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The Back Page - Apple Death Knell #44: Philips Electronics Buys Apple in 2005

by - December 29th, 2004

Writing for TheStreet.com and MSN Money, John D. Markman has put together his annual predictions column for the upcoming year. In "12 Big Surprises for 2005," Mr. Markman makes a number of political and economic predictions, as well as some very specific predictions about what individual companies will do. One of those companies, Apple Computer, will find iPods stacking up on store shelves in 2005 and have to sell itself to Philips Electronics, making Mr. Markman's column Apple Death Knell #44 in the Apple Death Knell Counter.

In his column, Mr. Markman wrote: "Apple Computer releases two new handheld devices in an attempt to follow up its iPod mega-hit, but they fail to gain traction. iPods begin stacking up at electronics stores when it is discovered that, after a Christmas buying frenzy, there are now 2.7 iPods for every American over the age of 6. Apple turns to Philips Electronics for a bailout and is sold to the Netherlands-based consumer electronics giant for $80 a share."

Mr. Markman's imagery of "2.7 iPods for every American over the age of 6" may be hyperbole, as that would mean that Apple would have sold some 675 million iPods for a whopping US$201.8 billion, give or take a few billion. Obviously a company grossing more than the GNP of several developing nations combined wouldn't need a bailout, so that must be an attempt at a joke.

I am left assuming he means that the 8 million or so iPods that Apple will have actually sold by the end of 2004 has already saturated the market, but it's just a weird way of trying to make his point. It's also interesting that he thinks Apple's follow up products will be a failure when the company has so far executed amazingly well every step of the way.

Be that as it may, Mr. Markman's other comments are clear: He expects Apple to need a bailout in 2005, despite the company's massive cash stockpile, growing Mac sales, growing iPod sales, and growing iTunes Music Store sales. That's definitely a bold prediction, and one that certainly makes Mr. Markman fitting company for the likes of Paul "Reality Check" Thurrott, Andrew Neff, Rob Enderle, and the other notables that are enshrined, for posterity's sake, in the Apple Death Knell Counter.

For a while, there, I was worried that I was going to have to start digging through more archives to find all those unsung Death Knells from years gone by in order to keep the ADKC growing. It seems, however, that there are still a few people who can see doom and gloom in Apple's future.

Note that Mr. Markman's comments about Apple come on page 2 of his column, and thanks to those Observers who wrote in about the piece.


began using Apple computers in 1983 in a high school BASIC programming class. He started using Macs in 1990 when the Kinko's guy taught him how to use Aldus PageMaker, finally buying a Power Computing Power 100 in 1995. Today, Bryan is the Editor of The Mac Observer, and has contributed to the print versions of MacAddict and MacFormat (UK).

You can send your comments directly to him, or you can also post your comments below.

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Show: Subjects Only | Full Comments
Close Name:Small White Car Posts: 1933 Joined: 02 Jul 2004
Subject:

So...if a bunch of imaginary stuff happens...Apple will be in trouble?

Ok, I'm glad someone explained that to me. I feel so much more educated!

Close Name:geoduck Posts: 1665 Joined: 30 Dec 2003
Subject:

He thinks Apple will need a bailout, essentially because of how well things are selling right now. I guess some people just have to keep searching for that dark cloud behind every silver lining.

Seriously though, this time of the year all of the political pundits/financial predictors/TV talking heads/end of year columnists, throw in a couple of off the wall predictions just to keep their predictions from sounding like those from all the other political pundits/financial predictors/TV talking head/end of year columnists.

Amusing but silly.

Close Name:DawnTreader -   TMO Staff Posts: 13396 Joined: 04 Jan 2002
Subject:

At least under that scenario the company sells for $80 per share or a $16 per share premium over today's price. A sale at the price noted would value the company at over $32 billion and about $6.5 billion more than the company's market cap today or an increase in the company's value of about 25%.

That's not a "bail out". It's a sale at a premium price

Close Name:Billy K Posts: 297 Joined: 06 May 2004
Subject: That's Funny...

