Apple, Google, And Legalized Gambling

Based upon how well both Google and Amazon are doing in the stock market the past couple of years, I’ve determined that much of the investment community is rigged. Either that, or it’s a form of legalized gambling controlled by a mob of very rich people who only work to get themselves richer and to hell with everyone else.

Hear me out on this. Let’s look at Apple and Google. Apple’s stock, despite a profit to earnings ratio that is utterly and ridiculously low, has been mostly paralyzed for more than a year, despite Carl Icahn’s $4B purchase of AAPL and the influence that brings on the market.

Apple Stock - 2014-02-12

Apple is obviously a well run company and has been for many years, whether under co-founder Steve Jobs’ reign or that of current CEO Tim Cook. Every leg of Apple’s multi-legged business is solid. Mac, iPhone, iPad, Apple Stores, iTunes Mall. Everything makes money.

Additionally, Apple has a well-earned reputation for disrupting business unlike any other. The Mac disrupted the PC industry. The iPod disrupted the portable music industry. iTunes disrupted the entertainment and application industry. The iPhone disrupted the smartphone industry. The iPad disrupted both tablet and PC industries.

Alright, now compare that against Google and GOOG.

Google, despite spending tens of billions of dollars on research and development, and the ill advised purchase of a number of money-losing companies (which had to be jettisoned), all with a desire to disrupt, expand, and become diversified, looks more and more like Microsoft each day.

The search giant’s revenue and profit– well over 90-percent for each– comes from the same source it has always come from– advertising. Even in mobile advertising, for which Google has spent tens of billions of dollars on Motorola, patents, and Android, most of the revenue and profits come from Apple’s iOS devices.

Google is the ultimate one-trick pony company. Yet, the stock market thinks otherwise.

Google GOOG - 2014-02-12

Put a simpler way, Google is being rewarded for sizzle but no steak. Apple is being punished for delivering both sizzle and steak. Does that even make sense? Google does not have a reputation or a history of upending industry markets but is being rewarded as if it has. On the other hand, Apple, which has a stellar reputation for growth, revenue, profits, and industry market disruptions, is being punished because of what it is.

Very successful.

One can only conclude that the stock market as we know it is run by rich charlatans as their own personal gambling casino. Otherwise, investors are idiots.

Why Investors Love Google, Not Apple

Thomas H. Kee, Jr. on why Google tops Apple in the stock market.

Google has become the darling of tech investors of all types, from institutional investors and fund managers all the way down to mom and pop.

Why?

It’s well diversified, its business model is open source in many ways and it isn’t directly subject to the whims of fickle consumers like Apple is because what they provide comes in all sizes, shapes, and forms — not just in a few gadgets.

Let’s see, almost 90-percent of Google’s revenue and almost all of the profits are tied to… drum roll, please… advertising. How is that considered diversified in the face of Mac, iPhone, iPad, iTunes, Stores, et al at Apple?

Kee wanders into mumbo jumbo land for a few paragraphs but never really says anything beyond the ludicrous.

Apple ebbs and flows on the demand for iPhones, but Google is in much more than just the phone business.

Google’s ‘phone business’ is a tiny sliver of the company’s revenue and profits, the vast majority of which come from one line item: advertising. Personally, my view is that the stock market is little more than legalized gambling, often run by charlatans. How well a business is run (growth, revenue, profits, etc.) has little bearing on the stock price.

Apple’s R & D Expenses Since 1995

Yoni Heisler did the grunt work to graph Apple’s Research and Development expenses since 1995:

Apple R&D Expenses

What I would really like to see is a comparison of R & D expenses related to profits, and then compared to other companies that compete against Apple.

The real reason Macs never got in the enterprise

The always entertaining Ed Bott with six reasons why the Mac never made it in the enterprise.

Spoiler Alert!

  • Enterprises run on Windows
  • Macs are expensive, IT budgets are tight
  • Office is a second class citizen on Macs
  • Desktop PC isn’t dead
  • Macs won’t manage themselves
  • No long-term support from Apple

What about the post-PC era?

These days, of course, Apple’s efforts are focused on mobile devices. The iPad line outsold all Macs by a margin of better than five to one last quarter and is beginning to approach PC shipment levels. And Apple is quick to note that most enterprises are now allowing iPads inside the corporate network.

Apple’s iOS devices lead Android devices deployed in the enterprise by a two-to-one margin.

