Monday, May 28, 2007

Apple Pie


I admit to being somewhat of a Macophile. I'm not blinded, just predisposed toward liking the products and the company. I'm not alone. The "likers" are a subset of the "followers" and it apears there are a lot of followers reading EN. Reader Huck Finn says:

I work in finance as an investment analyst. People love technology and always look and hope for strong returns in the tech sectors. The 90s were awesome; when the tech bubble burst, it really hurt.

As the old saying goes, however, time heals all wounds. Since equities have done so well over the last few years, people are starting to forget the pain of '00 (and '02). There are a lot of people waiting for that big tech rally.

It may happen at some point, but I personally don't think tech is a long-term winner. There may be phenomenal gains for companies like Google and Apple, but the thing about tech: people always want more product/features at a lower cost.

For every Apple and Google of the tech world, there are thousands of dot.com companies that didn't make it.

People hate my anti-tech bias. And, really, I guess I can't blame them. I just love dividends and strong cash flows.

[cont.]

More product and more features is an expense that cuts into profits eventually. The more you offer and the less you charge for it, the higher your sales numbers. Trouble is, it cuts into profits.

Apple is enjoying its (near-)monopolistic state of iPod, but they're going to have to keep rolling out new products that people will upgrade to (iPhone) or they will have to cut costs to attract new buyers.

What happens if/when their new products no longer look like they're worth throwing another $500 toward? How often will people get rid of their new-last-year iPods for the new-this-year-but-spendy versions?

[cont.]

- they have strong brand loyalty, their product line is innovative, they have strong cash flows, etc...

So Apple is probably a bad example in the near term, but it's still part of the technology sector...which makes me nervous.

People may make be making money hand over fist on Apple right now, but I'm not one of them.

I'm a contrarian - and am always very early on my technology bets.
----

Fair statements all. Remember also the codiclies about the differences twixt good companies and good stocks. Throw in the recent Caseylike behavior of so many companies including AAPL regards options and buying sprees, etc. and there's a lot to discuss. I've purposely not said my piece, I'll save it for the comments as my opinions are not worth anymore than anyone elses' and thus I won't abuse my position other than to say the iPhone as Apple's second most interesting product could be the ultimate under the radar technology innovation of the decade rivaling wi-fi.

35 comments:

Anonymous said...

ichiban!

unbelievable said...

First and Murst

TK said...

Moist!

Ogg the Caveman said...

Despite being an Early Riser™, I am not Murst.

Miguel said...

You're certainly right about Apple and Google being very bad examples if you're looking for representatives of the tech sector as a whole - they're doing well at the moment because they have the immense good fortune of a near-monopoly in certain sectors (music downloads, online searching) plus a well-financed commitment to innovation, but as soon as either of those elements gets adversely affected, the whole house of cards could come crashing down.

Microsoft and Apple had major wobbles in the mid-1990s, the former because they nearly dismissed the World Wide Web and the latter because they tried to go mass-market and neglect the innovation side of things. Both recovered (Apple's reappointment of Steve Jobs was a masterstroke, though the famous 1997 Microsoft-Apple pact was crucial too), but they might not have done. Commodore didn't, and I was a huge Amiga fan until the mid-1990s.

Casey Fannnnn said...

The iPod problem is solved! I rarely venture from the house, but when it's necessary, I like a constant MP3 soundtrack as much as anyone. I use a Sony CD player that plays MP3s. It cost $20 at a Target closeout shelf. It has a small LCD for navigation. A set of AA betteries and a recharger cost less than $20 at Big Lots. Blank CDs cost about ten cents and hold 10-15 hours of music. Total cost, 40 bucks plus CDs. Maybe I'm an old stick-at-for-mud, but I don't understand the whole iPod/MP3 player thing. It takes seven minutes or less to pull 12 hours of music from the junk-box MP3 server (which holds 10,000 hours of music and books) and burn a new compilation. It's a weird world in which CDs are seen as clunky, large and old fashioned. Maybe it's a "young person" thing.

Amigas forever! Except, they're dead. I sold my accelerated 1200+accessories on ebay for an ungodly ridiculous amount of money - almost as much as I paid for it many years before!

Anonymous said...

