Hmmm...So you're calling this a bubble even though Apple trades at 15.5x earnings (Google Finance)?
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Apple Becomes Most Valuable Publicly-Traded Stock Ever
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Hmmm...So you're calling this a bubble even though Apple trades at 15.5x earnings (Google Finance)?
less than 10% of the total addressable market. i.e. total handset (not just smart phone) sales (~4.85% share), or ipad divided by total PC sales (since ipads will largely replace laptops/desktops for most people, since most people only do FB and email on laptops or desktops anyways (9.09%). Their mac line, depending on who you ask, is about 8-10%, but again most people will be switching to iPads anyways, so it cant be bet on to have huge growth long term. all their i OS devices stream stuff, but thats not a major revenue stream.
- they haven't even released their TV yet. In 2008 flat screens were a $400 billion market, and the average sale price of the TV was about $500. Assuming they sell it for $1000, that's now an $800 billion market.
- all of these estimates are conservative in the sense that they protect 0% unit growth. so these numbers are actually conservative and distorted to the upside.
Apple goes much much higher.
The presumption that every phone becomes a smartphone and every PC becomes a tablet is not anywhere near realistic IMHO, especially given income of many of the countries apple sells in.
Your math is way off here. TVs are plummeting, Apple charging $1,000 for some imaginary device doesn't double the market's value. I just bought a 55" TV for under $800 which is less than I paid for a 36" tube TV 15 years ago.
Apple would have to be offering something really magical to compete with the ever-plummeting prices on flat-screen technology.
The average sale price of PC's in 2011 was almost $800. so an iPad 2 is half that, and a new iPad is only a hundred bucks more. Regardless of wealth in those countries, they dropped $800 on a largely inferior product for what they want to do with it. I think that the value of the software provided by the incredibly vast developer community who submit curated (that's key) apps, that are guaranteed to work after OS updates/tweaks, across all of their different devices is huge in this equation. furthermore, the cheaper price of the device such as an iPad will make it much more attractive to lower wealth countries, and the educational value they can provide is phenomenal. Hell, we're deploying them in this country for God's sake. No other company has the product company of Apple combined with the software and service quality of Apple. This can be seen by their iPad market share numbers, and their U.S. smartphone market share (no supply constraints to help competitors gain share in the U.S.)
1. I'm not saying that every smart phone is going to be a smartphone, and every PC is going to become a tablet. What I'm saying is they'll simply be much less popular, and many people will (and do) have both. And as I said before, this assumes 0% growth in these markets. The PC markets usually grow anywhere from 8% to 12% annually, and I forget how quickly the smartphone market grows, but its significantly higher than that.
2. it's not inconceivable that Apple can get almost that entire market, since their hardware, software, and services are collectively much higher quality than any of their competitors. Plus they're all integrated. That's also key. Microsoft managed to hold onto 95% operating system marketshare for way over a decade, and their software was pretty clunky (To say nothing of the crummy hardware it was sold on in many cases). people want quality, and once they get used to quality, they never go back to junk. We've all heard countless stories of people who have switched from Windows to Mac, and say they will never go back, but I personally have never heard a story of someone switching from Mac to Windows, and talking about how they will never go back. I've heard a ton of stories about people switching from android to iOS, and only a very few of people switching in the opposite direction (and most of them came back to iOS anyways).
Unit sales x Average sale price = Market size
If you double the average sale price, and keep the units the same, the market size doubles.
Yes, TVs have been coming down in price, because TVs today are largely a commodity. Theres almost no innovation in the space. Really, the only differentiating factor between TVs, is screen size, and screen quality. You said it yourself. You compared your TV from 15 years ago, to something you bought the other day. That's because the way in which the content is delivered to that TV hasn't changed in all those years. You still screw the cable in the back of the TV, and that's just the way it is, and has been.
Therefore, they absolutely would have to do something ground shaking in order to get a decent sized market share. But Apple has a track record of not releasing products into a space, unless they're going to radically change the business model of the market anyways. Enter the original Apple computers, or the Macintosh, or the iPod/iTunes store combination, or the iPhone, or the iPad, etc. The key to changing this market (I think) is changing the structure between the content creators, and the consumers. I think they have both the negotiating capabilities, and the scalability to achieve this goal.
Letting their consumers watch whatever they want, whenever they want, on whatever device they want is going to be huge here I think. I personally think they will have to work a bunch of deals with content providers directly (instead of having 100's of cable providers working those deals like we do today), and host their content on a server at Apple. This will help break the regional monopolies created by cable companies all across the nation. It will also break their ability to control the content (in the form of basic, medium, or premium cable packages), and turn them largely into Internet service providers, instead of content controllers and Internet service providers (thus lowering your monthly content bill, currently known as a cable bill, pretty considerably depending on what package you have). They will no longer dictate which shows air, at what times, when you going to watch what you going to watch, or where you're going to watch it.