I was just thinking yesterday, now that Apple's doing so well, I'm gonna miss the ADKs. Glad to see there are still some loonies in the press to keep me amused.

View Name:Guest
Subject: The towering success of the iPod casts a dark shadow
Close Name:kenaustus Posts: 601 Joined: 27 Jun 2003
Subject: John missed a few things in his article

The first is that Apple puts intensive efforts into inventory control - lack of which hurt Apple in the days when Steve was not around.

Then there is the fact that when an iPod is shipped it is sold - one can gather dust on a retailer's shelf (if the retailer isn't good at inventory control) but it doesn't go back to Apple.

Now let's consider the future - with around half a billion in R&D each year Apple sure does.

Finally, old John thinks the flash iPod will fail to gain traction? LOL

View Name:Guest
Subject:
View Name:Guest
Subject: Apple Stock Price
Close Name:mrmgraphics Posts: 824 Joined: 05 Sep 2003
Subject: report from the street

+

On Tuesday, I was at a Kaufgfman's dept. store in Monroeville Mall (Monroeville, PA, USA, near Pittsburgh). They has several kiosks on the ground floor displaying consumer electronics, with inventory of said electronic devices tucked behind locked glass cabinets. One display has the Sony HD Walkman; its glass cabinet was packed to the max with unsold inventory. Another display had the iPod and iPod mini. The iPod kiosk's glass cabinet was completely empty; even the display mini was missing. Which, of course, means that anyone and everyone buying music players at that one particular store chose Apple over Sony.

This isn't shocking. What is shocking is Markman's prediction that suddenly, in 2005, without any reason whatsoever, worldwide consumers are going to stop wanting iPods. His market saturation joke aside (2.7 iPods per person), why does he think demand is simply going to go away? Has he no idea of how many Walkmans sold, and how far iPods have to go to meet that mark? (That means plenty of room for iPod market growth in 2005, Mr. Markman.)

Then there's that "other" Apple product: Macintosh. As I've said in the TMO forums, interest is increasing -- based on my own observations at my day job -- amongst die-hard Wintel users. One of my bosses bought an iBook for his son for XMas (due to iPod halo effect and Windows security issues), a member of our crack IT staff is buying a G5 iMac (due, mostly, to Windows security issues), and several others have either bought iMacs or iBooks, or intend to do so in the near future. (As the resident Mac expert, they come to me with questions, which gives me a good handle on increasing interest in the Mac.)

And let's not forget the quiet product at 1 Infinite Loop: XServe. Its market share is increasing dramatically. And with major companies like Oracle releasing new products for OS X Server, the future looks brighter and brighter for Apple in the IT space. No, they're not going to replace Windows or Linux, but they aren't going to go away, either.

Finally, just a brief aside regarding corporate culture: Right now (12/30/04), log onto the websites for Microsoft, Dell, and Apple. Microsoft and Dell -- the Wintel juggernaut -- have Home pages displaying business as usual. Apple does not. There are no iMacs, iPods, iBooks, or XServes displayed anywhere. Instead, there are logos and links to seven major charitable organizations working to bring relief to the Indian Ocean tsunami victims, along with a brief statement from Apple all too reminiscent of its Home page statement in the wake of 9/11. That speaks volumes, IMHO.

Perhaps like never before in its history, Apple is doing everything right. The idea that they will need bailed out in the span of only one year -- because of a mere two product failures -- is preposterous. Anyone with any knowledge of Apple's history knows the Company has survived far, far worse, in far worse circumstances.

Wow...how can I get me one of these journalism jobs where all that's needed to claim a paycheck is a page of uninformed drivel???

Close Name:kevdo Posts: 54 Joined: 09 Dec 2004
Subject: Amazon too

Some credit to Amazon as well for putting a large donation image on their home page too. Apple doesn't have much going on post-Christmas and pre-Expo but Amazon does have a whole lot of customers spending gift cards, etc.

Close Name:macnut Posts: 52 Joined: 28 Jul 2004
Subject: This is a JOKE!

and a weird one at that.

