Apple Reports First Quarter Results: $13.06 Billion Net Profit | Hacker News Reader

Apple Reports First Quarter Results: $13.06 Billion Net Profit

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287 pointsyoda_sl261 comments

If you're following the call (fantastic liveblog from Jacqui Cheng at Ars[1]) really great exchange when they try to shoehorn the mac-windows analogy into mobile OS's:

Tim: I wouldn't classify it like Mac and Windows at all. The Mac has outgrown the market for over 20 quarters in a row, but still has a single-digit percentage of the worldwide market

whereas iOS, if you look at phones and tablets and iPod touch, we've sold over 315 million iOS devices

If you look at the NPD data, it shows in the US, and this is just looking at October & November, so part of our launch in October and all of it in November, it shows iPhone at 43% and Android at 47%

the Nielsen data from a few days ago shows iPhone at 45% versus Android at 47%

Comscore data that came out on October/November shows iPhone at 42% and Android at 41%

it seems that all of the data from the US would seem it's a very close race for iPhone, and I think on the iPad side, I think all of us inherently believe the iPad is way ahead

there's really no comparable product to the iPod touch out there

I wouldn't say it's a two-horse race. There's a horse in Redmond that always suits up and always runs and will keep running

So what we focus on is innovating and making the world's best products. We'll just keep doing that and somewhat ignore how many horses there are.

[1] http://arstechnica.com/apple/news/2012/01/apple-q1fy2012-liv...

Nice hat tip to Microsoft when he says "I wouldn't say it's a two-horse race. There's a horse in Redmond that always suits up and always runs and will keep running".

I wouldn't expect these words coming from an Apple executive. It means that Cook thinks WP is a good product that can be a rival for iOS; or that he's trying to be politically correct without following Jobs' style. Whichever it is, I really like the new path they're following.

Oh, and it also means that BlackBerry is completely out of the race, but we all knew that already, didn't we?

I think more its an acknowledgement of two things, the first being that Microsoft really is a company that always suits up. The second being that WP7 is an attempt at coming up with something new and innovative. I think from the Apple executives perspective that's a significant change.

Or it could be that WP doesn't represent a threat to them and they'd rather have it as a competitor versus Android.

It is a nice gesture, but I see it more as a setup for the next statement - "...what we focus on is innovating... and somewhat ignore how many horses there are." He's throwing MS in the race to deflate that prior binary Windows/Mac mind share dynamic being applicable to mobile - that for one to win the other has to lose.

In other words, I read that as Tim trying to convey they are more in competition with themselves than with others; that they're raising the bar by their own standards rather than paying attention to what the competition is doing.

I suspect the hat tip to Windows Phone is more along the lines of "the enemy of my enemy is my friend".

I think it means Tim Cook is a smart executive who doesn't write off his competitors.

Even if you look at Apple's history, way back when, IBM wrote off "all that software stuff" that Microsoft was doing. MSFT ended up having the last laugh there as they ate IBM's lunch with software.

(True, IBM did pivot, but I'm thinking in the Apple/Microsoft perspective).

[EDIT: plus, Microsoft trounced Apple once. That means they could do it again.]

> [EDIT: plus, Microsoft trounced Apple once. That means they could do it again.]

Those were different companies. It was Sculley's Apple (with a lot of an immature Jobs thrown in) and Bill's Microsoft helped by a seriously shortsighted IBM. Plus, Microsoft really didn't eat Apple's lunch until Windows 3, which also ate IBM's lunch for dessert.

I don't think Microsoft is capable of betting the company on some disruptive innovation like they were with Windows 3. They are too big and there is too much infighting between the various divisions.

And don't forget the upcoming windows 8. I think that they can recognize that Microsoft will finally offer something new. And maybe, the true rival for iOS and iPad format will come from Redmond, not from Mountain View.

For Steve it was personal and bitter with Microsoft. For Tim, who's been with Apple during the ascent from the abyss back in 1998, it's a different story, although I'm sure he still takes Microsoft seriously.

IMO, the real reason for this comment is to avoid sounding anti-competitive.

Even innocuous comments about market position or market leadership can come back to bite a company in an antitrust lawsuit.

It's not a very convincing rebuttal. Note how they switch from percentages to total sales and then from worldwide to US share.

However globally in smartphones, they're at 15% and slipping by about 2% over the last year which doesn't seem that far from single digit percentage. And while they're selling a lot of phones, so is everyone, the market as a whole is nearly doubling yearly and even the phones losing share like Blackberry are actually selling more phones than last year.

He should have just pointed at a large pile of money instead, that'll go a long way to help them survive any potential Android hegemony.

A giant cash pile earning 2% a year is not compelling for investors. AAPL has very high growth expectations priced into the stock which they somehow need to continue to meet.

"...AAPL has very high growth expectations priced into the stock which they somehow need to continue to meet."

It only takes a minute to go to a finance site and look up the PE for AAPL and see that this is utter nonsense. The PE is 16. Amazon has a PE of 97.

Disney has a PE of ~16. Do you think they have "very high growth expectations priced into the stock" too?

P/E can be argued both ways - Exxon has a P/E of 10.43, and over a 5-10 year timeframe, Apple probably has a riskier income stream than they do. AAPL's rev is highly dependent on 2-3 trendy, high-growth, high-margin HW products, competing in markets which barely existed 5 years ago.

When's the last time you bought electronics from Sony?

"Very high growth expectations" is what the OP referred to, not sustainability of income stream. Of course Exxon has a lower PE, do you really expect a high growth rate for them?

UPDATE: Why do you keep changing your post? Just reply to my comment instead of changing your comment.

My point is that Apple stock seems priced based on revenue and growth expectations which are probably unrealistic in the long term.

The fact that you can find other tech companies with a higher P/E doesn't prove or disprove that either way. Market irrationality is not limited to 1 stock at a time.

"... seems priced based on revenue and growth expectations..."

Seems based on what? One method, and probably the most popular, is to look at the PE ratio, which for AAPL is a low value, not in comparison to other tech companies, but in general.

Your opinion that there is growth expectations priced into the stock must be based on something, but it's definitely not PE.

This is mighty impressive. To put things in perspective:

Apple's profits ($13 billion) exceeded Google's entire revenue ($10.6 billion).

Source: https://twitter.com/#!/fmanjoo/status/161932440737296386 (via gruber)

As a rule of thumb, I think it's a lot easier to make more revenue as hardware company selling products worth hundreds of dollars at a time. Samsung made $37 billion in revenue in Q3 last year, for example, and HP makes about the same, too.

The only problem with these companies is that they don't really know how to maximize their profits. They usually compete on price and release many models with increases costs due to complexity, so profits end up being a smaller % of the revenue.

You are right in general, but here we are not comparing AAPL's revenue vs GOOG's revenue. AAPL's profit is more than GOOG's revenue. Now that's definitely remarkable.

That's not a surprise. They're in completely different businesses.

Google is a display advertising company that occasionally puts out a better display (Chrome, Android). Apple is in the business of finding and extracting value from hardware markets no one else took seriously.

That's exactly why I don't understand all this fighting.

They are each other's perfect complement! Apple has plenty of experience building hardware and OS's. Their core business is to SELL physical or virtual goods (devices, songs, whatever). They don't care that much about the services. For them, services are just a mean to sell something. Something to add value to something they want to sell. e.g.: Introducing iCloud! Use it on your Mac and your iSomething.

Google on the other side, is in the business of SHOWING things. They don't care about selling you something. It's more of a problem for them to sell, than it is to just give it to you for 'free'. They are a service company. Mainly, an advertising company. That's why they don't try to sell their phones to everyone (e.g.: nexus one). They just want you to see what they have to show. So, while you are seeing it, they can show you a few ads.

They bought Android, so they could accelerate and expand their market of eyes seeing their ads.

But they should ally with Apple. Apple wants to sell, Google wants to show you things. Do you want a video for free? Go to YouTube. Do you want to buy music ? Go to Apple Store.

There's no sense in keep fighting each other.

And of course, there comes Microsoft, with its own search engine, their own store, their own mobile OS... trying to fight both of them. And they are trying hard to resurrect.

That's not the way I see it. Google realizes that Apple with a strong majority share of the mobile market would be free to ignore Google entirely. They could severely reduce Google's ability to advertise by controlling mobile app ads. Google needs something like Android to ensure some fair play I believe. If mobile is to eclipse desktop usage, they can't be left out. But in any case Apple can keep going as it is. It's cash cow might die someday but by then it will have so much money they would have a century's worth of cash for R&D to find a new niche.

One thing bodes well for Google so far, Apple has struggled getting any kind of traction in the Online space. It's early for iCloud but it's still far from the competition.

I wrote something between those lines 10 days ago (http://news.ycombinator.com/item?id=3463957), so, I can understand Google's interest on having it's own mobile OS. But that's not a reason for them to start a war that is not on their best interest. Apple wins having Android around, so they can escape of being accused of monopolistic practices (e.g. no other Browser banned from their OS? Remember Microsoft?), Google wins, by having another channel of distribution for their ads. And both of them complement each other nicely.

It's about control.

Yes, Google historically has more robust services than Apple. Better, though? Apple's corporate DNA has them pushing for more control over their products, and outsourcing to Google doesn't serve this goal. Remember, Apple would rather release a product considered by techies to be lacking in features than to release something with a sub-par experience.

Google products tend to be reliable, and their design sense is improving. But their products tend toward functional rather than elegant; more importantly their products are designed to sell ads. This priority tends to be at odds with Apple's goal of selling products that people love to use.

At the moment I think it is more likely that Apple learns to do online services well (their missteps notwithstanding) rather than Google suddenly caring about users more than advertisers.

True. But it's a lot harder to make profits in hardware than in software.

Apple makes one billion dollars in profit a week. Say that aloud to yourself. It's simply staggering.

UPDATE: (@gruber has pointed out to me that it was a 14-week quarter, so only 0.935 billion a week)

The only killed me (my ghost invaded the internet).

There are only 7 billion people on Earth. Apple is essentially making $0.14 in profit per human, per week.

Of course, it's a much smaller number of very rich humans, probably less than 1 billion, actually buying their products.

There is a limit to how long this can continue, before every person on earth, who is so inclined and can afford it, has 1+ of every Apple product that they could ever want.

Assuming $300 per user every 2 years - with 50% margin and 1B users - they can only grow income another 44% before the growth (in real terms) is totally done.

So introduce new products? Fine, but almost every possible HW function is already in the iPhone4, and they are rapidly running out of things that current technology will enable them to improve. How many people are going to drop another $600 to get 128GB instead of 64GB? Or 1920x1080 on a 3 inch screen?

Seems like it'll be time to short pretty soon.

There's still plenty of opportunity for growth on the software and content distribution side.

I would bet against that saving the day. iTunes and the app store bring in maybe 5 billion a year? Even at 100%/yr growth, that's not enough to smooth even a minor bump in their HW revenue. It's pocket change.

There are always horizons to shoot for - the TV, wearable computing (I see Nano's on collegues' wrists everywhere at work, and that is only partly designed for that purpose), home automation, education, military and small business use are all areas where current products (perhaps newer versions) can make huge inroads.

And that's leaving aside anything out of the ordinary/expected that Apple might be cooking up in their skunkworks labs.

Are you kidding? Apple has only half the market of smart phones (and that market itself is growing quickly), and only single digit market share in PCs. And people actually replace their phones and their PCs over a few years. They can keep this up.

Unless you can get your customers to replace their devices more quickly every release cycle, the replacement of legacy devices is not growth.

