What is the matter with people in Washington and New York? There is obviously a jobs emergency and they're talking about deficits -- and in the middle of a frenzy of worrying about deficits they are talking about cutting taxes for the rich! ?? And, to make matters even worse, at the same time as millions are out of work with unemployment checks ending, there is an unbelievable amount of work that needs to be done modernizing our infrastructure, retrofitting homes and buildings to be energy efficient, and reviving our manufacturing base.
Is there a brain disease running loose that they aren't telling us about? Or is this really just corruption?
The Reagan/Bush debt and deficits are the fad subject of concern among our elites. The New York Times has a wonderful interactive "You Fix The Budget" deficit chart, where you can try different options (but only the ones the Times offers, few of the right ones that would work) to see how they lower future deficits. (Hint: the borrowing was caused by huge tax cuts for the rich and huge increases in military spending. Returning to pre-Reagan tax levels and pre-Soviet Union military spending are not options in the NY Times deficit game.)
Here's the thing. In New York and Washington the people in charge apparently don't know that unemployment in the country is 9.6%! Nine. Point. Six. Percent. That's only the official rate! And if you are not in New York or Washington you know that things are a lot worse than the "official" rate. If you are not in New York or Washington you know there are boarded-up houses, empty storefronts, and "For Lease" signs in front of every third or fourth office building. You know that people have used up their savings, moved in with friends and parents and go to the food bank. Americans are doing things people here never thought they would ever have to do.
In Washington and New York -- the cities that get the bank bailouts and military contract money -- they are not talking about the jobless at all. In fact, unemployment benefits are ending, and not being renewed. Instead of addressing the emergency they are talking about cutting our Social Security, making us work even longer (as if you can even get a job when you are over 50), cutting health care, and cutting the few other lifelines We, the People built for ourselves in this country over the decades. Bankers got bailouts and bonuses.
But get this. At the same time as they are in a hysterical frenzy about deficits, the other big discussion in New York and Washington is cutting taxes?
They are in a faint about deficits, and at the same time are talking about cutting taxes, and not talking at all about the emergency all of us as experiencing: jobs, jobs, jobs, JOBS, JOBS. JOBS? In what kind of brain does talk about cutting deficits and cutting taxes happen at the same time as a terrible, terrible jobs emergency is going on, without an epiphany of realization that the entire process has gone completely off the rails?
The country needs jobs and needs its infrastructure modernized. We have work that really, really needs doing. People that really, really need work. Borrowing money is really, really cheap. And investing in a modernized infrastructure makes American business more competitive, which helps us pay off the debt.
Washington and New York people: If you are not talking about jobs, jobs, jobs, jobs and JOBS then you are not talking about anything that matters. It is time for a bold jobs plan. The country needs it. The people need it.
Take Action: On Tuesday organizations will be pushing a congressional click-to-call campaign designed to flood switchboards with demands for a one-year unemployment-benefit extension.
The details: Click to call at www.usaction.org/call Or call toll free to 1-866-606-1189
Also, please visit unemployedworkers.org and sign the Petition: Tell Congress not to cut-off 2 million Americans from unemployment benefits this holiday season.
And: Tell Congress: Don't extend the Bush tax cuts for the wealthy!
To support a margin compression theory, the article begins by using institutional selling as proof and presents increasing Android market share as an argument. Let’s take a closer look.
1. Institutional Selling
The two examples provided (one institution selling and another expressing worry) are insufficient to support the conclusion that big money has started to dump Apple. What’s happening in the aggregate? Might other institutions have initiated positions or increased their holdings? Unless this table (http://www.nasdaq.com/asp/holdings.asp?symbol=AAPL&selected=AAPL&FormType=Institutional) is out of date (It does include Capital Growth Management’s sale.), there is no significant net change in the number of shares held by institutions.
