Does not compute. In one post you state that lowered margins are never a good thing. In another you explain why there are lowered margins and why they should be expected.
So what's the problem? Um...reality?
Wow, a gopher pitch. (Must... resist)
Yes, I explained why margins are lower, and why that isn't desireable. I could explain a lot of things that can be expected and aren't good. Please don't make me do it.
If APPL were driven by what the investors wanted then they'd be in trouble. As a publicly traded company they need to keep an eye on things like share price etc but it shouldn't be the driver. As stated in the call APPL continue to focus on the long term, unlike the short market which often looks for short term opportunities.
On the not moving quickly enough. Cook referred to how well the iPhone 4 was doing in emerging markets. That's a 2.5 year old phone and its still selling well. Maybe this SKU/product churn isn't necessary if you make good product in the first place.
We saw the impact of APPL rushing things last year. iOS 6 Maps got them worldwide coverage, for all the wrong reasons. The short life of the iPad 3rd gen had people criticising for that. They will release when the products are ready and they have sufficient inventory to match the demand. Isn't that the way that a responsible company should behave?
First off, AAPL.
It's all well and good to say that a company should not be driven by investor expectations, and that is fine, up to a point. It's a very limited point, though, if for no other reason than a company's investors include their top execs and board members. They get stung by falling stock prices too. Stock is also used by the company to recruit and retain top people, so once again a falling stock sharply undercuts that tool. Nobody is invested in falling stock values, except naysayers and people who short sell.
Apple will always be criticized for something, but criticism falls flat when they continue to produce earnings growth. The narrative only changes when earnings growth levels off, or goes backwards, as it did this quarter. Now the doubters have a full clip to fire off.
Let investors worry then. Other companies will always be releasing stuff for the sake of releasing stuff. Samsung just added a bunch of gimmicks to their new phone so they have something to rattle off on a spec/feature list. Even though most people will probably rarely use these "features" lets throw them in there so maybe the press will talk about that instead of the narrative being 'ho hum, it's just spec bump with a faster processor and better camera'. HTC completely redesigned their phone (hmm...I thought everyone loved the design of the One X) because they needed something to get people talking about them. And if you read most reviews of the One vs. S4 its basically buy the One if you care about premium design, buy S4 if you don't.
I think it would be a disaster for Apple to basically carbon copy Samsung. There have been many times over in Apple's history that they were considered doomed because they didn't follow a certain strategy and that some other product would be a Apple "killer". Now is no different than all those other times.
I'd be the last one to ever suggest that Apple should pull a Samsung, or a Microsoft, or an any other company. Apple is Apple, and they do Apple better than anyone could possibly hope. They will never (I hope) become a me-too company. Which is not to say that the competition isn't nicking Apple pretty good these days. The truth is in the numbers. So I think it's pretty clear that Apple has to do Apple better than ever now. The good news is I am quite certain management knows it at least as well as we do, and that resting on laurels is not an option.
It's going to be a rough few months for investors. I've kind of reconciled myself to that, which I would not do if I thought Apple had turned into Samsung or Microsoft. But in the meantime, at least Apple is sending me more cash. That will go some way towards compensating for what is likely to be a flat period for the stock value (at best).
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Rocketman,
Do you realize what the control premium to buy all the shares of Apple would be? I can tell from your posts that you are a sophisticated investor (presumably more so than me). But I can't see how it is feasible for someone to take Apple private. Now a company does not go private itself. It gets taken private by a collection of people or companies. Who could do this? Let's assume a management take over by Tim Cook. He would need to buy all the shares. If he did a tender offer to the shareholders at $450, do you really think 90%+ of shareholders would offer their shares at that price? I know I wouldn't even consider it.
Obviously Tim Cook is just a placeholder. If you want to make this more feasible use Berkshire Hathaway or use a big fund like Blackrock or Fortress. Let's say the shareholders are so spooked right now that an offer of $600 per share would be accepted. That would mean you would need to pay around $600 billion in cash to the shareholders. $100 billion (after taxes on the overseas cash) or so could come from Apple. But the other $500 billion would have to be borrowed, right? It would take a syndicate of the largest banks, private equity shops and hedge funds to raise that kind of cash. Even if your lenders were putting up $5 billion positions (and how many financing shops can do that for an investment in one company?), you would have to coordinate 100 of them. I just do not see how that is feasible. Also, the new private company would now be carrying $500 billion in debt and assuming folks who made that loan want a nice return on their loan, there would be yearly debt service of $50 billion, $25 billion if you think folks are lending at 5% to a heavily leveraged company that has two basic product lines that generate most of their profit. Again, this just does not seem possible.
You are describing a leveraged buyout, in other words, a recipe for disaster.
Companies generally go private when their performance has been poor and their prospects don't look a whole lot better (e.g., Dell). Putting Apple in that category makes my skin crawl.
