Is Android responsible for Apple’s deep market discount?(asymco.com)
asymco.com
Is Android responsible for Apple’s deep market discount?
http://www.asymco.com/2011/04/21/is-android-responsible-for-apples-deep-market-discount/
8 comments
I've seen many misleading charts from him that seemed very believable and indeed many people believed him. He's very good at twisting the data to show what he wants and "make sense".
The most infamous one I remember is when he used LG, Samsung and a few other companies profit and revenue data to show that they are losing or not making much money from Android, when he never actually showed the profit and revenue data for the phones themselves.
He took the whole profit of the companies, and even though it was still early 2010, when these companies didn't even start using Android on a very big scale, he managed to make it look like the companies are doing so poorly because of Android, when in fact Android had nothing to do with it and it couldn't since it wasn't used much by them at the time. Many, many people bought his "analysis" and took for granted that when manufacturers use Android their phone business performance is bad, which is completely false.
Of course, he conveniently omitted HTC who at the time was selling mainly Android phones and they were doing very well because of it.
The most infamous one I remember is when he used LG, Samsung and a few other companies profit and revenue data to show that they are losing or not making much money from Android, when he never actually showed the profit and revenue data for the phones themselves.
He took the whole profit of the companies, and even though it was still early 2010, when these companies didn't even start using Android on a very big scale, he managed to make it look like the companies are doing so poorly because of Android, when in fact Android had nothing to do with it and it couldn't since it wasn't used much by them at the time. Many, many people bought his "analysis" and took for granted that when manufacturers use Android their phone business performance is bad, which is completely false.
Of course, he conveniently omitted HTC who at the time was selling mainly Android phones and they were doing very well because of it.
A cursory glance at his articles shows that he's a completely biased Apple fanboy. Not really going to expect any objectivity from him. All he does is praise Apple and poke fun at Android and other competitors. Like Gruber, he has cultivated an audience and tells them what they want to hear to drive page hits and revenue. It seems to be a highly successful business model, atleast for Gruber. That's the real reason they write what they write, regardless of what they actually think.
A big reason for the P/E is Apple's market segment is consumer goods that get rev'ved every year. Consumer electronics are a fickle market. Ask Sony and Nintendo about it. One of the nice things about Samsung and LG is that they can smooth their earnings with component sales.
Apple needs to continue this great string of great products. If they do one rev of a subpar product they can see profits drop 50% in one cycle -- and this is in part due to Android. Android is close enough now to eat up share if Apple slips. And WP7, post-Mango, will be there too.
So the discounting is really some healthy skepticism that Apple will be able to keep on this roll. One thing history tells us is that the companies that are great today, will tomorrow be a HBS case study for how their greatness caused them to have a blindspot.
Apple needs to continue this great string of great products. If they do one rev of a subpar product they can see profits drop 50% in one cycle -- and this is in part due to Android. Android is close enough now to eat up share if Apple slips. And WP7, post-Mango, will be there too.
So the discounting is really some healthy skepticism that Apple will be able to keep on this roll. One thing history tells us is that the companies that are great today, will tomorrow be a HBS case study for how their greatness caused them to have a blindspot.
Android has nothing to do with it. It's just investors see where they are in relationship to other companies and think this can't be sustainable. So they keep discounting it's stock. I'm sure when it was trading at $60 no one thought it would get to $80, when it got to $100 no one believed it could get to $150, when it got to $200 it was inconceivable it would go any higher than that but here we are today and it's sitting around $350. Its P/E ratio is being intentionally depressed because analysts are hoping the chair gets kicked out from under them.
Why is that? Because to Wall Street they are unpredictable. Instead of chasing profits they chase customers. When others are firing employees in a down market they are vacuuming the good ones up. And they don't like to share information. Other OEMs announce products months in advance, Apple you get 1 day to 1 month of a heads up. This creates a lot of disruption for analysts. They hate disruptions. And they have a charismatic leader that a lot of people believe is going to kick the bucket any day now. Disruption.
Why is that? Because to Wall Street they are unpredictable. Instead of chasing profits they chase customers. When others are firing employees in a down market they are vacuuming the good ones up. And they don't like to share information. Other OEMs announce products months in advance, Apple you get 1 day to 1 month of a heads up. This creates a lot of disruption for analysts. They hate disruptions. And they have a charismatic leader that a lot of people believe is going to kick the bucket any day now. Disruption.
"Apple has not “lost sales” to Android as it has been selling all it can produce. "
I'm not sure that's a useful way of looking at it. If Android were never born Apple may have doubled production capacity and still be selling out for lack of a viable competitor.
And even if it's been benign so far, it won't be soon. It's hard to spot the effects of competition in a rapidly growing market like consumer smart phones or tablets. It'll be a lot easier once everyone already has one, and how far away is that? Phones are almost there and tablets probably will be in 2-3 years.
I'm not sure that's a useful way of looking at it. If Android were never born Apple may have doubled production capacity and still be selling out for lack of a viable competitor.
And even if it's been benign so far, it won't be soon. It's hard to spot the effects of competition in a rapidly growing market like consumer smart phones or tablets. It'll be a lot easier once everyone already has one, and how far away is that? Phones are almost there and tablets probably will be in 2-3 years.
I'm not sure your analysis holds either, though. All signs point to Apple being pretty aggressive in securing its supply-chain both for current production and future potential (see: Brazil).
>"Apple has not “lost sales” to Android as it has been selling all it can produce. "
Is that really true of the iPhone? Thought the Verizon iPhone was not doing so well because of all the flagship Android phones that run on Verizon.
Even if it were, it does not take into account the price pressure, if there were no competition, the prices, margin and hence profit could be much higher.
Is that really true of the iPhone? Thought the Verizon iPhone was not doing so well because of all the flagship Android phones that run on Verizon.
