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Comment by newman314 | Hacker News Reader

People were losing their minds over the fact that iPhone shipments slightly declined. If you look at the year over year growth (excluding the massive bump for iPhone 6), it would show that AAPL is still ahead of the growth curve.

See https://imgur.com/vO0kPEy

* Apple's quarterly revenue: $75.9bil

* Apple's quarterly profit: $18.4bil

* Google's quarterly revenue: $21.3bil

* Google's quarterly profit: $6.8bil

In sheer numbers, Apple's total profit is quite a bit more than Google's so there's that.

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Which pretty much shows that the market value of a company is not based on what they sell today, but on the expectation of what they will sell tomorrow.

Does Apple do research in biotech (Alphabet's Calico)? Are they developing drones delivering wireless internet to the world (Google's Skybender)? Do they have an investment arm (Google Ventures)? Did they start an ISP (Google Fiber)?

People see Alphabet's increasing outreach that almost seems ludicrous. Then they compare this with Apple who seems to have been doing iPhones and iPads for 6-10 years, and doesn't seem to be interested in anything else (though this is slowly changing with Apple apparently getting into home automation and self-driving vehicles). It doesn't matter if it is true or not. This is what people perceive. This is what makes them value Google more than Apple. For all we know smartphones and tablets could be disrupted by another technology (the same way PCs were disrupted by phones and tablets) and Apple may not be ready for this next tech disruption, while Google is placing bets in many other markets.

Apple's brand trades a lot on having extremely well finished products with very polished experiences. If they started experimenting left and right like Google does, they would lose that brand image, which is arguably their most valuable asset (even above and beyond the technology itself). If Google releases Glass and it flops, it hardly affects their image ('well, yes, it's cool technology, that's what Google does, but I don't think people want it for now...'), if Apple does the same it would be thousands of articles about how Apple is losing its touch and can't possible survive without Steve Job's genius.

Maybe the only way around that is taking a page out of Alphabet's playbook and making a parent company with "riskier" subsidiaries with their own non-Apple brand?

>Apple's brand trades a lot on having extremely well finished products with very polished experiences

I don't fully agree with this. Did you have the first version of the iPhone? No copy and paste? WTF.

Antenna signal dropping because "you're holding it wrong!"? WTF.

The only thing you can hold to the apple brand without any criticism is the industrial design of the packaging and look of their products has been consistent and un-matched.

There are plenty of UX issues that have arisen that take away from the polished experience.

Sure I like their products, but im not deluded to think that they are beyond reproach.

You're making the mistake of thinking other people evaluate products the same way you do.

How many people do you really think tested the copy and paste functionality on the original iPhone before making their purchasing decision?

I think almost no one.

I think you're on the right track.

The way I remember it: the product was still overwhelmingly better than everything else. Missing copy&paste was an "oh well" compared to owning an iPhone in 2007.

And it's not like they didn't get around to adding it. Apple does admit mistakes. They made their phones bigger too, finally.

They have well polished experiences compared to the competition. I don't think anyone would claim they (or anyone else) are perfect.

Apple's brand is about the perception of perfection, not perfection.

Instead they release a "me too" watch, a "me too" music service, a "me too" laughable pro tablet. They are losing their touch. No need to say it... it is obvious.

Except they already do.

https://beta.apple.com/

It's interesting that the market is valuing Apple's ability to innovate in the absence of Steve Jobs at ~zero. Apple trades like a value stock right now; Wall Street assumes that they're a cash cow that is just going to be milked, and unlikely to have any future major hits.

If you (correctly) disagree with this assessment, there may be money to be made here. If you agree with it, well, I understand why Apple wouldn't look very appealing.

I agree with you, but I think it's a bit bold to call "correct" or "incorrect" about future events.

The parenthetical is just there to make it clear that this only works out in your favor if events prove you correct in disagreeing with Wall Street.

Apple's P/E was quite low even at the height of the iPhone growth. The expectation for what Apple will sell tomorrow is nothing, because they'll be out of business, and it's been that way for a long time.

Meanwhile, since Google was founded, Apple went from the Mac company to the iPod company to the iPhone company. Apple has a proven ability to reinvent itself, with more agility and success than Google or really any other tech company. But this has never been reflected in the market. The perception you mention is based on who the companies are, not what they do.

Apple could announce all of those products tomorrow, and the needle wouldn't move. Apple is doomed because Apple, and Google is the market's darling because Google.

By all accounts, Jobs came back and reinvented Apple authoritarian-style.

I don't think it's proven that Apple can reinvent itself from within. Which is not to say that they'll never have another hit product.

"Apple has a proven ability to reinvent itself"

Apple does, or Steve Jobs did? I don't think Cook is anywhere near Jobs. Meanwhile, Larry Page is not only still alive, but is positioning his company so that he still has creative power and final say.

