Apple will lose the smartphone war: it’s time to sell

Apple has won the latest battle in the smartphone war.

A Californian court has ordered Samsung to pay Apple $1.05bn for infringing some of its patents.

A lot of people think this decision is a big win for Apple. Some think it gives the company a big advantage over Samsung – its biggest rival in the lucrative handset market.

Others think the ruling could be even more significant. They think that the real loser is Google. Stopping Samsung in its tracks will slow down the growth of Google’s Android operating system.

But we’re not convinced. In fact, far from being good for Apple, last Friday’s events may have revealed its Achilles’ heel – it’s simply too dependent on the iPhone.

Here’s why that could be a serious problem for the company – and its shareholders…

Just how strong is Apple’s moat?

There are many strategies you can use to make money out of stocks. But one of the most popular, used by longer-term investors such as Warren Buffett, is to invest in great companies and compound their returns (by reinvesting profits or dividends) over a long period of time to make money.

So how do you find a ‘great’ company? People like Buffett look for one characteristic above everything else. It’s called a ‘moat’. In plain English, this means you are looking for companies that can do things that others can’t copy.

If other companies can’t do what you do, it’s hard for them to take your customers off you. This allows you to make big profits.

So how strong is Apple’s moat? On the face of it, pretty strong – for now. As I wrote last week, Apple has a return on investment of nearly 300%.

How can it do this? It’s quite simple – it charges people a lot of money to buy its products. Apparently the gross margin (the selling price less the cost of making each phone) on iPhone sales in the US is a whopping 58%. So by selling each iPhone for $650, Apple makes $377.

It’s little wonder that Samsung and other companies want to take a share of this lucrative market. And little wonder that Apple is so desperate to stop them.

At the moment, it can sell these phones for more than twice what they cost to make. It can do this because lots of consumers think they are a ‘must have’ product. Indeed, during the first half of its financial year, iPhone sales accounted for over half of Apple’s total sales and a big chunk of its profits.

The trouble is, this leaves Apple very dependent on the iPhone. It means that each new version of the smartphone has to be much better than the last one to keep customers upgrading. A lot rests on the imminent release of the iPhone 5.

If customers start to be tempted by other smartphones, and Apple has to slash prices as a result, then it – and its shareholders – will have a big problem.

Seen in that light, Friday’s court ruling has hardly made Apple stronger. It may have scored a brief victory in the smartphone wars, but sooner or later, the danger is that competition and consumers will force down prices.

Even if Samsung fails to overturn the ruling, it only applies to the US market in any case. And it doesn’t even apply to Samsung’s latest popular model – the Galaxy SIII.

Apple’s moat is looking leaky

Apple’s problem is that together, Samsung and Google’s Android operating system allow people to buy phones that do a lot of what the iPhone does for a lot less.

In Asia for example, lots of people can’t afford iPhones. But mobile phone makers can use Android to give them cheap smartphones. This is why the Android operating system is on 60% of the world’s smartphones right now.

And other phones increasingly have features that make them more attractive than the iPhone in their own right. Samsung and HTC make phones with bigger screens and replacement batteries. They don’t tie customers into their software either (unlike iTunes). Throw in the fact that these phones are cheaper than the iPhone, and it looks like Apple’s moat has lots of leaks.

Google is a better bet than Apple

The real lesson for investors from the Apple-Samsung battle is this: companies are only as strong as their moats. Apple’s use of litigation to protect its moat is a sign of weakness, not strength. The over-reliance on the iPhone as a source of profits shows the fragility of Apple’s business model.

So who genuinely has the strongest moat in the world of smartphones, tablets and the internet? I’d say it’s Google – and Apple knows this. Google effectively owns the internet and the source of its profits – advertising revenue. This income is a lot more resilient than trying to sell consumer electronics products at high prices.

Giving away Android to mobile phone operators strengthens this position, which is why Apple wants to stop it in its tracks by the back door. Apple is trying to move away from Google by removing YouTube and Google Maps from its operating software.

But can it do without Google search? More importantly, can Apple keep charging high prices to tie people to its products? We don’t think it can. That’s why it may be time to sell Apple shares and buy Google (Nasdaq: GOOG) instead.

• This article is taken from the free investment email Money Morning. Sign up to Money Morning here .

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104 Responses

  1. 29/08/2012, Chris Clark wrote

    I agree Phil, and as soon as I heard the verdict I thought it was a loser for Apple. The move to take off Maps and YouTube is definitely a Microsoft era strategy.

    I have heard a rumour a recent IDC report has got Samsung outselling Apple 3 to 1?

  2. 29/08/2012, Mike wrote

    You might be right. Or you not. After years of using non apple computers and phones almost my entire tech spend for a couple of years has been on Apple products. 2 iPhones, iPad, MacBook, Thunderbolt Display.

    I used to listen to talk about ‘Apple Fanboys’ and how they were overpriced gizmos that emphasised style over substance, aimed at people with more money than sense. I’m not wealthy. I drive a old 15 year old Volvo because I like it and it works. Ditto Apple. If I’m going to use hi tech things I want them to work, without hassle. I’m prepared to pay for that. I’m also prepared to pay for their excellent customer service. I didn’t like the screen I had on the £2000 MacBook I bought. I took it back and they changed it without a murmur. I’m prepared to pay to know that if there’s an issue it will be sorted, exactly the reason I buy practically all my clothes at M&S.

    Attention to detail is what makes Apple such a good company. And if they can keep it up they will survive.

  3. 29/08/2012, Daniel Victor wrote

    I agree about Apple,but not about Google.When I ‘Google’ something now,I have to wait a few seconds for the page to stabilise -presumably while Google is busy inserting all of the sponsored links that earn it money.If I try to click on something before that,the text may shift,and I may find I’ve clicked on the wrong thing and have to go back.
    That is hugely irritating,and it leaves the way open for a faster loading search engine that doesn’t jump – which would really hurt Google.

  4. 29/08/2012, Reason wrote

    at Mike (2) – Agreed, Apple will survive for its quality and customer service. However not all of their current customers are ready to pay a premium for that. A lot of them are here for the “hype” Apple provides. Once this shifts to Android, Apple will lose more and more of its current market share. Maybe it will end up like the PC market where Apple has held 10% for years. It’s a good company, but its current valuation cannot be sustained in my view.

  5. 29/08/2012, Skitter wrote

    Some interesting points here; I agree that this maybe a Pyrrhic victory for Apple but I do think that your article ignores the sales of the iPad and future product launches. What this argument has always boiled down to is the closed seamless product group which is generally more hassle free vs. the open, compatible systems like Windows and Android which are cheaper but more complicated, full of unintelligble terminology and generally a less enjoyable experience. I am with Mike on this.

    My wife has a Samsung Galaxy and I have an iPhone. She wants my iPhone. I do not want her Galaxy!

  6. 29/08/2012, crazy tony wrote

    Just look at Nokia! World domination does not last long in the Tech world.

    most of the best ideas must already be in the lastest iphone and with guru Steve Jobs gone; this is as good as it may get.

  7. 29/08/2012, Simon Pickard wrote

    What a load of rubbish, for one very simple reason.

    What do you think happens to the other iPhones when the iPhone 5 comes out? You think they just disapear? Or, as costs to produce these phones come down, do you think Apple still sell them at cut down prices (to the very people you’re saying will jump ship).

    Check out the top 5 selling individual mobiles in the US..
    What do we see?
    Iphone4S
    Iphone4
    Iphone3GS.