Also, they will be integrating gaming directly under the TV (no console). If people are willing to spend hundred dollars on a used Xbox 360, or up to $400 on a new one, in addition to spending $60 on the annual Xbox live subscription, as well as spending $40-$60 per game, this could certainly contribute hugely for the TV paying for itself at $1000. Plus, you don't need those clunky hard drives, because everything relevant could be stored on iCloud.
And really, if current customers are willing to spend $1800 on the 15 inch MacBook Pro, or $600 to $830 on an iPad, or anywhere from $200 (carrier subsidized) to $850 on an iPhone, I'm sure they'll be willing to spend $1000 on a TV that isn't terrible.
(btw I'm not trying to argue, I'm just telling you why i think the stock is going to go up hugely, and why I have no savings account anymore just so i can buy as many shares as possible
! but I do like the debates guys! I'm always trying to think of feasible ways this thing could fail. It's hard to find them though!)The average sale price of PC's in 2011 was almost $800. so an iPad 2 is half that, and a new iPad is only a hundred bucks more. Regardless of wealth in those countries, they dropped $800 on a largely inferior product for what they want to do with it. I think that the value of the software provided by the incredibly vast developer community who submit curated (that's key) apps, that are guaranteed to work after OS updates/tweaks, across all of their different devices is huge in this equation. furthermore, the cheaper price of the device such as an iPad will make it much more attractive to lower wealth countries, and the educational value they can provide is phenomenal. Hell, we're deploying them in this country for God's sake. No other company has the product company of Apple combined with the software and service quality of Apple. This can be seen by their iPad market share numbers, and their U.S. smartphone market share (no supply constraints to help competitors gain share in the U.S.)
1. I'm not saying that every smart phone is going to be a smartphone, and every PC is going to become a tablet. What I'm saying is they'll simply be much less popular, and many people will (and do) have both. And as I said before, this assumes 0% growth in these markets. The PC markets usually grow anywhere from 8% to 12% annually, and I forget how quickly the smartphone market grows, but its significantly higher than that.
2. it's not inconceivable that Apple can get almost that entire market, since their hardware, software, and services are collectively much higher quality than any of their competitors. Plus they're all integrated. That's also key. Microsoft managed to hold onto 95% operating system marketshare for way over a decade, and their software was pretty clunky (To say nothing of the crummy hardware it was sold on in many cases). people want quality, and once they get used to quality, they never go back to junk. We've all heard countless stories of people who have switched from Windows to Mac, and say they will never go back, but I personally have never heard a story of someone switching from Mac to Windows, and talking about how they will never go back. I've heard a ton of stories about people switching from android to iOS, and only a very few of people switching in the opposite direction (and most of them came back to iOS anyways).
Unit sales x Average sale price = Market size
If you double the average sale price, and keep the units the same, the market size doubles.
Yes, TVs have been coming down in price, because TVs today are largely a commodity. Theres almost no innovation in the space. Really, the only differentiating factor between TVs, is screen size, and screen quality. You said it yourself. You compared your TV from 15 years ago, to something you bought the other day. That's because the way in which the content is delivered to that TV hasn't changed in all those years. You still screw the cable in the back of the TV, and that's just the way it is, and has been.
Therefore, they absolutely would have to do something ground shaking in order to get a decent sized market share. But Apple has a track record of not releasing products into a space, unless they're going to radically change the business model of the market anyways. Enter the original Apple computers, or the Macintosh, or the iPod/iTunes store combination, or the iPhone, or the iPad, etc. The key to changing this market (I think) is changing the structure between the content creators, and the consumers. I think they have both the negotiating capabilities, and the scalability to achieve this goal.
Letting their consumers watch whatever they want, whenever they want, on whatever device they want is going to be huge here I think. I personally think they will have to work a bunch of deals with content providers directly (instead of having 100's of cable providers working those deals like we do today), and host their content on a server at Apple. This will help break the regional monopolies created by cable companies all across the nation. It will also break their ability to control the content (in the form of basic, medium, or premium cable packages), and turn them largely into Internet service providers, instead of content controllers and Internet service providers (thus lowering your monthly content bill, currently known as a cable bill, pretty considerably depending on what package you have). They will no longer dictate which shows air, at what times, when you going to watch what you going to watch, or where you're going to watch it.
Also, they will be integrating gaming directly under the TV (no console). If people are willing to spend hundred dollars on a used Xbox 360, or up to $400 on a new one, in addition to spending $60 on the annual Xbox live subscription, as well as spending $40-$60 per game, this could certainly contribute hugely for the TV paying for itself at $1000. Plus, you don't need those clunky hard drives, because everything relevant could be stored on iCloud.
