With its mountain of cash, What’s next for Apple?

Ed: Apple has 3 businesses, iPod, Mac, iPhone. 

iPod is mature, market leading. Mac and iPhone have huge growth potential. All have high margins – earned from premium brands and residual commerce streams. 

Supply-chain wise, Apple has it’s own chip company, OS, Safari browser, iTunes and iPhone App store online, and chain of retail stores. They don’t assemble products. They don’t sell advertising. 

What’s next for Apple?

They don’t need low margin, slow growth businesses. That would harm the high capitalization for the Apple stock. 

They don’t need a fourth front to distract the company. Longer term R&D for new products does make sense, like the Apple TV product, ebook reader, or a notebook.

Select purchases to consolidate their supply chain make sense. Overall, the strategy is to keep the ship steady as Apple increases share in the two huge markets of laptops and smartphones. 

With its mountain of cash, Apple could buy…

Apple has a lot of cash on hand. $24.5 billion in fact, which is more than even Microsoft now. With it, Apple could buy a whole bunch of things. 24.5 billion things from the Dollar Store, for instance (at least in states that don’t charge sales tax). In one of the great turns of fortune, Apple could even buy computer maker Dell — in cash — as Apple 2.0 noted earlier today.

This must be particularly sweet for Apple because Dell founder Michael Dell famously said 11 years ago that he would shut down Apple and give the money back to its shareholders, when asked what he would do with the then struggling computer maker (this was before iPods, let alone iPhones).

Of course that’s just on paper. Dell’s market cap is $23.48 billion, if Apple actually wanted to acquire Dell (which you can be certain it doesn’t), it would likely take substantially more money. But there are several significant companies out there with severely sunken market caps due to the poor performance of the stock market recently.

Aside from Dell, with $24.5 billion in cash, Apple could now technically afford:

• Yahoo, with its $17.53 billion market cap, and still have about $7 billion in cash left over.
• Sun Microsystems, about seven times over, with its $3.38 billion market cap.
• Sony (at least the part traded on the New York Stock Exchange) with its $21.54 billion market cap.
• Netflix, which arguably competes with the Apple TV — about 20 times over.
• Blockbuster, which arguably competes with no one anymore — nearly 100 times over.
• Xerox, whose early experiments with graphical user interfaces (GUI) and the mouse influenced early Apple, about 4 times over.
• SanDisk, which, like Apple, loves flash memory, over 10 times over.
• PDA maker Palm, about 60 times over
• NVIDIA (which makes Apple’s graphic chips), about 6 times over.
• Chip maker AMD, over 12 times over.
• Texas Instruments, with its $22.14 billion cap.
• It could nearly buy BlackBerry-maker RIMM (one key iPhone competitor) with its $26.13 billion market cap.

ZDNet lays out some other possible acquisitions Apple could make among non-publicly traded companies including TiVo, Pandora, Last.fm (which CBS Interactive already owns) and Hulu (which NBC and Fox own).

TiVo and Pandora are interesting as both could complement or help areas of existing Apple businesses (Apple TV and iTunes respectively), but none seem particularly likely at this time. As are none of the above companies I laid out. Many of the companies know their stock prices are down temporarily, and their shareholders would likely demand a premium on the current stock price to close a deal. Instead, expect Apple to sit on its bags of cash snapping up smaller companies to bolster its future — like its purchase earlier this year of chip maker PA Semi — as it continues to rake in more money.

What Will Jobs Announce at MacWorld 2009?

by Dan Kimerling on October 25, 2008

Amongst many things, Steve Jobs is a master story teller. Every year he delivers two signature keynotes: one at MacWorld in January and one at Apple’s World Wide Developer Conference in June. However, these keynotes are more than just new product introductions. They are true stage craft and accordingly they have become major media events. Job’s keynotes happen so infrequently and are so central to Apple that their importance cannot be understated. A great keynote sets the tone for the year to come. This happened at MacWorld 2007, where Jobs announced the AppleTV and the iPhone. At the same time, a weak keynote can be a significant disappointment. This happened atMacWorld 2008, where Steve showed the world the MacBook Air for the first time. Given how important keynotes are for Apple, and that updated MacBooks and MacBook Pros all but complete Apple’s 2008 holiday product line up, the question now turns to this: What will Steve Jobs talk about during his keynote at MacWorld 2009?