Or unless you can charge them more every cycle.

That seems very challenging as Chinese and Indian consumers become a larger fraction of their revenue, and as Android puts constant pressure on their smartphone business.

First: iPad.

Most personal usage of PC laptops are mostly performing tasks that the iPad can do. And the iPad is getting more versatile faster than regular people are using PCs for more tasks. Apple hasn't maxed out their iPad business until iPads have completely displaced PCs.

Second: iPhone.

While the iPhone's market share of smart phones is about half, that market is growing. The iPhone's market share of all phones is very small. Also, keep in mind that the iPhone is Apple's strongest and most profitable business.

Third: Macs

Apple has only single digit market share here. Loads of room for growth, even at their current astounding, competition obliterating, growth rate. By no sensible metric is Apple close to capping out.

Someone almost always ends up with those legacy devices, usually someone with a dumber genetation of phones, so at least part of that replacement cycle ends up being growth.

If I'm making .935 billion dollars per week, do I care if it "stagnates" at that level?

Anyone know what their cash on hand is? If they aren't going to start paying dividends again, it seems they must be saving up for something major. Any speculation as to what it might be would be just that, but I can't see them leaving that cash laying around.

about $97B

To give that number some scale, consider that in 1985, the annual budget of General Dynamics Electric Boat topped out at $400B.[1]

Maybe they're saving up for an actual assault on Big Brother.

[1] - http://www.gdeb.com/about/history/centennial/eb-100yrs-7.htm...

To be clear, ~$400B was the US defense budget, not that of General Dynamics.

Wow, thanks for the correction. Skimming FTL.

(I formerly worked for GDIT, so this also looked wonky to me)

General Dynamics did a little under $32.5 billion in revenue last year, with $2.6 billion in profit. See: http://money.cnn.com/magazines/fortune/fortune500/2011/full_...

Holy crap. That's enough to buy a controlling share of AT&T, almost all of Verizon, Sony 5 times over, Viacom 3 times over... It's hard to imagine how they could spend that on facilities or R&D, and AAPL's not the kind of company to take a loss on something in order to corner the market like AMZN. I can't imagine what they would spend it on.

Actually, speaking of Amazon, Apple could buy them easily, and still have enough money left over for Netflix.

Thisw is, of course, idle speculation, but it does serve to highlight just how much they could throw their weight around, if they wanted to.

The problem is that both Google and Microsoft have a lot of cash on hand as well. I always saw their reserves as more of a assured mutual destruction than actually being liquid.

Anything that one really wants, the others can jack up the price to stupid levels (Nortel's patent).

I think it hurts all three companies...like spending money on nuclear missiles that you'll never use rather than something els.e

Each company has shown that they're willing to spend money to keep some companies away from the others. --Look at Microsoft's purchase of Skype (I'm still not sure why they really did that).

The one thing that Microsoft does differently is they pay dividends, which is a very clear way of providing value to stockholders. Google has never done this, and Apple hasn't done this since 1995.

Microsoft bought Skype because they had an excess of European profits and, instead of taking the US tax hit by bringing that money local, they spent it in Europe, by buying Skype.

If you want to think about how Apple could throw their weight around, consider the subtler options. Their moves with strategic suppliers might give a clue.

They'll buy Hollywood before launching their "TV experience".

Unlikely, that would skirt way too close to trusts and they don't see themselves as being in the business of content creation.

I suspect there are much cheaper ways to bring hollywood into their orbit.

More perspective- domestic box office for any given year hovers around $10 billion.

And both are higher than Goldman Sachs' revenue.

Here's another thing that impresses me.

Last quarter DID NOT include sales of the iPhone 4S in China.

http://online.wsj.com/article/SB1000142405297020462420457718...

The truly astounding statistic to me is that Apple sold 26% more Macs than the same quarter a year ago. This while PC sales for other manufacturers declines or remained stagnant. We expect to see increases in the tablet and smartphone markets since those markets overall are increasing. But to increase 26% in a stagnant sector is remarkable.

Completely agree. Do they release region wise sales? It'd be really interesting to see 'where' this 26% came from. I expect Asia (mainly China) to be the driver in this.

From the call:

Mac sales outgrew the market in all geographies, especially asia-pacific (58% year over year).

I have seen a huge surge in sales of Apple kit to our customer's development teams via Mac specific support requests.

I expect its due to the iPhone&iPad hype. Here in my country, I didn't know that company such as Apple or something as MacPc and MacOS existed untill age 17. And I was one of the most technology eager students at school and generally considered as "geek". Now the trend you can see (At least in my country), people buying iPhone, then iPad, and then a Macbook as a "accessory". I am not exaggerating, there were several people who approached me saying, "Hey, you know the other blog about iPhone I started to follow after I bought one, I read from there something, apparently there is a different version of 'Windows' of Apple, and the computer itself looks kinda cool, do you think I should buy it?". And then the same person learns about iMac and every iProduct in market. I know lots of such people here owning every piece of iProducts just because they liked the iPhone.

Your country is Turkmenistan? How long ago were you 17? That's an interesting perspective. I had thought that this effect you are talking about was going to occur in the U.S. 5 years ago. I think now we are fully seeing this realization across markets.

I bought my first Mac 6 months ago. I got tired of keeping up with how many gigs of ram I needed. What video card to get etc. I took the plunge and decided to trust that Apple would make good choices for me. I've not been let down. I my last Windows PC was top of the line and it would overheat from playing Netflix. My Macbook Air doesn't and I've never had a problem with it.

By the way, I've long wanted to visit your region of the world. Been to the Ukraine and Turkey but just haven't made it that far into Central Asia.

Yea, Turkmenistan. I am currently 22, so about 5 years ago. Believe me or not, I learned about Ubuntu much earlier than MacOS. People here realized about Apple when iPhone was introduced, which is around 2007 (I was 17 by that time). My friend bought MacBook Pro several months ago, and when people coming to his office see it, they still get this "What on earth is this computer, with Apple logo? Is its the same Apple as iPhone Apple one?". Please come visit our region any time, in case anyone happen to come here, email me : nazarmailbox at gmail dot com. I will gladly show you around :)

hmm your top of the line PC was overheating on playing Netflix. So hard to believe in it. could you share some info what specs was this PC, what software you used?

I agree with you that Apple make choices for you and usually they are excellent. But they come with price, you know?

This is the case in the U.S. as well. Apple products are considered chic, and people merely buy them for the fad value. Apple marketing has been very good lately - a stark change from "Think different." Their product release cycle and pricing are magnificent as well. While other computer makers are reeling from the crisis and subsequent changes in the market, Apple has created a small ecosystem that is very well designed to pull you in. Once you buy the peanut butter, you also need the jelly, the bread and the butter knife.

"Apple products are considered chic, and people merely buy them for the fad value."

Yeah. A "fad" that lasted for 12 years now, since the introduction of OS X with ever-increasing Mac/OS X/Apple sales. Are you kidding me?

Have you ever been to a conference for geeks/hackers/programmers? Most of the laptops you'll see are Macs. Go to Python, Ruby, Rails, Mongo, MySQL, Node.js and whatever conferences -- hey, even in Java conferences, despite Apple not caring about the language at all. You can also try visiting a university such as Stanford and see which are the most popular laptops there. Most people on Hacker News use a Mac too (according to a recent HN poll I saw).

You seriously believe that all those highly technical and capable people are victims of a 10-12 year old "fad"?

Btw, even Linus Torwalds (which doesn't like OS X's os tech) admitted that he wrote his autobiography on an iBook, running OS X and using Word. (Torwalds also used an Apple G5 as his desktop machine for a while, though he run Linux on it).

It seems that he currently has a MacBook Air dual booting Linux.

> Have you ever been to a conference for geeks/hackers/programmers? Most of the laptops you'll see are Macs. Go to Python, Ruby, Rails, Mongo, MySQL, Node.js and whatever conferences -- hey, even in Java conferences

Hell, go to Google I/O, half the machines there seem to be macs.

With the exception of a handful of brands (e.g. ThinkPads), most people I know can't stand their computers and plan to buy a Mac once their machines die or become unusable. I'm surprised that other PC manufacturers manage to sell anything at all. Crapware, poor build quality, bloated and impossible-to-comprehend product lines, it's like HP, Dell and co are actively trying to go out of business.

What you wrote pretty much sums up why I went with a Macbook Air recently. My first Apple product ever. I used to think in terms of cutting edge video card, processor, etc. But my last Windows laptop would freeze up from getting too hot. Just watching a video on Netflix caused this problem unless I elevated the machine to allow free flow of air.

My Macbook Air can compile a video lecture while I'm watching a Netflix video without overheating. I've realized that Apple creates a great computing experience without using cutting edge specs and their experience is much better than other PC manufacturers. And their products look like something you'd want to take care of and appreciate.

I can concur to this anecdote. I'm personally in the IT field, and just got tired of fixing computers all day, to come home and fix my own computer. It was something I loved enough to make a career out of, but yet I grew exasperated at having to maintain my own setup just to keep it in a semi-enjoyable state.

Once I had another hardware failure, I scrapped the whole thing for one of the first gen white Intel iMacs, and never looked back. I no longer get in to a domestic dispute with my computer when I come home at the end of the day. My desktop is at peace.

I have often wondered what people do to their computer to break it? I have a windows 7 install that is a couple of years old at this point. And my linux install is an unbroken series of debian upgrades going about 7 years.

What hardware are you running it on?

A self assembled PC that I put together eons ago.

Would you say you used high-quality parts? ;)

Only the very best - I prefer to use server boards which dont have whizbang features but receive bios updates for a couple of years. I think buying PC's is like an art. You dont want to buy any PC that has a radical feature vendor specific. For eg I would never buy anything with Nvidia optimus, chances of Nvidia sticking around to maintain it five years from now are zero. Youre much safer buying a middle of the road model that will receive vendor updates because the vendors lifeline depends on it. Buying motherboards that are used in supercomputing clusters is also great because those users tend to actually contribute kernel patches in case compatibility breaks over the years.

Agreed, Redhat 9 was hell but Ubuntu saved Linux for me. I hardly ever have any problems, especially the crapware, malware, 30 different "please update me" popups kind of problem that are a dime a dozen on windows. I also like that I know what's going on with the system all the way down to the bare metal.

The main thing that I can't use Linux for: Watching Netflix or other premium content is largely solved by the fact that I do all that, and play video games on my big screen TV via a PS3 and the built in Netflix/Amazon Video features of the TV.

Yes netflix has now replaced flash as the top frustration on linux. No easy solution seems to be in sight.

I had an install of XP that went for 4 years, then another 4 after something in it broke and forced a reinstall. Windows 7 is shaping up to beat that record. I don't want to say people are exaggerating or leaving out details like doing uncommon things, but I don't see how so many people have problems with Window otherwise.

I'm sitting here using a year-old $1300 HP Envy 14. It's the MBP of PCs -- all aluminum/magnesium alloy case, backlit island style keyboard, edge to edge glass around a 1600x900 display, i5, switchable graphics adapters, the works.

The fan cycles on and off every 3 seconds the entire time it runs. It hard freezes if I play certain games for a few hours. Sometimes it emits a high pitched noise. There's some discoloration starting where my palms rest. I doubt it'll make it another year without needing service to at least apply new thermal paste or pads or something. This is HP's finest build quality and it's still not up to Apple standards.

