tell. Let grandpa use the androids
And what better an occasion than to launch Google's Chromium OS for Desktops? Reggie hasn't even mentioned that. Good luck to H-P with WebOS, its a nice start.
iTunes? If you pay for any music that is more than 2 years old, you're a moron. I bought Led Zeppelin IV on 33 1/3 vinyl, on 8 track for my van (twice), never on cassette, on CD, on Re-Mastered CD (which sounded worse), and now I'm on to the DVD's LIVE in 5.1 Surround Sound. So my questions are #1) How many times am I to pay royalties on BLACK DOG & STAIRWAY? and 2) I don't listen anymore, I watch on YouTube- they have EVERYTHING!
Of course you can still donate to Apple via iTunes, don't let me stop you. Reggie is a very smart man, and soon he will stop talking about Apple because he'll be too busy w/ GOOGLE.
you're old.
Yes.
weakness of apple is due to japan, reggie
I'm using the above pro-AAPL comments as contrarian evidence of too much belief in the stock. At long last, I think Reggie has a good point on AAPL, to join his many fine observations about financial players. Last year, all I saw on ZH comments was "Crapple" stuff. I repeatedly argued pro-AAPL, said I was long it; and sold both just before and then after the Jobs recurring illness was announced. Sans Steve, Apple's just another highly valued company.
Not sure that Android's success, tho, is enough to make GOOG a Buy. It appears they are having troubles w their core competency, search. I and others have switched from Google search engines to elsewhere.
Like the movie "Shane" starring Alan Ladd, "Reggie", tell me it ain't so
Thank you all for The Apple flavored Kool-Aid. Reggie is 2 steps ahead of you appletree-huggers, all Google needs to do is one or two little things to add to Android and the whole flock of Android hardware manufacturers ALL will benefit. What things? Well, this story mentioned a payment platform Veri-Fone. Previous posts have mentioned direct advertising partnerships. My idea is that Google will grab Clearwire (it owns 15%) and imbed a 4g HotSpot chip in every partnered Tablet. FREE Internet! Plus each tablet would be a free wifi hotspot for everyone near them, Ubiquitous + FAST. This would not only hurt Apple, but Starbucks & McDonalds too. Think about it.
Well if you can't compete on true tech, FREE is always a good option.
What is technology but not a conduit? And by FREE I mean advertiser-supported, like TV was in the early days. Now we pay for cable and yet still have to put up with the advertising.
so Google give 'free' and when their advertising model sinks as the economy implodes Google will still be doing free? ...great biz model that!!
Yes, you can live without Cable TV, you can live without cell phones, but you cannot live without The Internet.
yes i agree but there's no relationship to Ad' revenues... they'll simply be pulled by half the companies (due to bankrptcy) currently advertising in the next 2-3 years and what remains will be very trimmed (halved!) budgets ... i see alot of Govt advertising with google Ads' which is another thing for the chop ...Ad' revenues are going to get hammered starting right about now (see stock market collapse unfolding)
If the companies stop advertising, they are out of business. Asshole.
Yes, the lines for iPad2 were massive and continue. The xoom... crickets chirping.
Soon a nice free MobileMe to enhance and extend the ecosystem.
And all the little things, magnets, covers, thinness, apps, and the booming Air. You should someday look for reviews on the MacBookAir. 100% Raves and it really is just now getting traction.
Next up we will hear the Lion roar.
I think a better title would be...
More on a Realistic View of how Reggie Middleton makes his money..
Please state for the official record Reggie that you do not and have not receive any compensation of any kind for all of the Apple / Andriod / Google "analysis". I think a number of us are a little suspicious...
I hope he does! Good gig if you can get. I was writing reviews for a now defunct online magazine and got a great free DroidX out of the deal. Passed it to all my friends for a week if they gave me feedback. They liked it, but no, they didn't want to replace their iPhone unless they had some "other" phone.
The ipad is an itunes, media and appstore distribution system, it isn't just a tablet. The Android tablets are just tablets and that makes them largely useless; glorified digital pictureframes, which are also more expensive. Apple has approximately 1 tech cycle, ~2 year, maybe more lead on Google & co on this one.
It's doubtful that iPads and Android tablets are fungible. Most consumers who want an iPad will wait out the delay and not settle for a dime-a-dozen Android tab. Since any tablet that hits the market will be compared to the iPad, Apple won't lose any mindshare either.
Undervaluation of Google? Put down the crack pipe please. Google is very heavily reliant on a 'consumption' economy that has a lot of surplus available for advertising. Take that away, and wham, Google's business model nearly entirely dissappears!