As much as I love Apple, I'm not as optimistic of their future without Jobs.

The market was not optimistic of Apple's future even when Jobs was at the helm.

> Which pretty much shows that the market value of a company is not based on what they sell today, but on the expectation of what they will sell tomorrow.

Just looking at the "Apple vs. Alphabet Market Capitalization Over Time" chart, this story appears to be as much about Apple falling as it is about Alphabet rising. And in that case I see what Apple is selling today.

iPods are obviously on the way out. iPads have been losing to cheaper tablets for a while now. Macs have been neglected to the point you can't even get one with a Skylake CPU. And now, the last week's news that iPhone sales are in decline. It seems Apple's fall is all about what they are (not) selling today.

Google has search monopoly Apple has nothing comparable. The rest of google projects are mostly there for google to claim that they are Tech company competing in many markets as opposed to a Search company.

If you add in the same comparison to Facebook's numbers, the valuations look even more puzzling (using the most recent quarter):

* Apple's quarterly revenue: $75.9b * Apple's quarterly profit: $18.4b * Apple's market cap: $538.7b * Apple's P/E ratio: 10.24

* Google's quarterly revenue: $21.3b * Google's quarterly profit: $6.8b * Google's market cap: 517.6b (pre-earnings) * Google's P/E ratio: 35.37 (pre-earnings)

* Facebook's quarterly revenue: $5.84b * Facebook's quarterly profit: $2.56b * Facebook's market cap: $319b * Facebook's P/E ratio: 89.22

Do investors really think Facebook can grow at the pace a 89.22 P/E ratio suggests? They're quickly reaching the point where everyone in the world who can get a Facebook account already has one. They're pushing hard to spread to poorer areas by offering Internet access, but how much marginal revenue/profit can a poor rural farmer add? If Facebook somehow magically increased their numbers tenfold at the same growth rate, which would make their numbers roughly match Apple's, the current P/E ratio would make them a 3.19 trillion dollar company.

People knock Apple for relying too heavily on iPhone revenue, but Google gets a pass because their even more unbalance reliance on search has a "bigger moat"? Their core product, ads, is something most people despise and put up with, not something they seek out. Let's hope that some of their moonshots actually pan out.

Apple will always have a lower P/E because the costs associated with building and selling physical products is higher.

Facebook's financials are ~1/3 Google's and so is its P/E. It's a much younger company and seems possible that's it's revenue and profit could approach Google's.

I don't see anything unbelievable or even particularly unusual.

> I don't see anything unbelievable or even particularly unusual.

Let's go back in time to a point when Apple's #'s roughly matched Googles.

https://www.apple.com/pr/library/2011/10/18Apple-Reports-Fou...

$28.27b revenue, $6.62 profit.

In 2011, Apple's P/E ratio hovered around 14, with a stock price that fluctuated around $46-$56 throughout the year:

http://financials.morningstar.com/valuation/price-ratio.html... http://www.nasdaq.com/symbol/aapl/historical

A P/E ratio of 14, and the company basically tripled their numbers in ~4 years. Does Google's P/E of 35.7 suggests we can look forward to a rough 10x increase in Google's numbers over the next 4 years?

No, it means that investors didn't believe there was much room for further growth at Apple[1]. They were clearly wrong! (Note that if you think that they are still wrong then there is a good opportunity to make money here!)

(Also, P/E is often related to margin as well as growth potential. Google's better profit margin is a factor here).

[1] http://www.asymco.com/2011/03/24/analysts-apples-growth-next... - the quote here is "The P/E ratio has remained at despondent levels for over two years.... The logical explanation is that pricing reflects a consensus that growth will fall off a cliff... Growth may slow to 18 percent the following year."

Now do Amazon which is a retailer, often running at a loss on the retail side, with a nicely growing Hosting business... but even the margins on the hosting business don't justify Amazon's P/E ratio.

I don't think the market is efficient, it has a lot to do with perception. Amazon, for instance, is constantly doing press releases for products, even products that have no future (this is a deliberate strategy near as I can tell from my time when I worked at Amazon)... while Apple does 3 or 4 product introductions a year, and doesn't do a lot of PR stuff (Though Tim Cook is getting interviewed a lot more than Steve Jobs did.)

I have a friend who works at Lab126 with some really interesting stories about the dysfunctional environment there. He's basically one of a handful or so engineers who have more than a 4 year tenure in his division. Their PMs are basically all fresh out of college. After the complete disaster that was the Fire phone, that team and its director got promoted and placed in charge of Lab126. As expected, everything went to shit.

No idea what the rest of the company is like, but internally, Lab126 employees treat it as a stepping stone until their resume or skillset becomes good enough for Apple, Google, etc.

The bet with Facebook is that one day they'll figure out how to get a little bit of money out of all their users. On the day that happens they'll have huge revenues. Their user base is absolutely enormous.