All That’s Truly Wrong With Apple TV

Ah, Apple TV. Where shall I begin? If ever there was an Apple product that doesn’t get much love but sells well anyway, it’s Apple TV. Only Apple knows for sure how many Apple TVs have been sold or are in use today, but it’s obvious the cute little device has a certain attractive anemia.

That means Apple TV does enough to be interesting but everyone can come up with ways to make it better. Too many of the channels on Apple TV require a cable TV account to view, so what’s the point? It’s not like you can cut the cable TV cord, so to speak, and watch the same thing on Apple TV while saving money every month.

Don’t get me started on the dearth of useful channels. Sure, Korean TV soap operas are all the rage these days, but that only highlights Apple’s TV problem. The latest Apple TV channel commemorates the 50th anniversary of The Beatles’ debut on the Ed Sullivan show. Talk about pandering to the baby boomer couch potato generation.

Of course, The Beatles channel highlights exactly why Apple TV is there, and why it doesn’t do much. The money trail. The Beatles channel links to music on the iTunes Music Store. Apple TV is there to sell music, TV shows, and movies. Again, only Apple knows how well it does what it does.

What else is wrong with Apple TV beyond the limited channel selection? Apps. Even Google has tossed out API’s so developers can create applications for their Apple TV wannabe, once called Google TV, but was such a hit that Google slashed the price and form factor and changed the name to Chromecast.

If you haven’t tried Chromecast, don’t bother. As anemic as Apple TV is, Chromecast is positively anorexic.

All Apple TV needs to make it great is content. Shamelessly on-demand content. And not just left overs that cable TV networks don’t want. Content. All of it. All TV shows going back forever. All movies. Even live streaming content. Content on demand.

Otherwise, put a DVR into Apple TV and let us record what we want from both the internet and cable TV (instead of paying the cable TV company by the month for the privilege of using their built-in DVR).

Sure, the cable TV networks wouldn’t like it, but it’s not like they care about their customers anyway.

What else is wrong with Apple TV? Besides content selection, the interface is simpleton simple and annoying slow to navigate from here to there. Give me a real iPhone and iPad app with Siri integration and let’s make Apple TV fun to use.

Where Does The Money Come From?

Ed Bott has a bunch of great graphs which show where Apple, Google, and Microsoft get most of their revenue. What’s missing is a similar graph which displays where the profits are. That would be more revealing.

Apple’s New Team

Mark Gurman has a look at Apple’s executives, old and new. The new team faces give Apple watchers an idea as to which product categories the company may move into soon.

In addition to the hundreds of skilled hardware and software engineers already at Apple, this group of recent hires shows that the company is planning to enter the wearable fitness and health device market in a major way. With Apple openly posting a job listing related to testing fitness and health devices… the question is no longer if Apple is building a smart watch, but it instead becomes when will Apple introduce the product?

Think health, fitness, and fashion.

Apple’s New Categories

Apple CEO Tim Cook in WSJ:

There will be new categories. We’re not ready to talk about it, but we’re working on some really great stuff.

As to spending big money on an acquisition:

We’ve looked at big companies. We have no problem spending 10 figures for the right company, for the right fit that’s in the best interest of Apple in the long-term. None. Zero.

Fraud At NBC

The real details on NBC’s fraudulent security issue at the Sochi Olympics from Robert Graham:

Yesterday NBC News ran a story claiming that if you bring your mobile phone or laptop to the Sochi Olympics, it’ll immediately be hacked the moment you turn it on. The story was fabricated.

I saw the story on NBC News. Shameful and as bad as Fox News.

Apple On Top: Is The U.S. Smartphone Market A Glimpse Of The Future (or, an anomaly)?

Another day, another graph which shows Apple’s iPhone taking a beating from Android in the worldwide smartphone market. Yet, there’s a graph and some tracking data research which shows Apple’s iPhone gaining marketshare against Android smartphones.

What’s going on?

Is the U.S. market simply an anomaly which deviates from the worldwide trend, or, based upon the iPhone’s dominance in Japan, a harbinger of things to come– a growing affluence which bodes well for Apple’s smartphone marketshare in the future?

ComScore, another of those research and tracking companies that follow the technology industry, says the iPhone owns about 42-percent of the U.S. smartphone market, while Android devices dropped to barely 50-percent. BlackBerry and Windows Phones make up much of the other category.

