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The rise and fall(?) of Apple

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It had become almost sacrilege to say anything negative about Apple.

Obviously, Apple was going to continue growing and would soon reach $1 trillion in market capitalization. Forget that no company has ever done that before. Think different.

Five companies had previously reached the $5 billion mark. They’re all worth less than that now.

Microsoft, GE, Cisco, Intel and Exxon Mobil, were the others.

Some Apple aficionados don’t want to hear anything negative about the company or the potential of its stock. It’s different this time. (That thought alone should give an investor pause.)

Apple stock has done extraordinarily well. There’s no disputing that. In fact, everyone’s on board, and it’s been almost impossible to hear comments to the contrary about Apple’s future.

But that’s changing.

Facts are emerging.

Stories on Apple have turned negative this quarter despite earnings.

Is the momentum honeymoon over?

Generally, if everyone’s thinking the same, then how much innovative thought is really going on? How many investors are thinking about competitive threats to Apple?

The near-religious zeal Apple fans hold for the company and its products is as much a detriment as it is an advantage. It’s been an advantage during the long stock price appreciation and the booming sales of Apple products.

But it’s a disadvantage now.

The problem with manic activity is that as Apple stock was reaching its riskiest time in the markets nobody wanted to hear about the risk. There wasn’t much listening going on.

It wouldn’t be the first time a company or stock was supposed to defy the odds, the averages. It’s hard to think in the face of such momentum.

Apple investors have done so well over the last few years, it’s hard for them to think that they’re wrong.

They are believers.

Ask not for whom the bell tolls …

Strong belief in brand is incredible. But from an investor’s point of view, it should make contrarian bells toll at this level. Open and honest communication with stakeholders includes discussing threats to the organization.

Doubt that? See the ongoing Wal-Mart story in Mexico, it has potential for great reputational fall out.


Investors would do well to remember momentum buys can end badly.

Here are some competitive threats to Apple:

Fly us to the moon

The stock went straight up recently. It was worth over $6 billion at the time I started making notes for this entry. The Wall Street Journal reported that out of 465 large-cap growth funds Morningstar tracks, 400 own shares of Apple.

So, who’s thinking different?

Have a look at the stock chart below comparing Microsoft and Apple. Pay special attention to how and where both stocks rocketed upward.

What happened to Microsoft over the last ten years until very recently? Will it be different with Apple?

Microsoft’s done better than Apple over its history. Is Apple really that different? Do companies reach a time in their history where they’re too big and too mature for their previous growth trajectory?

Since inception: Apple and Microsoft

A one-year chart on Apple shows a meteoric rise. Not a good sign, perhaps. Might some investors be thinking about taking profits?

What happens if there’s a slip-up in earnings?

Apple’s down more than 10 per cent since its peak in early April. At that time, headlines were shouting about its market cap daily. Admidst all the noise, would it have been better to buy Apple or wait?

Meanwhile, it’s dividend is miniscule.

Steve Jobs is gone

Whether you liked him or not as a person or a manager, it’s hard to argue that Apple’s growth would have been as strong without him.

Do you really need a new iPad?

The iPad accounts for about 20 per cent of sales. What if customers decide upgrades aren’t worth the cost of a new iPad?

When the iPad came out, it was innovative and new. Now, competitors are everywhere, and they’re bent on catching up.

What happened when the PC was introduced to the market? Did things get more competitive or less?

iPhone subsidies

The iPhone is anything but cheap.

If phone companies decide to stop subsidizing iPhones, will iPhone sales grow? What if smartphone sales fall?

What of supplier issues?

The iPhone makes up 50 per cent of Apple product sales. For a good discussion on iPhone subsidies, and the threat a suspension of subsidies would pose for Apple, go here.

Think different this time?

What are Apple’s competitors doing? Have they given up the ghost?

Maybe they’re creating an operating system that boots up in seconds on a 5-year-old Dell laptop?

See video …

And Microsoft’s numbers weren’t exactly awful recently.

