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re Yahoo
If the takeover bid is hostile, how much of Yahoo's top talent will really be staying, and what would MSFT get except runoff value from existing contracts and the brand values MSFT might leverage? That code doesn't maintain itself ....
http://www.electronista.com/articles/08/02/01/ms.2.day.yahoo.ultimatum/
I'm thinking that if the takeover bid is hostile and the company ends up on the hook for a bunch of take-over-triggered severance deals, it could be a bit more expensive than the optimistic case would indicate, and there might not be enough buy-in of key people to retain the talent that makes the bull case strongest.
Just a thought. No financial stake in either company. Just passing by
Well, financial stake in Google. Not like I have no dog in the fight at all, eh?
Take care,
--Tex.
agreed. em.
re Yahoo as a portal
I agree Yahoo has a great portal. It is almost surely the dominant portal. But ... just how many of the world really experience the net through portals? I agree Yahoo makes good ad money, and that as a cash cow it's fantastic, but the long term future of a business that is impacted by network effects is worth asking in light of its admitted steady loss of share.
As for the distribution of income and intellectual capital: you are certainly correct. I am unsure, however, that in a company with as much change at the helm as Yahoo, that it'll be clear at the strategic level which of the soldiers are members of Delta Force and which are fit only for latrine duty (regardless the pay they may rate in either group).
FWIW, I don't think Microsoft thinks in terms of less than 5 years when it thinks about investment of its own capital. I'm fairly sure when they decided to enter the game and console business, they were looking out to where that might put them 10 years into the future. I would imagine they're thinking along similar lines when it comes to this investment. If Microsoft were to properly manage the Yahoo search assets, not to mention blossom the portal, what sort of cash flows might those be producing 5 years from now? 10 years from now?
Maybe. That doesn't mean Microsoft is right about what its payout will be in 5 years. When Microsoft entered the game console business in the second half of 2001, I'm sure it didn't expect to be running an ongoing loss with no end in sight, and then taking a billion dollar charge related to warranty issues, six years later. I think Microsoft entered the business with the conviction that by controlling the platform and controlling the API and by buying some game manufacturers to produce in-house titles, Microsoft could create a product that shortly would give it fat high-margin software profits. Microsoft then spent billions buying the share it thought it would need to enter this position. Microsoft surely didn't expect to be skewered by Wii, which is winning in a field of hardware juggernauts with huge video processing capacity by building machines that are not so much powerful as clever.
Similarly, I think Microsoft overestimates where it can deliver in search. Just like it overestimated what it could deliver in filesystems. Or OS release dates. Or its ability to monetize authentication and become the epicenter of online payments.
So when Microsoft says it will buy the biggest Internet portal on the planet and cash in on synergies, I don't doubt it will buy the portal and I don't doubt it will fire folks it decides are redundant, but I have some doubt it will manage to create long-term value in this kind of property. I suspect that Microsoft will manage it like one would manage any good cash cow, and let it keep producing milk until it's time to lead to the glue factory. Unless pride keeps it alive past it's time. ("We firmly believe this is the highest quality milk on the Internet." Heh.)
Google's strategy -- to build wild tech and figure out how to make money on it -- is a bit riskier, but they are actually delivering new products. Google didn't become dominant because it was first (AltaVista? Yahoo? Microsoft?) but because it created better tech. It's effective development that makes this rock. I think Microsoft's failure to demonstrate it can still develop effectively is a reason to think that MSFT, while no doubt able to cruise on its cash cows, will be producing none of the stars I expect from Google.
Of course, Google has got a cash cow now, too: advertising. But Google isn't staying still, and Google is really improving its products. Microsoft can continue cruising on the steady income of proven properties, and work to protect them from erosion, but I think Microsoft's got its work cut out for it trying to build the kind of empire it wants on the web.
MSFT's best bet is working on seductive APIs to convince developers to build apps that require MSFT platforms for development:
http://news.netcraft.com/archives/2008/01/28/january_2008_web_server_survey.html
MSFT is good at this. This is MSFT's core competency. If MSFT is to overrun the net, it'll be because it creates a platform that seduces developers to lock customers into MSFT platforms. Running a media property or an ad business is a sideline that will get second billing behind things like expanding MS-Win (including server versions) or MS-Office.
So I'm not predicting MSFT to fail but I don't think MSFT will realize special outsize benefits from adding another trademark to its stable. What is MSFT calling its mail service now? Windows Live Mail? Day was, Hotmail was the hottest Internet property out there. Interesting, no?
Take care,
--Tex.
PS on spare cash: It may be that this is simply a better use of spare cash than letting it collect whatever it's getting in cash equivalents. If so, bully for them. Let them manage a proven cash cow, and even try to grow it. It will produce cash, and it will have some nonzero and maybe even growing value going forward. Apple's cash pile isn't even beating inflation, as near as I can tell.
I just don't think Yahoo will allow MSFT outsize profits, just reasonable profits. If brand mismanagement has created a bargain, then maybe MSFT will do better than the recent numbers promise. On the other hand, some advertisers with Yahoo might not be shoe-ins to become Microsoft customers. And without steady work on its ad program it could acquire technological disadvantages to competitors. So I don't see this as a no-brainer for MSFT, other than for the short-term problem of its embarrassing and falling search share and ad share.
As a cash cow, though -- it could work just fine.
re spacecraft from rubbish
I think this article pretty much nails it. MSFT's purchase assumes that joining two also-rans will produce a grand champion par excellence. I don't buy it.