Interestingly, AT&T, Verizon, and Sprint, have reported in the past year that the iPhone was their number one selling smartphone, which means Samsung’s Galaxy line is in second place and falling behind? Falling behind?

What’s going on there?

In the U.S. and other affluent countries, Samsung is caught in a squeeze with pricing pressure from Apple as the premium brand above, and pricing pressure on similarly equipped Android smartphones below Samsung. The Samsung brand hasn’t been able to gain the same level of brand caché as Apple commands.

Worldwide, Android smartphones hold a huge lead over Apple’s premium iPhone, but that is not the case in many affluent nations. Over 70-percent of smartphones sold in Japan are iPhones.

Is the smartphone situation in the U.S. and Japan indicative of Apple’s future against the Android juggernaut? Perhaps. Not only is Apple famous for disrupting these industries– PCs, smartphones, tablets, music, apps, and retail stores, the company has also disrupted the cell phone industry.

In nations where the dominant cell phone carrier does not sell the iPhone but competing cell phone companies do, their growth and profits are often stymied. When the larger carriers begin to sell the iPhone, that sets off more competition, which results in lowering the customer’s initial barrier to entry for Apple’s premium priced iPhone.

Win. Win. Win.

For Apple, the cell phone carriers, and customers. For Apple’s competitors, not so much, as they’re required by growing competition to cut prices on products which already have slim gross margins. As China, India, and other populous nations with price conscious smartphone buyers, Apple initially looks to be too expensive, hence a lower marketshare. As those populations migrate to middle class, though, Apple, the premium brand with inherent caché begins to prosper, while cheaper Android device makers struggle to survive with ridiculously low product margins.

Apple Nostalgia

This isn’t a first for Apple, but it’s something mostly unseen during the second coming of Steve Jobs. A reflection of the past in the 1.24.14 television commercial, shot entirely using iPhones. Steve Jobs:

I think if you do something and it turns out pretty good, then you should go do something else wonderful, not dwell on it for too long. Just figure out what’s next.

Apple seems to be doing more looking back recently.

Gates Out, Nadella In, Gates In Again

Microsoft named insider Satya Nadella as CEO. Co-founder Bill Gates resigned as Chairman, but decided to stick around as Founder and Technology Advisor. You know, just in case.

More Copying From Korea

This time it’s not Samsung copying Apple, it’s North Korea. Martyn Williams:

If imitation is the sincerest form of flattery, might the folks in Cupertino be pleased when they see the latest version of North Korea’s home-grown operating system?

Version 3.0 of Red Star Linux presents users with a radical refresh of its desktop design, one that closely resembles Mac OS X. The new look replaces the Windows 7-like desktop that was used in version 2.0 of the software.

Is this kind of blatant copying something inherent in Korea (North or South)?

Example of Korean Copying OS X

Sigh.

Apple’s Invisible Product Pipeline Might Be More Visible Than Critics Think

Back in 2012, a few months after Steve Jobs died, newly crowned CEO Tim Cook told analysts that Apple had some amazing products in the pipeline. We waited until 2013 and Tim Cook said the same thing. Amazing products are coming. Now it’s 2014 and guess what? Tim Cook’s song is the same. Amazing products are coming.

Either Cook believes that products with modest upgrades constitute amazing products in the pipeline or he’s biding his time until the company’s inherent vision catches up with technological capability.

Apple hasn’t released a product roadmap and other than the Mac Pro, nothing really new and different since the iPad in 2010.

Are the products in Apple’s product pipeline for real?

The company that always seems to Think Different might be leaving clues. For example, Apple hired Angela Ahrendts, the famous Burberry’s chief, to run Apple’s retail stores. Think upscale retail. Apple hired Dr. Michael O’Reilly, former CMO and EVP of Medical Affairs at Masimo. Think health products. Former CEO of Yves Saint Laurent is now Apple’s VP of special projects. Think wearable devices. Apple also hired Ravi Narasimhan from a health sensor company, and Nancy Dougherty a highly touted engineer whose products include health monitoring equipment. Think medical devices.

It’s possible that all these hires are a smokescreen and Apple’s product pipeline is absolutely stark naked empty.

I don’t believe that for a New York minute.

Apple’s products fall into the affordable premium category, but are decidedly upscale from the riffraff of Samsung, Microsoft, Amazon, et al, so we should expect future products to be in the premium segment as well.