As for the software side, one of my jobs is to resell advertising services, and I manually review each order to make sure the sites to advertise meet some quality guidelines - 20 to 30 a day. At least one of them each day will be a site distributing malware of some sort. Even with a firewall, Windows Update set to auto, Microsoft Security Essential Real-Time Protection enabled, and using the auto-updating Google Chrome... I sometimes get infected by one of these sites anyway. Last week it was one of those pieces of malware that pretends to be an antivirus program telling you to register to clear an infection -- while autokilling all processes except explorer.exe and iexplore.exe on the system. Took me half an hour in the registry editor in safe mode to get rid of it.

HP has never gotten their laptop thermal solutions right, sorry cant help you with that. For the other problem - create a virtual machine with windows installed. Then use a clone of this virtual machine to do your actual surfing. Once that gets infected just make anohter clone of the virtual machine and resume surfing. I am assuming that there is something windows specific in what you are doing, if not just surf in linux and kiss most malware goodbye.

"Create a virtual machine for the express purpose of surfing the internet" is a solution that should never have to be proposed.

...especially when "Use a Mac" is an equally effective solution, with pretty much equivalent user-friendliness (arguably more, given that so much hacker-friendly software is *nix friendly [and in fact developed on a Mac] and won't run on Windows at all).

What about the situation when you have a client that is using activex?

  > There's some discoloration starting where my palms rest.

  > This is HP's finest build quality and it's still
  > not up to Apple standards.

Apple dealt with that issue a while back. They constantly tried to downplay it until they came out with newer models that didn't have the issue. The Apple fanboys of the day were constantly berating the people that complained about it stating that they "must be dirty, sweaty and days without a shower." I remember constant calls for people to, "just wash your hands."

So you're saying apple is eight years ahead of HP in plastic cases.

It's an entirely metal case, not plastic. Whatever finish is coated on top of the metal is what's showing some wear.

This exact problem happened to me. Do you know what Apple did? They took my computer, replaced the case and did a full diagnostics on everything to make sure it was in perfect working order. I had the computer back at the end of the day.

> I'm sitting here using a year-old $1300 HP Envy 14. It's the MBP of PCs

Sorry. Had to stop reading after that because it'll be obvious what's coming. The problem here is that you are the prey of "High-End" PC companies with emphasis on the air quotes. You fell for /the works/ and the bells and whistles.

This is the problem with PCs. Anyone who can make a decent build for $700 will tell you the same: Pre-built PCs are the built like matchstick homes. As long as you put enough glossy paint on the exterior, you can sell it to any sap.

Now I don't go out there and advocating that /everyone/ build their own PCs (though they should at least consider it). I do advocate, however, that one should do enough research to be comfortable with their purchase and to NOT be comfortable with "I just bought a $2000 PC with all these shiny parts. It /has/ to be good."

> The problem here is that you are the prey of "High-End" PC companies with emphasis on the air quotes. You fell for /the works/ and the bells and whistles.

I didn't fall for something, I chose the only option available. I went to Best Buy, Staples, OfficeMax, OfficeDepot, Walmart, Target and Sears. Not a single one of those stores carried a single laptop under 17" with a higher density display than 1366x768. On a laptop this size, at 1366x768 you can see the damned grid etched onto the glass the pixels are so big. It's a huge leap backwards compared to what was offered before everyone went widescreen. Any of those computers would've been worse to work on than the one I was trying to replace.

HP offered a 1600x900 14" screen for a brief period and since that's important to me (my laptop is my primary development machine), I paid what it cost to get it. The only other option for a comparable screen in that size is a 15" MBP. A 15" MBP with 8GB RAM, a 128GB SSD and the display upgrade (the options needed to be comparable) costs $2299 or $1000 more than I paid.

> I don't go out there and advocating that /everyone/ build their own PCs (though they should at least consider it)

Nobody builds their own laptops.

Next time, get the thinkpad T-series. Yes, it's plastic rather than pretty metal, but the build quality is spectacular, even compared to my (Stolen.) MBP 13 inch. It runs both Linux and Windows like a champ. Oh, and it's easy to put in your own memory and hard drive, which decreases the relative cost. (I have an HDD and an SDD in there right now in place of the CD-ROM.

But people do build their own laptops, relatively speaking. They get Clevo bare bones and put what they want in it. I happen to think the clevo bodies are clunky, but to each their own.

I buy old 4:3 ThinkPads on craigslist. It's the only way to get a decent-resolution display today.

yeah, my last laptop was a dell inspiron 14" with a 1400x900 resolution. my current one is a dell inspiron 15" that does 1366x768 :( i could simply not get a 900 vertical resolution without paying an exorbitant price. (for my next laptop i probably will pay the price and get a decent vertical resolution)

Building your own laptop, though?

Now there's an idea. Standardised components so you could build your own laptop, just as you would a PC.

I am a big PC fan (love the openness) but even I will concede that buying a laptop has not been easy for quite some time now. fwiw - the asus u series is pretty good, good battery life and very light, the lenovo t series is built like a tank, and the hp elitebooks are very nice. For a desktop I would recommend PC's anyday, but for notebooks I must grudgingly concede that buying a mac laptop is the logical thing to do from a hardware standpoint.

I built a high end machine a few years ago. Quad core. 6gb RAM, fastest gpu available at the time. All quality parts, in excess of $1500. Installed Win 7.

I barely ever used it. I have a late 2009 MacBook that I use daily. About 6 months ago, I decided to turn my desktop into a Hackintosh. Put OS X on it.

Ever since, I use the desktop at least as much as my laptop now. I've determined it's the OS that's more important than hardware. Even with high end hardware, I can't work with Windows. Put Mac OS on the very same hardware and it becomes a powerhouse.

I used a ThinkPad T400 for about a year and a half before getting a Macbook Pro. The ThinkPad is junk compared to the MBP. Sadly, it's still one of the best Windows business laptops you can get.

I've had exactly the opposite experience. I've owned 3 thinkpads, 4 macbook pros (between my wife and i), and an ibook. The thinkpads are tanks that take any beating i give them and keep running. The ibook was solid. The macbook pros have been complete crap--breaking dvd drives, failing harddrives, failing keyboards, cracked displays, failing trackpads. On the dvd drives, Apple has refused to admit the problem, and has repeated deleted forums with people discussing it. They've completely lost me as a customer.

The t400 is a tank. It survived university and being dropped more than a few times, and beer spilled all over it. MBPs are like Maserati/BMW/whatever which are sexy but require much more maintenance and care than the Honda civic of laptops aka the thinkpad T-series.

People buy Macs when they can afford it and/or want to spend money on quality. But most people can not afford Macs or are not willing to spend that much on a computer. That's why the other PC manufacturers manage to keep selling, and that's also why the other PC manufacturers struggle with razor thin margins.

i can't find the stats now, but i remember seeing those figures when they came out. apple wasn't the only company to see significant growth in PC sales, asus and lenovo also had similar numbers. the makers of cheap crap all seem to have taken hits, the companies that make quality hardware are all growing. apple isn't alone here.

'We are very happy to have generated over $17.5 billion in cash flow from operations during the December quarter,” said Peter Oppenheimer, Apple’s CFO

Ok, I'm impressed. That is a literally almost 200 tons of cash when printed in 100 dollar bills [1]. I sure hope they go back to paying dividends.

[1] If you can believe this source ... http://answers.google.com/answers/threadview?id=441929

That depends, if they can use their piles of cash to improve further their supply chain, innovate even more and push out competitors maybe it is still better spent on that. Also with that kind of cash they could start being very agressive with acquisitions.

Well at some point Google and Apple will both have so much cash on hand that either can consume the other in an 'all cash deal'. it will be an interesting benchmark to watch, the sum of their cash at the end of this quarter is $100B and climbing. GOOG's market cap is only 188B, so more than half way there :-)

Dividends are taxed like ordinary income (IIRC), so paying dividends would be sending money out to shareholders, it gets reduced by taxes, and then the shareholders have to figure out what to do with it that would return as much as Apple would. The best return would thus be likely re-investing it in Apple shares. Its then a smaller amount, due to taxes and thus there's no really positive effect of it. I think the mainstream thinking about dividends isn't quite right-- the value of each Apple share goes up a dollar for every dollar they retain, and more than a dollar for every dollar that Apple can re-invest in its business at a profit.

This is why, for instance, Warren Buffett doesn't pay dividends in Berkshire Hathaway.

Apple is a very fast growing technology stock. It's really not the kind of company that should pay dividends because it has lots of opportunities to invest that money profitably.

Its quite possible that Apple is contemplating a $50-$70B acquisition that is very strategic.

Dividends are taxed like...dividends. Through 2012, qualified dividends are taxed at 0% or 15% depending on the recipient's income, same as long term capital gains. It is very likely there will continue to be favorable tax treatment of dividends (maybe LTCG and Dividends both at 20%) after 2012.

Apple isn't an investment conglomerate; it doesn't have as many ways to invest money as a company like Berkshire.

Part of the issue is that a good bit ($55b of about $80b as of September 2011) of Apple's cash is overseas, but it's unlikely Apple would pay out a large enough dividend to seriously deplete even the US cash hoard. There is an argument that Google, Apple, Cisco, etc. are all waiting for a special "5% tax on repatriated income" tax holiday in 2012+ (like in 2004) to bring back a lot of it. It's all income on which US tax has not yet been paid, so paying 5% vs. 35% would be a big win.

It is definitely up to Apple whether they do share buyback vs. dividend, but once your cash is clearly beyond

There is near zero chance Apple would make a $50-70b acquisition. They have never done that. If they suddenly deviated from their (successful) strategy, it would probably tank Apple's stock twice -- both less cash and an ineffective and risky use of the cash, distracting to Apple's core product, and would call into question both the executive leadership and the board of directors. I'd be surprised to see Apple make purchases beyond $1-5b, and even that would really be pushing it.

I agree with the parent - no way would Apple want to do a massive acquisition.

I also agree with the grandparent, Apple is unlikely to part with its cash soon.

All the cash is Apple's "war chest" - it's let them do innovative things with their supply chain (prepay for ~$1bn in parts to get a substantial discount), it's let them fight a massive patent battle (we'll see if this pays out), and gives them all sort of flexibility moving forward.

Could they do all of the above things with less than $100bn in the bank? Of course, but the massive cash hoard allows them to continue doing the activities above, even if sales/growth slow down.

Normally what you'd do at a mature company in a mature industry (oil, finance, etc.) is pay out 10-30% of your earnings, one or two times per year (or maybe quarterly). Apple would still keep (and keep adding to) its war chest.

Wall Street does heavily penalize companies which have started paying dividends if they ever cut the dividend (or end it), much more than it rewards companies for paying the dividend in the first place.

It's tricky -- tax policy (which does change over time), earnings, other uses of capital, and market expectations, all change.

"Part of the issue is that a good bit ($55b of about $80b as of September 2011) of Apple's cash is overseas"

This would probably be a great time to start iOS/OS X software companies outside the US. Give Apple something to spend its overseas cash on.

There is probably $2-3t in cash overseas in the form of deferred corporate profits, so US companies could do a lot of overseas acquisitions, indeed.

Most dividends are taxed at the appropriate long-term capital gains rate, for now:

http://en.wikipedia.org/wiki/Qualified_dividend

I could be wrong here, but those rates appear to be just for the US. I think I read somewhere that only about half of what Apple has is sitting in the US ($66 billion comes to mind).

Without paying dividends, how is a stock any more an investment than baseball cards?

Capital gains

There's no rational reason for a stock's value to go up just because the company does well if it doesn't mean the company will pay out dividends. That's just baseball cards: i.e. your Alex Rodriguez card will be worth more if Alex plays well, unless for some irrational reason other baseball card collectors feel otherwise.