    This is fact, and why you’re a muppet if you pay one slight bit of attention to the drivel here.

  8. 29/08/2012, PeterH wrote

    Far from being reliable, the iphone 4S has been plagued with reliability problems. I know at least 9 people who are on their4th and5th iphones due to them continually cutting out and the very common cracked screen. In fact drop one and the glass screen will crack almost every time. The other aspect here is the court case itself against Samsung. There is a very good chance that Samsung will the verdict over turned due to the way the jurors arrived at their verdict and there is also a significant amount of anger towards Apple over the whole thing. Call it the bullying effect. Also, a lot of their former customers are now aware that there are better products in the marketplace that are a lot cheaper and more reliable. At the end of the day, the market place is very fickle and Apple are now seen as a bully which never goes down well so I think they may well live to regret their court actions.

  9. 29/08/2012, Gregor wrote

    Its not just the hardware that matters. A key advantage Apple has over Google is the quality of the digital content, including the best apps in the App Store. Google Play has more apps, but the quality is hit and miss. The 3rd party developers ecosystem is hugely important – one of the factors why Facebook overtook MySpace. There were more and better features, not developed by Facebook, but by other developers (e.g. Zynga). Hollywood and the music labels hate Google, but make money from Apple.

  10. 29/08/2012, LeslieS wrote

    I don’t know why you think that making a 58% on the cost of sales is anything special, with products like perfume and contact lenses the margins are over well over 90%. I believe that the top companies stay at the top because they consistenly invest in new product develpment.
    Apple is is a good example of this practice.

  11. 29/08/2012, B-OnHayling wrote

    Enlightening article, thanks. Then you said “buy Google”!? Why – have they started paying dividends now?

  12. 29/08/2012, Tom O'Neill wrote

    One day I realized that everyone around me in the café and train was using an iPad. So I bought the shares.
    As others have remarked here, the moat is Quality, patiently built up over the years.
    The company can carry on innovating without Steve J.

  13. 29/08/2012, JREwing wrote

    Apple has become a fashion cult – nothing to do with actual utility and value for money. Most people that buy iPhones or iPads rarely use these devices for anything except the most rudimentary and mundane tasks. As long as Apple remains a fashion statement, the company will keep printing money as there is no shortage of stupid people out there who will pay through their noses for this cr@p.

    I bought an Apple product only once – the first iPod and then realised what a clever rip-off strategy it was. I never bought an Apple product again and never will. But there are others I know personally who have, over the years, forked out thousands of pounds for these toys. Never underestimate the stupidity of the public.

  14. 29/08/2012, JREwing wrote

    @ PeterH – yes the cracked screen is an Apple special. They could in fact make these problems a thing of the past but they do not. Corning makes Gorilla Glass (and has been doing for a few years) which is very very tough and rarely cracks after falls from low height (less than 6 feet – I have dropped my Samsung Galaxy phone numerous times and never cracked the glass even once). Apple not only DOES NOT use Gorilla Glass, the company deliberately has cr@ppy low quality glass on its phones. Their users who usually fork out a ton of money for these phones are then hesitant to spend even more money on insurance. When the glass cracks they have no choice but to get a replacement. And when they get the glass replaced, Apple fleeces them more. One friend forked out 600 pounds for his iPhone and then paid another 100 pounds to get the glass replaced after he accidentally dropped the phone.

    As I said, never underestimate the stupidity of the public.

  15. 29/08/2012, David wrote

    Good article!

    Nokia will surprise yet again with its Lumia range that work with Windows 8 – its a powerfully winning combination – the new Nokia is the next Apple… and Nokia’s stock is a compelling buy at this level.

  16. 29/08/2012, Jimmy wrote

    @Tom O’Neill
    “One day I realized that everyone around me in the café and train was using an iPad. So I bought the shares.”

    With respect, you almost certainly bought once the market had reached the ‘Public Awareness’ phase. You missed the boat.

    “The company can carry on innovating without Steve J.”

    The man himself may have been slightly over-hyped, but ultimately he was their edge. Without him, their advantage is merely based on momentum.

    Apple’s decline will be long and slow.

  17. 29/08/2012, ricardo wrote

    @7. welcome to the boards Steve Jobs :0)

    @11. B, good observation, just like Apple, Google don’t pay a dividend. In fact you’ll find it hard to find any household name tech-sector companies that do. Micrsoft being the exception. Which why the tech sector is only worth a punt on growth, not income.

  18. 29/08/2012, Handshoe wrote

    Some important factors for Apple are mentioned in the posts above, but another one constantly strengthening your “moat” is the lock-in: If your Macbook, iPad, Apple TV are all synchronised with your iPhone, via iCloud and iTunes, then the cost of switching isn’t just the cost of your new phone.

    How many other companies can offer a comparable solution package with the same quality?

    Don’t think I’ll be selling my Apple shares this afternoon.

  19. 29/08/2012, ader wrote

    This article is nonsense imho. Phil, did you have the foresight to buy big on AAPL at $81 like I did? When people move to Apple products they don’t tend to move away from them as they like things that “just work” and are high quality.

    People with iPhones and iPads don’t tend to move back to Android as they’d have to ditch all the software they’ve bought (apps).

    Apple’ marketplace is growing and they will also be branching out to other areas such as their long rumoured TV.

    Apple have multiple “moats”: the halo effect, their cash hoard, their ability to innovate, highest quality products that no-one can match, highest profit margins, market leading patented UI with ease of use etc.

    AAPL shares now provide a dividend too, and that will only increase over the coming few years.

  20. 29/08/2012, Jonathan, Leicester wrote

    An interesting article, but it does rather ignore the many reasons that Apple is the success it is.
    They have a philosophy to create the best products they possibly can, and yes that means aesthetics AND practicality.

    Their products aren’t perfect, but no one else strikes the balance like they do. Case in point – the rumoured Apple Television- they could have released any old TV, slapped Apple logos on it and made it nice and shiny. Lots of people would buy it. Apple makes lots of money. Their strategy is to make the best TV they can. Time will tell on this one…

    As for this court case, read into it what you like – the BBC has given a really poor explanation of the reasons for this case. The jury decided within 24 hours that Samsung had copied them, the copying was wilful and the Samsung executive team refused to answer questions that incriminated them further.

    But some people will call it Bullying… I’ll come round and steal your car and watch you let me drive off?

  21. 29/08/2012, Rich in name only wrote

    If you go back over the past 30-40 years of IT you’ll find that a lot of companies have come and gone. At the time each of them was considered to be at the top of their game, with no earthly chance they would disappear or be usurped by others. Apple is the latest one to add to that list.

    A few examples; NCR, Nokia, Kodak, Microsoft, IBM, HP, Compaq, Atari, Dell, etc. (most are still with us but not the powerhouses they once were).

    So please don’t get blinkered by Apple’s current success, and the fact they’re resulting to litigation to suppress competition suggests they running out of ideas for organic growth.

  22. 29/08/2012, Mike wrote

    @13 JREwing.

    You can make that sort of comment about almost anything. That x does the same as y but costs twice as much so anybody who buys x is stupid.

    People pay for quality, or even just for perceived quality. Otherwise nobody would buy a BMW and we’d all be driving round in Nissan Almera’s, because they go forwards and backwards, just like a BMW.

    I drive a 15 year old Volvo because it’s high quality. Built like a car should be (RWD) and with just enough technology to make it nice, but not too much to go wrong. It cost me £1200 on Ebay, and I’ve spent close on £6000 on it in 2 years. We all have different ideas about what ‘quality’ is.