The interesting thing is that, without the expertise to figure out even what would or would not work, both Yahoo and Microsoft will probably see the deal as a "win" because in the immediate term it will allow them to show an increase in ad metrics against Google. The fact that Google has been steadily eroding both of them won't matter in the quarter in which the deal is made, and won't keep departing execs from taking big compensation packages. It'll be a great exit for everybody.
The turkeys left holding the bag, well ... apparently it isn't clear who those turkeys are at MSFT, so maybe nobody will be embarrassed when it blows up. Ballmer will avoid embarrassment by showing a ton of cash being pulled in from MS-Office and MS-Windows, and claim everything's a great success regardless how internet revenues (or game machines) may perform. Anyone under Ballmer apparently has such diverse responsibility that blame can be escaped in the identical method, or is hidden from public view.
I think the fact MSFT's internet business answers to the buy in charge of MS-Windows speaks volumes about how MSFT thinks of the Net -- a platform for creating more developer lock-in (and thus deploying client lock-in) via IIS-dependent APIs. This is really an interesting organizational choice. The clarity with which it speaks of organizational priorities should marvel whole classes of MBA students. Ahh, well. I wonder if it's entirely escaped the notice of people looking to deploy web apps. Lock-in means monopoly pricing, excruciating subscriptions independent of any actual product improvements, and so on. I suppose it's not worth warning them any further. They've seen MSFT pulling this all their lives, no?
The only consolation I suppose is that the deal won't really save either company's bid to control the Internet.
Take care,
--Tex.
re MSFT's YHOO bid
I agree that paying a big premium on an ad company that's losing share to Google isn't well-advised. Yahoo does have lots of dedicated users, though. The minute they start serving off IIS, though, I'll have to switch to someone else's servers. To date:
http://searchdns.netcraft.com/?host=yahoo.com&position=limited&lookup=Wait..
The history of Hotmail was pretty interesting. Hotmail served off Apache on BSD, too, until bought by MSFT. When people pointed and laughed and said MSFT doesn't believe even with free licenses it's cheaper to deploy Hotmail on IIS than on BSD, MSFT tried to migrate Hotmail to IIS and it worked so poorly people laughed and said they can't even manage to do it at all, even when they try ... but eventually MSFT ate its own dogfood and moves to IIS, though I heard performance complaints. Not long thereafter OpenBSD's email list started getting information requests about how to configure firewalls to properly deal with IIS, since they were getting a lot of unexpected traffic from Hotmail. It turns out it wasn't firewall misconfiguration, it was post-IIS-migration Hotmail servers, infected with Red Code and Nimda, using the whole bandwidth of Microsoft's huge email server properties to attack every IP address they could find. A friend who worked with Microsoft writing enterprise apps for its consulting division unhooked his home server from the Internet, not believing it was plausible to secure his IIS server. Crazy.
So I'll boycott the imbeciles if they go IIS. It's just a menace to society.
Take care,
--Tex.
PS after the last news, and the firings, it's clear Yahoo isn't innovating some new tool to make money, it's cutting costs to ride out its old tools as a cash cow. MSFT is overpaying for an installed base that will leave as MSFT suckifies the offerings. Interesting that Google's expanding its offerings. Who'll need Yahoo? I certainly haven't used it for search in years.
re reseller expansion
It's interesting to hear Apple is able to add resellers, just as it's getting well known for rolling out Apple-owned Apple retail stores. I would have thought resellers might be running in fear. Is the reseller Mac-only, or is it a new certification of a longstanding general PC business?
At any rate, if Apple isn't rolling stores out very quickly abroad (they seem to be coming in drips as opposed to the steady stream in the US), the fact there's enough perceived customer demand to support non-Apple owned, private, Apple-certified resellers being created is a very good sign, in my view. I imagine many communities don't have the foot-traffic to meet Apple's retail store criteria, but have a steady demand for products.
How is support abroad?
A friend just recently called Apple on a RAID issue, using ordinary Apple Care numbers, and got a human in California who spoke to him fluently in his native language (English), and he was escalated to higher support levels as the techs realized they didn't know how to solve his problem (rather than encouraging him to experiment with things that would have led to immediate disasters, as some dufuses might have). They also didn't throw up their hands and tell him to reinstall. In the end he was very thankful he was running Time Machine, though. Impulsively clicking adjustments to a live RAID volume are kinda ill-advised, imo. But it was interesting he didn't get India.
Take care,
--Tex.
re wanting Garmin's phone
I'd love a Garmin-like positioning on an iPhone, but having used Garmin products, I vastly prefer the UI on the iPhone to any I've seen elsewhere.
If one believes a significant fraction of the "missing" iPhones have been exported to countries with no official sales channels for use on networks there, one would conclude that iPhone demand worldwide is pretty good and that as Apple rolls out more areas of distribution Apple will increase its sales. As Apple increases its
One reason I don't use the iPhone as an iPod is that the shape of the case where the audio jack is positioned makes it impossible to use most of the mini stereo jacks I have seen. So, I can't connect it in my car. I suppose for some price I can buy an adapter, but if I want music in my car I take an iPod.
The suckiness of in-dash nav systems and media controllers and so on is such that Apple could make a great OEM push to get iPhone-like UIs into in-dash control systems for cars' radios, GPS units, etc. Bluetooth connections to users' phones would enable drivers to make use of their existing phones as a network connection. I know Lexus already has Bluetooth connection to allow the car's speakers and mic to act as a headset (which turns down the stereo for your calls), so this stuff is quite possible. Mercedes' UI is so terrible that an Apple tie-in would be terrific. Apple needs to figure out how to pitch something like this to car mfgs. The in-dash command/control systems are kinda pricey to begin with, and I'm sure lots of that price is third-party software. Apple could pitch for that and increase the value of its phones, music players, and so on by offering superior support for devices that comply with the in-dash unit's compatibility specs.
