Google VS Apple

  • Posted: 14 August 2012 02:45 PM #166

    gliderplane - 14 August 2012 05:40 PM
    Centsless - 14 August 2012 05:21 PM
    gliderplane - 13 August 2012 08:49 PM

    Apple still seems like a great investment, but Android is a real threat. It becomes much harder for Apple to compete against rivals (Android device makers) who shoot for <10% gross margins when Apple’s business model and stock price depend on 50% phone margins. Economies of scale in production and Apple’s nice design help only so much, especially with attracting new consumer segments. As Horace might say, it’s asymmetric.

    I’m still optimistic about Apple, but I’m keeping an eye out for early signs of real problems. The continuing growth of Android and the disappointing Q3 Apple results has made me reassess whether Apple is a sure thing.

    If problems with Apple arise, I expect them to appear first in non-US markets, perhaps China, but maybe also parts of Europe and elsewhere. I’m not saying it’s likely, but it’s a real risk.

    I am pulling this from the other thread, gliderplane, because I think you are right on. Let me see if I understand.

    Two points in Apple’s favor I think are 1) IOS should prevail over Android in the US in the short term anyway, perhaps by a fair amount. And that means US enterprise will be there and probably then world enterprise will follow US. So that is good. And 2) I think if they can get that mini tablet established worldwide it will help with the erosion. And then the excellent ecosystem, China Mobile, iTV and pipeline. Plus other things I can’t think of now. So profits should continue to roll in for quite some time.

    But, yeah, long term Android will get cheaper and better. Those Chinese and Indian manufacturers are going to get cranked up. Samsung is good, Google and Samsung together are very good. And, you are right, it is going to show up in Europe and other countries first. Eventually either Apple’s market share or margins or both are going to have to take a hit. But hopefully that time isn’t now. Is that along the lines of what you are thinking?

    That’s right. As competitors catch Apple on quality, Apple might become an increasingly inferior value to customers, the way the Mac became vs Wintel in the 1990s.

    These risks won’t necessarily be realized. If Apple can lock-in a sufficient number of users to its platform (e.g., via iCloud) the way Wintel did, then we’re golden. If Apple can stay sufficiently ahead on introducing new and important features (e.g., haptic technology), that would also help. If Apple gets a monopoly over key inputs or functions in its products, such as Yelp, Facebook, and the new fingerprint reader technology, that would help. I’m sure there are other ways Apple can help secure its long-term position.

    I can see Apple continuing to do well for some time in the N American market via these advantages. I’m less sure about China and elsewhere, but it wouldn’t surprise me if Apple figures out a way to address these threats. It just seems hard to forecast.

    Yeah, good. Do you think further Android market share gains will keep Apple’s PE low or not too much effect? Google has a pretty good reputation and brand name among average consumers, it seems to me. Do you think a Google/Samsung/updated with modern OS/close to cost phone with a lot of free stuff in the ecosystem is a potential reality or will the two companies stay at loggerheads and never get their act together?

         
  • Posted: 14 August 2012 03:01 PM #167

    Centsless - 14 August 2012 05:45 PM

    Yeah, good. Do you think further Android market share gains will keep Apple’s PE low or not too much effect? Google has a pretty good reputation and brand name among average consumers, it seems to me. Do you think a Google/Samsung/updated with modern OS/close to cost phone with a lot of free stuff in the ecosystem is a potential reality or will the two companies stay at loggerheads and never get their act together?

    I think the market will continue to price this risk into Apple’s price. The speed at which firms in this industry rise and fall is extreme. I’m not at all suggesting Apple will follow RIM, Nokia, MS mobile, Motorola, and the dozen other failures in this industry, but from what I can tell, it’s a non-trivial possibility outside of the US. Maybe Apple’s position is more secure outside N. America that I’m giving it credit for? I just don’t see much that would lock in Chinese users yet, and I see Apple’s rivals having some natural advantages there.

    About Google/Samsung, I’d watch what Google does with Motorola at least as closely. Hardware-software integration seems important for significant innovation in the device market, where form factor is so important.

    Anything to add?

         
  • Posted: 14 August 2012 03:07 PM #168

    gliderplane - 14 August 2012 05:40 PM

    it wouldn’t surprise me if Apple figures out a way to address these threats. It just seems hard to forecast.

    +1
    They probably know more about the situation than we do by almost an order of magnitude.

         
  • Posted: 14 August 2012 03:09 PM #169

    gliderplane - 14 August 2012 06:01 PM
    Centsless - 14 August 2012 05:45 PM

    Yeah, good. Do you think further Android market share gains will keep Apple’s PE low or not too much effect? Google has a pretty good reputation and brand name among average consumers, it seems to me. Do you think a Google/Samsung/updated with modern OS/close to cost phone with a lot of free stuff in the ecosystem is a potential reality or will the two companies stay at loggerheads and never get their act together?