Even if it were, it does not take into account the price pressure, if there were no competition, the prices, margin and hence profit could be much higher.
>Thought the Verizon iPhone was not doing so well because of all the flagship Android phones that run on Verizon.
The speculation I've seen (and it's just that since Apple/Verizon never released forecast numbers) was that sales are running below expectations but the reasoning for that isn't settled. It could be because of the Android flagship phones, or (as Marco has speculated) it could be because of contract cycles and folks are waiting for their contracts to expire before switching rather than breaking their contracts.
The speculation I've seen (and it's just that since Apple/Verizon never released forecast numbers) was that sales are running below expectations but the reasoning for that isn't settled. It could be because of the Android flagship phones, or (as Marco has speculated) it could be because of contract cycles and folks are waiting for their contracts to expire before switching rather than breaking their contracts.
Capital markets are notoriously incompetent in spotting disruptions and often reward those who are failing right up until the bitter end.
I wish market evangelists would acknowledge this more often. The market is a useful mechanism but it's far from omniscient.
I wish market evangelists would acknowledge this more often. The market is a useful mechanism but it's far from omniscient.
If Apple bought Google (it already has a third
of its value in cash) and it shut down Android,
it could create $300 billion in value
Even if it had all the cash needed, isn't the board of directors supposed to agree? Would shareholders themselves agree knowing that (a) Apple is buying Google to dismember it, (b) Apple is putting itself in serious debt without having a guaranteed ROI and (c) Google is still ridding the wave and its best days may have yet to come ?
Why do people feel the need to make such statements anyway?
I think the fear of Android eroding Apple's dominating market position, the mid-term fate of Steve Jobs and the dependence on consumer hardware sales makes some investors hesitant.
Apple carries this aura that is amazing, and the stock is way undervalued IMO.
Apple disrespects and makes it difficult for big companies to do business with them in a way they are accustomed to -- yet probably 30% of the "enterprise" salespeople I run into are carrying iPhones and about 20% are ditching laptops for iPads. That's market power nobody on the market has right now.
Apple carries this aura that is amazing, and the stock is way undervalued IMO.
Apple disrespects and makes it difficult for big companies to do business with them in a way they are accustomed to -- yet probably 30% of the "enterprise" salespeople I run into are carrying iPhones and about 20% are ditching laptops for iPads. That's market power nobody on the market has right now.
Another content-free idle speculating navel-gazing post from the armchair analyst Asymco aimed squarely at Apple fans.
>If Apple bought Google (it already has a third of its value in cash) and it shut down Android, it could create $300 billion in value. If could even throw away all of Google and still walk out with a profit.
If that happens, Motorola, HTC, Samsung et al. are not going to go 'Oops, we lost' and then shutdown. They are going to move to a new OS, most probably Windows Phone which already has Nokia in the bag, and then the battle lines would be drawn up like in the late 80s and early 90s, Apple with it's single line of devices mantra and Microsoft with the OEMs competing to drive down price.
And not to mention Android is open source, so 'shutting down Android' doesn't make much sense. The OEMs would probably gang up to continue development which Apple can't do anything about.
What if Microsoft buys Mac OS X from Apple for forty billion dollars in cash and then quadruples the cost of Windows? Obviously it can make the money back because of the monopoly!
>If Apple bought Google (it already has a third of its value in cash) and it shut down Android, it could create $300 billion in value. If could even throw away all of Google and still walk out with a profit.
If that happens, Motorola, HTC, Samsung et al. are not going to go 'Oops, we lost' and then shutdown. They are going to move to a new OS, most probably Windows Phone which already has Nokia in the bag, and then the battle lines would be drawn up like in the late 80s and early 90s, Apple with it's single line of devices mantra and Microsoft with the OEMs competing to drive down price.
And not to mention Android is open source, so 'shutting down Android' doesn't make much sense. The OEMs would probably gang up to continue development which Apple can't do anything about.
What if Microsoft buys Mac OS X from Apple for forty billion dollars in cash and then quadruples the cost of Windows? Obviously it can make the money back because of the monopoly!
Ad hominem much? We can argue about his conclusions and methods, but to say that he's some armchair analyst to me implies that his track-record is poor and that he should not be considered trustworthy on analyzing Apple's financials.
That's simply not the case at all: http://tech.fortune.cnn.com/2011/01/19/apples-blow-out-quart...
That's simply not the case at all: http://tech.fortune.cnn.com/2011/01/19/apples-blow-out-quart...
Predicting numbers is one thing(luck can play a very big role) and deep analysis without being clouded by one's biases is another. Asymco seems to fail in this regard in most of the posts(including this one) which come through as abject fanboyism not tempered by reality.
How is it ad hominem? The poster clearly described why he thought so later on in the post. You can't take a line of someone's post to call ad hominem on it. Strawman?
How is it ad hominem? The poster clearly described why he thought so later on in the post. You can't take a line of someone's post to call ad hominem on it. Strawman?
I still think beginning your argument in that way is unhelpful to the discussion. He said nothing of value by calling him a navel-gazing armchair analyst. The comment would have been more valuable simply taking issue with the one line he quoted and then discussed. But now, I'm starting to be guilty of the same, so I'm going to stop.
Edit: That being said, certainly open to evidence that proves your points w/r/t his ability, and a later poster in the thread did just that.
Edit: That being said, certainly open to evidence that proves your points w/r/t his ability, and a later poster in the thread did just that.
The purpose of all of this, the best I can tell, is to worm the idea that AAPL is undervalued by 50% into the subconscious of the reader, and not actually about the effect of google's products on apple's stock value.
Quite a fascinating to see it done so well. I'd assume it's quite effective - I found myself feeling like I agreed with some of his premises simply because of how they were presented.