I'm sure Garmin's phone will sell well to folks who think maps are a high priority and don't want a separate phone. Frankly though, Garmin's devices are small enough that they're little trouble to handle -- and still I think they clutter the devil out of the cars in which I see them mounted. The in-dash system is the way to go. Apple should target it, with a Google Maps tie-in. Google and Apple could make some interesting opportunities for finding places and getting revenue from connecting lost hungry people with food and so on. Don't just get directions, get reviews -- Google has social network software and it's got the yellow pages, the rest is just a feature addition away.
As for cumbersome and annoying -- that title is held by MOT's phones, imo. Apple's phone is very nice, my main complaints being (a) network speed off a LAN, and (b) difficulty locating yourself on its excellent maps when you are thoroughly lost. Apple's working on (b) already, and I hope it'll get better.
Between iPhone and iPod Touch (which is the same platform on different hardware), Apple might really make an interesting dent in handleld devices and the range of tasks to which they're assigned, unless they really botch the SDK.
Take care,
--Tex.
Gartner: Apple share of PCs to double in 3y
http://www.electronista.com/articles/08/01/31/gartner.mac.to.12.percent/
From their lips to God's ear. Doubling Apple's PC revenues in 3y (which is not the same thing as doubling share, as the pie's size can change, and Apple's ASP can change, both of which will surely prove inaccurate the assumption of linkage) would grow the company's top line by about half before considering the impact of Apple's other businesses, some of which are linked to the Mac installed base (OS upgrades, support contracts, and software sales like iLife/iWork/QTPro/etc.) and some of which may offer synergies (e.g., handheld devices). Growing the top line by half should do good things for profit, since Apple's total costs for shipping its included OS won't go up with unit volume, unlike HP and Dell, which pays a per-seat tax. Engineering and other up-front costs will also not grow with units sold. Apple could enjoy some margins benefit on its PC hardware sales if it can grow units dramatically.
Hmm. What will Apple offer iPhone users on dot-Mac? Has Apple even thought out how to leverage iPhone users into dot-Mac? I think synching, remote synching, backup (esp. contacts, voicemails, emails) and the like might be of interest to folks who try to live out of a wireless-capable PDA, and the dot-Mac data storage, while it may look lame compared to local storage on a PC, is big relative to a phone. I think Apple could make something interesting of dotMac, but I haven't seen it yet. I do, however, know several physicians who have and use it. I do not, however, see them regard it as the fastest or most reliable way to get email. Apple needs to improve its performance if Apple is going to get my own business on dotMac, though Apple will have to do quite a bit given how disgusted I became when I was a dotMac customer. The service was frankly vile, I thought.
At least backup is more reliable with Time Machine than it was with dotMac. That really sucked in my experience.
Back to Gartner: they're clearly talking about US share. What of Apple worldwide? Does anyone know what Apple might be doing to grow foreign markets, other than building retail stores? (Aside from shipping a multilingual-one-OS-for-the-whole-world (which Apple should be touting to international enterprise for its support virtues, but apparently is not ... since Apple's essentially fumbled this as a competitive advantage by failing to sell it other than perhaps to Apple's existing developers, I'm not letting you count it!)
Take care,
--Tex.
Garmin GPS handheld to compete with iPhone
http://www.electronista.com/articles/08/01/30/garmin.nuviphone/
Apple had better get with GPS, no? Geolocation tagging of photos based on GPS is very cool to have integrated. Is the iPhone unusual in being bad at taking shots of moving objects, or might the Garmin unit really be better at taking shots of things while one is moving?
At any rate, I hope Apple's next-gen phone improves things. My recent attempts at "locate me" on Apple's improved map service have been frankly an embarrassment. I haven't even been inside the red circle yet in Houston.
Take care,
--Tex.
not 'news' exactly
But I just spotted it googling. Kaplan to offer test prep, quizzes, quiz analysis via iTS:
http://www.ilounge.com/index.php/news/comments/kaplan-intros-test-prep-on-itunes/
Interesting.
Take care,
--Tex.
from Apple can't make phones to we surrender in 360 days? Wow.
Thanks for the update!
Take care,
--Tex.
re Google
I suppose some short-term traders could get excited about "only" 17% profit growth as a "miss" during a high-consumption R&D phase of a company's growth, but I like the long-term promise of a company with the largest computer in the world and the only serious experience placing demands on such a beast.
I'm looking forward to that capacity being more effectively leveraged as a revenue-generator. If Google were only looking to make ad revenue, Google could probably copy Yahoo and fire folks rather than adding headcount.
Of course thinking about the long term is sure to lead to short-term disappointment, but since I'm worthless on guessing the short term it's the only thing I've got left
Take care,
--Tex.
At least one author at SeekingAlpha has a clue
Disputing some of the worthless speculation on Apple:
http://seekingalpha.com/article/62278-contrary-to-some-opinions-apple-doesn-t-do-loss-leaders?source=yahoo
The amazing thing is that folks credit the loss-leader theories floated, or the likelihood Apple will drop prices on phones rather than change specs.
Take care,
--Tex.
PS If iSuppli has estimates this bad on aTV, and the author's pricing theory is right, how wrong could they be on iPhone margins? iPhone has a few not-readily-priceable components, too.
re MS Word
I still get instructions from time to time to submit things in MS-Word. An online tool asking for a document actually rejected a PDF last week as "unsupported". People are craaaazy.