    I think the market will continue to price this risk into Apple’s price. The speed at which firms in this industry rise and fall is extreme. I’m not at all suggesting Apple will follow RIM, Nokia, MS mobile, Motorola, and the dozen other failures in this industry, but from what I can tell, it’s a non-trivial possibility outside of the US. Maybe Apple’s position is more secure outside N. America that I’m giving it credit for? I just don’t see much that would lock in Chinese users yet, and I see Apple’s rivals having some natural advantages there.

    About Google/Samsung, I’d watch what Google does with Motorola at least as closely. Hardware-software integration seems important for significant innovation in the device market, where form factor is so important.

    Anything to add?

    No, this is pretty good. A lot to think about. Thanks.

         
  • Posted: 14 August 2012 03:25 PM #170

         
  • Posted: 14 August 2012 03:31 PM #171

    Lstream - 14 August 2012 06:25 PM

    Pretty good, Lstream. Get lovemyipad to check the IPs.

         
  • Posted: 14 August 2012 03:37 PM #172

    Sign up with one account on a cellphone.  Sign up another one on WiFi, and voila - two different IP’s.

         
  • Posted: 14 August 2012 04:10 PM #173

    Lstream - 14 August 2012 06:37 PM

    Sign up with one account on a cellphone.  Sign up another one on WiFi, and voila - two different IP’s.

    The conspiracy has been discovered. Good work Lstream.

    [ Edited: 14 August 2012 07:23 PM by gliderplane ]      
  • Posted: 14 August 2012 06:10 PM #174

    1. Saying Android has 65% market share is meaningless. Any ground that isn’t cultivated will grow weeds. Weeds may well take 65% of the land with crops on only 35%, if 35% is all that’s needed. That doesn’t make weeds more “popular”. Iphone has the market it needs, and continues to have it. Android is sold to people who either have no choice, or aren’t interested in the product; it’s simply the weeds.
    2. Apple’s huge margin on iPhone is not only because it’s a better product.  The margin is Apple taking for itself surplus revenue from the carrier cartels. The carriers hate it, of course, but it’s the lesser of two evils. Android is a free for all. Google doesn’t control it. Apple controls iPhone and hence can make and deliver promises to the carriers. Originally by giving them exclusives, and then by managing the iPhone feature set to match the bandwidth the carriers could offer. Now iPhone is delivering customer satisfaction and hence loyalty to the network, and delivering customers with higher ARPU and better retention. The two changes in SIM format, to be followed eventually by a software SIM, help carriers to keep their iPhone customers. They can’t just pop a different SIM into their iphone. The high price of an unlocked iPhone drives customers to sign up for subsidised contracts. Apple manages the customers for the carriers and delivers a better, more satisfied customer, and the carriers pay.
    3. A consequence of this is that Apple has to sell unlocked iPhones at a very high price, and this means that markets such as India simply aren’t available, and that Android gets an apparently high market share (but not much profit).

    In my view Apple and the carriers are totally aware of this. For the time being, the carriers in developed economies have the power to milk the consumer on revenues, and Apple takes much of that milk for itself. If/when the carriers lose that power, and become dumb pipes, of course Apple will change strategies, and in my view become a global MVNO. Profits will remain the same, or maybe even better, but they will come out of service charges instead of device margin.

    So what’s Google’s plan to actually make money?  Google needs a monopoly; Apple doesn’t.

         
  • Posted: 14 August 2012 07:21 PM #175

    sleepygeek - 14 August 2012 09:10 PM

    1. Saying Android has 65% market share is meaningless. Any ground that isn’t cultivated will grow weeds. Weeds may well take 65% of the land with crops on only 35%, if 35% is all that’s needed. That doesn’t make weeds more “popular”. Iphone has the market it needs, and continues to have it. Android is sold to people who either have no choice, or aren’t interested in the product; it’s simply the weeds.
    2. Apple’s huge margin on iPhone is not only because it’s a better product.  The margin is Apple taking for itself surplus revenue from the carrier cartels. The carriers hate it, of course, but it’s the lesser of two evils. Android is a free for all. Google doesn’t control it. Apple controls iPhone and hence can make and deliver promises to the carriers. Originally by giving them exclusives, and then by managing the iPhone feature set to match the bandwidth the carriers could offer. Now iPhone is delivering customer satisfaction and hence loyalty to the network, and delivering customers with higher ARPU and better retention. The two changes in SIM format, to be followed eventually by a software SIM, help carriers to keep their iPhone customers. They can’t just pop a different SIM into their iphone. The high price of an unlocked iPhone drives customers to sign up for subsidised contracts. Apple manages the customers for the carriers and delivers a better, more satisfied customer, and the carriers pay.
    3. A consequence of this is that Apple has to sell unlocked iPhones at a very high price, and this means that markets such as India simply aren’t available, and that Android gets an apparently high market share (but not much profit).