    And yes, my mileage cost is still lower than somebody who buys a new BMW.

  23. 29/08/2012, Mike wrote

    But here is the example of Apple quality that I use to demonstrate to others. On the first Windows phone I had I would occasionally cut the call because I was holding the screen against my ear. On the 2nd Windows phone the screen went black when you entered a call, but you had to press the power button to get the screen back, from then on it stayed live (so you might still cut the call).

    The iPhone has a hardware proximity sensor. When you lift it to your ear (in call) the screen blanks, inactive. As you move it away from your ear the screen comes back. Apple hardly mention this. They’ve recognized a problem and implemented the most elegant solution to it. Quietly and without fuss.

    When I showed this to my friend who bought an iPhone before me, he wasn’t even aware of it. And it will have helped him, but he’s unaware of it.

    That’s Apple quality. Compare that with having to edit the registry in Windows or some such baloney.

  24. 29/08/2012, John Reveley wrote

    I have been a keen subscriber to Moneyweek for many years now, but I think they are missing something here.
    In 2008/9 Apple’s shares fell from $300 to $80 with other stocks, I recall Paul Hill featuring Apple in his weekly slot, warning us to keep clear, I believe he thought they were over priced then, unfortunately I took his advise! Now of course they are 8 times that level.
    IMHO I think with Apple, we are dealing with something that statisticians cannot calculate, perhaps it’s outside their understanding, so they discredit it.
    I believe the reason Apple continues to outperform, is because it leads the field from the front, all the competitors just follow, trying to catch up, but invariably their products do not ‘work’ the way Apple’s product do. Yes, Apple’s devices are more expensive but are so much more reliable and user friendly, and that’s worth paying extra for. Apple has proven that mankind loves well designed and
    quality products.

  25. 29/08/2012, David1949 wrote

    Nice one, Phil, but I don’t think you have considered a couple of other factors which can change the game. One is BRAND. And, related to that, the Apple fanbase. The fact is, the Apple company has grown to be what it is today through a fanatical attention to values which millions find deeply attractive. Hence it’s success in maintaining its margins. It ain’t going to be giving up its franchise without a titanic struggle. And it has the financial resources to make it happen…

  26. 29/08/2012, ricardo wrote

    24. John ” …Now of course they are 8 times that level.” that’s called taking a punt.

    Question for Phil. Phil just how big is that huge pile of cash that Apple has locked up offshore, that they seem to be unable to move for fear of the US tax authorities clobbering them ? And is it likely that shareholders will ever see any of it ?

  27. 29/08/2012, Phil Oakley wrote

    Hi Ricardo,

    I don’t know exactly, but the estimates I’ve seen state that it is around $80bn out of a total cash pile of $117bn.

    If brought back to the US it could be subject to tax at rates as high as 35%. Therefore it doesn’t make sense to bring it back at the moment. Apple and others have been lobbying for a tax rate of 5%.

    So unless the tax rate comes down, shareholders won’t see it in the form of a dividend soon. That said, the cash pile will get reflected in the price of its shares.

    Best wishes

    Phil

  28. 29/08/2012, Barkingmad wrote

    “In fact drop one and the glass screen will crack almost every time.”

    You mean the same Gorilla Glass that Samsung also use – or perhaps they have break proof screens.

    I have an iPhone – had a problem with the camera (probably after I dropped it) – back to the Apple store – took it away – went to get a coffee – 20 minutes later = fixed.

    Colleague has a Samsung – also had a camera fault – after over an hour on the phone and 3 phone calls – returned it to Samsung – over 3 weeks later got a refurbished unit back. In the meantime had to go out and buy a new phone. Could you be without for nearly a month?

    Apple = superior customer service and customers appreciate / value that.

  29. 29/08/2012, justin kayse wrote

    @mike – the difference is that a car is useful for 15 years and it’s worth it to pay extra for quality – consumer gadgets have a 2-4 year lifetime and that’s it, then it’s time to upgrade. Not worth paying twice as much for a gadget that doesn’t do anything twice as good

    If people bought Apple products because their focus was on quality and ease of use, then would Apple not have a greater share of the computer business (laptop/desktops)? They only have 7.55% of the market worldwide because their products are over priced and don’t offer as much value as others do. This same dynamic will be inevitable in the mobile sector when value becomes the main purchasing point for the consumer which it always eventually does – why pay more when you don’t have to?

  30. 29/08/2012, ricardo wrote

    Hi Phil, thanks for the feedback.

    “So unless the tax rate comes down, shareholders won’t see it in the form of a dividend soon. That said, the cash pile will get reflected in the price of its shares.”

    …or get frittered away on poor acquisitions !!

    As a former employee of a large British tech company that (no longer exists) I was witness to a large amount of *cash* spent on useless a buyouts. It’s not nice seeing real money wasted so.

    p.s. I agree with the thrust of your article, over time people won’t want to get locked-in to Apples software. Google have the advantage of providing an open platform.

  31. 29/08/2012, JREwing wrote

    @ Mike – Yes, and no. I had a similar discussion with a friend about buying a Porsche recently. His view was that you could get a Ford Mustang that went just as fast at half the price. But it isn’t the same thing. The Porsche is reliable and well designed. Also, it won’t fall to pieces in five years unlike the Ford. That is why people buy Porsche and pay twice what a Ford or a Chevrolet with a big engine would cost. But if it was a contest between the Nissan GTR and a Porsche priced at four times that amount, would I buy a Porsche? No. Because the GRT offers something that even cars priced at four times that amount do not offer. I get your point and do not entirely disagree with what you are saying. continued below….

  32. 29/08/2012, JREwing wrote

    But I do believe the situation with Apple is different. The example I gave is telling. Why don’t Apple use Gorilla Glass or something similar? I don’t see people walking around with lots of Samsung or HTC phones with cracked glass like they do with iPhones. Given the massive premium they charge, one would think it would be a minor problem for them to fix. But they don’t. Apple is built around ripping off the consumer for LIFE. If one is comfortable with that, then no problem buying Apple junk. Otherwise, no.

  33. 29/08/2012, justin kayse wrote

    @JREwing to continue with the porshe or even GTR, they are cars that are built in their own countries by hand and they developed and manufacture most of the parts that go into the car. Overtime these sorts of cars maintain their value and usefulness and in most cases become collectors items and appreciate in value. Apple just assembles parts from others in China and in 2-4 years goes in a land fill.

  34. 29/08/2012, JREwing wrote

    @ Justin – agree 100%. This is certainly true of things like Ferraris and Rolex watches, which do hold most of their value even if they do not appreciate in value (adjusted for real inflation).

  35. 29/08/2012, Rich in name only wrote

    Love the comments above. It used to be the case that if the shoe-shine boy gave you a share tip, you sold the stock. Now if the shoe-shine boy has an Iphone you buy the stock :)

  36. 29/08/2012, jdw wrote

    1- Apple uses Corning Gorilla glass in iPhones and iPads

    2-Most of Apple’s margin comes from the operations side. Other companies have difficulty even matching the price of the iDevices.

    3-Google’s platform is no more open than Apple’s. You can mod or tweak the OS easier with Android, but Google has the same lock in via apps and media as Apple does.

    4-From 2006 through 2010, MoneyWeek advocated not investing in Apple as it was “overpriced”. That turned out well for anyone who followed that advice.