I feel for you!
Take care,
--Tex.
they don't
This is content industry paranoia at work. They have a DRM scheme they've fallen in love with and their lawyers have the bit in their teeth.
Just my opinion
Take care,
--Tex.
re software
No question, Apple's advantages come largely from software. If Apple resold Vista, what would Apple's margins look like on computer hardware?
Apple's decision to acquire software to enable it to launch its multifaceted assault on creative markets helped position it to make good coin off segments with high demand for powerful hardware. Your point is that Apple could do the same in enterprise, and you name a software vendor. You are spot on. Apple could acquire a big customer base, show them how to migrate to Macs, and start selling more of its $999 enterprise support packages for its server products, atop the licensing costs for the enterprise software, plus down the road client tools. Interestingly, lots of folks are thinking iPhone looks like an interesting client tool for accessing some data. Imagine that. You think this hospital has folks who carry cell phones, or use email, or need to access the web? Apple happens to sell tools that do that.
Apple's wasting some interesting opportunities.
Being an optimist about Apple's future, I choose to believe this is a matter of "when", not "if". That said, I think the time is ripe for Apple, having conquered the professional video and audio markets, to select its next target and have a go. Employ the same tried and true tactic: acquire mostly mature software with leading credibility in the industry, repackage it, enhance it, mold it with other pieces of related software, and deliver the best-in-class Suite. Then let the wave roll.
You've seen me here talking about how Apple is poised to conquer enterprise long enough to appreciate my skepticism that Apple has finally, after a decade, clicked to it. There's no question that Apple's tried and true technique can work. The question is whether Apple's current management will work for the technique.
I keep thinking about the ApplePeels description of Apple's scorn for enterprise sales, the starvation of the salesmen, and their getting stiffed on their commissions. Apple doesn't want to go into the enterprise, perhaps, because the enterprise isn't hip?
It revolts me.
I do think that Apple's inclusion of YouTube and Google Maps shows Apple can partner with other software service providers, profitably. If Apple won't do things like social networks because it has some hang-up, perhaps there's a way forward regardless.
I sure hope so.
You are right, of course, that Apple's movement into something that isn't education or arts will be a watershed, and is a matter of when and not if, but when I admit this I see "when" including the possibility of some really long term investment horizons.
Incidentally, a Cocoa front end to a serious medical database application would be a lot easier to localize and support than some of what must be currently out there. I think the synergies with CERN are likely very good. It's not like this is Apple's first database app acquisition, either; if Apple amasses some serious database expertise, Apple could really begin to cook. Business runs on data.
I hope you're right sooner than later. I just fear it might be later. The captain hasn't changed and the charts haven't changed, so I think we'll still be in the same seas in a year. Let's hope someone infiltrates the bridge.
Set phasers to stun!
Take care,
--Tex.
if so ...
... wow. Those folks will be buying music and renting movies for a long time. If Apple can get them on the bus, and keep sewing up new crops as they're grown, Apple will be doing a hella big business.
Now if Apple could peddle more Macs ....
Take care,
--Tex.
charts in the iBox
make it a PITA to scroll to the comments, which is the only reason I'm here. If I want charts I go somewhere I can get current charts.
I prefer art here
Take care,
--Tex.
re iChat creator
I recall folks saying Apple's RSS update to Safari seemed kinda lame. I wonder what we'd have had if this guy was let loose to work. Evangelizing neat tech to bored or reluctant administrators can't be anything but an irritating chore to a creative mind looking to accomplish things.
Let's hope he finds backing to do whatever he needs to do.
I think Apple might benefit from some kind of social networking tools -- in fact, the dot-Mac tax would probably serve as a pretty effective barrier to keeping rifraff out -- and Apple could leverage their preferences and opinions to make Apple properties like iTS more valuable. Setting a bunch of Apple FTEs to police spam on iTS product review pages seems like slight bang for the buck.
I dunno. My impression is that Netflix reviews are so choked with garbage that it's hard to imagine Apple policing its quality effectively.
On the one hand, we're happy Jobs kills projects that would be distracting half-assed competitors of organizations committing real resources to ... ohh, here's an example: the new iMovie. We've been trusting Jobs to protect us from gaffes like throwing away a useful potential business tool (I've edited high-def client content on iMovie, and output it via HDMI to a biiig TV for presentation) in favor of a "tool" that makes it easy to put a 5-min vacation hilight flick to music but apparently little else. So far, we've been able to delay until readiness a Palm competitor, a cell phone, and something close to a subnotebook. We've gotten some tools offered in the Server that smell of utility (local collaboration tools) but which I've never heard of being used and never heard pitched as serious features by top brass.
Jobs is certainly a salesman par excellence, but it's a sure thing he never wrote a line of code. Jobs' departure might make it hard to corral the roiling tub of talent Apple's recruited, but then, has corralling it worked for or against investors? Folks might be very excited that with Jobs gone, their project might not get axed for no reason: they might expect something like peer review, which might kill it just the same but would have at least a veneer of process behind it.
UI simplicity is nice -- but Apple has done some really silly things in the UI, like burying the Services menu so deeply that I never use it because there's always a faster way to accomplish tasks, like copy-and-paste and launch another app and ... and ... meanwhile, one would be waiting for the menu to become opaque enough to read, or to slide out after a coded delay period passed while some deep tree of menus was navigated. Apple might do very well to ditch Jobs and get an UI review committee, and then form a team to identify markets Apple should be selling better into and pursuing strategies to make Apple more competitive there.