Wrong. I suggest you read up on the subject.

http://en.wikipedia.org/wiki/Share_price

Can you point out what in that article backs up your argument? I'm not finding anything relevant.

The actual rational reasons are,

1. If you get enough shares together you can influence the company's behaviour, (not relevant to most people)

2. If someone else wants to influence the company's behaviour they might be willing to pay for your shares, and

3. If the company goes under the shareholders might get something once it gets dissected (not really relevant to AAPL at the moment)

In the case of a company in which all control is held by a majority shareholder who intends to hold 51% forever, you're absolutely right - the valuation of the 49% is almost completely arbitrary, giving no control or ownership in a meaningful sense.

Is 3 ever relevant? Most failed companies go into insolvency and then bankruptcy, which means creditors walk away with it all.

1 and 2 are fair points, but with interesting consequences. By 1 and 2, it would be rational to invest in failing but promising companies, since they are more ripe for takeover. With a successful company like Apple, the profit-maximizing move from shareholders is to make sure they keep doing what they're already doing.

> There's no rational reason for a stock's value to go up just because the company does well if it doesn't mean the company will pay out dividends.

But the company is worth more (in real terms, not just market cap) and stock is partial ownership, so there is a reason. Just look at it in terms of assets - Apple has a bunch of stores and other stuff they didn't own 10 years ago. That stuff has value, the stock represents a portion of that value.

You are right that a huge part of this is pretty irrational, though. Hell, look what happened when Steve Jobs was rumored to have had a heart attack.

> stock is partial ownership

This is a nice idea, but it's not immediately obvious it should mean anything. If someone owns 1% of a company they may theoretically own 1% of its assets, but if they can't practically make use of those assets for personal benefit then that value evaporates.

Say I'm the director of a company. I own all of its shares and am the one-member board. As chairman of the board I appoint the CEO (myself) and in tandem with said CEO I make all decisions regarding hiring and pay. My company pays no dividends, and I've made it clear that I will never sell more than 49% of the company.

Now, the 49% that I might sell technically confers partial ownership, but it gives no control, no dividends, no benefit of any kind.

Say my company only does one thing: It invests in Company2, my other business. Company2 is run in exactly the same way as the first company of mine. Now, say I was willing to sell you 49% of the first company, and my first company (me) was also willing to sell you 49% of Company2. You'd own nearly 75% of Company2, but you'd have no control over anything.

I could keep nesting companies inside other companies until you effectively owned 99.9% of the company that did the actual work, but that's completely irrelevant - even if the company was worth billions, there is no logical reason that the value of those shares should be correlated with the value of the company. They might as well be correlated with the weight of the CEO, though they should probably be worth nothing at all.

I'm pretty sure partial ownership is only worth anything when it is relevant to a credible possibility of controlling ownership.

This is getting way over-complicated. Look.

When a company IPOs, ownership of that concern is split up into x pieces. The company has some amount of value, which is divided among the shares. As the company increases in value (hopefully), so do the shares. That is the reason why investing in a company is different than baseball cards. Baseball cards only appreciate in value due to changes in supply and demand, whereas a business can actively create value. There is no need to delve into weird counterfactuals or discursions on what the idea of partial ownership "means".

If a business's value can't be plausibly enjoyed by the shareholders, then the shares really are no more than baseball cards.

So far, the ways for a business's value to be enjoyed by the shareholders have been broken down to (a) dividends, (b) stock buybacks, (c) the ability to take control of the business, (d) the ability to sell stock to someone else attempting to take control of the business, and (e) claiming a share of the business's assets after dissolution.

(e) is right out--for a company that's doing well at all, their market cap is higher than the value of their assets less their liabilities, and a company doing poorly is certain to become insolvent before being dissolved. This is almost an intended feature of limited liability: the company can borrow itself to death, and the worst case scenario is that the stockholders get nothing.

(a) and (b) are stipulated as part of the original question--if the company doesn't issue dividends or buy back stock, of what value is the stock? Which leaves (c) and (d), which can be plausibly ruled out by having one intransigent party holding a majority share.

If a company has 100 shares on issue how is paying you $0.10 per share in dividends different from a buy back of 10 shares at $1 each.

Either puts $10 dollars into the pockets of shareholders and out of the hands of the company.

Dividends versus a buyback are the same thing except from a tax point of view.

If you choose not to sell that is like an automatic dividend re-investment plan.

Buybacks are fine too, but a lot of companies don't do either.

Not true. Marc Cuban has written an excellent blog post on this: http://blogmaverick.com/2004/07/20/microsoft-dividends-and-s...

Dividends reward you for holding a stock. Buybacks you when you sell the stock. I'd much prefer dividends, and if we had a better tax policy on them, I think you'd see companies do a lot less crazy #&*$ to expand into markets that they have no business in.

To expand on what beagle said:

1) owning stocks gives you some legal rights; in particular, management cannot spend the earnings as they wish (though in practice interests are rarely well-aligned). Also, if you control enough shares you might be able to make the company pay dividends.

2) more importantly, stocks tend to be more liquid than baseball cards. Though I'm sure there are counterexamples. :-)

> so paying dividends would be sending money out to shareholders, it gets reduced by taxes, and then the shareholders have to figure out what to do with it that would return as much as Apple would. The best return would thus be likely re-investing it in Apple shares.

Your answer is essentially fine, but:

1) There's no reason you should assume an investor would re-invest dividends in Apple as opposed to AcmeCorp. The resulting portfolio might be less risky than either all-Apple or all-Acme.

2) It doesn't take into account that investors are also consumers, i.e., they might choose to not re-invest the dividends at all, and instead "buy stuff". For instance, a retiree might use it to pay the rent.

3) Transaction costs for selling a stock vs receiving a dividend.

/nitpick

Indeed companies not spending or distributing cash is slowing US growth too. There are macrodisadvantages. And the complete aversion to paying taxes does not help the budget deficit.

they have a lot of this cash outside the US and the tax to bring it back is fairly high. I don't expect dividends on this basis.

For those keeping tracking, that means their growth rates are absolutely mind-blowing.

Revenues, YoY, grew at about 75%. Profits, YoY, grew at about 117%.

Keep in mind this is billions of dollars we are talking about. It's "relatively easy & common" for a "small" company to grow that fast on say revenues up to $400M or even $1B range. But on QUARTERLY numbers of $25B and still be growing that fast...that's...just...mind blowing.

To show how mind-blowing this is, let's do some speculation - what will those numbers look like for the next 4 years (assuming that growth rates remain constant):

Next Year (Y1) - Revenue = $81B, with Profits = $28.34 in Q1.

Year after (Y2) - Revenue = $141.75B, Profits = $61.49B in Q1.

Y3 - Revenue = $248B, Profits = $133B in Q1

Y4 - Revenue = $434B, Profits = $288B in Q1

Before you dismiss these numbers as fantastical, keep in mind a few things.

a) The tablet market is still nascent and is likely to continue exploding.

b) The smartphone market is nowhere near as big as the mobile market - even the mobile market still has room for growth.

c) We haven't even seen other products that will likely come out of the pipeline that could create new categories (iTV anyone?)

d) iCloud was just launched. It's like AWS - but for everybody. Give it some time, but I can guarantee you it will be a major, major source of revenue and profits for them (just like Amazon) in the next few years (more than likely towards the latter part of the next decade).

The truth is, seeing these numbers makes me very skeptical myself, but I would have never imagined that I would see a company as old as Apple, doing $26B in revenues per quarter and still growing at 75%/year.

"It's like AWS - but for everybody."

what? icloud has exactly zero things in common with AWS.

>exactly zero things?

So it's not a 'data storage service in a remote data center'?

Sure, AWS is made for servers - but the core business is the same. Charge people (AWS charges developers) to store your data in our cloud. Apple charges consumers.

Different demographic, exact service. Btw, iCloud is like AWS because AWS has many services (S3, EC2, etc.). Just like iCloud has 'store all your images and files', and 'match your music via iTunes'. Two services, via the same underlying core product.

It's identical to AWS - except for the target market.

While I appreciate the analogy, it is somewhat flawed.

The only common thing they have is that they both are cloud services, i.e both Amazon and Apple use their remote servers to provide services to their customers.

It's everything else that's different, and it's an important difference. (Keep in mind that any two things are similar for some level of abstraction. E.g apple's and oranges = both fruits. A brown leather sofa and a black hole = both exist in this universe. That does not say much).

For example, iCloud (all it offers) could have been implemented on top of AWS.

AWS could not have been implemented on iCloud.

AWS is like an operating system, iCloud is like a few specific applications.

I will use part of my answer to the comment right above yours:

That's three major forays they have done into the 'cloud services' business, but they have not unified the branding - like Amazon has done. Doesn't mean they are not a heavyweight player.

Also, just because they are not competing head to head doesn't mean they aren't competing.

GM made trucks, Yamaha made bikes. They don't compete for the same customer, but they do compete for some customers in some market segments. So that makes them indirect competitors.

Right now, as it stands, there are some customers (technically oriented) that might have rolled their own iCloud solution on AWS - but now they might not because they can use Apple's. Sure, that's a very small % of the market right now...but my point is that at some point - within the next decade I think - Apple will be more direct. It's only inevitable - assuming they want to keep growing as long as they can.

> For example, iCloud (all it offers) could have been implemented on top of AWS.

Not just "could have". It actually IS implemented on AWS. iCloud uses AWS and Windows Azure as its backend.

Source: http://venturebeat.com/2011/09/03/icloud-azure-amazon/

Interesting point. iCloud so far doesn't offer elastic computing, but that difference saide it's essentially the same thing except the developer builds a product and the customer pays for it, with apple essentially covering the developer's back end costs with the fixed cost (30%). The analogy fail when the developer still needs to support an app with separate cloud based services. If apple does extend iCloud to do this stuff then we get the "dream" (simple, fairly thin devices in user pockets, backed by arbitrarily powerful services in the cloud — presumably wrapped in a very simple price model for both users and developers).

    > It's identical to AWS - except for the target market.

It is similar to S3. AWS is way more than just dumb storage.

If anything, iCloud is more like Dropbox for "normal" users. It's more limited than Dropbox in what it stores, but it stores the majority case rather well, including system settings.

In any case, iCloud is most definitely not Apple's AWS.

Well, sure...Apple hasn't rolled out a unifying 'cloud product/strategy' yet...but the pieces are there. iTunes Store is just an application on top of the cloud infrastructure. Then iCloud is another application - that while it doesn't compete directly with AWS it does so indirectly...because of the implicit threat that it's just a matter of time before Apple moves in that direction (if they want to).

I prolly shouldn't have used the name 'iCloud' to describe what I meant. What I meant was, Apple has a clear business interest in selling access to a 'cloud digital infrastructure'. At first it was iTunes (they sold that access to the record labels, but consumers subsidized that effort), now they are selling it directly to consumers. So they have made two major forays into the 'cloud infrastructure monetization' business....which is the same business Amazon is in with AWS. They also did it with the App Store, then the Mac App Store (they sold access to third-party developers). Sure, not in the identical way as Amazon did, but it's not that far off.

It's not that far fetched to see that they will eventually be competing head-to-head with AWS.

> If anything, iCloud is more like Dropbox for "normal" users. It's more limited than Dropbox in what it stores, but it stores the majority case rather well, including system settings.

Well, each is more limited than the other. iCloud provides more stuff (synchronized key value store which can be used from more than one device at a time, etc.) but access to what it stores is more restricted.

iCloud is a service you could build on AWS - not the other way around.