  37. 29/08/2012, NeutronWarp9 wrote

    I seem to remember a good few years ago geeks buying Apple gear because it was not big bad Microsoft and their stuff looked fresh and coooool.
    Now this fruit has ripened, utilises factories employing less than ideal working conditions in China – so what dude? – and is trying to monopolise the market via biased US lawsuits. A classic Rise & Fall tale in a faddish market sector.

  38. 29/08/2012, lrd555 wrote

    Are we forgetting all the other multi-touch patents Apple’s amassing? What’s going to happen when Samsung & Apple go back to court next year? Which patents is Samsung bringing to the fight?

    I think the 1st bomb just got dropped; but that was the little one. Next time around the big one gets dropped.

  39. 29/08/2012, John Reveley wrote

    26. Ricardo, sorry for the delay,
    Taking a Punt…. hardly, since 2003 Apple’s share price has risen every year apart from one – 2008 in which the Dow Jones also fell from 13000 to 7500, so no surprise there then. In fact most of those years Apple’s shares doubled in value, when most of us were earning 4% in a building society. That’s a punt worth taking I think.

  40. 29/08/2012, John Reveley wrote

    29 Justin. To be honest I think it is incredible that one company can take 7.5% of the worldwide computer market, when you consider that Mircosoft had a tight hold of the operating software, and everyone and their dog was throwing PCs together at cheap prices, what a hill for Apple to climb, but I think that the introduction of the iPod and then the iPhone has demonstrated to the world that there is a better way that is worth paying for and consequently Apple sales of computers have benefitted, not least because they all work together, ‘They just work’.
    I have used Apple computers at work for 15+ years, I have used PC’s at home because of the cost, my experience has been problem after problem with PCs which cost in time and frustration, and my conclusion is that in the end it is cheaper to buy a Mac, and I have. Others will too.

  41. 29/08/2012, John Reveley wrote

    36 JWD part 4,
    I am just making clear that you are being sarcastic, right?
    In 2006 you would have bought Apple shares at between $80 and $100, in 2010 you could have sold them at between $200 and $320, that’s between 25% or 100% per year depending on what price you dealt at and assuming you bought in 2006 and sold in 2010, not bad!
    Just in case readers thought you were being serious.

  42. 29/08/2012, justin kayse wrote

    @John R – I just bought a new lenovo core i5 for $400! A comparable Mac would cost at least $1100-$1200 which is basically 3 times as much! There is no way that a Mac could ever offer the same value. My computer would have to catch fire 3 times for the costing to be on par…. I have owned lenovo computers before and they are tanks and last a long time because they’re built well. I have friends that have had to repair their MacBooks multiple times while my old lenovo had never needed repair. I don’t buy that Macs are more reliable. There are many good quality PC’s and I’m sure there is a lot of crap too, but if you research your purchase like anything else in life, you can find good value opposed to buying the most expensive thing in hopes of getting a superior product which is necessarily not the case. For instance, a Toyota is MUCH cheaper than an Audi, but the Toyota has better reliability.

  43. 29/08/2012, justin kayse wrote

    @John R Also, 7.5% is peanuts and insignificant market share. This shows that value buys are important to people and usually this is what eventually drives any product category and WILL happen eventually to the smartphone. Why buy an $800 iphone when you can get one that is at least equal or better for $500? Of course this doesn’t hold true to everyone, just most – especially in emerging markets.

  44. 29/08/2012, John Reveley wrote

    42. Justin.
    Of course you are completely right, there are well made PCs as well, my PC’s have been of the better made variety, and I have witnessed unfair criticism where Macs are said to be very reliable when compared with the PCs within a company, but the PCs have been £250 and the Macs £1500, that’s plainly an unfair comparison. But that’s the point, Windows which IMHO is a flakey, cumbersome and a unreliable piece of software has to work with equipment ranging from a tin box to top gaming machines, whereas Macs ensure consistent quality components and operating software tailored to work that hardware.
    There will always be problems with any computer system but my experience is nightmare after nightmare with PC’s, mainly software issues, whereas Macs problems are fewer and easier to fix. Just less grey hairs, that’s worth a lot.
    7.5% is peanuts?…. Across the world! one company! Against an established PC market! Against a near monopoly of windows! I see things differently.

  45. 29/08/2012, justin kayse wrote

    I use Windows 7 64 bit which is a robust stable OS. Windows had issues with 95, 98 and Vista was like the beta version of Win7. Also, the components for Apple computers is essentially the same as quality PC’s these days – same processors, same memory, same hard drives so they are all the same IMHO. I always believe use what is best for you and if Mac makes your life easier then cool ! I just believe that Apples business model is not sustainable and will come back down to earth eventually because their products are just too expensive to be sustainable. Too much profit comes from one device and others will undercut them. It doesn’t mean Apple will vanish, just they won’t be as big as they are now.

  46. 30/08/2012, John Reveley wrote

    Time will be the final Judge, Justin. Who knows what the future will bring, We’ll see.

  47. 30/08/2012, Constable Odo wrote

    As if Apple couldn’t build less expensive smartphones considering its huge economies of scale. It just seems so ridiculous how these pundits are always saying that every Apple product is going to be commoditized by some cheaply-build Android device. There will likely always be a fair percentage of consumers that will choose Apple products. Apple gives customers a lot of help and most of Apple products are relatively high-quality devices. Still, Apple can do just about anything it needs to do to keep the consumers coming back to them. Apple retail stores generate a lot of goodwill to consumers. Does Samsung even have any retail stores around the world?

    It sure is amusing how many pundits are always betting against Apple. They said this company was as good as dead ten years ago and now it’s currently sitting as the company with the biggest market cap and probably the most reserve cash.

  48. 30/08/2012, ricardo wrote

    @39. John ” hardly, since 2003 Apple’s share price has risen every year apart from one”. I guess the counter argument to that is that if you knew that Apple were developing the iPOD/iPhone/iPAD and that they’d take off quite as well as they did then I’d agree that it was a shrewd investment. Otherwise, to me, it’s taking a bit of a gamble.

    My biggest gripe with tech-sector firms is that they don’t pay a dividend, and usually for good reasons. Developing new stuff costs !! And usually a lot of money. Having spent half a lifetime in industry I’ve seen monumental amounts of money *wasted* on things that never see the light of day. It can be pretty dispiriting really.

  49. 30/08/2012, David wrote

    I have an Apple TV – it’s a nice little box that’s why down the pecking order in their priorities. The fact they haven’t slapped an App Store on it suggests they have big plans. ‘Internet-enabled TVs’ are currently lacklustre – if Apple can pull off the iPhone of TVs, they’ll have another few years of mad success even if the iPhone becomes more of a niche.

  50. 30/08/2012, Rob bear wrote

    @32. JREwing

    “Why don’t Apple use Gorilla Glass or something similar? I don’t see people walking around with lots of Samsung or HTC phones with cracked glass like they do with iPhones. Given the massive premium they charge, one would think it would be a minor problem for them to fix. But they don’t. Apple is built around ripping off the consumer for LIFE.”
    This post makes it clear that what you know about Apple, iPhones, smartphones in general and Corning in particular could be written on a match box with a very thick paint brush.
    Even a cursory google search would reveal that gorilla glass category of product was developed for apple, following apple’s discovery that existing screens would not be strong enough for its first iPhone. At the time Corning could not foresee any use for its product but apple could.
    The reason why no one bothers replacing the screen on the htc or Samsung phone is that the phones aren’t worth fixing throw them away and get another.

