Posts Tagged ‘Apple’

My venture in owning a piece of the Apple pie and why you should own it too

November 5, 2009

Prior to the January 2007 announcement of the impending iPhone, I was already a minor shareholder of Apple for their fine set of products.  Ironically, I had not yet owned an Apple product beside a mere iPod nano obtained through a holiday party raffle.  I invested a small amount simply on the news they had decided on switching over to Intel CPU’s for their entire product line.

The reason was not simply because Intel carries more weight in the industry or because Apple computers are to benefit from the higher processing power of the de facto leader in semi’s, but simply because an Apple computer has now become “doubly” valuable when compared to mere PC.  With an Apple computer, I can not only run Apple’s OS and all their slick consumer geared applications, but I can also quickly boot over to a full native Windows OS with a simple key press when turning it on.  Initially Apple lacked direct support for such a boot feature and most of the press focused on the ability to virtualize Windows within Mac OS.  Parallels and VMWare Fusion, the two main competing mac virtualization softwares, effortlessly ran to the spotlight as the way to run Windows within a Mac.  Ultimately Apple caught headwind of this frenzy and no more than few months, Mac had native dual boot feature for anyone wanting to run Windows and Mac as a choice with a single button click at boot time.

In short, a Mac, all of a sudden, presented a very valuable proposition for any serious Windows user in the market for a new computer.

A year or so later, the iPhone is announced.  My gosh, is this thing for real I remember asking myself.  The stock price that day was roughly in the 80’s if I recall correctly and had jumped about 8% following the announcement.  While I’m not an investor on day to day news, I am however a long term investor and any news having a definitive impact on longterm will always surely fork me to action.  I was sold from the moment jobs scrolled the music list with his finger in public for the first time — and I wasn’t the only one.

Video Jobs Demoing iPhone for first time in public:

So I decided to up the ante a bit for the longterm, Apple had an Ace card.

As the woo’s and wow’s resonated in blogospheres and hallways of corporate and consumer america in a relentless fashion never seen before, I was certain my ante was safe for the long term.  The impact was clearly evident in multiple sectors, music, phone, entertainment — even to the distaste of some non-believing computer sector titans.

Balmer laughs as first comment to iPhone:

Launch day, June 29, 2007.  Having performed my share of voluntarily marketing for the weeks and months leading up to release, my coworkers knew I would be one of those unfortuanate souls waiting in line for their purchasing opportunity.

The last time I saw lines forming with this voracity was Microsoft’s release of Windows 95.  At that time, I was too young to understand and apply Peter Lynch’s investment style — invest in what you know and are certain of, however had I, I would have reaped the benefits as Microsoft dominated the desktop and business software category the following 5 to 10 — year over year.  That missed opportunity only served as a reminder and a lesson learned for any future opportunity — and this may be it.

This frenzy served only to convince me I am not alone, and this is a domestic occurrence for product already planed and destined for international release.  The ante must be increased — the long term odds are too good to be true.

For the weeks and months that followed, I decided to stalk the Apple stores around south Florida.  Initially I was simply a member of the of the frenzied group interested in all things Apple.  I was going at my leisure when time permitted, however in short order I realized the frenzy, post iPhone launch, simply continued.  You couldn’t walk through an Apple store without saying “excuse me” at least a half a dozen times if not more just to navigate the main corridors.  I immediately questioned, is this frenzy having a halo effect on Apple and it’s entire product line?

Coincidentally the iPhone launch was on the last two days of Apple’s fiscal quarter so the full effect, particularly the halo effect, should be recognized and felt on their next quarterly announcement.

Touring the Apple stores became an interesting game of quasi-interrogation with various Apple staff and geniuses from store to store.  Questions were phrased with basic customer interest as an allegory to a relentless statistical business analyst.  Throughout the fiscal quarter, I visited each south Florida store at least twice — shaving the last bit of doubt for an all-in wager as I was witnessing the perfect hand forming.