Now, one could argue that CGM’s Heebner and FEAM’s Obuchowski are such stellar managers that their opinion warrants special attention. Well, Heebner’s CGM Focus fund is only a two-star Morningstar rated fund (http://finance.yahoo.com/q/pr?s=CGMFX+Profile). Heebner “knows how to count”, as the author writes, I suppose, but he doesn’t know how to outperform; Obuchowski’s FEAM50 (http://www.1empiream.com/FEAM50_Q3%2010.pdf) and APA125 (http://www.1empiream.com/apa.htm) funds have beaten their benchmark. However, he’s expressed concern about holding Apple two years from now. He hasn’t sold yet.
The article hence doesn’t provide either quantitative (as the number of shares held has not changed significantly) or qualitative (as no star manager is cited as selling) evidence of big money starting to dump Apple because of margin compression. For the one under performing manager cited for selling, no reason is provided. As a matter of fact, there’s no evidence for net institutional selling of Apple, period.
2. Increased Android Market Share
With a 35% profit share in 2009 (http://www.businessinsider.com/chart-of-the-day-revenue-vs-operating-pro...), the hardware industry's highest, hasn’t Apple been successful in the personal computer market? I would say so, and yet it had only captured a 7% market share. How has it accomplished this feat? By offering something different that consumers value at a premium.
The author writes: “Jobs also (understandably) failed to mention that the “commodity’ Androids materially outperform the iOS products in terms of features and functionality. This is pretty much in direct contravention to the concept of the term “commodity”, isn’t it???? I don’t think many Samsung Galaxy S, Droid X or HTC Evo owners will characterize their devices as “commodities”.”
A product’s characterization as a commodity is not a function of the quality of its features and functionality or user opinions thereof. The Android clones are commodities because there’s fundamentally little difference between them. One might have a bigger screen, another longer battery life, and yet another a thinner form factor, but they all run the same OS and hence offer the same functionality. If an innovative feature proves popular, it can quickly be duplicated. There’s little that sets one phone apart from the other. They are interchangeable. As such, they must compete on price. You might prefer the Galaxy S, but settle for a Droid if its price is sufficiently lower to sway you. Their makers will generate lower profit margins, just like Windows PC makers.
The iPhone, on the other hand, offers something different: superior aesthetics, greater ease of use, no bloatware, superior integration with related products (Mac & iPad), a certain prestige, but mainly a distinct OS. It offers the whole package. Its hardware competitors might best or equal some features, but not the whole. If you value this different product, you can only buy from Apple. By maintaining full control of the iPhone experience, Apple prevents it from becoming a commodity like all the Android clones and, so long as it’s able to produce a superior experience on the whole, ensures premium pricing and high profit margins.
The author also writes: “…its business model may prove unassailable unless Apple makes some drastic changes (ex. allowing cloning)…”
What if Apple did pursue the Google model and licensed its OS? If it allowed iOS clones, it would cannibalize its sales and its margins would be obliterated, as it would lose its main differentiator. Would it be able to keep generating a $238 profit per phone (http://www.asymco.com/2010/10/31/making-it-up-in-volume-how-to-view-unit-profitability-vs-volume-in-handsets/)? In light of the fact that Google is giving Android away, it’s highly unlikely.
Android has already won. The battle for market or unit share, that is. Apple will henceforth never sell as many phones. That’s OK because Apple will probably keep generating the lion’s share of profits (http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/) by executing a business model proven successful with the Mac.
As it reaches critical mass, Google’s model might indeed become unassailable. No other company will beat Google at its game. Apple has chosen to play a different game that might also be unassailable. They’re two different ways to win. Google will attempt to monetize Android through market share dominance, while Apple will maintain its profit share dominance among hardware makers through innovation and differentiation. Apple’s margins will suffer significantly only if it’s unable to keep offering something different, valued at a premium by consumers.
In short, the article fails to show an institutional dump of Apple shares. It doesn’t even show that the one (marginally competent) institutional manager mentioned for selling did so because of expected margin compression. Moreover, it is misguided in using Android’s unit share dominance to deduce margin compression at Apple. Apple’s profit margin will only suffer significant compression if it fails in the execution of its business model.