SoHo, for example. Enterprise. Apple's return to life riding Unix should have heralded Apple's push into the IT back rooms, from which it could launch a revolution in IT mindshare. Instead Apple decided to pursue only consumers, rather than consumers plus the geeks whose support or opposition control so many purchases in organizations. Apple came to apps on iPhone only after being dragged kicking and screaming. I wonder if they might still botch it.
While I'm not sure I agree that Apple needs a social network (Apple might leverage something Google does, for example, and stay out of direct competition with folks who make social networks a core competency, which Apple does not, while still benefiting in terms of user traffic, ad revenue, data), but I do agree Jobs isn't Apple. Jobs is Apple's salesman-in-chief, and Apple's salesman-in-chief has killed enough sales opportunities that I'm happy to hear about alternatives, and has killed enough projects that I'm interested to see what some of these stallions would do if given more rein. I think Apple can continue to do great things.
I think the day Jobs' departure from AAPL hits the news it'll be a crazy buy opp, as his impact on the company is widely assumed to be solely positive and the elimination of his negative impact won't be part of the market's reaction.
Hey, AAPL up a bit. Maybe I should pipe down on discussing Jobs leaving. Heh.
What would Apple add to social networking? Why not leverage existing social networking tools? Some social site with good community input on music would probably love to get links from Apple in exchange for a revenue sharing arrangement, and Apple wouldn't get stuck competing with folks who really know social networking.
Hard to guess in advance what the best route is, but your take that Jobs' control issues will trump community development are probably spot-on. How does this explain the existence of support forums, though? Yes, Apple occasionally cleanses them, but they're there. They suck in my experience, but they're there. Music ratings tools in the future?
Who knows.
Take care,
--Tex.
re speed of Dull
Having him try to work on your computer is a great way to get him to see your need. I twice took my PowerBook to law jobs because the supplied machines felt underpowered for the work I demanded (um, word processing and web use to reach online research tools), and the tools were clunky. That's not twice as in two days, that's twice as in two jobs.
*Nix rox. When I installed OpenBSD on an old box I was shocked -- shocked -- how quickly it ran. That's with X-Windows, full graphical UI, virtual desktops, the works. The price of MSFT upgrades is slothful machines. At least Apple's trajectory has been toward better efficiency; software update feels like a hardware upgrade most of the time.
I can't see a downside of deploying on *nix when it's an option, since it also helps you avoid problems from nitwits who think they will "upgrade" their MS-OS installation and break the things your app depends on. DLL hell and all that.
I heard MSFT is supposed to be releasing an OS update in a couple of years. I can't imagine how they will advertise it: Like the last one we sold you, but slower. or Like the last one you had to buy with your new machine, but decreased incompatibility with all those apps you couldn't make work like they used to before your upgrade. Yeah, I'm dying to hear it.
Actually, I have a slight fear that one day MSFT will snap to it and release a quality product. Competition could be in danger then. But it'd be the end of their release cycle, wouldn't it? What new product as MSFT really built recently?
Good luck migrating to Mac at work. Is that a plausible deployment platform, or will your company be trying to release freeware *nix behind the stuff it sells?
Take care,
--Tex.
There's a song
by a certain 3-man band from Texas, called "Waitin' for the Bus." It was recorded back-to-back with Jesus Just left Chicago. You guys have me in a mood for good blues, and this does it.
We're all in the same boat, we're just loading in a funny order. Worthwhile things include, I think, making good conversation as folks in other curls of the line snake past you, and paying attention to the quality entertainment one can see from various spots in the line.
I read a review a while back about the massively multiplayer virtual reality game Real Life. Hilarious perspective on the human condition. Not that this helps, but it was certainly thought-provoking.
Take care,
--Tex.
Apple to go razor-and-blades in video?
The evidence:
http://www.macnn.com/articles/08/01/29/low.margin.on.apple.tv/
It'll be interesting to see how it goes.
Take care,
--Tex.
credible rumors
Is there a credible rumor out there regarding what AAPL plans to do with its cash horde? Seems like a monumental waste (lost opportunity cost) to just sit on it forever, but perhaps sitting on a big hairy pile of cash for the near future is a good thing when one considers how much downside risk there still is in the general economy and markets... I'm even reading stories that suggest Alan and Ben have laid the foundation for the failure of the Fed, which is the 3rd central bank/system the US has had...
The best rumor I heard was about Braeburn last year, but since Apple hasn't really moved much cash off its balance sheet, it's hard to imagine Braeburn is being funded meaningfully as an investment vehicle.
It'd be a pity to blow up the credit of the US. The country's credit history is longer than the present Constitution. The US, from a standpoint of paying over time, is the best debtor ever. The problem is that, as China shows, it's possible to be a creditor government rather than a debtor one. China hasn't yet been seduced into expensive projects to project power across the globe yet. China, consequently, is flush with cash. The funny thing is that, as rich as China is, it's still being taken.
I think Apple's cash pile will sit fallow for the most part, with Apple failing to deliver meaningful returns, and in fact delivering negative returns after inflation.