For Facebook current profits are about $6bn a year. To justify a 319bn cap they'd have to earn maybe $18bn /year giving a 18x PE, or about 3x what they do today. I think it's quite likely they'll achieve that in the next 5-10 years.

You've got remember the billions of rural poor will probably be less poor in a decade or two.

That's quite plausible, but they have a $319B market cap today, so current shareholders would see their stock flatline over those 5-10 years.

70% of the revenue and (maybe) 80% of the profit of Apple comes from a single product - the iPhone. Apple themselves have given lower guidance going forward. There is a limit to the number of people buying iPhone at huge margins every year. The total units might continue to grow but not at the current margins and not as frequently. Hard to be bullish unless some other product takes off.

unlike Google, where practically 100% comes from one single product, which is ads.

all "other bets" are actually losing money, per their data.

People love Apple's products (for the most part). People hate ads (pretty much everyone). So this makes no sense to me at all that Google is worth more than Apple. If you imagine the future, no one really knows what each will do with all the stuff they are building, so saying Google is worth more than Apple in the future seems silly.

> People hate ads (pretty much everyone).

And yet the percentage of people who watch the Super Bowl explicitly to see the ads is a non-trivial percentage of the viewing population (obviously anecdata, but I know many people who throw super bowl parties for groups who have no interest in the football, and just want to have a party while watching the moderately amusing, big-budget ads with breaks for football in between).

I don't think people hate ads on principle. Some do, and they're vocal, but most people hate ads because they're annoying and obnoxious. If every ad was as well produced and as tailored to the content as super bowl ads are, people would be fine with advertising. Instead we get the ugliest, most obtrusively designed 10 second animations looping alongside articles and in between paragraphs, advertising disguised as content, and tracking scripts that reveal to questionable organizations an unsavory level of detail into our lives.

> People hate ads (pretty much everyone)

Except of course, the people actually paying for ads don't hate them... otherwise they wouldn't be paying for them.

Nope: there's Google ads, Google non-ads, and "Other Bets". Q4 Google non-ad revenue was $2.1 billion, or almost 10%, and this share has been steadily increasing.

https://abc.xyz/investor/news/earnings/2015/Q4_google_earnin...

yes, but no numbers on profits out of those segments.

OP was pointing out investor's criticism of Apple as a one-trick pony due to iPhone - I am pointing out that outside of ads, nothing generates any significant profit at Google either, even more so actually.

but whatever, HN really is the wrong forum for certain topics.

Don't know why you're getting downvoted but I agree. Google is just as much, if not more so, of a one-trick pony as Apple.

Yeah and Apple's Services business is also growing like crazy. Doesn't matter, the market apparently considers Apple to have zero stickiness.

The "other bets" that are (in aggregate) losing money are things that Alphabet does that are not part of Google. While Google is nearly 100% advertising revenue, it has non-advertising revenue streams inside of Google.

And we only know that the "other bets" (non-Google Alphabet operations) are losing money in aggregate, not that all of them are losing money individually.

We do know more: Ruth Porat basically said that Nest, Fiber, and Verily (formerly Google Life Sciences, and where I work) are making money.

Moreover, that the vast majority of capex spend over the next year will be Fiber roll-out, which is pretty reasonably considered as a one time impairment in my opinion, and not remotely like data center build-outs, real estate purchases, etc.

I'd compare Google's ads to consumer electronics as a category as opposed to the iPhone: they're many eggs, not just one. Search ads, DoubleClick, and AdSense are like the iPhone, iPad, and MacBook.

(Disclaimer: I work for Google, on open-source software that doesn't have anything to do with ads.)

It's worth noting that 30% of Apple is close to a $70B company, which would probably have $10B in profit. Granted the iPhone helps make all of that other business possible, but even non-iPhone Apple is pretty huge.

* Apple's quarterly profit margin: 24.2%

* Google's quarterly profit margin: 31.9%

> iPhone shipments slightly declined

iPhone shipments didn't decline, iPhone shipment growth declined.

Sorry for off-topic, but what the heck happened to Imgur? It used to be a great simple way of uploading photos, now it seems the product people managed to fuck it up thoroughly. I browse Random Mode daily, and sometimes the front page, so I get the social aspect, still there is such an insane amount of cruft there.

https://i.imgur.com/T98DOZ5.png

AAPL isn't as hot as it's been in the past, and that's ok. No company stays at the top forever. As your numbers show, Google has a higher profit margin.

Very true, but Apple has been the darling for a long time, and Wall Street has be desperate to find any flaw in their plans. Apple is a big part of a lot of people's 401k and other investments, so paranoia prevails.

Alphabet is only just now entering its Apple-like growth phase, however. It would seem that it could only go up, whereas at some point, Apple will saturate the market and have to start going down. Seem, mind you. This has nothing to do with reality, only with investor psychology.

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