To further the analysis, is Google’s licensing model superior to Apple’s integrated model, as many seem to believe? In the personal computer market, Microsoft made money by selling Windows to hardware makers. In the mobile phone market, Google is giving Android away, while planning to monetize market share dominance through services (search and others). The hurdles it faces with this model are not insignificant. Its lack of control over its OS is a liability: witness Verizon’s pre-installation of Bing on some Android phones (http://www.broadbandreports.com/shownews/Verizon-Bing-Wont-Be-Exclusive-On-All-Android-Phones-110294). Its platform is a customizable OS that hardware makers and wireless carriers can tailor to suit their own ends, which may be to Google’s detriment, and they don’t have to pay for it. Its success is far from assured. Might Google be going back to producing its own branded phone because its current strategy is proving difficult to monetize (http://www.engadget.com/2010/11/11/this-is-the-nexus-s/)?
Apple, on the other hand, is already monetizing the iPhone. As a matter of fact, it made as much money in Q3 2010 as all other phone makers combined (http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/), in spite of commanding only 4% market share. Apple won both the unit share and profit share battle in MP3 players with the iPod, as no worthy competitor came forth. This is not the case in smart phones with the emergence of Android. Nonetheless, the Mac, with 35% of PC profit share in spite of only 7% market share, has proven that Apple’s model can thrive even in the face of strong competition.
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seiger
What is the matter with people in Washington and New York? There is obviously a jobs emergency and they're talking about deficits -- and in the middle of a frenzy of worrying about deficits they are talking about cutting taxes for the rich! ?? And, to make matters even worse, at the same time as millions are out of work with unemployment checks ending, there is an unbelievable amount of work that needs to be done modernizing our infrastructure, retrofitting homes and buildings to be energy efficient, and reviving our manufacturing base.
Is there a brain disease running loose that they aren't telling us about? Or is this really just corruption?
The Reagan/Bush debt and deficits are the fad subject of concern among our elites. The New York Times has a wonderful interactive "You Fix The Budget" deficit chart, where you can try different options (but only the ones the Times offers, few of the right ones that would work) to see how they lower future deficits. (Hint: the borrowing was caused by huge tax cuts for the rich and huge increases in military spending. Returning to pre-Reagan tax levels and pre-Soviet Union military spending are not options in the NY Times deficit game.)
Here's the thing. In New York and Washington the people in charge apparently don't know that unemployment in the country is 9.6%! Nine. Point. Six. Percent. That's only the official rate! And if you are not in New York or Washington you know that things are a lot worse than the "official" rate. If you are not in New York or Washington you know there are boarded-up houses, empty storefronts, and "For Lease" signs in front of every third or fourth office building. You know that people have used up their savings, moved in with friends and parents and go to the food bank. Americans are doing things people here never thought they would ever have to do.
In Washington and New York -- the cities that get the bank bailouts and military contract money -- they are not talking about the jobless at all. In fact, unemployment benefits are ending, and not being renewed. Instead of addressing the emergency they are talking about cutting our Social Security, making us work even longer (as if you can even get a job when you are over 50), cutting health care, and cutting the few other lifelines We, the People built for ourselves in this country over the decades. Bankers got bailouts and bonuses.
But get this. At the same time as they are in a hysterical frenzy about deficits, the other big discussion in New York and Washington is cutting taxes?
They are in a faint about deficits, and at the same time are talking about cutting taxes, and not talking at all about the emergency all of us as experiencing: jobs, jobs, jobs, JOBS, JOBS. JOBS? In what kind of brain does talk about cutting deficits and cutting taxes happen at the same time as a terrible, terrible jobs emergency is going on, without an epiphany of realization that the entire process has gone completely off the rails?
The country needs jobs and needs its infrastructure modernized. We have work that really, really needs doing. People that really, really need work. Borrowing money is really, really cheap. And investing in a modernized infrastructure makes American business more competitive, which helps us pay off the debt.
Washington and New York people: If you are not talking about jobs, jobs, jobs, jobs and JOBS then you are not talking about anything that matters. It is time for a bold jobs plan. The country needs it. The people need it.
Take Action: On Tuesday organizations will be pushing a congressional click-to-call campaign designed to flood switchboards with demands for a one-year unemployment-benefit extension.