As for Apple's number of doubles from here ... it depends how bullish you are on switcher momentum building. As Jobs pointed out in '97, Apple plus Microsoft is virtually 100% of the desktop operating system market (there's Linux, but have you actually seen anyone buy a Linux deployment?). As MSFT's lock-in power fades with growth in standards (HTML, PDF, etc.), and Apple is increasingly able to offer a plausible migration strategy in both directions (hardware supports either OS, thus migration in either direction), the plausibility of real gains at MSFT's expense become more plausible. Analysts who talk about Mac gains must be thinking this is the wave of the future. I don't think the currently-projected rate of growth of the whole pie is really so much to be excited about. Well, there's a better-than-linear relationship between units and profit, so slight increases in units yield bigger after-expense returns; the OS doesn't get costlier to create, the initial design work doesn't get costlier; the only things you spend extra on are support (which is why I think we're hearing about Indian call centers just now -- Apple's growth has exceeded its ability to provide support even while it's presumably trying to grow support capacity) and components. Apple may be at the best position it can be in for getting good component pricing, but maybe not yet. Compared to Apple competitors, who don't develop the OS, but who carry a per-license fee on every box, Apple's position gets better and better with volume.
Eventually someone will decide shipping Linux and OpenOffice with a user-friendly UI is the way to go, and offer a migration tool that obsoletes MSFT's desktop products, but for some reason this hasn't happened yet. Don't ask me why. Maybe nobody with any interest in UI work thinks using X-Windows as a backbone makes any sense. Who knows.
AAPL will begin to get pressure for stock buybacks and/or quarterly dividends at some point down the road.
When did Apple last care what a majority of shareholders thought about any of that?
Apple's an interesting story. Apple might do great things with handhelds, but that's not clear yet. There's certainly a profit opportunity as Apple rolls out official supported service in more jurisdictions, so folks don't have to import them there and use them cracked. Apple's software distribution model on iTS might turn into a place to make money, and with screens on the iPods being as clear as they are, I expect eBooks. Basically, Apple has several interesting opportunities: online retail via iTS, physical retail via Apple Stores, and a Mac business that might be getting some real fire under it.
The pitfalls are also not few. Desktop Linux could be improved into a serious but free competitor. A large-scale economic meltdown could kill Apple sales. A large-scale market panic might make it irrelevant what Apple can sell, as people price shares for future failure with disregard for actual results. Music vendors could keep underpricing iTS until much of its content is unattractive ($0.89 DRM-free? No-charge downloads?). Who knows. High-def content deal meltdowns could kill Apple's video push. Security issues Apple has been long ignoring could mature into a serious issue on wireless portables.
Who knows? I'm long, but I've spent the last year diversifying. I'm not all bet on Apple as I once was. But I'm still long; I haven't sold. The last time I sold was to raise cash to cover a purchase I had to make when put to last spring at 90. Woe is me, getting put to at 90. Well, eighty-something after the premium is subtracted.
Our recent calamities aren't new for Apple; they're business as usual. Apple is a roller coaster. We'll drift for a while until news comes in -- and as volatility subsides, I'll look to buy calls. But that's later. Now, unless you're looking to enter, one might do as well not to look. That's certainly been true for me: I'd have made more in Apple if I'd never sold a share. So, I'm not keen to sell now.
Take care,
--Tex.
re banter
I think it might be a side effect of those Valiums that are calming everyone's nerves
At 120 or 130 I think the shares are priced for fairly lame results. If Apple's PC share continues to grow, Apple will be delivering upside in my view, and bubbly happy board members will be all chipper again
Take care,
--Tex.
no buyback
Jobs was just trying to run the ad machine. "We're rich, we're making money, and we're not vanishing overnight." It's a message Apple couldn't really deliver believably the last time shares dove like this. Talk is cheap.
At current prices, shares might be a good long term buy for Apple; each billion buys a lot more shares than it did last month. This doesn't mean Apple will do it. Apple's been pretty reliable about ignoring what's good for shareholders in its zeal to do what's good for management.
Take care,
--Tex.
smoking
Expanding his notion somewhat, Munster in his note to clients went on to speculate that an Internet-connected iPod could even stream content from users libraries hosted remotely, which would eliminate the capacity issues surrounding locally stored media. It could also leverage wireless e-commerce to upset the status quo.
The idea that Apple will roll out tools with enormous bandwidth demands just as its carrier partners roll out fixed-fee high-bandwidth wireless works against the profit they hope to make. Apple makes more money satisfying people's demand for local storage. Imagine how irate AT&T would be if all Apple's users started streaming movies and music to iPhones, saturating AT&T's already-challenged bandwidth? Users would revolt at the performance failures. No, this isn't the future. It's a nightmare. Networks would never keep up with demand. AT&T could never keep enough bandwidth to its towers. Everyone would hate it.
"If for example you are on your way to Starbucks, you could wirelessly order your drink from your iPod, pay for it using your iTunes account or the attached credit card, and pick it up without ever standing in line or waiting at a cash register," he hypothesized. "These features (and possible features) make the iPod touch more of a mobile computing device than a simple iPod."
This is a view of the future. Electronic ordering without eating the valuable time of register operators, and payment without having everyone in line wait for the card to be swiped, are definitely an advance of the convenience culture and put everyone in a position from which to increase convenience. And give Apple a revenue opportunity. I think a Bonjour customer order server could become a wireless offering of any business that wanted to streamline orders; just pack it up and deliver it to the pickup window. I'm reminded of businesses that pick your groceries for you then deliver them. This seems like an intermediate step: you pull into the Best Buy and they load your boxed chairs and printer paper into the trunk. Heck, you could order while touring the store and get your car while they organized it.
This is down the road a bit, though. First, Apple needs to establish a standard for "anyone" to enable iTS payments and to advertise them via Bonjour on local wireless networks. Strolling the mall, you could see what's on sale without having to step in first.
Oh, no. This stuff would involve offering services for enterprises. Surely Apple will find a way not to do it. It's gotta be bogus!