But I bought AAPL at $75 a share and it's now trading at $113! Surely, tech stocks can only go up?

Miguel said...

Amigas forever! Except, they're dead. I sold my accelerated 1200+accessories on ebay for an ungodly ridiculous amount of money - almost as much as I paid for it many years before!

That's good to know - I think a trip to my parents' attic is in order...

0 Comment Swaby said...

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Check me out!

Anonymous said...

Apple? Banana? Berry? Love all those pies. Sorry for the late question on Casey's Friday Talkfest, but I've been busy this weekend. Did LossMitPro ever make it on and have a discussion about loss mitigation and short sales/foreclosures?

king friday the 13th said...

rob dawg,

two things saved apple... 1) ipods / itunes and 2) macbooks / mac os x.

As someone who cut his teeth on an Apple IIe, and was a Mac loyalist through Mac OS 7, I like Apple but it was a pain in the neck to interface with non-apple machines.
Also, Windows NT and Windows XP were arguably more stable systems, so I switched.

Now, I'm back with a Macbook Pro and Mac OS 10.4. Technically, OS 10.4 has a beautiful architecture. I'm not a zealot for any technology; I know enough to know there is no *perfection*. But, the Mac OS is the closest I have seen.

UK said...

I've been a Mac fanboy since 1989, and started buying APPL in July 2006. While stocks can go up and down, I think the iPhone will be revolutionary and a big plus for Apple's bottom line. I don't use my cell phone much, but once I'm back in the US, I'll get an iPhone and use it for internet access while traveling or away from home. My phone bill's going to go up, but probably not up to $200-300/month.

I'm teaching myself Mac programming for fun. I can't wait to see what features will be announced at WWDC.

Mouse And Pencil said...

First Apple was a Apple II - later upgraded to an Apple IIE. Drew my first digital logo in Apple Basic one pixel at a time. (There's 4 stacked in my Dad's closet...)

I've followed Apple all these years, but around system 9.5 I was ready to bail, it was the worst, most buggy piece of crap OS, the machines were'nt much better, and the company was floundering under two CEO's who did not understand the company or culture. The clones were making money hand over fist, but Apple was'nt.

I joined the best test team for OS 7.6, and was on campus the day they announced Jobs was back. The air was electric, people were thrilled, because a buyout by IBM or Xerox or Sony was inevitable, now...hope.

The savior of the Mac was the iMac. Freindly, COLOR, a decent operating system. It took the Mac from the dull beige box world of cubicles and into people's living rooms. It became part of the decor. They were *hip*.

Remember, at that point, computers were *serious*. Dull beige or black plastic, no frills, very boring. The iMac rocked the computer world, and despite the jeers from the dullards in the Wintel camp who called them "fruity" and "toys", they took over. Now Wintels are all japped up with LEDs and paint and colors, and they can thank the iMac for starting that revolution.

Since then, Apple has had ups and downs, but none as serious as before 7.6 shipped (which solved all the issues and was rock solid). They bit the bullet and dropped their antique OS for BSD, and got Mac OSX. They introduced the iPod, and yet again the Wintel world snickered and said nobody would by them, they're too overpriced and the market is dominated by other players...and yet again they were handed their lunch by Apple.

Apple changed their business model with hardly anyone noticing - they became a producer of consumer items, computer gear aimed at the lifestyle, not the job description. They also maintained their dominance in the small markets they dominate in, like publishing and video, and made key purchases of software to do so. They've had one failure, Aperture, because they invoked the wrath of Adobe who responded with Lightroom.

And now the iPhone. Yes, Rob, they are gonna sell TONS of them...if they get onto more systems than Cingular. The effect is already there, everyone is copying them, but I'm waiting to see the real deal -and already decided not to buy one until I can get it on Verizon. I'm iffy on the iPhone only because they're on Cingular, and everyone I know HATES Cingular.

Apple TV is also one to watch. I bought one. It's...awesome. It works flawlessly. On Mac AND PC.

Okay, smug Apple babble over. I love Macs, the Apple culture, and their products. Sue me. I've owned many over the years, along with Wintel machines, and I've never had any Wintel product grab me like Apple's does. There's no bond.

I currently have: Mac G5, 17" Powerbook, G4 Cube (never throw that beauty away), and a few older Powerbooks I aquired along the way.