The details: Click to call at www.usaction.org/call Or call toll free to 1-866-606-1189
Also, please visit unemployedworkers.org and sign the Petition: Tell Congress not to cut-off 2 million Americans from unemployment benefits this holiday season.
And: Tell Congress: Don't extend the Bush tax cuts for the wealthy!
To support a margin compression theory, the article begins by using institutional selling as proof and presents increasing Android market share as an argument. Let’s take a closer look.
1. Institutional Selling
The two examples provided (one institution selling and another expressing worry) are insufficient to support the conclusion that big money has started to dump Apple. What’s happening in the aggregate? Might other institutions have initiated positions or increased their holdings? Unless this table (http://www.nasdaq.com/asp/holdings.asp?symbol=AAPL&selected=AAPL&FormType=Institutional) is out of date (It does include Capital Growth Management’s sale.), there is no significant net change in the number of shares held by institutions.
Now, one could argue that CGM’s Heebner and FEAM’s Obuchowski are such stellar managers that their opinion warrants special attention. Well, Heebner’s CGM Focus fund is only a two-star Morningstar rated fund (http://finance.yahoo.com/q/pr?s=CGMFX+Profile). Heebner “knows how to count”, as the author writes, I suppose, but he doesn’t know how to outperform; Obuchowski’s FEAM50 (http://www.1empiream.com/FEAM50_Q3%2010.pdf) and APA125 (http://www.1empiream.com/apa.htm) funds have beaten their benchmark. However, he’s expressed concern about holding Apple two years from now. He hasn’t sold yet.
The article hence doesn’t provide either quantitative (as the number of shares held has not changed significantly) or qualitative (as no star manager is cited as selling) evidence of big money starting to dump Apple because of margin compression. For the one under performing manager cited for selling, no reason is provided. As a matter of fact, there’s no evidence for net institutional selling of Apple, period.
2. Increased Android Market Share
With a 35% profit share in 2009 (http://www.businessinsider.com/chart-of-the-day-revenue-vs-operating-pro...), the hardware industry's highest, hasn’t Apple been successful in the personal computer market? I would say so, and yet it had only captured a 7% market share. How has it accomplished this feat? By offering something different that consumers value at a premium.
The author writes: “Jobs also (understandably) failed to mention that the “commodity’ Androids materially outperform the iOS products in terms of features and functionality. This is pretty much in direct contravention to the concept of the term “commodity”, isn’t it???? I don’t think many Samsung Galaxy S, Droid X or HTC Evo owners will characterize their devices as “commodities”.”
A product’s characterization as a commodity is not a function of the quality of its features and functionality or user opinions thereof. The Android clones are commodities because there’s fundamentally little difference between them. One might have a bigger screen, another longer battery life, and yet another a thinner form factor, but they all run the same OS and hence offer the same functionality. If an innovative feature proves popular, it can quickly be duplicated. There’s little that sets one phone apart from the other. They are interchangeable. As such, they must compete on price. You might prefer the Galaxy S, but settle for a Droid if its price is sufficiently lower to sway you. Their makers will generate lower profit margins, just like Windows PC makers.
The iPhone, on the other hand, offers something different: superior aesthetics, greater ease of use, no bloatware, superior integration with related products (Mac & iPad), a certain prestige, but mainly a distinct OS. It offers the whole package. Its hardware competitors might best or equal some features, but not the whole. If you value this different product, you can only buy from Apple. By maintaining full control of the iPhone experience, Apple prevents it from becoming a commodity like all the Android clones and, so long as it’s able to produce a superior experience on the whole, ensures premium pricing and high profit margins.
The author also writes: “…its business model may prove unassailable unless Apple makes some drastic changes (ex. allowing cloning)…”
What if Apple did pursue the Google model and licensed its OS? If it allowed iOS clones, it would cannibalize its sales and its margins would be obliterated, as it would lose its main differentiator. Would it be able to keep generating a $238 profit per phone (http://www.asymco.com/2010/10/31/making-it-up-in-volume-how-to-view-unit-profitability-vs-volume-in-handsets/)? In light of the fact that Google is giving Android away, it’s highly unlikely.