Take care,
--Tex.
iTunes suspect in iPhone app distribution
http://www.forbes.com/2008/01/26/iphone-apple-developers-tech-wire-cx_ew_0128iphone.html?partner=links
The idea, apparently, is to use iTS and the DRM processing in iTunes to install apps the iPhone will verify as runnable; the question is whether iTunes will throttle free apps, or will just help folks find developers' apps faster. Some question over how developers will be paid (I'm guessing, this isn't hard to work out, the question is what take Apple will rake from gross proceeds for processing it).
Worldwide content (Apple's language support in Cocoa rox, incidentally) on iTunes (rather than the by-country restrictions we see in music, film, and content made for television), could significantly develop its international store, assuming Apple is successful in getting Leopard handhelds (iPhone, iTouch, iWhateverIsNext) in broad use.
Broadening Apple's international content is a major plus for the store, assuming Apple pulls it off. I've been interested to see when Apple would do this with music, but doing it with software and other content may be even more useful: people will use it for updates, including paid updates, and the content may have broader appeal than a particular track of music. And a higher price.
Still, the big drivers for Apple are surely Macs. I'm interested to see Apple's Mac share numbers for the next few months. Adding countries to iPhone distribution is a plus, as is anything that will help Apple beat the 10m number while avoiding sacrificing the service revenue stream. But the big business with the best growth potential in the really short term seems to be Macs.
Assuming Apple doesn't botch its rep with India-based service.
Take care,
--Tex.
PS estimated quarter of iPhones unlocked?
http://biz.yahoo.com/rb/080128/apple_iphone.html?.v=4
I'd think Apple would have a better handle on currently-unlocked phones, based on things it could sniff from iTunes, but Apple has stated it isn't able to tell yet how many not-yet-activated phones are not-yet-activated due to being given as gifts to people whose contracts haven't freed them for the "right" carrier, and how many are really cracked. It'll be interesting to see what those numbers look like when Apple has real carriers in Central and South America, Asia, and so on -- places folks could be using unlocked phones.
secret
No, the "Take 2" that was described isn't different, unless included storage changed. Are the supported resolutions the same?
The "hot' new features are all software. Thats all Take 2 was, as far as I could tell.
All the new aTVs contain Take 2, the rest get it as a downloaded upgrade.
Take care,
--Tex.
Take 2
The difference between aTV and aTV Take 2 is, as I understand it, a software update. Sorry I was opaque or speaking in apparent code
All the best.
Take care,
--Tex.
re iPhone component orders
We had a report like that shortly after launch, too, didn't we?
Who knows what's up.
Hasn't Apple worked to make itself as independent as possible from specific component suppliers in the wake of its disastrous MOT relationship? Some component order to some particular supplier might be a real report and still not mean much. Also, when's the 3G part coming online?
Questions, questions.
Take care,
--Tex.
old news, already posted
Might or might not be true. If it does represent channel fill (which can only be called "sales" outside Apple's own channels, and how big is the inventory in the non-Apple channels?) then, depending what the actual sell-through rate is, it could just as easily be called channel stuff, and no-one will know for sure 'till the period is over.
More thoughtfulness, less rah-rah, please.
Take care,
--Tex.
re Morgan Stanley
On the other hand, they had some traders long into the conference call last summer on initial iPhone results and made money selling at the after-hours peak around 150 back then. They have at least some folks who can spot a decent bull speculation opportunity in Apple.
Of course, the guys writing the "analysis" for public consumption don't make money for the company, and they don't direct the traders. They are about the most worthless thing the company has, as the real brains would be involved in making deal fees and trading profits happen.
Take care,
--Tex.
re product cycle
... yeah, and we've just had a major one -- the OS. That fat wad of upgrade revenue will start to trail off as folks get the new OS with new machines instead of buying software upgrades for their old boxes. There's been a new pro desktop, too, and we're not ready for the 3G phone yet, and Apple's rate of rolling out non-US iPhone sales will be limited by its ability to find carrier partners in each of the (separately-regulated) markets around the world. And Apple just released a subnotebook, too.
What do you think this new product cycle will yield? Star Trek transporters?
I could list my hypothetical new products, or upgrades, but basically Apple's bread is buttered on -- and most of its hypothetical upside is probably predicated on -- the sale of Intel boxes right now, and there's not a lot of sex in selling Intel boxes. But one could have a whole discussion on that.
Lakers_w: Drop the hype and talk about what's really happening with the company and its competitive position in its various markets.
Take care,
--Tex.
old v new
I think Take 2 was a free software update, right? Same hardware inputs and outputs, and same capacity choices? Or did capacity choices change?
On a different note --
This note suggests there's some question about the "missing" iPhones as possibly being part of the normal channel inventory for a product selling at a rate that would yield 10m/y: http://blogs.barrons.com/techtraderdaily/2008/01/25/apple-more-on-the-missing-iphones/?mod=yahoobarrons
Have a good weekend!
Take care,
--Tex.
$64k Question
When this new sales guy reports to his superiors that what customers want is a certain panel of enterprise functions, either as a migration tool from an existing solution or in order to provide what others offer, what will Apple do then?
If the guy at ApplePeels reports a story that Apple hasn't changed, Apple will snooze while this salesman toils through the night to build the customer solutions himself, and won't lift a finger to make a sale happen. Then Apple will stiff him on his bonus for the sales he does make.
Let's hope someone at Apple gets this crap straight.