Read what he says about Sirius:

"Sirius Satellite Radio (SIRI:Nasdaq - commentary - research) does another secondary offering to raise $250 million and offers the bulk of it to outgoing <B>Secretary of Defense Donald Rumsfeld</B> for a seven-year broadcasting deal. In a press release, Sirius management says it believes the devotion of Rummy's global audience will translate into millions of subscriptions. Sirius stock soars on the news"

View Name:Guest
Subject: Get real - it's a joke!
Close Name:Substance Posts: 32 Joined: 21 Sep 2004
Subject: ...Or is it?

I had a tough time telling if the author was serious or not, then I read a previous column of his:


"One more thing: My column did not say that Apple Computer was a better stock than Sirius. It said that the companies represented two different successful paradigms: One in which users select and download music to listen to, and the other in which users enjoy it passively without commercial interruption.

This year, I pointed out, the stock representing active choice was beating the stock representing couch potatoes. Next year could be different. In fact, it wouldn't shock me to see Apple gobbled up at a premium before long by a larger company like Sony or Philips Electronics."

He then goes on to explain how great Rhapsody and Napster are. Here's the link:
http://www.thestreet.com/funds/supermodels/10200449_2.html

One thing is for sure, I'm not going to be taking stock advice from him.

Close Name:Small White Car Posts: 1933 Joined: 02 Jul 2004
Subject:

Quote
Guest wrote:
It's crook when so many Mac users seem to have lost their sense of humor!

The original article was satire, it was full of mildly funny jokes like this, only one of them involving Apple. It wasn't subtle, it wasn't a troll, anyone who had the slightest vestige of humor in their make-up and actually read the article could tell it was a joke.


Hmmm...I've re-read it several times and I think you may be right. But I take issue with this:

Quote
Guest wrote:
...anyone who had the slightest vestige of humor in their make-up and actually read the article could tell it was a joke.


Yeah, see, the problem with that theory is that what he wrote isn't really "funny" by any definition. I agree with you now...it probably IS a little bit of satire...but it's hard to recognize satire when no effort is made to make it funny.

I mean, I guess because Phillips is not the company that would really buy them in such a situation...? That's the "funny" part? Why not say that McDonalds bought them? If the joke is that it's an unlikely buyer, why not pick a more unlikely one?

And 2.7 iPods per person? Wouldn't something like "153 iPods per person" actually be kind of funny? With "2.7" Bryan actually had to do MATH to show how it was an unrealistic number. Having to do MATH to understand that it's an exageration is supposed to be satire?

As I said, if it IS a joke it's done very poorly.

Close Name:AFCdtLoeb Posts: 2533 Joined: 20 Jul 2004
Subject:

I have a freind that works at CompUSA and another that works at an Apple store. When I asked them how they were doing selling merchandise, the Apple freind said it was selling well. The CompUSA guy said they would have "had an easier time keeping crack in stock". That warms my heart.

Close Name:Mace Posts: 9015 Joined: 07 Aug 2003
Subject: John D. Markman is a brother of John C. Dvorak?

He can't be serious. Why would Philips want to buy Apple for $80 if the company is failing. Is he hinting at a joint venture between Philips and Apple?

Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject: It's a joke!

Right around the 2.6 iPods per person comment it was obvious this article was intended to be humerous. Given that we have established this fact, does this really count as a death knell?

Close Name:iJack Posts: 254 Joined: 13 Jun 2001
Subject: It used to be...

that we Mackies used to call Wintel folks humorless (among other things). The whole article was written with tongue firmly in cheek. READ IT ALL!

To TMO Editor: you should know better than to publish this as deth knell #44. Jeez...