Android has already won. The battle for market or unit share, that is. Apple will henceforth never sell as many phones. That’s OK because Apple will probably keep generating the lion’s share of profits (http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/) by executing a business model proven successful with the Mac.
As it reaches critical mass, Google’s model might indeed become unassailable. No other company will beat Google at its game. Apple has chosen to play a different game that might also be unassailable. They’re two different ways to win. Google will attempt to monetize Android through market share dominance, while Apple will maintain its profit share dominance among hardware makers through innovation and differentiation. Apple’s margins will suffer significantly only if it’s unable to keep offering something different, valued at a premium by consumers.
In short, the article fails to show an institutional dump of Apple shares. It doesn’t even show that the one (marginally competent) institutional manager mentioned for selling did so because of expected margin compression. Moreover, it is misguided in using Android’s unit share dominance to deduce margin compression at Apple. Apple’s profit margin will only suffer significant compression if it fails in the execution of its business model.
To further the analysis, is Google’s licensing model superior to Apple’s integrated model, as many seem to believe? In the personal computer market, Microsoft made money by selling Windows to hardware makers. In the mobile phone market, Google is giving Android away, while planning to monetize market share dominance through services (search and others). The hurdles it faces with this model are not insignificant. Its lack of control over its OS is a liability: witness Verizon’s pre-installation of Bing on some Android phones (http://www.broadbandreports.com/shownews/Verizon-Bing-Wont-Be-Exclusive-On-All-Android-Phones-110294). Its platform is a customizable OS that hardware makers and wireless carriers can tailor to suit their own ends, which may be to Google’s detriment, and they don’t have to pay for it. Its success is far from assured. Might Google be going back to producing its own branded phone because its current strategy is proving difficult to monetize (http://www.engadget.com/2010/11/11/this-is-the-nexus-s/)?
Apple, on the other hand, is already monetizing the iPhone. As a matter of fact, it made as much money in Q3 2010 as all other phone makers combined (http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/), in spite of commanding only 4% market share. Apple won both the unit share and profit share battle in MP3 players with the iPod, as no worthy competitor came forth. This is not the case in smart phones with the emergence of Android. Nonetheless, the Mac, with 35% of PC profit share in spite of only 7% market share, has proven that Apple’s model can thrive even in the face of strong competition.
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seigereric seiger
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seiger
What is the matter with people in Washington and New York? There is obviously a jobs emergency and they're talking about deficits -- and in the middle of a frenzy of worrying about deficits they are talking about cutting taxes for the rich! ?? And, to make matters even worse, at the same time as millions are out of work with unemployment checks ending, there is an unbelievable amount of work that needs to be done modernizing our infrastructure, retrofitting homes and buildings to be energy efficient, and reviving our manufacturing base.
Is there a brain disease running loose that they aren't telling us about? Or is this really just corruption?
The Reagan/Bush debt and deficits are the fad subject of concern among our elites. The New York Times has a wonderful interactive "You Fix The Budget" deficit chart, where you can try different options (but only the ones the Times offers, few of the right ones that would work) to see how they lower future deficits. (Hint: the borrowing was caused by huge tax cuts for the rich and huge increases in military spending. Returning to pre-Reagan tax levels and pre-Soviet Union military spending are not options in the NY Times deficit game.)
Here's the thing. In New York and Washington the people in charge apparently don't know that unemployment in the country is 9.6%! Nine. Point. Six. Percent. That's only the official rate! And if you are not in New York or Washington you know that things are a lot worse than the "official" rate. If you are not in New York or Washington you know there are boarded-up houses, empty storefronts, and "For Lease" signs in front of every third or fourth office building. You know that people have used up their savings, moved in with friends and parents and go to the food bank. Americans are doing things people here never thought they would ever have to do.
In Washington and New York -- the cities that get the bank bailouts and military contract money -- they are not talking about the jobless at all. In fact, unemployment benefits are ending, and not being renewed. Instead of addressing the emergency they are talking about cutting our Social Security, making us work even longer (as if you can even get a job when you are over 50), cutting health care, and cutting the few other lifelines We, the People built for ourselves in this country over the decades. Bankers got bailouts and bonuses.