Labour abuses, CSR and sustainability

Most people have heard something about Apple’s supply chain labour abuses. Apple’s working hard to redirect attention away from what’s already happened toward what it’s doing to improve the situation. Yet criticism continues to mount.

The following New York Times article and the comments left by readers are a threat to Apple’s reputation. The headline alone is damaging.

Apple’s tax strategy has also received negative attention recently. And guidance came out below analysts’ expectations.

The New York Times recently ran another less-than-flattering story on Apple retail stores. Shortly after, Apple decided to go from “green” to “brown” citing design direction. Great design isn’t green?

Think critically: Critical thinking is a positive exercise

The pace of change in tech is a lightning bolt. Sheer momentum favours Apple, but … eventually momentum stops, or investors sell on earnings.

When it comes to Apple stock, think about the future, think different:

Will ignoring competitive challenges to leap on to the Apple bandwagon pay off? Is the past a good indicator of the future, or is this the beginning of a new paradigm?

Whatever happens critical thinking is anything but negative. Critical thinking is the lifeblood of all creativity and innovation. It shouldn’t stop with remarkable success.

If you’re active in Apple, consider that risk went up significantly when the stock shot straight up. Will Apple get anywhere near the $1 trillion market cap an analyst at Piper Jaffray & Co. forecast? Or the $1,001 stock price another at Topeka Capital Markets sees? Will it become the only company to reach these levels?

That’s a more than 40 per cent increase in the stock price.

The ride may be bumpier from here.

Investor be informed.


How Apple blew it on the iPhone

Apple misses

Business/IT professionals say they’ll buy Android tablets

The New MacBook Pro: Unfixable, Unhackable, Untenable

Apple issues guidance below analysts’ expectations for Q3

Hedge funds dump Apple and buy Microsoft and Google 

Amped for apps?

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New survey says: Not really

Just before Christmas, I was sitting around with a few friends discussing technology. Talk turned to smartphones and tablets.

“It’s all about the apps,” someone said.

But a recent survey says it’s all about websites and mobile sites.

There’s an app for that, but right now only 4% of smartphone/tablet users are using branded apps

Smartphone and tablet apps are not consumers’ preferred channel for browsing or shopping:

• Just 4 per cent of connected consumers like to use branded apps, whereas 87 per cent prefer to use websites and mobile sites

• 60 per cent choose to shop via digital or print catalogs

Connected consumers’ tablet use and spending activity is on the rise:

• In the 2011 holiday season, 87 per cent of tablet owners did their holiday shopping using their tablets, spending $325 on average

In addition, 49 per cent expect to shop more on their tablet over the next year.

So, while people are using smartphones and tablets and plan to use them more, they’re not engaging with branded apps much, says a Zmags survey.

You can find the survey here.

Consider: Apps need to be downloaded.

While it may be fun to poke around and see what kind of apps are out there, will the extra effort required to use branded apps turn out worthwhile in the long-term?

In “App(le) fatigue: It’s not just users — many businesses aren’t keen on a big cut for Apple” and in “Three digital considerations for the year(s) to come” I blogged about the app phenomenon and HTML5, which might turn out to be the biggest challenge to apps over the long-term.

The need for foresight

Kodak’s decline has hit the news hard recently. Without doubt, companies have to be flexible in today’s business environment. They need to forecast and invest in what’s coming.

While branded apps seemed to be everywhere in 2011, people weren’t using them as much as most of us thought or were led to believe according to the study.

Companies are using apps as vehicles for marketing, awareness raising, instruments for monetizing digital media or channels for movie and music sales.  Developers are increasingly developing apps for Android.

Still, will apps remain a peripheral channel if people begin to suffer “app fatigue”, or will apps  start to close ground on websites and mobile sites?