Wearable devices of all kinds come to mind, including the long awaited iWatch and iGlasses, but others like iMed could easily move Apple into the rapidly growing health products industry, a business segment where Apple can do what it does best– leveraged integration with other Apple products.

It doesn’t take much imagination to see that Apple’s future products are beginning to take shape. There’s visibility this year where there was only invisibility last year.

Google Plus Is Not Dead (yet)

From way back when, Dave Llorens says Google Plus is just all part of the company’s grand plan.

99% of the people in Silicon Valley I’ve talked to about this, including some very, very bright folks with quite a bit of money and clout, will tell you that Google Plus flopped. They have, in their own minds, written it off entirely. The remaining 1%, while willing to consider that it didn’t flop, are still so tepid that they refuse to stake any credibility on saying it will be successful (which I would measure as having the same level/range of active users as the other big social networks like Facebook, Twitter, LinkedIn, etc.). Articles written by that 1%, like this one, are all chock-full of “mights” and “maybes.”

Google force feeds Google Plus to users so ‘success’ of some sort is probably guaranteed, but the social component is hardly competitive with Facebook.

But I’m willing to stake my reputation on the following statement: If Google Plus doesn’t have a staggering number of active users by the end of 2013, you can all come over to my office and pie me in the face.

What’s your address, Dave?

Chromebook Month

ZDNet’s Kenn Hess is ready for a month-long trial using a Chromebook.

For the entire month of February, I’m going to use my Chromebook exclusively for everything** business and personal. My experiment’s hypothesis is, “Can I survive for one month with just a Chromebook?***”

Notice the heavy use of asterisks?

**Exception: My day job.
***No iPad, no Mac mini, no other PC.

Sounds like fun.

Reviews of various Chromebooks on Amazon are usually good, considering the price tags on the most popular models which range from $199 to $350. They’re much like tablets with a keyboard and limited apps.

Apple Store Body Odor

Rocco Pendola found an odd smell coming from Apple’s new store in Santa Monica.

I call it a “known issue” because I spoke to two Apple Store Santa Monica employees this week who confirmed, without hesitation, that the store, at times, does indeed stink. When I asked one employee about it, this employee chalked it up to “human beings.” Lots of them. Lingering and loitering.

The Apple Store I frequent the most is the flagship store on 5th Avenue. It smells like New York.

Android Unraveling

What a week for Google. Patent deal with Samsung. Motorola sold off. Missed earnings. Yet, Nancy Gohring thinks Android is unraveling.

Google will continue to cede control of Android to others who have figured out a way to piggyback on Android for their own profit.

Huh? Yes, there are lots of Android forks that don’t benefit Google, but Samsung isn’t one of them, and probably the only one making a profit on Android-based smartphones and tablets.

The Good News About Apple’s Stock Price Drop

Apple reported record revenue and profits. Again. And AAPL dropped like a rock on the market. Again. Is there anything good to take from all this?

Yes.

Investor Carl Icahn took a bath on his AAPL holdings. I don’t want to rejoice in the misery of others, but in his case I’ll make an exception.

Whether Icahn thinks Apple is still a growth story or not, his investment has probably helped to run up the stock in recent months, and despite the post-earnings downturn, his strategy is as obvious as a three-legged stool.

  • Help to run up the stock price and cash out with a healthy return
  • Sit on AAPL until the company hits another growth run with new products
  • Squeeze Apple for a larger stock buyback and go home richer

Apple has hit a wall of sorts. When a company runs past $100-billion in annual revenue it becomes more difficult to grow by 10-percent a year, let alone the 25-percent that Wall Street charlatans prefer.

Therein lies Apple’s problem. Growth.

Forget the fact that Apple is wildly profitable, has trouble meeting new product demand, or that customers love both the company and their products. Forget the fact that Apple, even with enormously ridiculous buybacks, sits on over $100-billion. Forget the fact that Apple is highly diversified with multiple profitable revenue streams that are unmatched by any competitor (Mac, iPhone, iPad, iTunes, retail stores, app stores).

From my perspective, Wall Street rewards risk and growth and, at least for now, Apple is neither. The company is viewed as safe if not stodgy, predictable if not passive. How well a company is run or how much profit it can squeeze out of a product line is unimportant to the miscreants of Wall Street.

It’s all about growth and Apple isn’t growing as much these days. Still, it was good to see Icahn take a bath (although I’m sure he found the recent drop to be a buying opportunity, too).