One bright side: Apple's support of visual voicemail proves Apple's willing to build back-end support for iPhone features it thinks are in demand. Apple might be willing to expand the breadth of these back-end-supported features, perhaps. For organizations with their own telephone exchanges, secure networks, and so on, perhaps Apple and AT&T can work out that these organizations' secured content is run by the customer on Apple servers, sending the data tunneled over AT&T's network to their own people's iPhones. Impossible? Who knows. But I'm obviously smoking the "what if Apple cared about solving business problems" pipe again.
Damn, gotta lay off that thing. Hard to operate machinery after.
Take care,
--Tex.
fascinating ...
... but surely the work of AT&T demanding a strategy to grow iPhone in the business-led smartphone sector. The last Blackberry I saw was bought for its baffled user by his large-enterprise employer. AT&T surely wants that sale, and teh service contract beyond it.
Take care,
--Tex.
lowballing
Apple's been lowballing for a while, but Apple's lowballing is more easy to believe as accurate projection when there's a big overhang of not-activated phones not paying Apple its anticipated monthly revenue, and the credit markets a re tough, and there is a recession, and the news is strikes and job loss and near-level US iPod sales y/y. One wonders where the growth will come from.
Of course there are anwsers to the question where the growth will come from, but uncertainty works against price and Apple's been repriced accordingly. It makes good sense. The puzzle is how Apple's Q2 guidance got positioned as a drop when it's a rise. Yes, it's not where some wall street nutballs had fantasized, and Apple's famous for lowballing, but all things considered why should Apple be priced higher just now?
The question, same as this time last year, is: where's the new news coming from?
The answer will come, and with it price moves, and we'll see whether it's up or down. But uncertainty's effect on price is why BRK.B has done so well in the last year: folks know the company's portfolio companies and investments are steadily churning out cash, and that reliability is a reason to buy. Apple has been pegged as a fashion accessory maker selling into the teeth of a recession. There's a basis for fear. The price drop is rational.
Either tolerate it or knock on BRK.B.
Take care,
--Tex.
Missing phones
The article title is misleading. They show math of 1.4 million not activated, of which quite a few were sold legitimately for unlocked use. The "missing" number was under 700k. The question is how many are in their gift box waiting for an old contract to run out, how many were disassembled for parts for analysis, how many were stolen and are being slowly eBayed, how many were unlocked by folks who didn't like the terms of service, and so on. Apple's point is that it just doesn't know yet. Fair enough.
The next time Apple cuts the price, they need to go with a rebate based on activation with a carrier. It wont be as clean a process as Apple normally likes, but it could help slow down sales of unlocked handsets.
Actually, since activation runs through iTunes, Apple could do this pretty easily. Apple could process the rebate straight to the carrier on activation, or issue some kind of credit, or what have you. Good idea to connect price change to activation
June would be ok if they are launching the 3G version then....but if it is an announcement with sales in October/November, Apple will have a problem
Apple will definitely talk about the iPhone dev kit. Whether Apple talks about 3G will, of course, turn on its release date, which in turn will surely turn on the availability of the components on which it depends.
I think app releases are a key piece of news going forward for this platform. Identifying new sources of support will be interesting to see where there's interest for adoption. I know some folks who want to see Hippocrates on iPhone, and it'll be interesting to see what other apps are demanded, and which show up unexpectedly.
The OS on the iPhone puts it over the top, but it seems that consumers are looking at least as much at camera quality and 3G when making their buying decisions.
The camera sucks, frankly. If the target is moving at all you get a worthless blur. I'm definitely behind Apple needing to think of a different solution for the phone.
Take care,
--Tex.
re iPhones
On the cc Apple said unlocked phone purchases appeared significant. Apple said it was unable to estimate the real impact of this because Apple had no historical data on which to base estimates. I happen to know of a couple of people who received iPhone gifts from people who had no idea their recipient was locked into a carrier contract for another year. Those phones haven't gotten unlocked yet.
Apple will need a way to model this other than by the wild guess.
I wonder if the 3G phone won't be part of a WWDC centering on iPhone development. I mean, Leopard is out of the bag; they can have sessions on making Leopard sing for developers' apps, but the new and news-getting stuff is likely to be iPhone-related because that'll have been the most recently released dev material.
Take care,
--Tex.
writes his own
The advantage to Apple making its money on the hardware transaction rather than relying on software transactions for the majority of its money (though OS upgrades and pro apps and home-app upgrades and office productivity stuff and maybe now iTouch apps are for sale) is that Apple can ship top-quality developer tools to everybody who buys a machine or an OS copy, and the only effect is that Apple casts a wide net to get low-budget guys developing on the Mac.
Some of those guys turn dev hobbies into eventual job resumes, or go full-time commercial. I thought shipping the dev tools in every box was a masterstroke. Apple has seduced a huge slice of the developer community to working on Macs as their mobile (if not their sole) dev machines, so many open-source projects that once were a trick to get compiled and running on MacOS X now compile out of the box and work like a charm.
Apple's dev-friendly decision to give away the tools and the free ADC membership levels to allow folks access to various dev resources lowers the bar to those who would want to work on the platform. I note that the cost of working legitimately on MSFT's platforms hasn't done anything noticeable to thwart malware developers.
Apple might benefit from working with someone on a software development curriculum for school kids. Getting folks writing apps on Macs from an early age couldn't be bad for the platform Back when I was in school, computer classes were about programming computers, not about sitting in front of bought software and learning to type and print or add columns of numbers. Apple might want to work to turn back the clock toward user empowerment and away from luser generation.
Glad to hear about the hardware sales. I'm wondering when to pull the trigger on my own. I'm thinking this year, but I'm not sure when. I'm thinking pro tower and a decent monitor.
Anyone got monitor advice? What camera should I use for iChat video?
Take care,
--Tex.