The rise of HTML5

Meanwhile, HTML5 is raging ahead:

  • 58 per cent of regional web developers are using HTML5 in the Asia Pacific region
  • 43 per cent in the U.S.
  • 39 per cent in Europe, Africa and the Middle East

Some other considerations regarding “app mania”:

  • Will efforts to encourage users to download apps be cost-effective in the future?
  • Could these same efforts be better-used elsewhere?
  • The genius of HTML5  is it arms developers with a way to create browser-based sites. These sites store data locally if a mobile device loses its connection. The device still gets real-time data and creates rich mobile sites that download faster.
  • Developers can also create mobile websites that look and act very much like an app using HTML5. Will this make apps redundant?
  • Will “apps” only be called apps in the future and actually be HTML5-based websites or mobile sites?
  • What will the focus for apps be in the short-term, and how will that affect long-term marketing and communications strategy?

We need more research on the app environment while strategic business decisions need to take into account that other technology may replace apps.

Apple is one in a long list of companies proving technology never sleeps.

And, as ever, when it comes to app mania, the threat of HTML5 is growing. Many won’t know what they’re calling an “app” isn’t really an app but HTML5-based.

According to results on how consumers prefer to browse and shop (using websites and mobile sites), traditional apps may experience some challenging times.

Thought leaders would do well to stay on top of the HTML5 phenomenon.


Apps: If you build it, they might not come

Infographic: A history of HTML5



Written by johnrondina

January 18, 2012 at 11:54 am

Cash, corrections, the end and feeling fine

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 It’s all about the cash (and being able to sleep at night) when it comes to the stock market correction: Finding optimism in the insomnia of the moment

Didn’t the Twist go out a long time ago?

Somebody should tell the U.S. government that half-measures hardly ever satisfy anyone. Doing the Twist may be the middle ground, but now is the time for leadership and focusing on one’s convictions.

Is the glass still half-full?

Cash on Corporate Balance Sheets

In “Too much cash on corporate balance sheets: So, does this mean we can expect higher payouts?”, I wrote about the Everest of cash sitting on balance sheets. Today, Thursday, September 22, as I write, markets are moving down aggressively suggesting the Fed’s doing the Twist wasn’t what the markets wanted. There’s still one overwhelming fact that we shouldn’t overlook:

• Corporations are sitting on mountains of cash

What are they going to do?

Since they’re not in the business of becoming money market funds, (though some companies are starting to look like balanced funds by the mounds of cash they’re hording [more on this in a moment], these corporations need to do something with all this cash. After all, just like investors sitting on GICs, corporations sitting on cash aren’t going to get much of a return on it.

Now, let’s Think Apple, for example.

Seems the apple’s full of cash. But Apple’s not a balanced fund. It’s a company. Not everyone’s enamoured of Apple’s strategy.

While a lot of this cash hording relates directly to our current economic times, it still raises the ire of many people. High unemployment, especially amongst students, doesn’t make people rejoice when they hear you’re sitting on $76 billion.

With that amount of cash on the balance sheet, it seems management at Apple’s got the Mayan calendar out and are waiting for the end of the world. If that’s their forward-looking scenario, an iPhone or iPad won’t be much use …

“Hi … Mom, dad, I just thought I’d say bye … The end is coming …”

Perhaps investors in Apple have more confidence in Apple’s future than Apple management does?

But let’s revisit what’s most important to remember:

• Corporations have to do something with all this cash
• And some are

Microsoft recently raised its dividend: One of many companies to do this. It’s about sharing the wealth.

The fact that Apple hasn’t issued a dividend seems like a strategic mistake. It will be interesting to see how long investors will tolerate so much cash on Apple’s books.

Since opportunity appears in times of crisis, it’d be foolish to forget that all this cash has to go somewhere eventually.


  • Dividends
  • Mergers, acquisitions
  • Buying back shares
  • Towards hiring the most important resource, people, as the economy improves

Part Two is here.

App(le) fatigue: It’s not just users — many businesses aren’t keen on a big cut for Apple

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In “Three digital considerations for the year(s) to come”, I wrote about the “app phenomenon”. The future of apps depends on users. Will they continue to download apps or will they develop “app fatigue”?