New Apple products depend on a holistic view of the markets, supply chains, and economics.

@Flat panel – makes no sense. Low margin business that does not match Apple’s long term strategy. HP has been struggling as low margin Taiwan makers have become increasingly aggressive.

@notebook – unproven segment. If Amazon Kindle gains traction, look for Apple to get aggressive.

@iPhone nano – if an iPhone clone gains traction, this becomes a defensive product extension. HTC, Samsung, … the Asian gang don’t have the design skills. Short term view of orders versus brand, community building limits their ability to compete. If RIMM thinks cool is adding color casing, they have a long way to go before they can compete. Motorola, Nokia, and Microsoft move too slowly. The old Palm can do something innovative, but they need to re-energize their own employees. Thus, iPhone has clear sailing without the need for price reduction.

iPod has majority share. Laptops have delivered slow, increased share growth. A faster iPhone processor w/ low power consumption makes more sense – particularly for video and multi-threaded use.

Just an opinion.

-DJ
http://telCade.com/
http://adEcon101.blogspot.com/

Apple’s iPhone Boosts AT&T’s Wireless Business, But Whacks Profits

Ed: Apple sold 6.9 million phones in Q3. From ISP subsidies and customer purchase, the revenue impact is $2.8 billion. Further, Apple earns royalties from monthly fees, margins from iTune and App purchases, and halo switch to the Macintosh platform. It’s a grand slam.

AT&T complained that iPhone lowered profits by $900 million. Between subsidies and cost to activate new customers, they are spending $400 per customer – without the normal cost of advertising to bring customers into the store. Apple supplies the latter as value-add. One analyst suggested increased capital expenditures as the cause. iPhone uses both 3G and Wi-fi. Thus, there’s less impact on capex. The real  issue is productivity. Anyone who has called AT&T support knows the problem. They fail on labor productivity – and the results show. AT&T is unable to scale with rapid change.

Dan Frommer | October 22, 2008 8:19 AM

Why did AT&T (T) make sacrifices to become Apple’s (AAPL) official U.S. iPhone carrier? Because it’s leading the company in growth: AT&T says it activated 2.4 million (about a third of Apple’s 6.9 million total) iPhones last quarter, including about 40% to customers who were new to AT&T. That helped the carrier add 2.0 million net new wireless subscribers last quarter, ahead of expectations.

But subsidizing all of those new 3G iPhones took a bigger than expected whack to the company’s earnings and margins. And that’s going to keep happening. From AT&T’s release:

AT&T’s third-quarter 2008 reported and adjusted margins and earnings reflect revenue growth and continued progress with previously outlined cost initiatives, offset by hurricane-related expenses and effects on wireless results from the iPhone 3G. Impacts from the company’s iPhone 3G initiative reduced pretax third-quarter earnings by approximately $900 million or $0.10 per share…

Based on third-quarter customer response, AT&T is optimistic regarding continued strong iPhone 3G activations and is confident in the long-term value created by this investment in acquiring high-value, data-centric wireless subscribers. As a result, AT&T expects its dilution associated with the iPhone 3G will run above its previous expectation, and AT&T now expects, depending on volumes, its full-year 2008 wireless service OIBDA margin to be better than 37 percent versus its previous outlook of 39 percent to 40 percent. AT&T expects its full-year adjusted consolidated operating income margin to be approximately 23 percent versus its previous outlook of approximately 24 percent.

Why is this a good thing anyway? Because iPhone subscribers spend about 1.6 times more money on wireless service per month, and use the mobile Internet more than other subscribers — important to AT&T’s strategic goals.

Also of note, AT&T says more than two thirds of its 1.7 million “postpaid” net subscriber additions — who sign long-term contracts and pay monthly bills — bought smartphones last quarter, surely led by Apple’s iPhone. The telco says 22% of its subcribers now use smartphones, up from 10.5% a year ago.

Overall, AT&T reported in-line Q3 sales of $31.3 billion, but adjusted EPS missed consensus: AT&T posted 67 cents per share, below analysts’ 71 cents per share estimate.

AT&T is reporting a boom in customer acquisition and, it seems, a bust in profits. According to a recent earnings report, the company activated 2.4 million iPhones but lost $900 million in third-quarter earnings as a result of all the data and voice blowing through Apple’s darling.