  51. 30/08/2012, JREwing wrote

    @Rob Bear –

    List of products that use Gorilla Glass:

    http://www.corninggorillaglass.com/products-with-gorilla/full-products-list

    “The reason why no one bothers replacing the screen on the htc or Samsung phone is that the phones aren’t worth fixing throw them away and get another.”

    The screens don’t crack easily. The Apple screens do. May be, my evidence is purely anecdotal but that is what I have seen. And I have dropped my Samsung phone countless times and it has never cracked the screen.

    It is comical to see people claiming that Apple phones are more “valuable.” This shows the genius of Steve Jobs the marketer. There is no special hardward in Apple phones – they are built in the same factory from the same materials that Samsung phones are (heck Samsung manufactures a big chunk of the iPhone’s components!) But the clueless public is shown a shiny toy and the “cool” Steve Jobs smiling on TV and the hypnotism is complete. Pretty funny.

  52. 30/08/2012, JREwing wrote

    One of Steve Jobs’ most brilliant marketing gimmicks was to convince a large number of gullible fools that owning Apple products showed how you were part of the “hip” crowd – you “cared” about “global warming”, you were “against child labour”, you were “progressive”, you were “cool”, you had the right politically correct opinions etc. Behind the scenes, FoxConn workers were working like robots for peanuts cranking out Jobs’ billions and committing suicide by the dozens. It would be comical if it wasn’t so tragic.

  53. 30/08/2012, justin kayse wrote

    The people believe in Apple so much, I guess you think Apple is a buy at $673? When Apple was $80 3-years ago it seemed like a good bet of upside but up here I would err on the side of caution.

    The analysts calling for $1000 just want to take your money by shorting it when it corrects and comes back to earth. Every company that has hit the to spot in market cap has not been there 2 years later. Unless

    Apple better have some good tricks up their sleeve to match and sustain their growth over the past 3 years or Wall Street will punish the stock.

    I am not looking for opportunities to be long APPL, I am waiting to short when the time is right which I suspect will be in the next year / year and a half. Just like it was a good bet long 3 years ago, it’s looking like a compelling bet to get short

  54. 30/08/2012, Rob Bear wrote

    Jrewing wrote:

    “List of products that use Gorilla Glass:

    http://www.corninggorillaglass.com/products-with-gorilla/full-products-list

    Wow, I am amazed apple isn’t there, it’s not like apple suppliers have to sign ndas.

    You might like to look it up on Wikipedia 

    http://en.wikipedia.org/wiki/Gorilla_Glass

  55. 30/08/2012, Rob Bear wrote

    Jrewing wrote:
    “The screens don’t crack easily. The Apple screens do. May be, my evidence is purely anecdotal but that is what I have seen. And I have dropped my Samsung phone countless times and it has never cracked the screen. “

    It doesn’t get much more anecdotal than that, my experience is different I have dropped my iPhone dozens of times without a problem. I have had to replace a couple of employees iphone screens but 90% of our iPhone screens survive the 2 year contracts without a scratch. Spoke to friend recently who runs a similar size phone fleet in his company, he had endless problems with htc & samsungs but not a problem since he switched to iPhone.

  56. 30/08/2012, Rob Bear wrote

    Jr Ewing wrote:
    “It is comical to see people claiming that Apple phones are more “valuable…There is no special hardward in Apple phones …(heck Samsung manufactures a big chunk of the iPhone’s components!)”

    Apple phones are clearly more valuable than Samsung phones as people are willing to pay more for iPhones than they are for Samsung’s. Yes, Samsung is a component supplier to apple but Pirelli is a component supplier to Ferrari , would you be willing to buy a car from a tyre manufacturer for the same price?

    The magic of apple is in the software, design, integration of the hardware and the entire broader ecosystem with supporting infrastructure in short the lasting value that the whole package brings. The magic of the Samsung is in the price.

  57. 30/08/2012, JREwing wrote

    Here is another interesting article on iPhone 4 cracked glass incidents:

    http://intentious.com/2011/11/02/apple-sweeps-iphone-4s-broken-glass-under-the-mat/

    @Rob – The Wikipedia entry shows that Apple did initially use Gorilla Glass but there is no information on whether this is being used now. In fact, the page I linked to above indicates that Apple are no longer doing it. Hey, why do it if you can con your foolish customers out of an extra $200 on top of the $400 you made on the initial sale?

    “It doesn’t get much more anecdotal than that, my experience is different I have dropped my iPhone dozens of times without a problem.””

    I doubt this very much. I have several friends who have iPhones and several who have Samsung and HTC phones. I don’t know of one with a cracked Samsung or HTC but several with cracked iPhones. Look, if you want to spend four times what the toy is worth, why try to justify it? Everyone understands that the need for a “fashion accessory.”

  58. 30/08/2012, JREwing wrote

    @”Rob – “Yes, Samsung is a component supplier to apple but Pirelli is a component supplier to Ferrari , would you be willing to buy a car from a tyre manufacturer for the same price?”

    Ferrari own, manage and run their own factory. Apple uses cheap Chinese workers paid $2 a week by Foxconn in Shenzhen. Enough said.

  59. 30/08/2012, Tom O'Neill wrote

    A cautionary note: we’ve had an extraordinary one year sp hike of 70%+ (actually, not even a year, more like a mere nine months.) But that pace cannot continue, and it seems a bubble is forming in the SP, although the P/E is falling to 12.6 in 2013, with a decent PEG of 0.7, and healthy 12% EPS growth (2012 is 60% EPAS growth).
    I certainly wouldn’t recommend buying now.

  60. 30/08/2012, John Reveley wrote

    One thing I have noticed whilst reading these comments is the very polarised points of on this Apple vs Samsung (and the rest) subject. Apple fans, myself included, are passionate about the brand and the way that Steve Jobs has taken Apple to heights that no other manufacturer has dared to dream of, importantly has raised the bar so high that he has forced positive change (and shown the way) to his competitors across the industry. I firmly believe computers would be all beige to this day without SJs influence. Sadly, anti-Apple disciples seem to riddled with bitterness, and quick to belittle the brand at every opportunity.
    53 Justin, Maybe you are right, But Apple are not of the dot com brigade or Facebook. Apple is a solid, very profitable company constantly creating exiting products, think carefully before shorting.

  61. 30/08/2012, John Reveley wrote

    Just one other thing about the share price.
    I have traded Apple shares on the buy side on and off over the past few years, my biggest worry has been that of Steve Jobs health. I knew that if SJ had died whilst I held the shares that the share price could have plummeted possibly wiping me out. As it happened when he did die the share price held up better then expected, (I was out of the trade then anyway). We are in new territory now, that risk has vanished, I know that the company has lost a great leader but I believe that his influence lives on in the company and in any case his projects are still live and ongoing.
    60. Tom. As I have mentioned before, most of the last 8 years Apple shares have nearly doubled every year. Seeing is believing.

  62. 31/08/2012, Rob Bear wrote

    Jrewing wrote:
    “Ferrari own, manage and run their own factory. Apple uses cheap Chinese workers paid $2 a week by Foxconn in Shenzhen. Enough said. “
    Apple owns and manages the most strategically important parts of its supply chain, in the modern world of electronics assembly lines best outsourced. Its supply chain management is a world beating source of competitive advantage.

    The Foxconn wages are around $2 an hour, which probably more than htc pays. Samsung are also a Foxconn customer.

  63. 31/08/2012, Rob Bear wrote

    “I have several friends who have iPhones and several who have Samsung and HTC phones. I don’t know of one with a cracked Samsung or HTC but several with cracked iPhones.”
    I doubt this very much.

