This page has been archived and commenting is disabled.
Blackberries, Apples & Fruit Borne Successitis - The Problem With Excess Profits Is Hubristic Management Tends To Take Eyes Off
Sameer Singh posts Apple & Samsung's "Profit Share" Trap on Tech Thoughts blog:
Smartphone "Profit Share"
Over the past few days, there has been a lot of noise in the tech media about the supremacy of "profit share" over "market share", specifically related to Apple's performance in the smartphone market (but it can be extended to Samsung as well). Most proponents of this argument seem to fundamentally misunderstand the long-term relevance of the "profit share" metric.
Exactly! I've been preaching this mantra since the beginning of my coverage of the mobile computing sector. Let's recap...
In early 2010 I warned on Blackberry (then RIMM), with market share loss to Android being the prime determinant... Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion. I put significant data out in the public domain to illustrate my point and put explicit price points out for subscribers, ie. RIM Smart Phone Market Share, RIP? Was I right?
Blackberry market share vs margin correlation analysis
I explained this in detail in the post "Cost Shifting Your Way To Prominence Using The Network Effect, Or Google Wins - Apple, RIM & Microsoft Have ALREADY LOST!". Failure to achieve the network effect effective is tantamount to a failure to be able to control you margins, long term. Of all people to of know this, who do you think preached it most convincingly? Take note:
What ruined Apple was not growth … They got very greedy … Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible … they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share.
Who did I just quote? None other than the RDF Chief in Charge, Steve Jobs (circa 1995 Forbes interview)! So, if he was able to see what happened to his baby in the '90s, what happened in the new millennium? I certainly warned it would happen again, see this three year old article - A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple. In Apple on the Margin I showed the margin fade coming ahead of time, as well as in the following references:
- 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
- Empirical Evidence of Android Eating Apple!
- More of the Android Onslaught: Increasing Handset Revenues and Growth
- A Quick Peek Into the REAL WORLD Logic That Went Into Building the BoomBustBlog Apple Model: It’s Called Compression!!!
So,Apple's top management knew how this worked. I knew how this worked. What happened? Who the hell cares, a short is a short. Next up was the contrarian call of the decade, but it took very little intelligence and as much as I'd like to claim credit for being a genius... all you had to do was watch the trend.
$34,852,564,500 - That's How Much BoomBustBlog's Apple Research Was Worth Today!
- Deconstructing The Most Hated Trade Of The Decade, The w 375% BoomBustBlog Apple Call!!
- Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All
So, now the question remains, "Is Apple a steal at these prices?" Well Doug Kass seems to think so (Doug Kass: 4 Reasons Apple Is Turning Around - CNBC) and I'd love to discuss this with him on air or, or both! This was discussed here in detail - Is It Time To Buy Apple As A Valuation Play? The Contrarian That Called The Top In Apple Weighs In.
I refer my subscribers to the research documents below for the answers...
Subscribers, download the Q3 2013 valuation reports (click here to subscribe).
Apple 3Q2013 Valuation Update - Retail
(Technology)- Apple 3Q2013 Valuation Update - Pro & Institutional
(Technology)
The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescienct!
See also:
The short call - October 2012, the month of Apple's all-time high and my call to subscribers to short the stock: Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All
- advertisements -
"...The Problem With Excess Profits..."
You're an accountant (ie. clueless) Reggie, at what point is profit "excess" of the exact profits the management designed into the margins?
You're hardly one to judge "too much" margin or too little "margin compression" when you endorse Goofy dumping their trash, Android, for $0.00000 (that's 0.000% margin Reg) for free on the market without clucking and squaking about it. Queit as a Church mouse.
Months of "margin cmpression" too little and now you've flipped completely (in more ways than one) and are calling "excess profits" at Apple a problem too
Never a day goes by you wonder if the lunatics have all been let out the asylum and joined the professions, like accoutancy ...please make your fucking mind up which is the problem at Apple, too much profit margin or too little you village idiot??
"...Hubristic Management Tends To Take Eyes Off.."That's a moral crusade you're on there Reggie Rooster, not maths. Far be it for me to point out to you your job is to count, not make moral judgements of the usually insane hysterical religous variety
If Apple are 'hubristic' for making more money than your beloved gasping nag also-rans Goofball and Microshite can muster combined, what does that make the the management of GOOG and MSHIT ...dumb devils??
and what does it make of an accountant who is so far away from the maths in his loony-bin moral crusade (yet again) he looks as stupid and senile as every Pope there's ever been?
