Why Apple Shareholders Should Be Cautious | Hacker News Reader

Why Apple Shareholders Should Be Cautious

online.wsj.com

15 pointsmartey28 comments

One thing keeping Apple from lots of extra iPhone sales to business users is that Mr. Jobs, for some reason, has a thing against keyboards. There's no business reason for it. It's a silly, unforced error.

Not building products that fully appeal to "business users" isn't an "unforced error". It's a market segmentation decision.

I read it as the author implying that not going after as many markets as possible is an unforced error.

...which would be wrong. If going after another market makes you mediocre in the market you're already winning in, you should say no. A physical keyboard adds bulk and weight to the device that make it a lot less attractive to consumers.

Would having an optional version of the iPhone with a keyboard (or an optional addon, even third party) make Apple more money? If the answer isn't no, then the author's point has some merit, even if you prefer a slimmer device without a keyboard.

Quick question: with all the third-party devices and addons that Apple permits via its proprietary iPhone/iPod/iPad connector, is there one that provides a mini physical keyboard? If not, do we know if Apple is intentionally preventing it (via API's or licensing)?

There are dozens of physical keyboard addons for the iPhone. Apple doesn't prevent any of these 3rd party addons from working. So if some business really wanted a physical keyboard for the iPhone for their employees, they could make it happen.

Yes, he also hates "Women with nails" (Nails don't work on the thumbkeypad that iphone uses).

There are reasons to be cautious about Apple, but not in this list. Most of the OP's concerns boil down to a perception that Apple has been 'too' successful, and it's due for a failure.

On the one hand, Apple's valuation is extremely high. On the other, their products are selling like gangbusters and the iPhone in particular has nowhere to go but up. The current emphasis on software and interfaces gives Apple a substantial advantage over the legacy players like Nokia and RIM; as the iPod showed, it's not a trivial advantage to overcome.

And [Verizon's] data traffic just jumped 20%, even without the Apple phone.

To put that in perspective, mobile data traffic on AT&T's network has increased 5000 percent over the last three years. In 2009, which presumably this article references for Verizon, AT&T was up 200%.

http://digitaldaily.allthingsd.com/20091118/time-to-cut-att-...

There are a lot of statements I disagree with in this article. At the same time, it is true that if Apple were bought to the same ROI as Microsoft then the stock price would be less than half of what it is. Buying put options to cap your downside is not a bad idea, especially if the stock has already made you a few dimes.

These reasons are pretty weak. For example:

#3. The Share Price

Apple still has a P/E ratio of only 22. Meanwhile, Amazon's is 70. If Apple traded at that P/E ratio, the share price would be $940, instead of $270.

Whose investors should really be worried?

In 2006, Motorola traded at a P/E of only about 12, despite huge and rapidly growing profits from its wildly successful RAZR phones. They were nearly as dominant in the cell phone market as Apple is today. Between 2003-2007, Motorola sold roughly 110 million RAZRs, compared with the 50 million iPhones that Apple has sold to date.

Then Apple came out with the iPhone, which was light years better than the RAZR. And further models of the RAZR continued to disappoint.

The Motorola stock that you bought at a P/E of 12 in 2006 has lost nearly 75% of its value today. Motorola runs at a loss now (well, technically they've turned a thin profit in recent quarters, after losing more money in 2008 than they earned in 2006). Its P/E is negative.

Beware P/E ratios. Earnings can head south very quickly, particularly if they're based on one breakthrough tech product.

That's an excellent example that you seem to have been able to access quite readily - impressive, +1. And I do agree that you can't just look at P/E ratio.

But the key difference is ...based on one breakthrough tech product...

Apple has a much more firm footing in people's digital lives - and more brand loyalty - than Motorola could have ever hoped to have.