The Golden Age of Smartphone Profits

Nitin Bhas opines the golden age of smartphone profits may be coming to an end. That can’t bode well for those smartphone makers who have yet to turn a profit.

The shift in the smartphone market away from focusing on the high margin, mature North American and European markets to the far less saturated emerging markets, and a growing split between the mature and emerging markets, will become evident

Duh.

Who, besides Samsung and Apple, actually makes a profit on their smartphones?

Wireless Charging For iPhone 6?

The rule of thumb for headlines is, ‘If it ends with a question mark, the answer is no.’ Chris Smith has details on the potential for an iPhone 6 with wireless charging capability. How? Sapphire screens.

Sapphire glass will actually include tiny solar panels that would help you charge iPhone batteries by simply using the power of the sun. Matt Margolis says the iPhone 6 and the 2014 iPod touch (if there will be one) may come with a display capable of increasing battery life.

What’s really impressive with this somewhat far out look at keeping an iPhone powered is that it’s not as far out as today’s iPhone 5s is from the original iPhone.

Apple: Big Numbers, Stock Dives

Apple’s latest quarter set another record for revenue, profits, unit sales.

The Company posted record quarterly revenue of $57.6 billion and quarterly net profit of $13.1 billion, or $14.50 per diluted share. These results compare to revenue of $54.5 billion and net profit of $13.1 billion, or $13.81 per diluted share, in the year-ago quarter. Gross margin was 37.9 percent compared to 38.6 percent in the year-ago quarter.

No other company in the tech sector posts numbers like those. Or, these.

The Company sold 51 million iPhones, an all-time quarterly record, compared to 47.8 million in the year-ago quarter. Apple also sold 26 million iPads during the quarter, also an all-time quarterly record, compared to 22.9 million in the year-ago quarter. The Company sold 4.8 million Macs, compared to 4.1 million in the year-ago quarter.

Apple’s reward? The stock dropped.

30 Years Later: How 2014 Could Be Exactly Like 1984

Yes, I plan to watch the Super Bowl. Why? The TV commercials. The game might be interesting, but it’s the television commercials that everyone else will be talking about for days afterwards. Besides some entertainment sprinkled throughout the game, what am I looking for?

A glimmer.

A glimmer of hope.

A glimmer about Apple’s newest product (or one of the oldest).

It’s been 14 years since Apple ran a commercial in the Super Bowl. One of the greatest Super Bowl ads ever was Apple’s introduction of the Mac back in 1984. Apple surprised the world with the Mac in 1984 and 30 years later the Mac lives on, stronger and a better value than ever.

What makes me think that Apple might advertise in this year’s Super Bowl? Advertising legend Lee Clow dropped a hint on Twitter.

Gonna be a good Super Bowl. Mac’s gonna be 30.

That’s not much to go on which is why it’s in the glimmer of hope category. If anyone outside of Apple would know, it’s Clow, who co-created Apple’s legendary ’1984′ TV commercial.

Let’s assume for the moment that Apple will advertise in the Super Bowl. What Apple product will be advertised? Mac? iPhone? iPad?

Or, something new?

In the ’1984′ TV commercial Apple advertised something new. If Apple advertises the Mac again, then the company could be accused of jumping the shark; looking backwards, glorifying the past and the accomplishments of history; not looking forward to the future (a Steve Jobs thing).

If Apple advertises iPhone or iPad in the 2014 Super Bowl it is merely taking advantage of a huge worldwide viewing audience (particularly one that pays attention to the commercials), and that’s certainly acceptable, but nothing out of the ordinary.

So, back to the glimmer of hope. What better time for Apple to introduce a new product than with a commercial in the 2014 Super Bowl, 30 years after the Mac was introduced?

It could happen.

Now, if Apple does introduce a new product line, what will it be? iWatch? iGlasses? iPhablet? A safe and predictable Apple will run a Your Verse commercial. The Apple we know and love would instead introduce a new product.

Will 2014 be like 1984?

New Bedfellows

Samsung and Google, always pals (until Google steals something from Samsung), put some ink on a new cross-licensing patent deal. From AP:

Samsung said it also paves the way for deeper collaboration on research and development for Samsung and Google. The two already collaborate on smartphones and televisions.

I see Samsung self-driving cars, and Samsung Android-based glasses in the future.