An interesting post of Google finance of a fellow who sold all of his APPL holdings with reasons created a lot of interest. So here’s my response.
Folks have pointed out the biggest flaw in your reasoning, that people will switch to Android on ATT.
However, you have guts to put up your reasons and to sell. But, if I
were to sell, here would be my reasons.
- I’m getting out of the market and it’s time to move to an indexed
fund or bonds. IOW, I’m wealthy enough and yearn for a desert island.
- Apple will soon be the biggest capitalized stock on the market.
Many will figure it’s difficult to keep a PE above 15 once that
occurs. Actually, this is a concern for me as well.
- The employment rate is still terrible (10% is awful), eventually the
rich greedy bastards on Wall Street will drive us all into a
depression. They haven’t been punished at all for there last greed
run.
But, the reasons I haven’t sold out follow.
- Apple’s market share in any area (other than iPods which is becoming
relatively unimportant) is very small, the room for growth is
amazing. It’s only recently that they’re getting more revenue outside
of the US.
- The KEY to Apple growth are the Apple Stores. They’ve hardly
touched the possibilities outside of the US. If you look carefully,
you’ll notice that Apple’s growth began with the Apple Stores and will
continue. Up until the introduction of the Apple Stores, there was no
outlet that promoted Apple.
- Apple has always wanted to build it all, but it’s only recently that
people buy a product and have no need to add anything to it. In
essence, it’s an expensive commodity. That will continue for a long
time (at least a decade).
- People will continue to replace their cell phones every two years
since that’s the contract length and close to the technology jump
period. Apple never had the luxury with computers since folks kept
their computers for at least double that period. And the margin and
profit are much larger in the mobile arena.
I’d guess my number is about $350. I’ll be rich then and ready for my
desert island and lots of Viagra.
I should add that I’m not at all concerned with Android. Just like PCs which have gotten a lot cheaper, both in price and quality, Android will attract the same cheap shit. However, these will keep Apple from gaining a monopoly in the mobile market. But, who cares, 40 to 50% of an exponentially growing market creates numbers that blow your mind.
Who’s dumb enough to buy an Android for the same price as a piece or art. Little things have started to show up like creating and editing movies, FaceTime, man this is only the beginning of the separation between Apple and others.
I haven’t even bought an iPhone yet, other Apple products yes, but the iPhone 4 with stainless steel, almost unbreakable glass, retina display, A4, and a seamless software experience is going to be enough (well I should add that a $15 data plan is all I need, so I’m cheap).
nolavabo 4:42 pm on July 10, 2010 679 days ago Reply
The key is that people look at market share, which is completely irrelevant. GM has been the market share leader forever, and it went bankrupt doing so. Toyota decided to chase market share, and look what happened to it.
Profit share is all that matters. Forget sales, forget market share. Profit is it. What is telling is that in 99% of stock screening systems, there is no way to pull up profit, just sales.
Apple makes nearly half the profit of the entire PC industry in the US. IOW, if you put together the profit earned by Dell, HP, Asus, Sony, Toshiba, Acer etc etc, all combined they make as much profit as Apple does.
Apple makes about 20% of the profit of the entire cell phone industry worldwide. Nokia might sell 100mln units a year, but when the majority of them clear $7 profit, that’s a stupid market to chase.
Apple goes after big profits, and lets the rest of the industry fight amongst each other for the crumbs under the table. Idiots all. And nobody seems to get this, as you rightly point out, Birra.
Birra 5:46 pm on July 10, 2010 679 days ago Reply
Thanks nolavabo, that really makes it clear. It also points out that in all likelihood Android will pass up Apple is units sold. I really wonder what percentage iPhones will be able to maintain, perhaps the 80/20 rule applies. It didn’t for iPods, but there are a lot more players in the smart phone market.
(However, the real story may end up being the patents. Will the courts do the right thing or will they capitulate to outside pressure?)
nolavabo 9:27 am on July 12, 2010 677 days ago Reply
Android will pass iPhone in unit sale within 24 months, IMO. How much does Google make (directly) per Android unit sold? Zero cents, zero dollars.
Android is all about continuing to lock people into the Google ecosystem – Gmail, Google maps, google search, google calendars etc. Google then continues to sell its pre-existing advertising model, but now onto mobile handsets.
Google hasn’t actually created a new revenue stream. Whether it’s an iPhone using Google maps and seeing the logo saying “Gap clothing store” here, or an Android user doing the same, Google doesn’t actually make any more money. This refers directly back to my previous comment about market share vs profit share. Apple is chasing profit, Google is chasing market share. It is INEVITABLE that Google will win the market share war. I don’t care in the slightest. Android is the Windows of the mobile space, embraced by the same fanboys and the same mentality of checkbox wars. Just like Windows it will achieve 80-90% market share. Unlike Windows, it won’t actually make Google any money.
Apple has seen the value of monetising a (semi-captive) ecosystem; that you can make money outside of selling the hardware. Hence iAds. Let’s see how this all shakes out.
JPWatkins 12:40 pm on July 12, 2010 677 days ago Reply
Well said, Nolav. My thoughts exactly.
Apple seems to be centered on optimizing three core values: excellent experience, success and sustainability. These three essential values are strategically concentrated on three large targets; the user, the products, and the company, and they totally reinforce each other.
When a user has a great experience, it enhances their success and makes the product more useful to them (in many situations and over a long period of time — sustaining the positive experience.) It also makes them appreciative and loyal to the product and the company. This has similar benefits for the company: the product line is simplified; customer support and product evolution are easier. The company can focus resources more sensibly (company experience, success and sustainability.) This all increase profitability and efficiency while enhancing strategic focus on the sweetest, most profitable, but most competitive (skill wise) part of the market. The product is enhanced and becomes more difficult for competitors to emulate. The benefits and value (of and for) all three targets — users, the products, and company — is enhanced. Rinse and repeat.
It’s these three values directed at these three targets that Apple concentrate on. Things like market share, profits, and a strong brand are consequences of along, continuing, journey rather endpoints or destinations in a quick sprint.