>So it's not a 'data storage service in a remote data center'?

okay, looked at from a naive enough perspective, they have similarities. they both can be described using the buzzword 'cloud', but it doesn't go much beyond that. they do not perform the same task. they do not serve the same market. they do not have a similar interface. one service cannot replace the other. drawing any sort of comparison between the two is completely meaningless to the discussion at hand.

Not right now...the point is that if Apple wants to, they CAN create an API on top of iCloud to compete directly with AWS. That's the only major difference. Right now, Apple is one layer above Amazon. AWS is infrastructure, and iCloud is an application. But my point is, just like Amazon first built their data center capabilities to support their retail operation and eventually started selling their excess capacity - so too could Apple eventually do the same thing and have iCloud compete directly with AWS.

Regardless, the point is moot. My main point I was making is that iCloud is still a very small business for Apple - when what Amazon has shown us (even though they haven't broken out the financials) is that monetizing your excess capacity can be a viable business. If Apple knows how to do anything, it is to build viable products.

Regarding point d), specifically around iCloud being a major source of revenue and profits:

[Tim Cook] said iCloud is "not a product, it is a strategy for the next decade."[1]

iPhone and iPad are major sources of revenue for Apple; they are also "products" with a heavy focus to make them "great". iCloud is one of many features that makes Apple products great, but IMHO is not itself a focus for Apple as a revenue generator.

[1] http://www.google.com/hostednews/afp/article/ALeqM5hOAZb_nCI...

The $13.1B profit is the 4th best quarterly result in world history, the 2nd best in US history (Exxon Q308), and the best by far of any company outside of Oil & Gas. Not inflation adjusted of course.

Source: http://en.wikipedia.org/wiki/List_of_largest_corporate_profi...

Interesting to see United Airlines on the largest profits and the largest losses. Is this an artifact of their bankruptcy?

How did AOL Time Warner book a loss of nearly a trillion dollars in a single year?

Those free shiny AOL coasters didn't print themselves.

A trillion is a thousand billion, not a hundred billion.

The write down after AOL bought Time Warner, and AOL's stock went south.

Also, Apple makes 409,000$ profit per employee. (last quarter)

From the ever useful Wolfram Alpha: http://www.wolframalpha.com/input/?i=apple+profit%2Femployee...

I want to see a study of what the changes over the last ten years correlate to: http://imgur.com/BDOSZ (couldn't find a permalink for individual sections)

That is really impressive. The management of Apple is definitely to be commended for doing an epic job.

No need for accolades, they pay themselves extraordinarily well.

http://www.businessweek.com/news/2012-01-11/apple-ceo-s-stoc...

That wasn't pay, those were stock options that are worthless currently --if he leaves before 2016, he gets nothing-- but will pay off well if he sticks around. Half of the stocks vest in 2016, the remainder in 2021.

http://tech.fortune.cnn.com/2012/01/10/apple-ceo-tim-cook-di...

And $1.7M revenue per employee. Including all the retail employees.

http://www.wolframalpha.com/input/?i=apple+revenue%2Femploye...

It's quite ridiculous, I wonder why they don't use that as leverage to truly screw with everyone hiring talent in the industry.

I guess they don't need to.

If you are going to open an angle of attack, its generally good to know that you can win that battle.

To win though, would require them to commit more and more cash (as competitors start pouring in money as well). This would pollute the hiring pool, inflate long term expectations of engineers, and piss off shareholders who would suddenly see Apple engaged in a war they didn't expect.

Besides, they could just as well use that money to pay lawyers and sue over patents, hurting competition at their bottom lines.

Its an amusing thought to play with none the less.

I wonder what that figure would look like if you factored in Foxconn City.

Quite impressive indeed. I was particularly interested in the insane iPad numbers, which surprised me.

I thought I would use this opportunity to ask the HN community: what do you think people use their iPads for? Honest question - I have had one for a long time now and barely use it as it sits in this awkward middle between a "full" PC and a smartphone. With so many millions of iPads sold and Tim Cook saying "There Will Come A Day When The Tablet Market Is Larger Than The PC Market” I am trying to form an informed opinion but just fail to see what the use case is for the iPad (perhaps reading a book? casual web browsing? netflix/youtube?).

So what do you think the future of tablets holds? Link to studies on the topic are much appreciated as well!

I have the same question. What do people use iPad for? I myself am laggard when it comes to electronic gadget and I haven't got an iPad yet. I got a Kindle though since it's good for reading.

Some of my pianist friends use iPad for reading music sheets while playing. But they don't use it much besides that.

I have an iPad and barely use it as well. BUT...that is because my wife and 1.5 year old are on it constantly. If you have kids, it is absolutely the most fantastical product you could ever own. Beginning at around 8 or 10 months, my son could use it pretty effectively. For xmas, we got a case to mount it on the back of my car's front seat. Just slide it in, turn on a movie and the kids are engaged for hours.

I actually do use it a lot, mostly for surfing web, reading email, watching movies/tv, etc. I generally use it where a notebook would be awkward such as in bed, while watching tv, in the car, and, yes, on the john.

I use mine for everything I use a computer for which isn't creative. So things like watching movies, reading books, reading the news, reading textbooks (who said learning had to stop in high-school/college?), reading articles, playing games, facebook, twitter, browsing dribbble, in general chilling out and screwing around.

Once I need to write/design/code then I whip out my laptop.

I use my iPad all the time in my day to day life, several times a day. In the morning I flip through my Flipboard and catch up email and news while I eat breakfast and sip coffee. I take it with me to class and look through PDF's while the instructor is presenting. For example, I go on Wikipedia and I look at related material as I learn about it. (And yes in a particularly boring class I go to reddit, here, or play a game). In office I like to hook my headphones to it and listen to music. When I work on a problem set I always open the PDF on my iPad-- no need to print. When I go to a talk I always take it with me in case it is boring. While I eat dinner I also browse the internet, with the iPad next to my plate. Finally, I also read all my books on it now.

All these things could be done with a laptop I suppose, but the iPad is so simple to take out from the bag and just start using it right away. It occupies very little space and is much lighter. In fact, I actually don't use my laptop anymore... I use my desktop in office or home, or iPad everywhere else.

The computer, even though its a laptop, lives on my desk with a chair in front of it. I use it for work (mostly).

The iPad is for everything else. Going up to the roof to hang out on the deck, I browse the web, play games, compose music with garage band, sometimes I'll play around with editing movies in iMovie (though it would really be better if I could use the iPad to edit movies that live on my computers hard drive, since thats where all my footage lives.)

The iPad is a dream for browsing the web, just big enough to be an expansive experience, but nearly as portable as the iPhone.

I can't imagine dragging the computer up to the deck. Its a laptop, sure, but it has a USB hub plugged into it, headphones, a mouse I periodically use and an external drive. These things effectively anchor it to the desk. Plus its much easier to sit in just about any position and use the iPad, where the laptop kinda forces you into the sitting-at-a-desk position.

The iPad also great for reading books. I have no paper books anymore-- all of my books are iBooks, and if there's a book I want to read, and the iBookstore doesn't have it, I don't buy it. The other day I downloaded over 200 ebooks in ePub format from the mises institute- http://mises.org. This means I have essentially the entire works of austrian economics on my iPad, at my fingertips. There are also probably another 200 books from the iBookstore we've accumulated, as well as Oreilley ebooks, and a very large collection of PDFs (the iBooks PDF viewer experience is dramatically improved recently and is just great now.)

I've also got the entire footage from WWDC 2011 on my iPad. I watch it periodically when I need to refresh myself on iOS development issues.

Of course there are some perennial movies that we like, and so I keep them synced to the iPad. Sometimes we'll put our TV shows on there that we subscribed to in iTunes.

I travel a lot, and the iPad is the full time computer on trains and planes.

The iPad has a big chunk of photos. I have a photo folder in aperture that syncs with it, and of course iCloud keeps the most recent 1000 photos. So, it was really easy to show photos to my parents when I visited them last, or to show a photo to my partner or co-founder.

When in lectures, or having a company meeting, I use the iPad to take notes. I have no problem touch typing on the on screen keyboard. I set the iPad down and use notepad and don't even have to look. Sometimes though we record discussions to be transcribed later, particularly during brainstorming.

The iPad is a great email machine. I'll read email on it and reply to people. Often late at night when I still have work to do but am tired, I'll get in bed and do email.

Of course, it also makes a great TV while in bed- I've watched Netflix movies and shows on Hulu, and used to watch TV on ABCs app in the past.

I use the iPad for research. I keep iCab open as a seperate browser specifically for researching technical topics. This way I can have a bunch of tabs open and essentially open unlimited tabs, and its never polluted by my normal browsing. I switch between iCab and notepad to make notes about ideas, and in this way I architected our main product. (In fact, I spent a couple weeks with an illness and used the iPad full time to do work those weeks.)

When there's an issue with one of our machines, I'll use the iPad to SSH into it and see if I can diagnose it, sometimes. (though of course usually I use the laptop for this stuff.)

Oh, I forgot, I do play games on it too. And I use twitter. And Facebook, though I don't use Facebook much at all these days.

Whenever I need to close tabs on my browser so that I can concentrate on work, I will use instapaper to save the tabs that I want to read later. Then, later, on the iPad I'll read those articles.

I use the iPad to keep in touch with my cofounders. We are often in different rooms and rathe than disturb each other we send iMessages back and forth.

When I need to talk to someone on the phone, I use the skype app. Haven't really used FaceTime much but might start doing that soon as the people I talk to are all on more modern hardware.

I have bluetooth headphones so if I'll be spending some serious time with iPad, I'll put on some tunes. I have a selection of music synced, but everything is in iCloud too so I an add whatever I want whenever I want. Its amazing to have your entire music library accessible in a portable way like this.

About the only thing I don't do on the iPad is write software...

There are periods that I go without using it at home (I read a lot on the train with it), but when I do I am reminded of why I bought it. The internet in your hands really gets me

I like mine for reading the news (HN and otherwise) in the morning, still laying in bed (takes me a while to become fully awake).

I use it the same way throughout the day: casual browsing, social networking. Doing that helps keep distractions off my real computer, so I can stay focused on and do real work. Plus its convenient to take with me and read articles during lag time when I'm out and about or running errands.

That said, while I love my iPad, the whole syncing thing is a major quagmire. One of the "geniuses" at the Apple Store accidentally wiped my boss's iPad clean during a one-on-one session. I wasn't surprised, given that iTunes pops up attempting to do that every time you plug your iPad into a computer other than the original host.

Well, I certainly didn't appreciate the potential use cases for an iPad: http://news.ycombinator.com/item?id=1236558 until I used one for a while. I love gaming on the iPad. The abundance of well-designed, easy and quick to play 2D games is almost overwhelming.

The iPad is fantastic for video. Several hours of tutorials or iTunesU before needing a charge. My 11" air can burn a full charge in a couple of hours of video playback (flash or html5). And it's nice to watch on the iPad, and code along on the Air.

Reading and browsing goes to the Air or EeePC. The keyboard makes a very convenient stand. Lying in bed, propping the front edge of the laptop on my chest and using the trackpad to navigate is ridiculously effortless (and lazy). Page load is noticeably faster. Text is also much crisper on the otherwise inferior TFT screen. A touchscreen does bring a somewhat visceral (for lack of a better word) feel to browsing that I miss on a computer.

Of course, all of the above would hold true for an Android tablet as well. Ok, maybe not the games, yet, but the Market is getting there quickly.