I've also owned a 7100, G3 Beige box, Mac II, and a few others I can't remember.

Mouse And Pencil said...

Please ignore my typos above, especially the "japped" one, that was supposed to be "jacked" - apologies isf anyone is offended, that's a word I've never used.

Lou Minatti said...

"Maybe I'm an old stick-at-for-mud, but I don't understand the whole iPod/MP3 player thing."

Most people don't want to buy the whole CD, they want to buy individual songs. You can't fit more than 10-15 songs on a CD. Further, the podcast medium is exploding. It's a huge convenience factor - few people are gonna download their daily podcasts and burn them on to a CD every morning before heading to work. Most podcasts are listened to once, just like radio. Seems rather dumb to burn a new CD each morning then throwing it out once you've listened to it.

You don't have to use an iPod to do this. Apple simply has better product marketing and design. Moreover, they have iTunes, which ties it all in.

If the other vendors ever get off their asses and figure it out, the iPod will have some real competition. SanDisk is the only manufacturer that comes close.

Miguel said...

First Apple was a Apple II

So was mine, way back in 1980. I jumped ship in the late 1980s to the Amiga, but came back to Apple in early 1998, when it was clear that the Amiga had no future. (I'd been using a surprisingly effective Mac emulator for a good couple of years before that, though)

Which handily meant that I missed out on all the upheavals of the 1990s.

ou don't have to use an iPod to do this. Apple simply has better product marketing and design. Moreover, they have iTunes, which ties it all in.

That's the thing that non-iPod owners have difficulty grasping - true, there are loads of other music players that can superficially do what the iPod does, but I've yet to see a single one that's as intuitively easy to use.

Nigel's Publicist said...

I had a ton of macs back in the system 7 IIxx days, really good machines I thought, loved em. However even at the time my aging amiga had way better games to play and so did PC's - for someone that went on to become a game programmer that was always a dealbreaker. I've owned a few ipods but never another mac and tbh, when i finally shake free of MS, it'll be to Ubuntu or some flavour of linux rather than apple. Apple would be just as monopolistic and controlling as MS given the chance, it's only Jobs' reality distortion field that somehow fools people into thinking they are so benevolent and nice - if you want to see how nice Jobs really is watch Pirates of Silicon Valley some time, he is just as ruthless as Gates.

The Iphone will be interesting to watch, i must say i have my doubts though. For starters it will be awful for playing most games on, due to the touch screen. How much this will affect other apps is debatable. However, and this is a big downer, there is no way of putting your own software onto the iphone (so i've heard) it's a closed platform. This makes it very limited in my eyes, although given my job is making software for phones i do have a slight bias :) Battery life is my main other concern, you cannot run a big screen like that for long without depleting your battery - but then how do you make a phone call? Until i get my hands on one i'll be reserving judgement though, it does look like a nice piece of tech.

Miguel said...

Battery life is my main other concern, you cannot run a big screen like that for long without depleting your battery - but then how do you make a phone call?

The iPhone has two batteries - one for calls, the other for the other stuff.

segfault said...

I gave up the gaming thing a while ago. It's more interesting to read stuff on the Internet...

Apple, in some ways, is like a version of communism that actually works. They control the hardware and software, and you trust that everything will work well together. They tell you the price you will pay (retail for most people, and about 5% off for students and educators), and you will like it. You might get a free printer, but that's about it.

They don't compete in the low-end of the market ($500 PC with printer and monitor). You won't buy a $1500 iMac one day and see it discounted to $1000 the next day--I've seen similar things happen with Dell's online store.

Because they are always pushing the edge of the technological envelope (and avoiding the low end), there is little pressure to make things cheaper. If you buy a new, mid-level Mac, you'll probably pay about the same you paid three years ago for a new, mid-level Mac, but you'll have bleeding-edge technology instead of three-year-old tech.

Miguel said...

That's not entirely true - MacBooks are significantly cheaper now than they were a year ago, when first introduced (I should know: I bought one then and am using it now!)

But one of the reasons I'm a Mac loyalist is because of their predictability - every time I get a new one (and I generally change either my desktop or laptop Mac once a year), I can be reasonably certain that it will work straight out of the box in exactly the same way, and I can make a seamless transition.