And really, if current customers are willing to spend $1800 on the 15 inch MacBook Pro, or $600 to $830 on an iPad, or anywhere from $200 (carrier subsidized) to $850 on an iPhone, I'm sure they'll be willing to spend $1000 on a TV that isn't terrible.
(btw I'm not trying to argue, I'm just telling you why i think the stock is going to go up hugely, and why I have no savings account anymore just so i can buy as many shares as possible
Whoa there. Your post is about 110% full of assumptions. SHOULD Apple release a TV there's no reason to think that it would reduce costs in any way for anyone. The $1,000 figure is fantasyland for an Apple-branded TV with any integrated technology. The 27" Apple display is $1,000, and while displays differ from TVs, it's just not feasible for Apple to enter a commodity market at commodity pricing, especially if they add features.
As for consumers getting a break on content, Apple's goal is to draw dollars away from cable companies for their benefit, not yours. It's not a Robin Hood TV.
Walt Disney springs to mind. H. Ford could be mentioned as well. Never cared much for these type of stories though. To me, while they would probably make good movies, they say very little. I am more interested in cases where turnarounds were achieved through radically redefining something or everything within an organization (e.g. Toyota).
Of course, it's not like I have inside information to go on lol. If you break monopolistic pricing power of regional cable providers, it inherently saves money, because either unit margins compress, or unit volumes (i.e. the channels I have but don't watch) decline. I know in my case I pay 70 bucks a month for the premium package, even though I'm only interested in about 4 channels in that package, so I'm paying for dozens of choices that I don't need, or want for that matter (enter Jersey Shore and the like). I'm sure I'm not the only one with that problem.
Apple products, when compared to competitor products of similar hardware specs, are actually very close in price, if not actually more competitively priced. They're higher quality products, not necessarily higher price. They can do this with laptops for example, because they only offer 5 or 6 different models, when their competitors offer many dozens if not over 100 (ridiculous overkill much??). Lower production variation = lower costs, and those savings are passed onto consumers.
If Microsoft can get the price of a new Xbox down to $200, and still be making money (about 15-16% last I checked I think), then I think the cost of getting a gaming experience working on a TV is a bit trivial. You'll be paying almost as much in tax than the cost of that integration.
Displays have much higher pixel densities than TVs. Therefore their cost is much higher. The cost of making a TV with lower pixel densities is much lower, and therefore the purchase price won't be anywhere near there. This is especially so if the company enters into the market with the mindset of "Marketshare > Profits." They have had this mindset for a very long time, but most recently if can be seen with the iPad. There were analysts on TV literally seconds before they announced the price, estimating around $1000. Apple priced it at half that.
Apple has traditionally only charged 30% of for selling content on the iTunes store (music, apps, etc.) For example, last quarter Apple saw $35 billion in revenues, and the iTunes store accounted for only $1.8 billion of that, or about 6%. I really don't see that 30% fee going up, and in fact it may even come down to entice content providers to their platform further. The sale of content is not viewed as a pillar of success at Apple, it's viewed rather as a means of attracting more people to buy and use their hardware and software products, as opposed to wandering off to a competitors platform.
Marketshare > Profits
I don't recall Disney or Ford going through any near death moments to come back even stronger. In any case I won't argue the finer points here, since the larger one is that stories like Apple don't come along very often in the annals of business. Apple's turnaround is already something for the history books, and the story is hardly finished.
Incidentally of your two examples, at least the one of Ford does meet your criterion of radically redefining something, if I understand what you meant. Disney too, arguably.
Its good to see reports like this, but it doesnt' change the immutable truth that since Steve's departure, Apple is largely running on momentum.
Steve left them with a ton of momentum, rising stock prices, a solid product line, etc. The real test of their mettle will be when they make their own mark on the company and step out of the shadow Steve left.
Steve left them with a ton of momentum, rising stock prices, a solid product line, etc. The real test of their mettle will be when they make their own mark on the company and step out of the shadow Steve left.
I didnt say Ford or Disney, i said Walt and Henry. And indeed, Henry Ford, Ford, and Fordism qualifies everyday. In more way than once, i might add (e.g. welfare capitalism, massive vertical integration, production line design) - at least to some degree (from the top of my head, welfare capitalism was pretty standard in the early days of industrialization, mainly - i would assume - in britain, but probably existing through the entire west).
In this sense, i find Henry Ford far more interesting than Steve Jobs - then again, Jobs is probably a neat case from a marketing (broadly speaking) perspective.
Henry Ford built the right car but he backed the wrong horse.