    “Look, if you want to spend four times what the toy is worth,”

    If your phone is a toy, then I can understand skimping on quality and buying the cheapest. My phone however is a business tool, and it more than earns it keep, ROI is more important than price.

    “why try to justify it? Everyone understands that the need for a “fashion accessory.”

    Rather ironic given that htc and Samsung are the companies that are selling a plethora of different models essentially as fashion accessories.
    Samsung are the ones inflating their sales figures to make their phones & tablets appear more fashionable than they are. But strangely, when they have to account for their sales to a court they tell a different story.

  64. 31/08/2012, JREwing wrote

    “If your phone is a toy, then I can understand skimping on quality and buying the cheapest. My phone however is a business tool, and it more than earns it keep, ROI is more important than price.”

    If your phone is a “business tool”, why not buy the best tool that money can buy? For the price that people pay for the ridiculously overpriced iPhone4, which is fitted with an outdated dual-core processor, you can buy a Samsung Galaxy SIII, which is fitted with a blazing fast quad core processor and much higher RAM and storage. Also, storage is upgradeable (which cannot be done with ANY Apple products). If the utility of the phone were the issue, Dollar for Dollar or Pound for Pound, the Android phones can do everything (and then some) that the iPhone can do.

  65. 31/08/2012, Rob Bear wrote

    Jrewing wrote:
    “If your phone is a “business tool”, why not buy the best tool that money can buy? For the price that people pay for the ridiculously overpriced iPhone4,”

    Don’t you think Samsung would try to sell their phone at the same price that apple does if they could? Samsung phones are perceived to be inferior by the market.

    “which is fitted with an outdated dual-core processor, you can buy a Samsung Galaxy SIII, which is fitted with a blazing fast quad core processor and much higher RAM and storage.”

    I don’t really care about how many cores a processor has. For me it is all about the software, with android you get stuck with the operating system version that ships with the phone. With apple you can install upgrades when they release the next version of the operating system.

  66. 31/08/2012, Rob Bear wrote

    Jrewing wrote:
    “Also, storage is upgradeable (which cannot be done with ANY Apple products).”

    I am not sure what the point of microSD is, I can’t really remember if it was superseded before or after the DVD or the floppy drive but it’s kind of quaint that you are so excited by it.

    On iOS you have a whole ecosystem and infrastructure that reinforces the value proposition of the phone.

    Also, the operating system is upgradeable the instant the os is released (which cannot be done with ANY Android products).

  67. 31/08/2012, Rob Bear wrote

    Jrewing wrote:
    ‘If the utility of the phone were the issue, Dollar for Dollar or Pound for Pound, the Android phones can do everything (and then some) that the iPhone can do.”

    Except make a profit for their manufacturers.

    I am not really sure why you are trying to sell me on a Samsung phone, do you work for Samsung or are you still trying to rationalize your own purchase decision? I first entered this thread because you were misinformed about apple’s use of gorilla glass.

    You also don’t seem to have worked out that android phones are phones that are made by phone manufacturers, while apple’s iPhone is a computer made by a computer operating system and hardware company. Apple is playing a different game, they have managed to turn the phone industry on its ear along with the computer industry.

  68. 31/08/2012, JREwing wrote

    @ Rob – I have no desire to sell any phones to you. I am just curious as to why people seem so fixated on Apple phones (or products generally) and so fanatical about them. So far you have not indicated anything that the iPhones do which a Samsung (or HTC) phone cannot do – other than the fact that Apple develops its own software where as Samsung or HTC rely on Google (why should I care? – if anything that makes it easier for Apple to keep ripping people off slowly on a daily basis) Also, the video I posted earlier indicates the brittleness of the iphone 4 – it is now actually subject to class action consumer law suit. The outcome of that will be interesting.

  69. 31/08/2012, JREwing wrote

    @ Rob – Purely out of interest, what happens when you run out of storage space on your iPhone? What do you do then? Of course, one can always plug the phone into the PC and transfer data back to back it up but then it means you are severely limited in terms of space. This may not be a big problem on the iPhone but it is on a device like the iPad – you can get a phone or a pad with a bigger memory of course but that costs another $300 or something stupid like that.

    I like pushing Apple users to get some rational responses out of them as to why they buy Apple products. I never get them. It is a psycholgocial phenomeon that is of interest to me as this is something future marketers can learn from. There is no doubt that Steve Jobs was a genius but not in the way that people understand it.

    You also said that I am uninformed about Gorilla Glass. Did you watch that video I linked to or did you ignore it like Apple users usually do?

  70. 31/08/2012, JREwing wrote

    @ Rob – “I don’t really care about how many cores a processor has. For me it is all about the software, with android you get stuck with the operating system version that ships with the phone. With apple you can install upgrades when they release the next version of the operating system.”

    Pretty funny. Android phones can be upgraded. I’ve done it countless times.

    “Samsung phones are perceived to be inferior by the market.”

    The market also thought housing can never go down. When you run with the herd……………..

  71. 31/08/2012, John Reveley wrote

    Why do us Apple fanatics love Apple so much.
    Because Apple Products work straight out of the box, they are designed so they are so user friendly and intuitive that you almost know how to operate them when turn them on for the first time. Apple bend over backwards to make the user experience perfect. But I hear non believers say, well so do Android, Samsung etc etc, and maybe you are right to a point, but only because Apple has lit up the way and set the standards before hand, you must not forget the days when you had to trudge your way through a labyrinth of menus on your phone to find what you needed, 10 minutes later. And what about Windows which Microsoft copied off Apple, I bet if Apple didn’t exist, we would still all be using DOS, and the world would be 20 years behind where it is now. Some things are worth paying for.

  72. 01/09/2012, trevor wrote

    I have actually purchased some Samsung shares. They are on a very low p/e rating (under 9). Their products are excellent. Sales have been $80 billion in last five years. I am not worried by this fine. Their version of an iphone is miles cheaper and in some ways more advanced. Good luck to them for giving Apple a run for their money. Apple products are a bit of a rip off; this is not so with samsung.
    The shares are very “heavy” but you can buy in lots of ten

  73. 01/09/2012, JREwing wrote

    @ John Revely – Yes I think you cover some of the reasons why Apple is able to sell its products at ridiculously high prices.

    I think there are probably three main factors here:

    (1) ease of use (or perceived ease of use. Android phones work “out of the box” too and just as easily)
    (2) aesthetics – Apple makes a lot of very pretty looking toys. I know people who will buy a phone without ever checking the specs or what it can do only because it looks pretty. In fact, Apple even jeopardised the quality of the iPhone4 by casing it in a brittle glass case just to make it look pretty. They know what sells (they also know that their customers will even pay through their noses to get the glass replaced numerous times – and often do this uncomplainingly).
    (3) fashion

    There are limited number of areas were Apple software does work better than Android (and vice versa) – but those cannot account for the vast majority of Apple sales.

  74. 01/09/2012, Rob Bear wrote

    “@ Rob – I have no desire to sell any phones to you. I am just curious as to why people seem so fixated on Apple phones (or products generally) and so fanatical about them. “

    I think it varies from person to person. One friend who hadn’t seen for a while who has a pc based tech business and had a fleet of android phones couldn’t help telling me how much happier he was now that he had switched exclusively to iOS because the hardware is more reliable and general experience was better. Also, how his designers were more productive since his lead designer convinced him to get macs for that part of his business. Another I recently ran into another friend who worked for the iconic personal computer company, before moving to a senior it security role for a very large telco also remarked how much happier he was since he moved to using apple.