Even the switch to Intel was remarkably painless - and it's nice knowing that I have the option to run Windows, even if I've yet to try it out.

Sprezzatura said...

I'm planning on switching my home desktop to a Mac sometime this year, probably when the new iMacs come out (oh please let that be soon!).

The craptastic Vista was a big reason why. No way I want that ... thing .... on my computer.

And the advent of Boot Camp means I will not have to give up my favorite games, either. Yay!

The Scripter said...

@Casey Fannnnn (7:12 AM)
Granted your ~$40 solution gets the job done (DiscMan + batteries + recharger) but I've been dissatisfied with my DiscMan because:
1) It skips - newer models are probably better?
2) The battery life! I'm lucky if I get 3hrs! Maybe they are more efficient now (mine is from the mid-90's) but the energy required to spin that disc would seem to be much more than just push electrons around in the flash-based iPod Shuffle and iPod nano. (no moving parts except headphones) It looks like most iPods get over 10hrs battery life! - http://www.ipodbatteryfaq.com/#7
With iPod shuffles on eBay for about $60-$70 I'm not sure your solution is any better?

BadjerJim said...

This may get lost (with a newer higher post) but I hope not.

One of the great usung Apple products is the Nike+ iPod Sports System. I started runnig for exercise about 2 weeks ago, and I have to say: this is the coolest product to come along in a long time.

Put a transponder in your running shoe. Plug a dongle into your iPod Nano. And you have an instant "workout coach" through the earphones, all along with your favorite music. Thenwhen you sync/charge the iPod, the workout data is transmitted to a website where you can track your progress.

All ths for $29 (plus the cost of an iPod Nano). (You don't have to use Nike shoes.)

I have to confess that this is the coolest tech product that crosses over into daily life that... well, I'm blown away.

Mouse And Pencil said...

@Nigel's Publicst

Yes, Jobs is an ass - but he's a successful ass. Gates is no bed of roses to work with either, and my father worked directly with both of them. (He was VP of a company that had heavy ties to Apple and MS)

The Pirates movie is mostly fiction. My father watched it, snorted, and said it was a wonderful fairy tale, but they got most of the facts wrong, embellished the rest. He knew most of the players in the movie, and was in a position to know.

There's a lot of urban legend repeated in that movie as "truth". Caveat Emptor.

Casey Fannnnn said...

Re:
>>...I've been dissatisfied with my DiscMan because:
1) It skips - newer models are probably better?
2) The battery life! I'm lucky if I get 3hrs!...
With iPod shuffles on eBay for about $60-$70 I'm not sure your solution is any better?<<


Ah. Good points. My purchase was in 2003, when the iPod situation was considerably different and pricier.

The Sony unit doesn't skip with MP3s. Buffered, I guess? The disc spins more slowly for a data disc of MP3s, than the 300rpm of CD audio, I think. Maybe. Thus, longer battery life than when playing CDs. I get four hours, at least. There may be more power, but I haven't played it longer.
If I was buying a portable MP3 solution today, an iPod of some variety might make sense. Or I might pop for one of those crappy Weird Brand $40 2-gig solid state USB-plugin units from Big Lots. I know people who bought them on a lark and were surprised that they worked well. I hear they have finite I/O life, but at the price they look interesting.

Re:
>>Most people don't want to buy the whole CD, they want to buy individual songs. You can't fit more than 10-15 songs on a CD.<<

I'm talking data discs with MP3s, not CDAs. Depending on bit rate , you can cram a lot of stuff on a CD. With mono, low-fi, books on tape, I've packed forty hours on a CD. Music, of course, demands more bit room.

Sprezzatura said...

@BadjerJim -- I joined a new health club today, I'm off shortly to go get a pair of Nikes and an iPod/Nike kit as soon as I'm done eating lunch.

@Mouse and Pencil -- I have very fond memories of some 30 dot-commers jamming into a living room back in NYC to watch that show, drink, and generally enjoy ourselves. We didn't care if it was true or not, it was entertaining.

EZ Money said...

When buying stocks you want a near monolopolistic company. Apple doesn't give away divendeds because they put there money into research and delveopment. Granted you problably don't want to hold on to the stock for a long time, and tech changes every 5 years? It's generally a good idea to get out before the bear market hits. If anything Apple more of a momentum play then a value play IMO.