At work I have a 13" mbp with 24" cinema display that I rarely take home. Then at home I have my 27" imac so I primarily leave my ipad at home and use it at night to do more long term web reading. Like if there is an insightful multi-page article thats not just for quick skimming. Also use for some stupid games, reading on kindle app, and occasional email if I forgot to send out something before I went to bed.

I read this question, and I'm typing my response, on my iPad.

Gross margin for the quarter: 44.7%

Holy shit.

yeah, at those rates they could afford to stop using slave labor or at the very least invest a bit to make life easier for Foxconn employees or maybe startup the charity programs again

Cook reinstated the charity price-matching policy, soon after he took over Apple. (Not that I'm saying that it redeems Apple, but they are moving in a more charitable direction.)

Foxconn is dominant in its industry. Moving to a another location may eat up way too much from the pie.

I'm not saying they shouldn't do the very least. A bit of CSR might be even good for business.

No need to move away from Foxconn, Apple could easily dictate exactly what Foxconn needs to do.

Foxconn makes stuff for a lot more companies than just Apple: https://en.wikipedia.org/wiki/Foxconn#Major_customers

They could ask, and even encourage, but not dictate. And Foxconn is not likely to do something that puts them at a competitive disadvantage.

They can certainly dictate. Apple has the money and volume to get anything they would like. If Apple told Foxconn that everyone making Apple products will be paid triple what they are making now and work no more than 8 hours a day, it could happen tomorrow.

What happens when Foxconn does that and every other company switches to Foxconn's competitors?

Just about every other company is already having trouble competing with Apple on price and quality. So, my guess as to what happens is that Foxconn attracts and retains the best (most productive + highest quality work) employees, leaving them, and their customers, at a disadvantage to compete with Apple + Foxconn, unless they too improve their wages and labor standards.

Apple's cost structure has much more to do with its ability to purchase in advance than the quality of the workers. The workers are exchangeable, but Apple buying up 100% of a components supply for a period of time is not exchangeable. Same for putting down billions for a new factory. They have more cash than the bank and play banker for a lot of people in the supply chain.

Apple do not use slave labour.

Here's the roundup of estimates, even the rosiest forecast is below the actual quarter:

http://fortunebrainstormtech.files.wordpress.com/2012/01/scr...

Just revealed on the call: they sold 1.4 million Apple TVs this quarter (vs 2.8 million in the 4 previous quarters).

The success of apple , in my opinion, is largely built on the work of app developers. Without the effort put into the software, they would not be able to have so much profits.

We, the developers, are in fact the cheap workers in the Apple Empire, not those factory workers from China. Funny thing is they even charge money from us.

Consider what convinced us to develop for their platform. That was their work. Developers don't come to the App Store by accident.

After hours snapshot: AAPL is up 32 points (7.78%), at $453/share, now has more capitalization than XOM (ie, largest cap stock in the world).

In december I bought a Macbook Air, iPhone and passed down my iPad to my nephew. I don't begrudge any of their profit, well done to them I say.

I wonder what's Apple's strategy when everybody who wants/needs an iPhone gets one (and I'm sure they have one in place). This is a very deep well right now and the record profits will likely continue to be posted for years to come, but the demand is bound to subside eventually right?

Once everybody has a decent iPhone/smartphone is there really a need for anyone to upgrade more often then let's say every 2-4 years?

Can Apple/Samsung sustain their growth when the only really new prospects are the next generation of teenagers entering the market?

The same thing they did for when iPod sales declined (as they have): more new products in the pipeline (which they have).

My opinion is that Apple's strengths only really work in new things, and not for mature products. So, they have to keep finding new waves to ride (which is where they like to be anyway). Fortunately for them, one can also introduce a new thing into an old market (e.g. music, phones, tv, textbooks).

To answer your question: iPad, iTV, textbooks - and probably others. Note that the iPad 3 will have the resolution to display diagrams from textbooks (which the kindle didn't).

BTW: it's curious that the iPhone is still growing faster than the iPad. Maybe because the iPad 3 was delayed. Though, 128% and 111% are both OK :-)

Most iPhone owners I know buy new versions every single time, just because they can. (And every time they show me how cool the apps are on their new phone, though I haven't been impressed in a while).

> just because they can.

That's largely driven by a very high resale value for last year's model, though; that also won't survive market saturation.

And this is a company allergic to paying dividends. If I were a shareholder, I would be asking some questions.

Based on the performance of their stock, there's only 1 thing an unhappy Apple investor can be: stupid.

I'm a shareholder, and I'm pretty thrilled. I've got a few shares from the $40s, and a bunch from the $70s. I'll take success over dividends any day.

Why? The only way you'll get that return is if you sell your stock today. That destroys any chance for you to earn future value from the performance of the company.

Dividends are the better way companies return value to their shareholders, not encouraging them to engage in "flipping" which is not sustainable for long-term value.

http://money.cnn.com/2011/09/15/technology/thebuzz/index.htm

> The only way you'll get that return is if you sell your stock today.

Or, they can continue to use their pile of cash to be able to make good strategic decisions and continue doubling my share value every few years.

Not necessarily. Paying dividends forces everyone to "sell" whether they want to or not, and the only way to stay on the ride is to accept the taxes you have to pay and then buy back in. When the company reinvests (and/or buys back stock), your money grows tax-free.

A split would be nice, though.

> A split would be nice, though.

Why? One $100 share versus one hundred $1 shares is functionally the same thing.

You can sell just part of your holdings when you have 100 * $1.

Even at $450/share it seems a little silly to sell them one at a time.

Congratulations to Apple on a blow out quarter. BUT, I've got to ask the hard question. What the hell is Apple planning to do with their $97.6 BILLION in cash?

Apple's recent acquisitions pale in comparison to other's in the tech space so this cash pile is even more acute.

It's not so much to buy companies, it's to buy up key suppliers' capacity to ensure component availability.

Like when Apple bought up all the 1998 Christmas season air freight cargo space from Asia to the US, to carry the new iMacs, rather than shipping them by boat.

It's worth noting that iOS is pretty conclusively outselling Android at this point. 60+ million devices in Q112 vs. at most 50 million Android devices. Android may be selling more phones, but at the operating system level, there's no contest.

The $46.33 billion in revenue is insane. The Airspace broke it down in comparisons—over $5,000 per second! http://theairspace.net/events/apples-q1/

I guess someone saw that coming: http://thestreethub.com/rushi-shah-on-apple-inc-aapl-until-o...

It's great that Apple is reviving a stagnant market, but this isn't going to last forever. It's an artifact of soaring market share and turning smartphones and tablets into more than an executive toy.

It could go on for a long time, but all it takes is someone figuring out how to compete, and that's going to become more likely as their profile grows. Apple has earned its wealth, but it's too easy for them to forget what made it possible and slide into mediocrity.

Out of all the big players in tech, I think Apple understands very well about sliding into mediocrity. Apple has been around for a few decades now and they already experienced a huge decline before.

Impressive but I can't help to think about the people who create all the Apple products.

who is in charge of that bank account... I wonder do they get interest? :)

Does anyone get interest these days?

Yeah . I was down voted because I asked a semi serious question. Awesome.

At that scale they don't use bank accounts. Probably a lot of it is invested in short term T bills, while liquid cash is kept in a money market. And yes, apple will be making interest on it.

I wonder how long it's going to be until the monster in DC wants a bigger slice of Apple.

Big oil gets targeted constantly for windfall tax proposals. As Apple marches toward $50+ billion in profit, it seems impossible the government will just leave the world's richest and most powerful corporation alone.

You're missing why oil companies are good targets for that sort of thing - people have little choice but to buy their products, prices to consumers are rising so the companies are unpopular and they are directly or indirectly responsible for shed loads of environmental damage.

That's not the case with Apple, Google, MS or other tech companies.

To the beast in DC, it has absolutely nothing to do with the arguments you posit. You're talking about logic; it doesn't apply to their decision making.

It's about the money. That's why big oil has always been a target, it has been the most profitable enterprise in America since Rockefeller formed Standard Oil.

News flash: they also didn't target big tobacco because cigarettes are bad for you (that was merely the excuse they needed), or to pay for healthcare bills. They targeted them to steal / fleece a golden goose, and then divert the stolen money to other projects. Which is exactly what they did.

I agree with you. Its just getting to be too tempting. Plus government would be the last one to worry if they destroy something.

They could look very deep into the "made in china" "issue". Lookup "Kluska" - owner of company Optimus in Poland. One of the richest man in 90s. Basically, CBS imprisoned him for months after he allegedly broke the law by exporting parts to foreign countries where PCs were assembled and brought back to Poland. The issue was that he did not pay tax out of the assembly. After years of litigation (bail denied), he was free man, while his company went bankrupt and he was left in debt after fighting with Government. Polish IRS (Urzad Skarbowy) did not even apologize.

The public don't like taxes of any sort on anything, however targeting specific taxes is far easier to sell if they're levelled at companies seen to be bad hence tobacco and alcohol taxes, banking taxes, oil and so on.

Walmart are massively profitable and are by many measures the biggest company in the world yet remain untargeted. If what you say is true why is this?

As you say, it's the excuse they need but if they don't have an excuse then the won't/can't do it.

Have any of the windfall tax proposals ever moved forward? The energy industry receives heavy subsidies even as they make mounds of money.

http://en.wikipedia.org/wiki/Energy_subsidies#Allocation_of_...

The reason oil companies get a lot of their subsidies: http://en.wikipedia.org/wiki/Golden_gimmick

Also, created the problem of sending so much money overseas.

Apple also isn't responsible for any of the major ecological catastrophes of the last 100 years. Labor violations in China certainly, multiple companies ruining hundreds of miles of United States coastline not so much.

Huge difference between Apple and Exxon, etc.

1) Big Oil is in an industry where demand is highly inelastic, while demand for consumer electronics is far more elastic.

2) Big Oil is the subject of huge direct and indirect subsidies. Apple benefits to some extent from the fact that they don't pay for some of the inherent costs of their profit-making activity (disposal of iPhones, etc). The energy industry generally, and the fossil fuels industry in particular, don't pay for a lot of the inherent costs of their activity. From an economic point of view, dollar of uncompensated environmental damage is as good as a dollar of direct subsidies. The BP settlement, at less than what BP would've had to pay in damages, was probably $10bn+ subsidy. I haven't seen statistics for the oil industry, but the indirect subsidies in the coal industry run to the $300-$500 billion/year range (http://www.fastcompany.com/1727949/coal-use-costs-half-a-tri...). I'd imagine oil is in the same ballpark.

If only they put their record-breaking profits into building factories and inspiring local workers, rather than relying on near-slave labor in a faraway land.

Not to forget that they don't just sell their products in the US. And not to forget that their sales in APAC region is bound to grow significantly in the future. Not justifying the bad work conditions you're pointing to, but it seems fair to generate employment in places where they're getting their profits from.

My point is that, last I heard, Apple is sitting on $70 billion. Meanwhile, Steve Jobs was telling Obama that the US could never produce the iPhone. Why? Because he seemed to think that near-slave conditions (e.g. rousting 8,000 workers from corporate housing for immediate 12-hour shifts) were necessary simply to create the products he sold.

Also, keep in mind that nobody working at Foxconn can afford to purchase the iPads they build. It appears that this will remain the case, no matter how long they work there.

> Also, keep in mind that nobody working at Foxconn can afford to purchase the iPads they build. It appears that this will remain the case, no matter how long they work there.

The same is true for the average American worker at a BMW factory.

I don't think you should try to draw conclusions by comparing commodity personal electronics to luxury automobiles.