But get this. At the same time as they are in a hysterical frenzy about deficits, the other big discussion in New York and Washington is cutting taxes?
They are in a faint about deficits, and at the same time are talking about cutting taxes, and not talking at all about the emergency all of us as experiencing: jobs, jobs, jobs, JOBS, JOBS. JOBS? In what kind of brain does talk about cutting deficits and cutting taxes happen at the same time as a terrible, terrible jobs emergency is going on, without an epiphany of realization that the entire process has gone completely off the rails?
The country needs jobs and needs its infrastructure modernized. We have work that really, really needs doing. People that really, really need work. Borrowing money is really, really cheap. And investing in a modernized infrastructure makes American business more competitive, which helps us pay off the debt.
Washington and New York people: If you are not talking about jobs, jobs, jobs, jobs and JOBS then you are not talking about anything that matters. It is time for a bold jobs plan. The country needs it. The people need it.
Take Action: On Tuesday organizations will be pushing a congressional click-to-call campaign designed to flood switchboards with demands for a one-year unemployment-benefit extension.
The details: Click to call at www.usaction.org/call Or call toll free to 1-866-606-1189
Also, please visit unemployedworkers.org and sign the Petition: Tell Congress not to cut-off 2 million Americans from unemployment benefits this holiday season.
And: Tell Congress: Don't extend the Bush tax cuts for the wealthy!
To support a margin compression theory, the article begins by using institutional selling as proof and presents increasing Android market share as an argument. Let’s take a closer look.
1. Institutional Selling
The two examples provided (one institution selling and another expressing worry) are insufficient to support the conclusion that big money has started to dump Apple. What’s happening in the aggregate? Might other institutions have initiated positions or increased their holdings? Unless this table (http://www.nasdaq.com/asp/holdings.asp?symbol=AAPL&selected=AAPL&FormType=Institutional) is out of date (It does include Capital Growth Management’s sale.), there is no significant net change in the number of shares held by institutions.
Now, one could argue that CGM’s Heebner and FEAM’s Obuchowski are such stellar managers that their opinion warrants special attention. Well, Heebner’s CGM Focus fund is only a two-star Morningstar rated fund (http://finance.yahoo.com/q/pr?s=CGMFX+Profile). Heebner “knows how to count”, as the author writes, I suppose, but he doesn’t know how to outperform; Obuchowski’s FEAM50 (http://www.1empiream.com/FEAM50_Q3%2010.pdf) and APA125 (http://www.1empiream.com/apa.htm) funds have beaten their benchmark. However, he’s expressed concern about holding Apple two years from now. He hasn’t sold yet.
The article hence doesn’t provide either quantitative (as the number of shares held has not changed significantly) or qualitative (as no star manager is cited as selling) evidence of big money starting to dump Apple because of margin compression. For the one under performing manager cited for selling, no reason is provided. As a matter of fact, there’s no evidence for net institutional selling of Apple, period.
2. Increased Android Market Share
With a 35% profit share in 2009 (http://www.businessinsider.com/chart-of-the-day-revenue-vs-operating-pro...), the hardware industry's highest, hasn’t Apple been successful in the personal computer market? I would say so, and yet it had only captured a 7% market share. How has it accomplished this feat? By offering something different that consumers value at a premium.
The author writes: “Jobs also (understandably) failed to mention that the “commodity’ Androids materially outperform the iOS products in terms of features and functionality. This is pretty much in direct contravention to the concept of the term “commodity”, isn’t it???? I don’t think many Samsung Galaxy S, Droid X or HTC Evo owners will characterize their devices as “commodities”.”