The iPhone, we see, is a double-edged sword. Because it goes out to early adopters and folks who understand mobile data, AT&T faces the same problems MVNOs like Helio faced in the U.S.: aim at heavy data users and get hit for data usage. While this is a testament to the majesty of Steve Jobs, it’s also a problem for AT&T. How can they keep making profits if they’re spending on their cash on network upgrades?

As we all know, all that data comes at a price. The high bills AT&T is sending out to 3G users attests to this and it will definitely be harder in the coming months to convince price-conscious consumers to pony up $175 or more just to get Facebook on the go.

How About That iPhone Bump? Motorola Tries Android

How About That iPhone Bump?

It has been widely reported that iPhone owners use data connections to surf the Internet more often than people whose smartphones have built-in browsers do. Indeed, flat-rate data plans, a bigger screen, a near-desktop quality web browser along with the ability to connect to multiple networks (3G and Wi-Fi) are all contributing to the heavy Internet usage on the part of iPhone owners…

Remotely Control Your iPhone with Veency

If you’ve taken the plunge and jailbroken your iPhone, you have access to more apps than the average iPhone owner. Popular apps such as Cydia and Installer provide access to numerous other apps that Apple refuses to provide to App Store customers. The only downside is that these apps are exclusively available for jailbroken iPhones, which can be a tedious and confusing process for some and also voids your warranty. Nevertheless, we have one more app recommendation that might be worth jailbreaking your iPhone to get. It’s called Veency…

Make Your Own iPhone/Android Apps With New App Generator

Today AppLoop launched a mobile application generator which lets you turn any RSS feed into a mobile application for either iPhone (available today) or Android (coming soon). The company, who also runs the analytics and advertising solution MediaLets, wanted to provide everyone with the tools to make a mobile app, even if they didn’t have any programming experience. To do so, they’ve created their new Mobile Application Generator, a tool which creates a mobile-ready application in less than two minutes.

According to AppLoop, only 3% of developers know how to program Cocoa which limits their ability to enjoy the growth of the iPhone platform. To address this need in the developer community, as well as to provide a tool for non-technical folks, the company decided to launch a mobile application generator. The generator requires no programming experience, software downloads, or code maintenance – the application runs entirely on the web and all the code is maintained for you.

Using the Mobile Application Generator

Using the tool is simple: you just enter in a blog URL or RSS feed in the box provided in order to get started. Next, you enter in the name of your application. There’s an option for you to upload your own image to use as the logo which appears on the launch screen. If you choose not to add an image, the AppLoop logo will display the app launches…

Motorola is Really Getting Jazzed About That Android Social Networking Phone

Motorola, which is recruiting as many as 350 people to work on Android phones, is gearing up to make its first one:the Android Social Smart Phone. Last week, Android Guys spotted a job posting for the project, and now BusinessWeek has more details, including a mention of the Motorola job posting pictured at left on Monster looking for an Android application developer. If the people pictured in the ad to represent Motorola employees are any indication, embarrassing dance moves are a plus, but not required.

According to BusinessWeek, Motorola is putting $50 million into its Android project, which is being run by a team from Good Technology, a mobile e-mail company that Motorola bought in 2006. The first phone won’t come out until the second quarter of next year, it will have a touch screen like the iPhone and a slide-out keyboard like the HTC T-Mobile G1 launching on Wednesday, but will look more like the Motorola Krave. It is also expected to be cheaper than the G1’s $180 price.

But how will it tie into existing social networks? Already, the G1 imports your contacts from Gmail into the phone. It wouldn’t be too hard for the Motorola Android to import your friends’ list from Facebook or MySpace directly into the phone’s address book, and let you IM them and see their status updates and activity streams on your phone. Kind of like the Facebook app on the iPhone lets you do already, except that you wouldn’t necessarily need to launch a separate app…

Despite Record-Low IT Spending Plans, iPhone Gains Business Traction

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Corporate IT spending for Q3 and the next 90 days is experiencing a drastic, record downturn that foreshadows even tougher times ahead for the US economy, according to a survey fromChangeWave.

At the same time, the Apple iPhone is beginning to gain traction in the corporate marketplace even as Research-in-Motion (RIM) maintains a large lead in the smartphone market.