Then what is that example trying to prove? There is no way I could afford to pay for the software my company produces.. Should everyone work in a place where they can afford what they build?

Why do you think that US auto workers, making a living wage producing luxury automobiles, have anything to do with near-slave labor?

If Apple has stowed away $70 billion, don't you think they could afford to pay higher wages, benefits for those mangled by RSI (back to back 12 shifts, not counting unpaid overtime) or machinery, and generally not treat people like dirt? I think they can afford to.

Ho-lee-crap.

Not a fan of apple products, but those are awesome results. Nice work apple.

won by unethical manufacturing labor and lockin-in customers. not impressed.

And who do you think is building your Android handset, exactly?

At least i can charge it with regular usb connectors. use regular microSD cards. remove the sim card with bare hands. etc. etc.

...now i only have one problem to deal with.

So, like this?

http://www.usbfever.com/index_eproduct_view.php?products_id=...

And since when is removing your sim card with "bare hands" a feature? Not to mention all it takes is a pin for the iPhone.

I take it you never traveled in your life?

I'd imagine even in the worst areas of the developing world you'd be able to find a narrow pin to eject a SIM card.

I hear the phrase 'apple fanboy' thrown around a lot, but I think the 'anti-apple fanboy' is more common and extreme

How I read it : Apple shows that their hardware is overpriced.

Any chance it might have something to do with Steve Job's death? Edit: Why is this being down voted? There are typically record sales following the death of cultural icons (Elvis Presley, Michael Jackson, John Lennon, etc.). Steve Jobs is arguably one of those icons.

Doubtful. More likely pent-up demand for the next-gen iPhone.

Apple had in previous years been like clockwork - every summer, new iPhone. Then 2011, and no successor in July... so many people waited (I did). Also this is the first iPhone launch without AT&T exclusivity (both VZ and Sprint are alternatives to the big bad T)

Just wanted to chime in with an "me too".

I had an iPhone 3G for three years before I ended up switching to AT&T from T-Mobile and bought an iPhone 4S and too date it is still my most favourite purchase.

Your examples are of cultural icons whose lifeworks were in music. It's possible that many who had not known of those music artists bought their albums after their deaths because they wanted to understand why people were grieving and perhaps people who were already fans bought more memorabilia since they miss the artist that they held so dearly.

But with Steve Jobs, it's unlikely that people think to themselves "Damn, who was this Jobs guy? Maybe I'll buy an iPhone/iMac to find out" since iPhones and Macs are not going to give them a connection to who Jobs was as a person. And compared to Lennon, Presley, and Jackson, Steve Jobs is less of an icon for the general public. Most people know Jobs as that Apple guy, but fewer actually know who he is and what he did. I have a teacher that thinks Jobs worked with Paul Allen and founded Apple when she really means to say Steve Wozniak.

That probably applies to the book about him. I think electronics are expensive enough that relatively few people would buy for that reason.

It is a good question. When the iPhone 4S launched and started to sell really well I questioned the same thing, maybe the sales were related to the death of Steve Jobs and I was downvoted. I really don't understand the urge of some people to go against it, it is a quite common feeling.

I have a Macbook but I really like Android phones and I had a strong desire to buy an iPhone after Jobs death. I noticed the same feeling with a lot of people around me.

Is it just me who is slightly uneasy at the idea that one company can generate billions in profit at the expense of millions of people who had to pay much more than the product was actually worth to produce. Is that a fair bargain, or is it exploitation of a monopoly of invention?

It's just you. Apple is a business.

All business charge highest possible price for service and product that buyers in the market accept. The cost of making something is practically irrelevant. We all know raw material in a good restaurant costs only a fraction of price on menu. But people will all swarm there if it is a high rated by critics. Will you feel uneasy?

No. One restaurant is unlikely to be able to make billions in profit. It is unlikely to be able to make billions in profit from charging millions of people much more than a product is actually worth to produce. That is, of course, because the dinners in that restaurant are not mass produced for the millions, but finely produced for the very few.

Of course most businesses try to charge the highest possible price, but that does not mean that to do so is necessarily right as far as society as a whole is concerned. What, for example, has Bill Gates done to be worth more than whole countries but win some genetic lottery. How many millions are poor and perhaps starving and how many geniuses or great inventions have we missed on because of the insane concentration of wealth that our society permits on the hand of very few people or companies?

Just because communism has failed I do not think means we should all try and rip off each other through an exploitative monopoly of invention. Not Apple, nor any other business can make 30% profit which amounts to billions by morally clean means. That, I think, is what makes me uneasy.

I think as long as they don't abuse power in law to protect their huge profit margin, then any one who thinks they can do better job will be rewarded handsomely and they will step in to compete. If iPhone didn't make so much money, I wonder Google and Microsoft would spend so much man power on their mobile systems.

The sad thing of my home country, Taiwan , is no one has such power to make such a big profit. All electronic manufacturers fight for 0.5% margin among each others, Chinese and Koreans. Most of ic companies are heavily subsidized by government with low interest loans. They are just too big to fail. I would rather to see they can build business that not only self sustain but making profit without tax money from general public.

Also I think the whole global restaurant industry is probably at the same magnitude as Apple. And the whole industry is possible making billions in profit from "Overcharging" millions of people.

The power of technology for a lot of times just concentrates what was distributed, small scale into a behemoth. But at the same time, I think by blaming Apple but ignoring possibly similar industry that repeatedly rip off customers, ill treating employees, but at a distributed fashion is somewhat unfair.

I will concede that there are many reasonable social frameworks designed to maximize societal wealth in the long run. You are simply describing your own version.

After all, capitalism is one solution to this very complex problem of resource allocation. It's not without flaws, of course: e.g. externalities. That's where regulation steps in. It's possible to get companies to pay for the negative externalities they are creating or even stop altogether (see: pollution). A theme in my post will be: let's not throw the baby (capitalism) out with the bath water (negative externalities).

Here are some points I came across reading your post.

1) You say that products should be priced close to their cost, that they should not charge "the highest possible price". Why? If Apple forcefully lowered their prices you could actually argue that Apple is trying to squeeze competitors out. Apple is hugely efficient. If they charge slightly above cost, do you think any other company would be able to sell anything remotely similar for a reasonable price?

I know you're going to say that Apple uses underhanded means to be so efficient. I agree with that. By abusing human rights, Apple is getting a cheaper deal unfairly.

But your claim that "products should be priced near cost" is flat out wrong. If the observation "Apple unfairly gets highly efficient" led to a policy "let's force all companies to sell at slightly above cost" to "benefit consumers", that would actually exacerbate the issue, with everyone rushing to abuse human rights in order to compete with Apple's efficiency. Profits are not evil. If you're going to target Apple's ethics, by all means do so, but do not use false economic arguments to support that claim.

2) You want geniuses and great inventions to come about, but then once they do (e.g. Steve Jobs, Bill Gates) you don't want them to make too much money. How much is too much? For you, billions. For others, millions. Maybe even just thousands. Where do you draw the line between "too much" and "enough"? Do you think it would be a good precedent to force all companies making over a million dollars a year to donate half of it to some charity? I think this is yet another slightly irrelevant argument you make to support your main point, which is that Apple shouldn't be able to get away abusing human rights. To verify this, imagine: suppose Apple makes billions but also supports human rights everywhere by only working with legitimate companies. Do you now have respect for Apple? Or do you think they should still do more things for society? If the latter is the case, you're basically saying that all wealth should be redistributed by law, to some arbitrary degree (maybe the voters decide?). Hmm... not exactly communism, but not capitalism either. I have no additional points here, I haven't had time to imagine such a world in detail. I won't dismiss it outright, though.

3) Patent monopolies. I do agree that patents are tricky. On one hand, you want society to benefit as soon and as much as possible from new stuff. On the other hand, you want to encourage inventors to spend lots of money on research with the promise that they will be rewarded handsomely with patent monopolies. If you remove patents, you risk a world where no one will ever sink mounds of money and time into research (I would even contend that this world wouldn't be quite so bad, seeing projects like Wikipedia, as long as theft is not tolerated). If you support patents too strongly, you risk a world where society is squeezed dry even after the original inventor passes away (I believe the incumbents want this way, and it's bad). There is a middle ground here...

Indeed, your last statement really is the heart of your argument, which is what you should really focus on instead of spurious economic arguments: neglecting human rights is a negative externality. We as a society should pay to uphold human rights and punish those who do not.

EDIT: Some grammar issues.

I think you are mistaken in suggesting that my main argument is that of human rights. That is because everyone agrees that human rights should be upheld, thus there is no argument to make.

You make some very good points though. If Apple is to charge just above the cost, thus making "enough" profit, whatever that may be, then you say Apple would beat all competition. You say that is so because they are very efficient. Perhaps, but I think it is more likely that they would beat everyone because of their inventions. Iphone, Ipad. Efficiency therefore has little to do with it. Just as Bill Gates became a billionaire despite of any efficiency. They invented something. Then they have gone on to exploit such invention by ripping people off through charging them 30% more than the product is actually worth. Not 10, not 20, but 30. That is greedy and the consequences are concentration of wealth in the hands of the few for their benefit alone.

As for the solution, government already decides how to distribute wealth through taxes. I think it should go further. Perhaps there should be a law that no man can be paid in total above, say, 1 million per year. Nor can any company make more than 10 billion in profit. Both, of course, increasing by the base inflation point. With an individual is easier, you just make it illegal. With a company is more difficult. Maybe the profit above the 10 billion can be a rebate to those that purchased their product or service.

The very existence of the law would probably incentive companies to treat their employees and their customers better rather than focusing on a Darwinian jungle of eating everyone at any expense and ripping off everyone as much as you can get away with.

There are several arguments I disagreed.

1. A company may be hold such beneficial position for a while, but not forever if we allow competitions and fair market without political connection to protect this status quo by law.

2. Human being can invent things and no one buys them. We see this everyday in fail web startups. And customers vote with their money and their time to use service or product, so if an invention doesn't improve general/macro efficiency for its own customers with spent time/exhanges of money. It won't sell. And don't forget that people can choose not to use the service and product unless it is required by law. Apple/Microsoft are not in such position if I remember it correctly.

So invention as you said is improvement of efficiency. They may not improvement in their own manufacturing efficiency but they improve macro efficiency.

3. I understand the human right issue, that's why I raise restaurant business as a case. Why there are so many illegal immigrants working in restaurant business under bad conditions and people are aware of and without saying a word? Those workers also don't want to go to law enforcement to endanger themselves.

4. But to improve the human right issue in China, I don't think there is shortcut. The only way is to wait for the time that Chinese labors demand and fight for their rights. for democracy and rules of law. This takes time and unfortunately we are exploit them for business benefits.

5. As for fair taxation of such a huge profit. Don't you think it is very unfair for USA to take lion share of them and redistribute it to USA citizens ONLY. Or due to Apple's most work is done in china and let Chinese government to take majority of the profit on behalf of workers or ruling bureaucrats?

I feel you confuse cost of a thing/service with worth of a thing/service.

For example, your employers knows it costs them much less than your salary for you to survive. You can live on basic food, clothing, and other very low cost means to survive. But don't we personally strive to look for maximize the salary?

I know you will argue that companies shouldn't be treated as human beings. But why do we need to treat a collective of human brings different from individuals?

You are being downvoted not only because a large portion of HN believes that adding huge amounts of value to society should pay off handsomely, but also because a lot of your points are easily falsified.