Interestingly enough, while working at Inktel Direct, the President, Ricky Arriola, happend to give a presentation on leadership as a kick of to a series of successful internal training seminares termed “Idea” (Inktel Direct Excellence Academy) a few days prior to Apple’s quarterly announcement.  Already motivated by the various topics presented, a topic which resonated was making a decision — leaders don’t teeter on a topic longer than necessary and more often than not make a decision and take direction.  This inspiration from the presentation and the highlight of that one particular topic combined with Apple quarterly announcement imminent and the bag full of statistical measures all pointing to a  royal flush, the “all in” call was a no brainer at 3:50PM before markets closed prior to Apple’s after market quarterly announcement.  Chip gathering followed at 9:40AM shortly after markets open the following day.  Ironically, I must emphasize I truly don’t condone or recommend any type of short term trading of this fashion as the only sure fire way to win in markets is Buffet & Lynch’s style with long term solid positions.

Apple was on the rise.  All throughout 2008 reaching a peak of about $200/share at end of 2007 prior to the general collapse of the markets.  As the markets collapsed, Apple, as much any company in any sector, suffered as the exodus of investors seeking a safe haven in treasuries, bonds, and other low risk fixed income investments.

Are the fundamentals of Apple really affected though?

TIME magazine named iPhone invention of the year
http://www.time.com/time/specials/2007/article/0,28804,1677329_1678542_1677891,00.html

The rumor mill for a new iPhone becomes rampant, an iPhone which connects to the faster 3G network.  The blogosphere lights up again, this time with spy fotos from China factories confirming the imminent release.  For a recession, Apple seems to be capturing all the spare attention and dollars at the expense of all other non-essential items.

iPhone 3G launch day, lines abound even further. Here is a video I recorded while arriving at Aventura mall in Florida.  In a recession, lines like these convinced me to play more long term rounds in the Apple game.

iPhone 3G launch in Aventura Mall, July 7 2008

Store congestion not only continues, but actually increases as it’s difficult to even walk through a store during the 2008 holiday season.  Can this long term game ever have any signs of ending?  During this time, the financial crisis is in full swing.  Henry Paulson and Bernanke are feverishly trying to get emergency liquidity approved and injected into the economy through the treasury as Bernanke had virtually exhausted all his options from a federal reserve perspective. It was literally chaos in D.C. and economically as a whole.  Ironically, while financial armageddon was occurring domestically with trickling effects internationally, Apple stores were flush full with holiday shoppers.  I’m I seeing an oxymoran here or what?

Despite Apple shares suffering along side all companies, I decided to apply Lynch’s & Buffet’s philosophy along with the typical dollar cost averaging during the continued down turn.  The company long term is solid, it’s fundamentals are solid, it’s sitting on tons of cash with no debt and customers abound.  Lets start the wagers.  I don’t have the full house assured in my hand, however I’m certain the turn or the river will complete my flush long term. With each down turn of $10 in share price, the ante was matched.  It was painstakingly difficult to continue this pace from $190/share through to $80/share — but images of Buffet preaching fundamentals soothed my anxiety and gave me confidence with each submission.

By the time $80/share came around I was too heavy in Apple.  Apple far outweighed my portfolio 10:1 if not 20:1 — I needed to diversify, and no better time to do so than on the down low.  A weekend long research, steadfastly applying Buffet’s value approach and some stats filtering tools putting me neck deep into P/E, debt, revenue qtr to qtr, stochastics and bollingers for hours on end,  I arrived at a solid list of fundamental stocks by Sunday evening.  Ricky’s presentation echoed in my mind again — a decision needs to be made — should I throw new capital at the fire or simply reduce some Apple at a loss.  Buffet kept me from selling at a loss just for capital reasons — fundamentally, Apple is too good and I barely gave it the time necessary to fulfill it’s long term destiny.  Done.  Timing on late February 2009, the theoretical bottom of this recession, was purely coincidental and the long term bandwagon officially commenced.

