This morning has been the wretch-fest with all the angst on Apple and it's stock price performance.
The latest is the fascination about some sort of "wrist device." Now the sell-side charlatans are really down to the last straw they can grasp.
Let's put this BS to rest eh? You can make a wristwatch-sized device that plays music or similar. In fact there already is one; the "Shuffle" or any of its competitors such as the little SanDisk Sansa that I have.
But playing music requires almost no power, and thus you can obtain reasonable in-service use for something that's (1) inexpensive and (2) works for the occasions where you want to have a very small package for playing music.
As soon as you stick something that transmits RF in that case power budget goes way up and battery life goes way down. And despite the higher power density of lithium ion batteries over the last decade or so there's simply no way to get 1,000mah or more into a package that fits in your wrist and is of reasonable size. My Garmin GPS watch (the Forerunner 305) that I use for running and biking has a ~900mah battery and its size forces the form factor of the device, along with limiting "in service" time to about ~5 hours per charge -- not enough for an "all day" wearing, and that's a radio receiver.
The simple and inescapable fact is what I've talked about for years: All hardware producers ultimately devolve into commodity status, and commodity hardware manufacturers all eventually trend to single-digit gross operating margins.
This reality, along with the utter impossibility of continual exponential growth (especially when it occurs in double digit quantities) without winding up with every bacterium being eventually "blanketed" with your alleged "technology", is what always pops these bubbles.
I am continually reminded of the follies of 1998 and 1999. Northpoint/Rhythms/Covad anyone? These folks all came into my offices a bit earlier on trying to get me to "partner" with them to deliver DSL, at the time the "great thing", to people's homes. It was a good pitch, honestly, and a number of my competitors took the bait.
I took out the calculator instead, and quickly concluded that there was simply no way that the numbers would work over the intermediate term. I thus declined, and ultimately was proved right, evading what would later turn into an unmitigated disaster for anyone who got sucked into it.
The game hasn't changed folks, only the screaming of those hawking the wares.
PS: The terminal phase of all bubbles is when the implausible is all that's left to sell. We're there in an increasing percentage of stocks generally, and that in turn means that if you wish to keep some of what you have accumulated over the last couple of years you'd be wise to pay attention rather than follow the crooners right off the cliff.
Disclosure: No position at present in the worm-ridden apple.
Specifically, Seagate (STX) and VMWare (VMW).
Both got hammered last night following their earnings reports. VMWare and Seagate were both flying on the premise that "cloud computing" was the "savior of the world", and that both virtualization and of course ever-expanding storage requirements come with this premise.
But the guidance -- and the conference calls -- were full of hemming and hawing on forward expectations.
Seagate, interestingly-enough, was trading at a P/E of five before this happened, and they pay a 4% yield! To get hammered for roughly 6% on "softer guidance" is either a gross over-reaction or it presages a top in the "virtualization and cloud" meme.
VMWare says, by the results, it's the second.
Now do realize that VMWare had a P/E of about 58 (!) before the report, and that the company did beat on both the top and bottom line. But the earnings call and forward guidance did not lead to confidence in the future, and stock prices look at forward expectations.
My view is that the entire "cloud" game has been radically oversold, just as the tech meme was in the late 1990s. Yes, there is a business there, but (1) the economies of scale aren't nearly what people make them out to be, (2) the risks are under-appreciated and dangerously so for many enterprise applications and (3) this has resulted in utterly ridiculous forward expectations that will resolve in the southerly direction for the stock price of related firms.
I know this is a contrarian view, but this is my set of expectations given my experience in the tech world. Simply put we are again living in a dreamland when it comes to tech, where valuations don't matter, actual earnings don't matter and indefinite exponential growth is again being sold to investors as the way the world works.
It's a lie this time just like it has been every other time, leaving the only real question "has recognition occurred and the collapse yet begun?"
Disclosure: No position in either company.
Apple is rumored to be working on a "cheaper" iPhone.
Nokia released information this morning that their Q4 shipments were radically ahead of projections, and the stock is up 15% premarket.
RIMM may be sandbagging, as I wrote on yesterday.
The underlying problem for Apple is that the company has stopped innovating. Love him or hate him (I'm in the latter camp for those who don't know better) Steve Jobs was one of those guys who could make teens scream and then buy all the crap he produced, irrespective of how good it really was (like, for instance, not understanding RF well enough to design an antenna that would not be de-tuned by simply holding your phone!) But Jobs is dead, IOS is dated and Cook doesn't have that "zing" that Jobs did, which means that now Apple is an operating company instead of an innovation factory.