Changing the example from Apple to Microsoft does not make my point any less true. In any market, the most efficient player, if he chooses to cut prices drastically, will make it tougher for other players, even if he's not actually that efficient. Through competition, this process weeds out the less efficient companies and ends up lowering prices. Microsoft was one of the only producers of a decent operating system. You can argue that Microsoft was a bloated bureaucracy, but they were surely the most efficient player of their time. They would have dearly hurt competition if they lowered prices.

In fact, many today argue that students who pirated Microsoft software cemented Microsoft's monopoly. Generations of youngsters too poor to afford Windows somehow got their hands on it and trained themselves so that when they got old, they were already equipped to use Word, Excel, etc.

If the observation "Microsoft makes too much money" led to the policy "make them cut their prices" I would bet that the exact opposite of what you intended would occur. They would have cut their prices by half for about a year, driven out their competition, gotten every cat, dog, and donkey on their OS, and cemented their monopoly status.

This phenomenon is not rocket science or new... it's called predatory pricing: http://en.wikipedia.org/wiki/Predatory_pricing.

As for distribution of wealth... I was able to think a little bit more about it, and I have been able to pinpoint some cons with your idea. Basically, your idea is closer to communism than capitalism, so my rebuttal is basically a rebuttal against communism. I do not attach any a priori negativity against communism. I like to argue ideas on their merits, so hear me out.

As I mentioned before, you might think a cap of 1 million per year per person is reasonable, but someone else might think the cap should be 100,000. "There's too many starving kids in the world", he might say. In fact, if members of the government aren't so well paid, they will probably take an existing precedent of 1 million and abuse it to grab more and more cuts from successful businesses. "If you give an inch, they'll take a mile." But let's say your government is corruption-free for the sake of argument. Is it still a good idea?

Allow me to tell a story. WIDCO is a company that makes widgets. These widgets are very complicated and so require manual labor. Meet employees Bob and Jake. They're both exceptional widget makers, but Jake is above and beyond the better one. He might possibly be the best in the world. A normal employee averages 50 widgets a day; Bob averages 100; Jake averages 300. It's clear that Jake is providing quite a lot more value to WIDCO than any other employee. But because of regulation, WIDCO can pay at most $100,000 to Jake. Jake understands. He is a humble man and understands that $100,000 is enough for him and his family. But day after day, he gets demoralized because he realizes that his hard work and skill is being used to subsidize the pensions of employees who just can't do the work as well. Eventually, Jake realizes that he'd rather leave early to his family than work his ass off for no additional benefit. He figures that making about 150 widgets or so a day is enough to keep his salary constant. So he works just 4 hours a day and goes home soon after. Bob never feels this as he's getting paid $85,000, which he can still increase by getting better at producing widgets. He still believes in hard work and produces more and more. Until he reaches the cap, of course.

You might think, oh well Jake goes home! Better welfare! But whereas today, Jake actually has a choice between working more + get paid more vs. stop working + go home, in this world the government's basically removing that choice. Now, if that choice is absent in today's world, yes that is a problem that points to human rights abuses like I mentioned in my first post.

Do you want to discourage employees like Jake? You can imagine employees like Jake in the real world, who really aren't greedy, but who also aren't gonna just work for free when they have alternatives like going home.

You can see that the artificial salary cap has DECREASED the production rate of WIDCO.

Above all, I think you have a deep-seated belief that consumers need protection from themselves. It's not a black-and-white issue, of course, but you're strongly putting words in their mouths by claiming that they're being "ripped off". When millions of people can't wait long enough to hand money to Apple, are they really being ripped off? On what basis do you get to decide how they should spend their money? What if they're actually getting a DISCOUNT for the happiness they derive from the IPad? Before, they had to spend a weekend in Tahoe to get X units of happiness. Now, they just need to spend $600 on an IPad for the same X. In that case, they're not being ripped off at all right?

My advice to your future theorycrafting: think through the consequences of policies, not just the immediate and close ones, but also the long term and global ones.

I do not mind the downvoting. I expected it, but still chose to reply because I do not think that my points are not worth making, I do not think I am trolling, but instead it seems that I have been able to generate a nice intellectual debate about a matter which is extremely relevant today in a forum where intellectual debate is encouraged.

I should also add that perhaps I do not hold any belief in what I said or any sort of conviction. I am theorising about how a system can be improved and am very much open to be shown that my suggestions are not optimal.

You say that my points are easily refuted, yet it seem that you are not addressing them fully.

Predatory pricing, according to the linked wikipedia article, occurs when the price is set below the cost of production. I have nothing against profits, but exuberant profit which I think is the product of exploitation.

Apple invented the Iphone and the Ipad and before that the Ipod. All are great products. All wanted these products. The products have benefited society greatly. That all is good.

It also explains the great profit made, in my opinion. The competition, which to start with there was none, came later to the game and as such had a less favourable environment because they faced a competitor, unlike Apple to begin with. I think therefore that the profit generated has little to do with efficiency - although that probably is a factor - and much more to do with the fact that they invented a unique product which everyone wanted. Thus, had a monopoly in practice.

Invention is of course to be encouraged, but not the exploitation of such invention. I do not think it can be doubted that they made a 30% profit on their revenue because they priced their products 30% higher than their actual cost. That means that millions of people had to give away more of their wealth to one person or one company making such person or company richer, while everyone else poorer.

No one forced them, but that is beside the point. No one forces anyone to buy electricity. What person can today for example have a decent job and not a computer. It can even be said what person can have a decent job and not an Iphone or a smartphone.

If you agree with that point, that one should be able to make a profit but not excessive profit, then the question becomes technical, namely, what is excessive.

I said 1 million in total remuneration for an individual. You say why not 100,000? The example you gave is a very good answer to that question. 100,000 would not allow for differentiation between individual productivity. That cap can easily be reached, as you showed from that example. There are many people today earning 100,000 and probably they deserve it. They are many people earning 400,000 or 500,000. You can count on one hand however the people that are earning a million or more in total remuneration. In my opinion, such people are awarded such amounts not because of any genuine extra productivity, but because there is no mechanism which can keep a check and balance on their pay.

1 million therefore allows for the differentiation of individual production and is a sufficient amount to incentivise producers.

So what argument can there be against setting a maximum remuneration at a cap of 1 million? The only one I can think of is that of founders. Bill Gates for example has certainly contributed more to the world than many others who may be capped at one million.

It is not difficult, conceptually and even practically to make an exception for founders and set their cap to 1 billion. One billion, in my opinion, is a sufficient incentive for anyone. Why, afterall, should their children, who merely won a lottery, have a higher claim on their fathers wealth than 1 billion?

You may say that it seems that I am simply picking up these numbers from thin air. Perhaps you are right. I think however that the vast majority of people - and we live in a democracy where the majority rules - would agree that if a cap is to be set it should be at such levels, or perhaps, slightly higher, i.e. maybe 2 million and 2 billion. That, however is a point about technical matters which is worthy of discussion if one agrees with the main principle. Which is that society should have a say on the maximum profit and remuneration of an individual and company so that society as a whole can benefit at an optimal level.

As to whether it is more communism or capitalism in my opinion is irrelevant. It is neither. It is a mixture of the two. You can have profit - capitalism - but not too much profit - communism.

I do not think simply because something may be linked to some ideology it should be discounted for that reason alone, as you accepted. Neither communism nor capitalism are perfect, they both are extremes, thus perhaps a middle ground would be best.

"That means that millions of people had to give away more of their wealth to one person or one company making such person or company richer, while everyone else poorer."

No, the people who bought Apple's products were not poorer. They converted part of their wealth (or resources if you prefer) from currency to an Apple device, having decided that the exchange was a fair one.

Electronics don't hold their value very well, so over time the person will gradually become "poorer" in the sense that they could not sell their Apple device and get their money back. But in the meantime the person was richer in that he or she had the use of the device.

Also this falls into the "pie fallacy" of view of wealth. Total wealth in the world is not a static function that doesn't change overtime. If people decide to exchange some of their wealth and "time" to make them feel happy and satisfied and just their state of happiness make them produce more stuffs/services/quality of life because they are much happier than they were before exchange. Is that a negative thing?

>> Predatory pricing, according to the linked wikipedia article, occurs when the price is set below the cost of production. I have nothing against profits, but exuberant profit which I think is the product of exploitation.

Yes, strictly speaking, predatory pricing is when products are priced below cost. My point was that in the absence of competition, artificial price cutting makes it more difficult for newcomers to setup shop, and in the presence of competition, is a natural result.

>> No one forces anyone to buy electricity.

Actually, if you look at the law, it specifically lists certain types of public utilities, such as electricity, that must be regulated because the providers are what are called "natural monopolies". You basically are forced to buy electricity from one company (or two) and electricity is nowadays considered a necessity. But I digress.

>> one person or one company making such person or company richer, while everyone else poorer.

You can't look at every transaction as simply an exchange of money. By that metric, every time I buy some food, I'm becoming poorer. True, but pretty meaningless, because I would have not spent it any other way. Now are you claiming that an IPad is a "basic necessity"? People chose the IPad, even among similar knock-offs, if they chose to buy one at all. I, for one, have chosen not to buy any tablet. In any case, these buyers are basically saying, "I'm happier with an IPad than $600".

Perhaps there's an externality here, where people end up wasting more time and reducing their productivity as a result of buying up IPads, and so Apple should be forced to pay that cost to society. But that's still a different issue than your claim, which is that they're priced "too high".

>> thus perhaps a middle ground would be best.

Note that our current economic system is not so extremely capitalist. It's capitalism + externality pricing + taxes + (other stuff that I frankly think is government mandating inefficiencies to support special interests, like subsidies).

>> Which is that society should have a say on the maximum profit and remuneration of an individual and company so that society as a whole can benefit at an optimal level.

I can think of another way to phrase this claim -- most people will not live any happier with $1 billion than $1 million. All that extra money could be used to increase the utility of other people by a much higher margin.

But I must note: people already do donate. I'm sure you've heard of the billionaire's pledge. It's happening TODAY, in our capitalist society. Like my example with Bob and Jake, in our society, people have a choice. They have a choice to donate their billions to the plights of the world. In your world, all citizens will be forced to.

So I guess to summarize: 1) I like giving people choice. 2) I think if you give government an inch, they'll take a mile. Even if capitalism and communism were identically effective theories, a government in a communist economy by definition is so much more powerful than a government in a capitalist economy... I think the corruption would be difficult to battle.

EDIT: By the way, it sounds like you are pretty reasonable. However, your initial tone of "profits are evil" and that false economic policy statement "companies should price just above cost" probably pissed a lot of people off. You probably shouldn't say those things because they're not your main point anyway and they just close off people unnecessarily. As I've seen, you clearly have a more reasonable way to express your arguments anyway!

I don't see the problem.

It's not like they're price gouging on staple food products. Tablet computers and smart phones are practically luxury goods. A person buying one almost certainly has all of their important needs covered, and are buying them with disposable income.

And, perhaps more important, there are tons of alternatives. Nobody buys an iPhone not knowing there are hundreds of cheaper alternatives.

People "waste" their money on a lot of things I would never buy, but at the end of the day it's really their decision.

What exactly is the mechanism of exploitation or coercion?

It's not like workers at a coal mine forced to rent their housing from the employer, and forced to buy everything at the employer-run company store at vastly inflated prices, often incurring a growing debt over time.

People are free to spend their money as they see fit. You don't see how Apple's products provide value for money. Many others disagree. Their priorities and values are likely different from yours.

You're basically saying that you're smarter than EVERYONE who buys Apple products, that you see what they all miss, and that they need to be protected like an infant needs to be protected from eating chips of lead paint.

Which is absurd.

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