  75. 01/09/2012, Rob Bear wrote

    Jrewing wrote:
    “So far you have not indicated anything that the iPhones do which a Samsung (or HTC) phone cannot do – other than the fact that Apple develops its own software where as Samsung or HTC rely on Google (why should I care? – if anything that makes it easier for Apple to keep ripping people off slowly on a daily basis) “

    Apple contends that neither samsung, htc nor google have written the software on android phones and that code should be withdrawn from the market. Recent court decisions suggest that will become an issue for all three.

    Also, the video I posted earlier indicates the brittleness of the iphone 4 – it is now actually subject to class action consumer law suit. The outcome of that will be interesting.

    The “drop tests” in the video are hardly scientific and who cares if there is class action lawsuit against them? Class action law suits are ridiculously common, if apple had a dollar for everyone suing them they would have as much money as htc or dell.

  76. 01/09/2012, Rob Bear wrote

    Jrewing wrote:
    “@ Rob – Purely out of interest, what happens when you run out of storage space on your iPhone? What do you do then? Of course, one can always plug the phone into the PC and transfer data back to back it up but then it means you are severely limited in terms of space. This may not be a big problem on the iPhone but it is on a device like the iPad – you can get a phone or a pad with a bigger memory of course but that costs another $300 or something stupid like that. “

    You delete the things that you are not using and do not need. You have heard of both wireless and the cloud haven’t you?

  77. 01/09/2012, Reason wrote

    Sadly the conversation has been hijacked by the usual fanboys from both sides rather than sticking to the point: can Apple maintain its current valuation over time?

  78. 01/09/2012, Rob Bear wrote

    “@ Rob – “I don’t really care about how many cores a processor has. For me it is all about the software, with android you get stuck with the operating system version that ships with the phone. With apple you can install upgrades when they release the next version of the operating system.”

    Pretty funny. Android phones can be upgraded. I’ve done it countless times. “

    You are in the minority, currently less than 0.8% of android phones run the latest version, around 16% are on ics, and 60% are on honeycomb. This is something that android app developers don’t find very funny. A fragmented market where google has to update android it is then modified by phone manufacturers and then by the carriers is a barrier to adoption of new features.

  79. 01/09/2012, Rob Bear wrote

    Jrewing wrote:
    “There are limited number of areas were Apple software does work better than Android (and vice versa) – but those cannot account for the vast majority of Apple sales. “

    The vast majority of people who have used iOS and android prefer iOS. The apps for iOS are generally of a higher standard, not surprising given that the returns for developing for iOS are much higher. The supporting infrastructure is better and the software and hardware is much better integrated.

    Your constant refrain that iPhone buyers only buy them because they are pretty and that apple rips them off is vacuous and puerile in the extreme on a technology blog. But on a financial blog, it’s positively brain dead.

  80. 01/09/2012, Rob Bear wrote

    Reason wrote:
    “Sadly the conversation has been hijacked by the usual fanboys from both sides rather than sticking to the point: can Apple maintain its current valuation over time?”

    I, too, am far more interested in the answer to that question.

  81. 01/09/2012, John Reveley wrote

    78 Reason,

    Yes I am a ‘Fanboy’ but I have also been an active trader of Apple shares for years, so I put my money where my mouth is, see my contributions, 24, 39, 41 and 62.

  82. 02/09/2012, rossi46 wrote

    The real factor here is the software wars. Nokia are producing the best designer toys at the moment but are saddled with microsoft. Google have pretty much caught up with Apple in terms of mobile OS and apps. The dominant force in the next ten years will depend on which OS gets the market sentiment. My bet is Android but it can all turn on a sixpence.
    I just wish Nokia had cut a deal with Google !

  83. 03/09/2012, Mike wrote

    As I recall a Mackintosh computers ranged from £2000 to £5000.You are right about IBM, they were making 900% profit on the sale of their main frame computers. IBM didn’t envisage a day when the midi computer would supersede the main frame and as for the PC well that was sold by Sinclair at under a £100 to enthusiasts, but to his astonishment he had completely underestimated demand and brought out a version that used basic programming language. There was slow runner in the race called PYE, which used the CPM Operating System and a guy called Bill Gates who was writing his own version of CPM called DOS. This was for the old 8000 series of CPU’s, but the 8000 series were soon updated. So Gates rewrote his new OS for this chip. Bill gave users of his new OS a choice they could use the old key prompt system or they could use the new user-friendly, interface called windows. On screen it operated in most ways exactly like the Mackintosh OS and Apple sued Microsoft.

  84. 03/09/2012, Mike wrote

    However, copywriter infringement was impossible. DOS was a completely different operating system, with a completely different directory system, designed and build for a computer chip that had not been around when Mackintosh wrote their operating system. But this was two American companies competing for the same market and Microsoft won. A PC could be brought for as little as £300 and Mackintosh has no other option but to lower their prices to £1000.

    Well Apple is back to it’s old tricks of monopolisation and protectionism. Buy taking Samsung to court Apple is telling the world that Samsung products are really as good as there own, but a lot cheaper to buy. Therefore Apple is extremely worried about the competition. Microsoft’s aim was simple to have their operating system in every home in America. In the end they had their operating system on every computer in the world! Something tells me Apple has just shot themselves in the foot.

  85. 03/09/2012, Mike wrote

    Protectionism will become contagious, will destroy the global market place and isolate America at a time when it least needs it. As for IBM, it really was the big one, but was providing computing for corporate America. IBM went down, because corporate America went down. Most of the hardware for these smart phones are produced by the same Chinese companies and today’s producers are tomorrows bankers. I think you are right, Phil Apple is in big trouble.

  86. 03/09/2012, Ed Dixon wrote

    Apple won’t go bust, but they will paint themselves into a corner in exactly the same way they did in the 90s. To remain competitive, they have to be able to break into the BRICS markets in a big way, but they won’t be able to do that with a phone that costs $600. Either they have to make a ‘dumbed down’ version – perhaps a 4s body with iphone 2 innards and a less expensive screen, or they have to remain in a niche – a very desirable and profitable niche, but one that is declining.

    They have been forced to change their strategy by the Google bandwagon – bigger screens and styluses will be the way of the future and for the first time, we are seeing Apple having to chase the market rather than to lead it. If the iphone 5 or whatever it is called doesn’t live up to expectations (and if it’s just a big iphone 4s it might not), then Apple are in a whole world of trouble.

    They’ve enough of a cash flow from itunes, but less people using their phones will mean this declines.

  87. 03/09/2012, Sach wrote

    Comment to 78/81/82.
    Yes Apple will maintain its “value” :

    1. It trades at a relatively low PE compared to its peers and S&P average too.
    2. It pays a dividend.
    3. A lot of old iPhones are near their contract expiry – so iPhone 5 will soak up all that demand. How many iPhone users will go to Android – not many !
    3. Look at the cash pile – $117 billion … Assume ZERO growth – Apple will STILL add around $50 BILLION cash annually.
    4. One “rough ‘n tough” metric to use for share price : SP ratio to cash : over last 8 quarters, this has ranged between 4 and 6, but hugging nearer 5. This translates to approx $160bn cash in 12 months time – SP : $640 to $960 – but expect nearer $800.