Close Name:jacrav Posts: 268 Joined: 04 Jul 2001
Subject: Weird sense of humor, that’s all …

TMO made me read an article I could easily have done without … None of the content in the whole piece is serious, except maybe the stock values mentioned, which might be worth considering. His setting of an expected $80 value on AAPL totally contradicts the commentary and seems pretty bullish to me (that’s a 25% upgrade from today’s closing !)… Why would investors keep bidding such high prices if the iPod were sitting on store shelves ? I know they are often crazy, but usually, with Apple, it is in the other direction: sell your stock every time Apple announces a profitable quarter …
The whole piece is in the same type of tongue-in-cheek (read Sirius or HP as well …), outrageous, not-very-funny kind of humorous …
Not worthy of ADKC rating …
Sorry iJack, looks like I was writing my rant while you posted yours
Note to Bryan: you probably boosted his readership by a factor of 10 … and I wonder how many flames in his email … ?!?!?

View Name:Guest
Subject: Satire??
Close Name:Bryan -   TMO Staff Posts: 7325 Joined: 11 Jun 2001
Subject:

I read through his entire piece quite carefully because I also thought he may have been joking. However, nothing else was remotely funny or silly, and he compared this year's predictions to last year's, even rating his own misses and hits. One doesn't look for where one was right and wrong when you are joking around in the first place.

To me, that said he was being serious about the predictions, even if he tried to use humor to make some of his points.

Also, I believe his exaggerations about Apple were intended to drive home his point, and were not subtle attempts at humor.

Mind you, I was wrong before...once before...and I could be wrong here, too.

Seriously, though, I respect the opinions of those who think it was all a joke, but I personally do not believe that to be the case.

Thanks for comments!

Bryan
Editor
TMO

View Name:Guest
Subject: Hidden agenda
View Name:Guest
Subject: There is always a reason...
View Name:Guest
Subject: GDP
View Name:Guest
Subject:
View Name:Guest
Subject: Philips??
Close Name:iJack Posts: 254 Joined: 13 Jun 2001
Subject:

Quote
Guest wrote:
If the author did his research correctly, he would realise that although Philips is an electronics giant, they are actually not profitable in their CE (consumer electronics) division which accounts for most of their revenues - only their medical division makes money at present....

Well, that's not quite true. I don't know if it's "CE" or not, but their TV's, radios, coffee makers, electric razors, toasters, and lightbulbs, etc., do very well in the EC and much of that gear is branded and sold here in the U.S. as Norelco.

Philips also sell EC countries a whole bunch of defence electronics and gear.

View Name:Guest
Subject: RE: Buy a sense of humor to go with your iPod
Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject:

Well its pretty obvious that its a joke. Maybe the Death Knell Counter uses a short instead of a long to store the number of minutes since the last death knell so this story was just a way to keep the TMO web server from crashing.

Close Name:DawnTreader -   TMO Staff Posts: 13396 Joined: 04 Jan 2002
Subject:

Quote
Bryan wrote:
I read through his entire piece quite carefully because I also thought he may have been joking. However, nothing else was remotely funny or silly, and he compared this year's predictions to last year's, even rating his own misses and hits. One doesn't look for where one was right and wrong when you are joking around in the first place.


I agree. Under the scenario mentioned Apple would be acquired at a 25% premium to current trading levels. I've started a topic on whether or not Apple should accept an $80 per share offer in the Apple Finance Board forum.

Many may not like the idea of Apple being sold, but what would be in the best interest of shareholders if an $80 per share offer came along?

Can Apple be reasonably expected to follow-up the success of the iPod with products that will add another 25% or more to shareholder value within the next 12 months?

Close Name:Mace Posts: 9015 Joined: 07 Aug 2003
Subject:

iPod phenomenon is not sufficient to push AAPL over $80. Increased Mac sales, sale of another big-hit device/application and success of the wireless broadband strategy will.

If Apple has no more idea after iPod, $80 is a good price to let go.

View Name:Guest
Subject: another person who just doesnt get
View Name:Guest
Subject: there are more ppl in this world than just in america
Close Name:Intruder -   TMO Mac Specialist Posts: 2837 Joined: 07 Jul 2004
Subject: Well?

Well, the stock is over $81 now. Philips?

<crickets>

View Name:Guest
Subject: 5 million iPods sold how much traction do you need?
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