There are many who claim that Apple is not a "one-man" company. Baloney. Apple was always a one-man company.
Most firms that pull off the sort of "flash and jizz" game that Apple has are -- it's just reality.
But now that's gone and (literally) eaten by worms -- and this always happens; it's the inevitable reality associated with the world we live in.
Here's the bottom line: Once you start to cannibalize your margins and market share begins to slip, as is happening with Apple, the honeymoon is over.
I don't expect this to have an instant effect on the stock price in a severely-negative fashion, as the "fanboi-fu" is strong with this company. But Apple has had that before, and then imploded -- and will again.
Apple's Cook is said to be meeting with China Mobile's chairman and is spiking the stock this morning. Yeah, ok. This sort of thing is like Herbalife, where you need to find more suckers customers on a continual basis -- or else. The problem with that sort of "spread the mess" customer-seeking game is margins -- doubling your penetration sounds good but if you do it with half the gross product margin your gross is the same but your overhead has gone up -- and may have doubled! That's not parity, it's a net loss. And worse is the fact that this rock we live on is finite.
RIMM and Nokia, ironically, along with Samsung, may be right in the "sweet spot" to capitalize on this. Much of the time in business you don't need to be the best, you just need to be there to pick up the pieces when your competition blows its own brains out. There are plenty of people who hate the linkage with iTunes that comes with Apple products, but like the products themselves, as just one example.
Everyone on Wall Street wants to talk about ecosystem, but what they're really talking about is a walled garden -- and the wall has razor wire and broken bottles embedded in the top. It's a prison, which appeals greatly to Wall Street types but it only works for consumers so long as the illusion of free choice and beauty persists. If and when the pretty vines and flowers covering the wall start to wilt a bit, and people realize that they're imprisoned instead of being served up utopia, you've got trouble on your hands.
Interesting times are coming in this space. The "personal computer" has been said to be dying on the vine, and that may be true, but I believe that many of the firms in the personal electronics space have overplayed their hand, much as Facebook is doing, and despite the 50% move in the latter's stock price over the last few months the people who made it "great", teens, are going elsewhere -- they got pushed too hard, there are too many ads, too many fake "likes" that these folks know are fake, and once the customer realizes that your "walled garden" is a prison he or she is likely to look for a means of revolt -- which is going to go right to your bottom line.
LAS VEGAS, 2013 International CES (North Hall, Booth 1837), January 8 — QNX Software Systems Limited, a global leader in software platforms for in-car electronics, today announced that Delphi Automotive (NYSE: DLPH) has chosen the QNX CAR™ application platform 2.0 for use in next-generation infotainment systems.
This week, at CES, Delphi will demonstrate how it has leveraged the HTML5 framework in the QNX CAR application platform to create a powerful graphics system for automotive use. Visit the Delphi booth in the North Hall, #730.
Oh my, it was nice knowing all those other platforms for this sort of application. Delphi has been working with QNX for quite some time, but this is a pretty-serious announcement, and it has broad implications for both RIMM (which owns QNX now) and the other "smart device" makers.
This one caught me by surprise, but it makes perfect sense given the long relationship. It both bodes very well for RIMM while at the same time being very bad news for its competition, none of which have made any material inroad into the in-vehicle space.
Technology matters more than hype in the end.
Additionally, in the full ToS, the second item under Rights states "you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you." In short, Instagram has the right to share content that's already public with advertisers in order to generate revenue.
You're kidding, right?
So what Instragram is trying to claim is that they can take your content and use it for advertising they generate?
Oh I think not.
Watch out for this folks. Facebook already appears to be doing this, and in some cases might even be making it up, as I've previously reported. There are serious questions about people allegedly "liking" things when they're dead, or when there's no indication that they did.
All online message systems in some form or fashion expect you to give them a royalty-free license to use your contributions; after all, without that what would they be doing in the first place, and what would you be doing, posting and distributing the material?
But this clause appears to give Instagram the ability to effectively bundle your content with advertisers. This is vastly different than, for example, a blog or news source (like this one) displaying ads on the sidebar that may be relevant to a user; it is more-akin to the ability to use your content as the gist of the advertisement.
Wait a second -- isn't that what Facebook's "likes" are when they're sold as advertising?
Uh, I think so. Kinda. Maybe.
You might want to rethink exactly what "the bargain" is that you're involved with on these sites.... for some it will be fine, but for others (like professional photographers) it may well be time to leave.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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