    All JMO of course …

  88. 03/09/2012, JREwing wrote

    @ Rob Bear – Vacuous and puerile according to whom? You? If Apple was hands down producing the best product in terms of value for money, why would it keep losing market share? This is not reflected in sales numbers as the smartphone market is still growing at a fast clip and Apple can keep showing sales growth. But Apple is struggling in the countries where the growth will be greatest (hint: that isn’t the US or Western Europe). In Asia where I grew up and where I travel regularly on business, Apple has a small chunk of a market dominated by the ultra-rich that need to flaunt their wealth. The rest of the market has been swallowed up by Android phones. If Apple was really the outstanding product in terms of money, it would have the majority of the market but it does not. So your comments are falsified not by me but by market share data.

  89. 03/09/2012, JREwing wrote

    cont………..The iPhone may or may not be better but it clearly isn’t so far better that one should pay 3X the price that one would pay for an Android phone with better hardware. Also, Apple is a total money grubbing machine. Here is an interesting story that puts it into perspective:

    http://www.thesun.co.uk/sol/homepage/showbiz/4517317/Bruce-Willis-to-fight-Apple-over-music-rights-after-his-death.html

    This kind of behaviour will do long term damage to Apple’s PR. The jury is out.

  90. 03/09/2012, Rob Bear wrote

    @ Rob Bear – “Vacuous and puerile according to whom?” I think that you have already begun to recognize this yourself.

    “If Apple was hands down producing the best product in terms of value for money, why would it keep losing market share? This is not reflected in sales numbers as the smartphone market is still growing at a fast clip and Apple can keep showing sales growth.”

    You are looking at the wrong metric, if you were to look at profit share you would see that apple has 73% of the mobile industry profits. While Samsung has 26% which leaves almost exactly nothing for the rest of the industry, including all the android licensees. Selling phones at a loss isn’t going to make android manufacturers stronger.

  91. 03/09/2012, Sach wrote

    Don’t forget that iPad can be a huge determining factor in the share price from hereon.

    Have you considered comparing Operating Incomes from Go0gle vs. Microsoft vs. iPhone vs. iPad ?

    If interested, see this link from Horace Dediu’s website

    http://www.asymco.com/2012/08/21/the-interlopers/

    The crucial question remains if and when the iPad will be a bigger business than Google and/or Microsoft. The iPhone climbed over both some time ago.

  92. 03/09/2012, JREwing wrote

    @ Rob Bear – the metric is right. Android market share has increased dramatically. I am not suggesting Apple will disappear tomorrow – its legion of “loyal buyers” in the First World will see to that. The topic of discussion on this thread is the Apple share price, which has priced in existing growth and all the cash and profits Apple has. If Apple is to grow bigger from here, it will need customers in emerging markets where your typical buyer will be unwilling to shell out 3X the cost of an Android phone just to have an Apple product. At that point, Apple hits a brick wall in terms of growth and cannot get bigger. Also, one failure on a new iPhone model will massively cut earnings and profits – and hammer the share price.

  93. 03/09/2012, JREwing wrote

    @ Rob Bear – as an Andoird user, I’d rather keep my money than fatten the balance sheets of a bunch of overpaid corporate executive at Apple. We have different priorities.

  94. 03/09/2012, John Reveley wrote

    JREwing, Dear sir, you seem to be a bitter man, I don’t know why, maybe your business is selling android phones, you deliberate over iPhones breaking screens (I personally know of none, but I am certain it happens), you constantly refer to iPhone a fashion item and although all Apple gear is well designed I doubt the majority of people buy one just because it up’s their street cred. Now you insist that Apple need the emerging markets to survive, I don’t know about that. Many iPhone owners, (well any mobile phone owners in fact) like to change their mobile regularly . Apple will get major sales in the west simply because folk want the latest technology and will buy the new version, maybe the cast offs will end up in the emerging markets, and good for them.

  95. 03/09/2012, JREwing wrote

    @ John Revely – What does any criticism of Apple have to do with “bitterness”? Is Apple above criticism?

    “I don’t know why, maybe your business is selling android phones, you deliberate over iPhones breaking screens”

    I am not the only one saying it. The whole internet is talking about it and there is a class action law suit in America on this already.

    “Now you insist that Apple need the emerging markets to survive”

    Not to survive but to GROW. Survival is guaranteed in the short term due to the loyal fanbase and the cash hoard (see what I said above). The issue is growth. For growth to occur (which will mean selling more than replacement phones for existing buyers), new customers will be needed. Since the West is already saturated, the logical growth area is emerging markets. And in those countries, people are ruthless when it comes to cost. Here the whole Apple proposition falls apart as people do not care about brands (except the rich – and their numbers are small).

  96. 03/09/2012, JREwing wrote

    Here’s a typical Apple customer:

    http://www.youtube.com/watch?v=FL7yD-0pqZg

  97. 03/09/2012, Sach wrote

    @ JREwing :: see this link from Horace Dediu for saturation of smart phones, especially in US ::

    http://www.asymco.com/2012/06/04/trouble-with-the-robot/

    Long way to go for full saturation ….

  98. 03/09/2012, John Reveley wrote

    re: 97 JREwing.

    ha ha ha lol :-)

    Well if that is how the iphone fan world is then Apple should quadruple its share price for certain within the next year. ha ha

  99. 04/09/2012, Rob Bear wrote

    Jrewing wrote- “as an Andoird user, I’d rather keep my money than fatten the balance sheets of a bunch of overpaid corporate executive at Apple. We have different priorities.”

    Read the second sentence of the article

    “A Californian court has ordered Samsung to pay Apple $1.05bn for infringing some of its patents.”

    If your priority is not to fatten apples balance sheet don’t buy an android phone. In future, a large part of your purchase price will go to apple until Samsung and others stop infringing apples ip.

  100. 04/09/2012, JREwing wrote

    @ Rob Bear – “If your priority is not to fatten apples balance sheet don’t buy an android phone. In future, a large part of your purchase price will go to apple until Samsung and others stop infringing apples ip.”

    You must be an Apple employee or a dealer. Your comments are becoming more ridiculous by the minute.

    I think you know nothing about the US legal system. A jury award of $1 billion does not mean that is what gets paid in the end. Exxon were ordered to pay $5 billion in the Valdez case back in the 1990s. The final payout was a small fraction of that. GM were once ordered to pay $5 billion by a California jury for defective pick-up trucks that went up in flames. GM appealed and had the amount drastically reduced. There is a whole system of appeals that this will go through. Also, Samsung just won against Apple in a patent case in Japan. Apple’s tactics show desperation and growing frustration. The rip off model has hit a ceiling.

  101. 04/09/2012, JREwing wrote

    @ John Revely – LOL

  102. 04/09/2012, Rob Bear wrote

    Jrewing wrote:
    “You must be an Apple employee or a dealer. Your comments are becoming more ridiculous by the minute.”

    I wish! It would be great to be selling a product that people were clamouring for and happy to buy at a premium, money for jam and stock options would be great!

    “I think you know nothing about the US legal system. A jury award of $1 billion does not mean that is what gets paid in the end.”

    In this case it would actually lead to more being paid as the ruling will help apple pursue further Samsung products. But you seem to be arguing that the verdict will not affect Samsung, if that is the case why did their shares fall by 7% following their court loss?

  103. 04/09/2012, JohnyBlue wrote

    I don’t get it.
    Those who advocate apple seem to show blind loyalty to a brand that forces you buy all apple or get limited functionality. When something better comes along – and it will – you will have paid vasts amounts of money for something that is outdated, you will have to replace it all or fall behind.
    I refuse to spend vasts amount of money on something that is costly to replace even if I can afford it.

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