Quarter after Quarter, the sound of Apple increasing it’s market share in the computer space resonated and brought a subtle smirk.  iPhone exceeding sale expectations, 3GS with video launches in mid summer brining demand so high problems with fulfilment and inventory plague Apple for weeks.  World wide launches continue in other countries where even my cousin in Uruguay is now aware of a company called Apple and their infamous iPhone.  Apple erecting stores world wide at a pace faster than people fill their gas tanks.   Wall street journal classifies Apple’s brand within spitting distance of titans like Coca-Cola, Google, & Microsoft and first in regional ares such as Asia.

WSJ 9/11/2009 – Apple ranked as region’s most admired multinational company
http://online.wsj.com/article/SB125259938989400063.html

The explosive growth is so horrendous, for lack of a better word, Microsoft had to rethink their strategy from a full business perspective.  Ads now target Apple directly, something lacking from Microsoft now for over a two decades.  Their mobile phone strategy had to take a full about face and consider touch screens and hardware innovations as key priorities.  To get closer to the consumer, Microsoft saw the need to open resembling retail outlets — the first opening less than a month ago on Oct 23.

Microsoft opens first retail store:
http://www.foxnews.com/story/0,2933,569264,00.html

To bring finality on this growth segment, while Apple has a steadily increasing market share for computers sales currently at 8-9%, setting aside all the low end laptops and desktops sold and only considering computers in the $1k range and up, apple commands a 91% market share, up roughly 40% from their 66% the year earlier.

In overall conclusion, although Apple is currently a large cap with slow stymied growth, the numbers are extremely good and investor appreciation, be it stock or dividends, are sure to materialize more long term.  It’s additionally rumored, Apple will be changing the accounting rules on iPhone sales.  Instead of spreading the sale over two years, as a subsidized product by AT&T, Apple may soon start accounting for the full value upfront.  If this occurs, Apple earnings report would have a redbull injection to boot.

P.S. Oh, I forgot to mention Apple is now the #1 music distributor, leapfrogging Amazon, Best Buy, Wal-Mart in roughly two to three years of massive iPod expansion and sheer dominance in portable music devices.

http://arstechnica.com/apple/news/2008/04/apple-passes-wal-mart-now-1-music-retailer-in-us.ars

Digital Readers – another music CD replay?

August 5, 2009

Continuing with the inertia of all things digital movement, we are now approaching the official transition of electronic books into the mainstream.  Yes, we have had ebooks and ebook readers, but there were always obstructions preventing them from reaching critical mass.

Digital rights & copyright surely have their fair share objections, however technology has also been an inhibitor.  Take for example low resolution screens.  The human eye, when compared to traditional measurements of resolution, can process the equivalent of “324 megapixels” (1) camera.  So transitioning from reading magazines, with a relatively high print resolution, to a low resolution screen would be a painful experience for long periods of reading.

On the flip side, the benefits of digital reading are profound.  The ability to select a word and obtain it’s definition on the spot without much effort or interruption is a dream to any highschool student — at least that was my biggest complaint back then.  How about searching for a specific section of a novel to extract an excerpt? How about simply accessibility — who would want to lug  around 4 or 5 books.

Now with technology all caught up — extremely high resolution screens, awesome processing power with advanced CPU’s, and great battery technology and the connectivity of the cloud thrown in to boot — the time has come!

Let me break away for a sec to compare this to CD’s.  When compared to music CD’s there was a time where we would pack our CD boxs on our weekend trip — not all, but your favorite set for sure.  Today, you surely carry hundreds of albums on your iPhone (yes, I’m biased) as a second thought.  Well, books are on their merry way too — and with a vengence IMHO.

Music took a while too take a foothold to digitization primarily becuase the world was simply adjusting to the digitization shock.  I recall first hearing about MP3 around the middle of my BS degree around 1995 to 1996 time period — yet the first mover risk syndrome still took a heavyweight like Apple an additional 5 years to release the first iPod.