Are they really all that dominant, though? As I see it, they have 3 major product lines: the Macintosh, the iPod, and the iPhone (perhaps the iPad will join that soon). They have massive brand loyalty among a certain segment of the population, but a good number of people don't give a rats ass about them. I'm typing this on a Macbook Pro, but I honestly regret that purchase (I wish I'd gotten a System76 Pangolin instead). I've got a iPod Nano sitting unopened in a box, an unused gift from my employer. I couldn't live without my N1, but have never felt the need for an iPhone.

Why do you wish you went with the System76 model (I'm considering both right now)?

I found that pretty much the only applications I use on the Mac are Terminal, Macvim, Chrome, VLC, and BitTorrent, all of which are just as good or better on Linux. Plus, I like to play around with advanced programming languages and other command-line only programs, and usually the apt-get packages are a bit stabler and more problem-free than the MacPorts ones. I'm perfectly familiar with Ubuntu - I use it at work - so the usability/eye-candy benefits of a Mac don't apply to me. In fact, I found it harder to get used to and learn a whole new set of keyboard shortcuts, because I'm so used to Linux.

If I'm just going to use it like a Linux machine, I might as well pay half the price and get a real Linux machine.

The Mac does have some nice points. Two-finger scroll is great, as is the magnetic attachment for the power cord (I can't count the number of times I've tripped over that). The battery life is significantly better. I can get more & better games for the Mac than for Linux. But the screen on the Pangolin is better, and for half the price, I think I'd end up liking that more than all the little fit & finish on the Mac.

Plus, the Mac had a firmware bug when I bought it (thankfully been fixed since) that randomly would lock up the computer for 30 seconds at a time. Not impressed, Apple.

when it peaked at $200 in 2007 the P/E was about 40. The company has grown a great deal since and the stock has a long way to go just in terms of post-recession P/E inflation, if that ever happens. meanwhile they continue to dominate. the only thing I'm worried about is another market collapse, but that's not specific to apple.

I get the feeling that the WSJ only understands products in terms of feature lists. it's like they are frustrated because all they can attribute apple's success to is "it's a hipster/yuppie fad". they just don't get it. It's the kind of analysis that I'd imagine someone who reads a lot of Ayn Rand to come up with.

Perhaps this is wishful thinking, but I'd say a good reason to be cautious about Apple right now is the growing discontent that they're creating amongst "alpha geeks" (http://www.martinfowler.com/bliki/AlphaGeek.html).

I get the opinion from the swarm of recent Apple-related articles here on Hacker News that Apple-loyalty is down and that a large number of alpha geeks are, at the very least, prepped for competing devices to sway them away if they haven't left Apple already.

Right now they're paying most of the cost of each new iPhone, and under-charging for the data plans too. That's great for customers and great for Apple, and bad for the networks.

Provider-wise an influx of new iPhone customers sounds like one of those good problems to have. Word is you'll be able to get a Verizon plan on the next iPhone, Verizon doesn't seem to be shying away from it.

"4. Steve Jobs's ego"

This is Apple's main asset. It doesn't belong on a list of Apple's weaknesses.

Double-edged sword.

Apple fatigue? The ipod mania has lasted almost 10 years... my sister wants to upgrade her ipod nano to an ipod touch because her nano "feels" old. I have a feeling the ipod will still have a good share of the mp3 music player market for at least the next 10 years or so.

I would like to see more iPod innovation.

Phones are the direction for iPod/mp3 player innovation. Once battery life and storage size reach a certain point, there's no reason to carry a dedicated device.

ok, well, i'd like them to have loud speakers and the ability to transfer music p2p

I'm not sure -- Apple sold as many iPod Touch models as iPhones. Considering that they still sell iPod classic, nano, and shuffle, someone at Apple probably has the data that shows that it's still necessary to sell all these other models.

"Cautiousness" has been the prevailing investor sentiment over the past 9 months, and it hasn't worked.

All these "weaknesses" can be turned around to be strengths. Much of this is why Apple is successful.

Is it just me or these are all terrible points the guy made? WSJ, fire that guy!

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