A product’s characterization as a commodity is not a function of the quality of its features and functionality or user opinions thereof. The Android clones are commodities because there’s fundamentally little difference between them. One might have a bigger screen, another longer battery life, and yet another a thinner form factor, but they all run the same OS and hence offer the same functionality. If an innovative feature proves popular, it can quickly be duplicated. There’s little that sets one phone apart from the other. They are interchangeable. As such, they must compete on price. You might prefer the Galaxy S, but settle for a Droid if its price is sufficiently lower to sway you. Their makers will generate lower profit margins, just like Windows PC makers.
The iPhone, on the other hand, offers something different: superior aesthetics, greater ease of use, no bloatware, superior integration with related products (Mac & iPad), a certain prestige, but mainly a distinct OS. It offers the whole package. Its hardware competitors might best or equal some features, but not the whole. If you value this different product, you can only buy from Apple. By maintaining full control of the iPhone experience, Apple prevents it from becoming a commodity like all the Android clones and, so long as it’s able to produce a superior experience on the whole, ensures premium pricing and high profit margins.
The author also writes: “…its business model may prove unassailable unless Apple makes some drastic changes (ex. allowing cloning)…”
What if Apple did pursue the Google model and licensed its OS? If it allowed iOS clones, it would cannibalize its sales and its margins would be obliterated, as it would lose its main differentiator. Would it be able to keep generating a $238 profit per phone (http://www.asymco.com/2010/10/31/making-it-up-in-volume-how-to-view-unit-profitability-vs-volume-in-handsets/)? In light of the fact that Google is giving Android away, it’s highly unlikely.
Android has already won. The battle for market or unit share, that is. Apple will henceforth never sell as many phones. That’s OK because Apple will probably keep generating the lion’s share of profits (http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/) by executing a business model proven successful with the Mac.
As it reaches critical mass, Google’s model might indeed become unassailable. No other company will beat Google at its game. Apple has chosen to play a different game that might also be unassailable. They’re two different ways to win. Google will attempt to monetize Android through market share dominance, while Apple will maintain its profit share dominance among hardware makers through innovation and differentiation. Apple’s margins will suffer significantly only if it’s unable to keep offering something different, valued at a premium by consumers.
In short, the article fails to show an institutional dump of Apple shares. It doesn’t even show that the one (marginally competent) institutional manager mentioned for selling did so because of expected margin compression. Moreover, it is misguided in using Android’s unit share dominance to deduce margin compression at Apple. Apple’s profit margin will only suffer significant compression if it fails in the execution of its business model.
To further the analysis, is Google’s licensing model superior to Apple’s integrated model, as many seem to believe? In the personal computer market, Microsoft made money by selling Windows to hardware makers. In the mobile phone market, Google is giving Android away, while planning to monetize market share dominance through services (search and others). The hurdles it faces with this model are not insignificant. Its lack of control over its OS is a liability: witness Verizon’s pre-installation of Bing on some Android phones (http://www.broadbandreports.com/shownews/Verizon-Bing-Wont-Be-Exclusive-On-All-Android-Phones-110294). Its platform is a customizable OS that hardware makers and wireless carriers can tailor to suit their own ends, which may be to Google’s detriment, and they don’t have to pay for it. Its success is far from assured. Might Google be going back to producing its own branded phone because its current strategy is proving difficult to monetize (http://www.engadget.com/2010/11/11/this-is-the-nexus-s/)?
Apple, on the other hand, is already monetizing the iPhone. As a matter of fact, it made as much money in Q3 2010 as all other phone makers combined (http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/), in spite of commanding only 4% market share. Apple won both the unit share and profit share battle in MP3 players with the iPod, as no worthy competitor came forth. This is not the case in smart phones with the emergence of Android. Nonetheless, the Mac, with 35% of PC profit share in spite of only 7% market share, has proven that Apple’s model can thrive even in the face of strong competition.
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eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seiger
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
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eric seiger eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seigerepic fail photos - Probably Bad News: Police FAIL.
News publishers and readers both benefit when journalists get proper credit for their work. That can be difficult, with news spreading so quickly and many websites syndicating articles to others. That's why we're experimenting with two ...
Commonly all the plastic surgery that celebrities undergo to preserve their age backfires and makes them look as though they have tacked years onto their plastic bodies. Other times, celebrities ar...
eric seiger