But the future also depends on companies.

There’s no doubt it’s easier to use a browser than to download an encyclopedia of apps. Apple has recently made it a priority for some companies to commit to HTML5 by charging exorbitant prices for sales within an iOS app. Many content publishers have no desire to share a 30 per cent cut of sales with Apple.

Will Apple’s recent move enforcing its 30 per cent cut of sales through iOS apps turn out to be a strategic mistake?

Ready or not, HTML5 is coming …

Written by johnrondina

August 5, 2011 at 12:52 pm

Posted in Uncategorized

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Amidst all the hoopla: Dell, IBM vs. Apple — Surprise, surprise

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Dell and IBM continue to beat Apple over six months

Reality check:

Amidst all the hoopla over Apple earnings, what many have missed is that, if you look at a six month chart of Apple in comparison to Dell and IBM, Dell and IBM have outperformed. In fact, Dell is the standout at an almost 30 per cent return, nearly double Apple’s return.

With the Apple marketing machine and great earnings, Apple’s still not outperforming Dell and IBM. Hmmmm …

Of course, it will now take $40 billion dollars of new investment to show a 10 per cent return on Apple.

Will Apple’s size slow it down? Will Dell and IBM continue to outperform?

One thing’s for sure, it’s tough to stay on top and over the last six months investors have seen more reward in Dell and IBM.

Stay tuned.

Written by johnrondina

July 20, 2011 at 4:36 pm

How’s Apple stock been doing over the last six months?

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Not great.

It’s down about 12 per cent from its recent high. That’s over $3o billion.

While it may not be facing RIM’s challenges, Apple’s practically turned into a proxy for the Nasdaq over the last six months delivering about the same return. Of course, holding just one stock limits your diversification. Considering how huge Apple’s market capitalization has become, moving upwards now requires a tremendous investment in Apple.

Has it become a victim of its own success?

Consider: Apple’s market cap is now $300 billion. In order for it to increase even 10 per cent, Apple needs a $30 billion cash injection.

Not exactly pocket change.

Over the same period of time, Dell and IBM have outperformed returning over 10 and 15 per cent. The Dow has done better and so has the S&P TSX 60 with a lot more diversification.

Apple’s weighting in the Nasdaq has been lowered so fund managers don’t need to buy as much of Apple to keep pace with the Nasdaq.

Is bigger always better? Maybe not.

Update: The Android cometh – the latest chart on smartphone subscriber share

Apple stock’s been thinking different

Written by johnrondina

June 21, 2011 at 2:47 pm

Privacy issues: Update on “Three digital considerations for the year(s) to come”

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Is Big Brother following you?

Security issues revealed regarding iPhone

In a piece I wrote a little while ago, “Three digital considerations for the year(s) to come”, I discussed how privacy concerns may continue to gain momentum in our increasingly digitized world. I focused on social media, however, the mobile tools that enable such communication are important.

The Guardian recently published an article, “iPhone keeps records of everywhere you go”, which could be explosive in its revelations. You can watch the video of researchers discussing the “tracking” here.

Coming in the face of RIM being criticized as the most secure mobile network, how will iPhone users respond to Apple? What about policy-makers? How will consumers considering an iPhone purchase respond?

Apple marketing used to use the image of “Big Brother” to portray the competition (Microsoft) in a less than flattering light. But you can’t argue against the fact that this data-gathering of user information seems a lot like the “Big Brother” Apple once targeted in its advertising.

So far, Apple has “declined to respond”. However, communications best practices would suggest that a response should and must come soon.

Will corporate decision-makers take a chance on a product that has such a security flaw? Will RIM’s more secure network look more appealing than ever for the enterprise market?

Will iPhone users look at their phones differently? Will they think differently?

Update: Senator Franken chairs committee on mobile technology and privacyApple and Google have been “invited” to discuss issues related to tracking software and smartphones

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