    In my view Apple and the carriers are totally aware of this. For the time being, the carriers in developed economies have the power to milk the consumer on revenues, and Apple takes much of that milk for itself. If/when the carriers lose that power, and become dumb pipes, of course Apple will change strategies, and in my view become a global MVNO. Profits will remain the same, or maybe even better, but they will come out of service charges instead of device margin.

    So what’s Google’s plan to actually make money?  Google needs a monopoly; Apple doesn’t.

    Interesting and unique viewpoint as always, sleepygeek - glad you weighed in. I buy most of what you say here, especially the latter part.

         
  • Posted: 14 August 2012 07:36 PM #176

    sleepygeek, one question if you don’t mind. Would you say that Apple is in better shape competitively now than at any time in its history, outside of maybe its first year or two? By this I mean that for the first time Apple truly controls its destiny, with Microsoft falling a little by the wayside.

         
  • Posted: 14 August 2012 11:21 PM #177

    Centsless - 14 August 2012 10:36 PM

    sleepygeek, one question if you don’t mind. Would you say that Apple is in better shape competitively now than at any time in its history, outside of maybe its first year or two? By this I mean that for the first time Apple truly controls its destiny, with Microsoft falling a little by the wayside.

    Yes, I think Apple controls its destiny and can be true to itself, and can be confident no-one outside will stop it. That doesn’t necessarily mean it’s in the best ever shape to grow “market share”. Apple’s ability to innovate includes a need to constantly destroy the old, and that means Apple will never please everyone. I think about 60% market share may be the most Apple can achieve.

    On the other hand what does “market share” mean? Not much. The very phrase indicates a lazy mindset that thinks there is pre-existing “market” in which a company offers products. It’s that mindset that allowed the old cellphone incumbents to ignore iPhone.  IOS and Android are much more like competing economies than products competing in a predefined market.

         
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    Posted: 14 August 2012 11:27 PM #178

    Market share is a snapshot in time (a quarter, for example).

    Apple’s market share will “suck” CQ2 (calendar quarter) and CQ3 2012 (to a lesser extent)

    It’ll be better in CQ4 and CQ1 2013.

    Me, I just go with good ol’ YOY growth.  That’s bigger picture, and Apple is poised, I think rather easily, to achieve 60% annual growth in iPhone (for the fiscal year).  That’s hardly what I’d call bad.  And if it’s the case that smartphone rate of growth for 2012 was LESS than 60% in that same period…then what exactly does that say about using market share as a proxy for much of anything, other than that snapshot in time?

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  • Posted: 15 August 2012 11:19 AM #179

    sleepygeek - 14 August 2012 09:10 PM

    For the time being, the carriers in developed economies have the power to milk the consumer on revenues, and Apple takes much of that milk for itself. If/when the carriers lose that power, and become dumb pipes, of course Apple will change strategies, and in my view become a global MVNO. Profits will remain the same, or maybe even better, but they will come out of service charges instead of device margin.

    I’ve been thinking about what you said here. How do you think this could play out?

    Edited to add: I like this idea. It solves a lot of problems.

    [ Edited: 15 August 2012 01:00 PM by Centsless ]      
  • Posted: 16 August 2012 04:02 AM #180

    sleepygeek - 15 August 2012 02:21 AM
    Centsless - 14 August 2012 10:36 PM

    sleepygeek, one question if you don’t mind. Would you say that Apple is in better shape competitively now than at any time in its history, outside of maybe its first year or two? By this I mean that for the first time Apple truly controls its destiny, with Microsoft falling a little by the wayside.

    Yes, I think Apple controls its destiny and can be true to itself, and can be confident no-one outside will stop it. That doesn’t necessarily mean it’s in the best ever shape to grow “market share”. Apple’s ability to innovate includes a need to constantly destroy the old, and that means Apple will never please everyone. I think about 60% market share may be the most Apple can achieve.

    On the other hand what does “market share” mean? Not much. The very phrase indicates a lazy mindset that thinks there is pre-existing “market” in which a company offers products. It’s that mindset that allowed the old cellphone incumbents to ignore iPhone.  IOS and Android are much more like competing economies than products competing in a predefined market.

    Thank you for the reply.