Answers on a Postcard to: Another Accountant with his head up his arse, Cannot see the Maths for the wood Chips on his Shoulder Dept., Googleville NAG-2ND-·3RD-LAST
The gravy days are over for the smart phone segment.
As smart phones become more ubiquitous people will spend less and be more selective.
The entire segment will become less profitable and more lean.
Think pocket calculators.
I'm not so sure. I can think of more than a few ways that the market can be diversified even further.
For one thing, I think there are many people who look at these devices as cameras. They have an insatiable appetite for better camera technology being built into the phone.
Similarly, there are others who would be very happy to see the device fitted out as a serious piece of musical hardware.
Others may want a phone designed for rugged outdoor use.
Artists and visual creative types have their own list of issues and desires.
The current devices can do many of these things, but mediocre at best. I am, however, very surprised at how quickly the quality of the camera technology has advanced.
every component of the new smart phones are already a commodity item in truth; phone, SMS/text, camera, video camera, maps/GPS, Games, web surfing, Apps tc etc
the trick is to be a step ahead of the commodity curve by adding use/worth/speed to the consumer which adds value (profit) to the product itself. in order for Apple to maintain its lead and margins simple evolution of existing items will not be enough, so Apple must innovate (revolution) every so often ...hard call
so the value is in the thought process, the pre-programmed intelligence designed into the software, which Apple is a master of being ahead of the curve and others such as Goofy and Microshite always behind the curve folllowing/copying/cribbing the cool tooty fruity pack leader
Whatever next? ...best space to watch for the answers has always been Apple
Reggie is missing the Blackberry comeback, and the unique strength of its new products for business users, so well documented by Karl Denninger ... who is quite unbiased was an Android user before the new Blackberry
Re Reggie Middleton's continued touting of the criminal Google Inc
As Michael Whalen said in a great interview on ZeroHedge, about how all the big info-tech-media companies are in trouble:
« GOOG is not the AAPL killer – but rather the tiny new companies that will nibble all of the giants into irrelevance. »
http://www.zerohedge.com/contributed/2013-05-27/apple-another-sony-talki...
LOL, you mean the red part of the graph, yer might take a bit more then selling bulk to buisnees.
Reggie,
You are great analyst and generaly nice bloke - but really clueless on tech.
Samsung makes devices that most people can AFFORD to buy.
Apple makes devices that most people WANT to buy.
Sure, Apple will finally screw it. Just, it's not now.
One free advice from an old guy. Being a top professional (that I sincerely have no doubt you are) is like a being a lady: if you insist that you are - you are probably not. So, chill out. Only baboons didn't see that RIM will go tits up back in 2010.
Ya know, for calling someone clueless, you sure failed miserably in your effort to make the point.
Now, I'm not saying that Reggie's bragging isn't over the top (especially in light of the fact that there is only a rigged casino, NOT a market), but if you're going to call someone clueless without looking like an idiot, well, perhaps you could make at least one meaningful accusation?
what do you call an accountant that disses the most profitable company in history?
..if not clueless, delusional and a village idiot what is he, Einstein?
wake up NoApp, Reggie Rooster is a headless chicken clucking round the farmyard, at least on the Apple-hater twat campaign, not the bank finance topics, it's waaaaay past stupid-o-clock time Farmer Durden called "Christmas dinner" and took this total f'ing turkey down the wood shed and stuffed him
Reggie,
One of the best analysts in the business because you go to the source and do not rely on rumor or the "web" for your info. I'm an Apple guy, love the products, their intuitiveness, ease of operation, looks, etc but I have to admit that Google's structure is almost guaranteed to top the competition each time. Probably has a lot to do with leadership choices, what to emphasize, where to explose, new paths, etc. Good luck on the newest CNBC stock pickers contest!
The secret is testing, testing and more testing which made Mr Jobs very good being a perfectionist, the new guys just play on your need to have the latest product which is always going to lose you customers.
Still can't find a battery for my Casio watch though, Casio there but the grace of him goes Apple.