Mouse And Pencil said...

The *best* portable unit I ever had was a Sony MD Walkman:

http://www.amazon.com/Sony-MZ-N505-Walkman-Player-Recorder/dp/B000065CE1/ref=sr_1_8/104-2622926-4909557?ie=UTF8&s=electronics&qid=1180401359&sr=1-8

One AA battery which would last weeks, massive storage on fairly cheap disks, or rip the album lossless, would NOT skip (I dropped it all the time), patched into my car stereo it blew out my speakers, and could also be hooked up to a home stereo and sound incredible. (if you did'nt rip mp3 - mp3 sucks period). It was releatively small, very light, somewhat bulky for working out but i found a lanyard, like the kind backstage passes or conference id tags come on worked best.

BUT

THE worst interface ever, and you had to use the incredibly bad and slow Sony ATRAC format, so you had to rip your songs to their format, put them in a library, and then "check" them out to ONE player. (Early bungling attempt at DRM).

I heard the newer player dropped the ATRAC, but havent followed up on older players. Mine is still sitting in a drawer, still works, I take it outto record client's rehearsals and shows occasionaly. (The record function is also very cool, if you record shows).

Not as sexy as an iPod, but overall the best player. Mebbe I;l dig into the web and see if they got it working without ATRAC yet.

1000 a weak said...

I had a collection of AAPL but sold it on its current meteoric rise. I think I bought at 30 and sold at 85. But that's neither here nor there.

More product and more features is an expense that cuts into profits eventually. The more you offer and the less you charge for it, the higher your sales numbers. Trouble is, it cuts into profits.

Here's the thing: Apple has huge margins on their hardware. As in, they could cut the price of almost all of their hardware by 30% and they would still make a ton of money. Ironically, Apple's operating system is based upon 30-year-old technology that is, for all measures, free. They have managed to do what only one other company in history (Be, Inc) was able to do: make Unix actually usable by your grandmother.

What happens if/when their new products no longer look like they're worth throwing another $500 toward?

That's the great thing: this day will never come. Most sales on the iTunes store are of tracks that people already have on CD. Think about that for a minute-- people are buying tunes that they already own, and downloading them at a lower quality than what they would get if they spent 30 seconds to put a disc into their Mac/PC. As Tommy Lee Jones said in Men In Black, guess I get to buy the White Album again.

If anything, the technology race is accelerating, and more and more products that are worth spending $500 on will be out next year. About eight years ago, I had to explain to airport security what the 32MB Diamond Rio MP3 player was that I was lugging around. Eight years from now, who knows what products that have yet to be invented will be ubiquitous.

I won't abuse my position other than to say the iPhone as Apple's second most interesting product could be the ultimate under the radar technology innovation of the decade rivaling wi-fi.

You know what, though, the iPhone isn't even the ultimate innovation. It's the application of interface onto an existing technology. If you want under the radar, look at AppleTV. The raw hardware power of that little box is making a lot of companies very nervous. With one software update, Apple could wipe Tivo off the map. With another, Netflix. Hell, that little box could destroy entire cable and satellite providers.

Apple is the ultimate bad example of the technology sector, mainly because A) they know what the hell they're doing, and B) they have a big bank account, so they don't have to listen to investors. Their primary shareholders are all enveloped by the Steve Jobs Reality Distortion Field, so there isn't the call for hand-over-fist YOY increases that a lot of tech companies get.

Apple is probably overpriced right now. iPhone runaway success is priced into the stock. The next revision of OS X will have some good features, but won't be the change that 10.4 was over 10.3. But I would be very very careful in investing in any company that was even remotely in Apple's sights. RIM? Dell? Nokia? Sony? Very dicey.

Marty said...

Apple makes very pretty and expensive products. There are way more ipod copycat products sold than ipods because you can get them at fraction of the price.

Price is king.

The iPhone has pichable icons so that you can shrink them and a large pretty video screen. Now get on the internet - something all phones do today. Whoops!

Also, I'm a homophobe and they all like macs. I don't wear pink dress shirts either.

Mouse And Pencil said...