The periodic survey, which asked respondents involved with IT purchasing whether their Q3 spending was on track, found as follows:

• 30% of respondents said they’ve spent less than planned, three points worse than May results.

• 12% said they have spent more than planned.
• 29% said their company’s IT spending will decrease – or there will be no spending at all – in Q4, five points worse than the previous survey.

• 13% said spending will increase, a two-point decline from May.
• 39% said they did not think corporate IT spending would pick up until at least Q2 2009, or later.

The last survey that projected such a large IT spending pullback was in August 2001, ChangeWave said.

The two major causes for spending decreases include high energy costs and the US presidential election. More than a third (35%) of corporate respondents reported high energy costs are affecting their company’s IT spending plans for the second half of 2008, while another 25% said the US presidential election is having an impact on their company’s IT spending decisions.

Corporate Smartphone Buying

In the same survey, ChangeWave examined corporate smartphone purchasing and found that RIM, at 79%, continues to overshadow its two main competitors – Palm and Apple – in terms of planned fourth-quarter purchases, but this number is down three points from May’s record high.

Apple, however, continues to show considerable momentum in terms of corporate planned purchases, up four points to 17%.

Some 19% of respondents also reported that the release of the iPhone 3G has made their company more likely to purchase Apple products in the future. Only 1% said their companies were less likely. These responses suggest that the iPhone is creating a “halo effect” in terms of improved overall corporate purchasing intentions for Apple products

About the survey: The survey of 1,947 respondents involved with IT spending in their organization was conducted August 11-21, 2008

MacBook rumors confirmed, debunked and educated guesses

With the Apple MacBook event slated to kick off in just a matter of hours, Daring Fireball’s John Gruber has been able to confirm several of the rumors, debunk others and lay out some compelling guess for the rest. It’s definitely worth noting that Gruber is the same person who nailed Oct. 14 as the date for this event several weeks ago.

What to expect later today? According to Gruber:

• Newly redesigned MacBooks and MacBook Pros.
• The MacBook Pro images leaked earlier are real.
• The new trackpad has no button because the entire thing is a glass button that can be clicked.
• Matte finish will no longer be an option for screens, it’s all glossy. (At least for the Pro models.)
• The 17-inch MacBook Pro will get no design update. It could be getting phased out.

As for his educated guesses:

• The new MacBooks will look similar to the MacBook Pros but with 13-inch screens (instead of 15 inches).
• The MacBook Air will look the same, but will get spec updates — including a 128 gigabyte solid state drive.
• CPU speeds will largely be the same, but performance increases will come from the new Nvidia graphic chips.
• The MacBook Pro will get the two-GPU chip, which should work well with next year’s OS X Snow Leopard release.
• The $800 MacBook rumor was false.
• But there will be a sub-$1,000 MacBook, a $999 old-school white plastic one.
• The cheapest of the new ones will be $1,299, which Gruber thinks will enrage people (he’s probably right).
• The $899 mystery object, is a new 24-inch Cinema Display monitor. It’s LED-driven…

Excerpt:

• All connectors on one side.Unibody enclosure, Led Display, Next-Gen graphics
• Multitouch glass trackpad
• Mini Display Port connector
• All of the regular stuff: Backlit keyboard, built in isight and mic, stereo speakers, mag latch, sudden motion sensor
• “Unibody saves us half the parts”
• “Much more rigid, strong construction that we get”
• Lights are going up so we can see it.
• He’s passing it around. Show and tell!!

. . .

•  “A new way to build notebooks”
• Steve’s back on.
• In the first three quarters, they’ve already matched 2007 at 7.1 million sales
•  Surpassed Dell to become #1 notebook in the education sector
•  One out of three dollars spent on retail computers spent on Macs
•  Showing that one picture of the college classroom with nearly all Apple laptops
•  Revenue share: 31.3%
•  17.6% of unit sales in US retail
•  Outgrew the market 14 of last 15 quarters
•  Over 50% of sales are new to Mac
• 400,000 visitors to Apple retail stores each day

. . .

• Steve’s Blood pressure: 110/70

What Will Be in Apple’s Next Laptops? - 2 months ago (ed: myYahoo bug;-)

You can never be sure what advances will find their way into the next round of Apple hardware updates until practically the…