Now, roughly 14 years after mere MP3 awareness, we have a proliferation of digital music to the point where by the music titans are forced to rethink the concept of the album and the CD album insert, etc. from a digital perspective and make it a reality by collaborating with the new digital music titan — Apple and iTunes (2).

So, I feel we are just at the beginning of a similar digital turning point with books.   Amazon, naturally and without much turbulence, took the first step with their Kindle in late 2007 early 2008.  Their reader suffered from what I would call the newcomer syndrome.  Amazon is not known for building hardware nor software, yet here they are with a device on center stage.  With sufficient top down support (Bezos practically reserved Kindle as his next child’s name) adoption is certain.  The level of endorsement has parallels with Bill and his digital ink / tablet initiatives.

In short, what struck a chord to write this blog is Sony’s entry into the market.  Sony’s is known for building hardware — particular for consumers with their walkman of the 80’s and other eletronic devices having a sliver of software with them as their modern handycams.  Sony just yesterday announced a economically priced eReader for just $199.  Price attracts and with a brand like Sony, surely it will sell and will be a prominent second footing (3).

My bets however are with my good old trusted expert in hardware/software combos with a keen focus on consumer — yes, Apple.  Apple has been on the rummor mill now for years with a tablet — even having a patent exposed for a tablet with touch screen.  My guess is they have no choice but to introduce a tablet or some type of reading / entertainment device leveraging their touch experience with the iPhone.  Perhaps even by the holiday season if rumors have their way this season unlike previous failed attempts to resurect it.  As a shareholder, I would almost be disappointed if they don’t given the feaverish rush in this arena.

(1) http://www.clarkvision.com/imagedetail/eye-resolution.html

(2) http://tech.yahoo.com/blogs/patterson/55013/report-apple-music-labels-hope-to-revive-the-record-album/

(3) http://www.dailytech.com/Sony+Announces+199+Pocket+Reader/article15887c.htm

Comics 2.0 in the Digital World?

August 27, 2008

While I have enjoyed the recent Hollywood iteration of Marvel comics with movies such as Superman, Spiderman, Hulk, etc., I have never been a reader of comics books themselves.

Reading through my typical news articles I found an intriguing article about Apple banning a comic book based app called Murderdrome.  Apple, according to the SDK guidelines, reserves the full right to reject any application which may be offensive to some people.  It’s very concerning to me when content beyond the obvious porn and blatant gore is blocked from being available through the App Store.

If an international news application, not bound by domestic censorship rules, posts a graphic image of a war scene in their news application as part of an article — can this now embody Apple to remove the application from the App Store?

Due to lack of access, I have yet to preview the Murderdrome app to determine how graphic the scenes may be, but based on the YouTube video below it’s plan comics and far from any graphic or questionable content.

Presuming Murderdrome simply has a controversial name and their content was actually quite the contrary to from the name’s suggestion, would Apple have accepted the App?  And if so, would they take it out afterwards when the content transitioned slowly to the more murderous scenes as the name implies.  As you can see, it’s a very blurry line Apple has their work cut out for them if they are going to play the “Content Cop” in their App Store.

The matter of fact is this App is very revolutionary.  Just by watching the YouTube video, I learned about the way comic are from pencil, to ink, to color — granted, one could have derived this through simple thought and this should probably indicate how distant I am from comics in general.

http://www.youtube.com/watch?v=CecFio3gIOA

Bottom line though, Infurious, the makers of Murderdrome, decided to exploit the iPhone features to expose the entire process to the reader — an innovative feat clearly seen in their YouTube video.

In essence, they capture the three representative images for each scene during the stages of development (the pencil, inking, and final colorized step).  As you interact with the comics by flipping through the screens, you can drill down to either of the three images by dragging down or up. So if you like comics with the pencil look, you have it.  If you like comics in their full color mode — you have it to.  If you are simply the curious observer on how they created a particular screen, stop and flip through the three versions accordingly.

This is simply another demonstration of how digitization enhances the experience of a traditional medium beyond a simple port.

 

References:

http://www.macworld.com/article/135205/2008/08/comic.html?lsrc=rss_main