@1000 a week:
As far as we know, the next revision of the OS is a minor upgrade compared to Tiger, but there are features they havent announced yet, and I hear things...

Also, the key to the iPhone, and why I would get one, is the integration with the OS. That's also what makes the Apple TV so cool - I opened mine, and in 3 steps had it connected to my network and itunes library, and was watching movies and accessing my music library. The iPhone will hook into the OS in ways a phone from Verizon can't - and in ways I really, really want and need.

@Marty:

You are a very sad person.

And just FYI, I know a lot of gay folk, you tend to run into them living in the Bay Area, and i have gay family...all of them, as far as I know, use Windows machines.

But beyond that, George Bush and Rush Limbaugh use Macs. Does that make me a Republican?

Oh, yeah, Al Gore is on the board of Apple. Whoops.

Don't buy one if you don't like them, but if you think using a Mac makes you "gay"...which in and of itself makes me laugh my ass off, as I personally know a lot of most definitely NOT gay rawk stars, actors and sports figures who use Macs...but beyond that, how pathetic is your self esteem if you think buying a Mac will change your sexual orientation.

Wow, man. Just wow. I'm laughing my butt off over here, you have to be trolling!

Huck Finn said...

That's the great thing: this day will never come.

I heard this a lot in 1999.

A lot of my clients at the time were mad at me for making them stick to their target asset allocation, which which was set up long before the tech rally and often included a 30% to 40% stake in bonds.

They hated me then, but were pleased eighteen months later.

Only one of my clients refused to take my advice. He was set to retire in about a year and had 90% of his holdings in his company's stock, a tech company. It started to slide in early 2000 and I really, really, really pressed him to diversify. He refused.

He lost 80% of his retirement assets over the course of eight months.

But like most investors, he stubbornly believed that the company would recover and STILL wouldn't give up on the stock.

Last I heard, he's still working - 7 years after his initial goal.

Nothing is a guarantee and I shudder when I hear someone say something like that about a company or product.

Casey Fannnnn said...

RE:
>>Don't buy one if you don't like them, but if you think using a Mac makes you "gay"<<

Hm. Gays, as a group, have more success and a generally higher profile than the general population, IIRC. However, for better or worse, there exists a highly visible minority of gays, mostly male, who are flamboyant, louder, and more showy than most people, and engage in that behavior with deliberately questionable taste that indicates a profound sense of humor, sensitivity, and bittersweet acceptance of life. Ya know, campy. "Gay" always seemed like a shorthand description that was powerfully evocative and short, a characteristic of good, concise, communication. Saying a pink, translucent plastic computer looks "gay" is not a condemnation of gays, but an immediately comprehensible reference to the most salient traits of a fascinating subculture. Joel Schumacher's BATMAN films were monstrously gay. Tight pink bell bottom polyester pants on a fat guy are monstrously gay. Or thats the way I hears it, anyway.

Marty said...

@Mouse and pencil

No it does not mean that you are a republican but it DOES means that Rush and Al are indeed gay. Totally gay. Just as I thought.

And yes, I am trolling. How did you ever guess?

Anonymous said...

Great post. I've been working in IT for 11 years now. I remember the dotcom bubble in 1999 or so where everyone and their grandma was taking an HTML course to get those "sweet" $50 an hour web design gigs. I told these sheeple that the industry would mature and that there will be a huge glut of unemployed techies with signs that read "will do HTML for food" within 3 years. Everyone thought I was INSANE for questioning the orthodoxy of the so-called "New Economy".

I survived the dotcom crash somewhat--I stayed employed because I was in a job that didn't pay much and I decided it would be prudent to not ask for a raise. I prefer a steady paycheck (even at below-market rates) than the uncertainty of always trying to find temporary consulting work.

As for my 'clairvoyance', I can't really say that I'm a genius or anything. I was simply citing a precedent regarding the home computers/video games crash of 1983-1984 -- I read a lot of home computing magazines as a kid (Compute!, Ahoy!, Gazette, etc) and that is how I learned about the boom/bust cycle of the tech sector.

The tech sector has recovered somewhat and I would argue that we might have reached another plateau (albeit, not as high as in 1999) and we'll see another bust cycle within a couple of years.

I love technology, but it is the only profession where it's workforce is working towards making their own jobs and functions obsolete.