Apple's Market Share Now Worth $$ Half Trillion

[JackD201]

Indeed Orb. What intrigues me with Apple is that while they are still considered primarily as a manufacturer, it is their hugely successful entry into both brick and mortar and online retailing that is making my eyes pop out. They aren't just selling their own stuff anymore. That's profit made on products they don't have to spend a dime on development for. The Apple Stores are expanding, eating up spaces of faltering neighbors. With that expansion comes increasing variety of third party products both hard and soft. Who knows how much the iTunes Store and the App Store are pulling in. I believe they are already ahead of eBay in terms of gross sales. They are now challenging Amazon. Amazon in turn has done something I never would have thought they'd do. They're going into Brick and Mortar! It's a whole new battle front.

 

[Soundproof]

The Apple "eco-system" has been extending extra pods in many directions, ensuring a variegated revenue stream, while pushing aside entrenched competitors, who didn't see the potential in integration that Apple has created. It's very difficult to compare the Apple model to that of other companies, as Apple is now pulling in revenue from a variety of sources where they are the conduit, without having to pay anything for development of products to be offered through those conduits, they're just taking a percentage.
They saw the potential in becoming the hub for digital content of all kinds, through a platform that allowed easy and user friendly integration.

Will it last? As orb points out, now comes the challenge of satisfying a larger number of customers, that have more diverse demands. Toyota became the world's largest car manufacturer, only to suffer erosion of customer loyalty as its after-sales offering fell below par compared to expectations, they simply couldn't handle the volume.
Can Apple suffer a similar fate? This is where the intuitive interface comes in - using Apple products is very simple, even when they perform complicated tasks.

However - Apple could begin suffering erosion of loyalty if it becomes too transparent in exploiting the world's largest base of credit cards on file, in creating locked-in products for that customer base. There's only one way of avoiding that: keep on exceeding expectations, and so far they've done that with a wide margin.

 

[Phelonious Ponk]

Will it last? As orb points out, now comes the challenge of satisfying a larger number of customers, that have more diverse demands.

If they attempt to do this, that will be their demise. Apple has become the right thing for millions of people by refusing to yield to the temptation to attempt to be all things for all people. That never works. The most successful brands always have a clear, unique identity that turns a chunk of the population off with style and impunity. The more dogmatic and virulent their critics, the better. The more dogmatic and loyal their followers, the better. How big can a company get running down this path? Apple is probably the biggest ever. We'll see. But if they step off of that path, and try to be all things to all people, they will fail; or at least they will cease to be Apple. They should just continue what they've been doing -- develop great products and great business models that are unique, visionary, and laser-focued on a better customer experience. Continue to take risks and be willing to take a few hits without letting fear limit the next opporunity. Follow the vision, not conventional wisdom. The question, of course, is did the vision die with Jobs?

Tim

 

[amirm]

So they just announced a $2.60 dividend. And a $10B stock buy-back which is silly in my opinion. It is not like the stock is hurting price wise. They should have used the money to acquire companies and such.

 

[Steve Williams]

I think it's great that they're paying dividends. Not so sure about buying other companies. What would you have done differently?

 

[jazdoc]

Well the $10B stock buy back is to offset dilution from stock options. Despite the dividend, they expect their cash to keep growing. Presuming Apple's current management are rational allocators of capital, they are signaling that the best use of cash is not acquisitions or stock buy backs (which tells you something about management's feeling about the Apple stock price and the price of potential acquisitions large enough to make a meaningful contribution to earnings/cash flow), rather they are returning the cash to the owners of Apple to redeploy in higher return investments.

 

[Steve Williams]

On CNBC several days ago, an analyst was stating that even at it's current price per share Apple stock is still undervalued with plenty of room to grow

 

[audioguy]

If they attempt to do this, that will be their demise. Apple has become the right thing for millions of people by refusing to yield to the temptation to attempt to be all things for all people. That never works. The most successful brands always have a clear, unique identity that turns a chunk of the population off with style and impunity. The more dogmatic and virulent their critics, the better. The more dogmatic and loyal their followers, the better. How big can a company get running down this path? Apple is probably the biggest ever. We'll see. But if they step off of that path, and try to be all things to all people, they will fail; or at least they will cease to be Apple. They should just continue what they've been doing -- develop great products and great business models that are unique, visionary, and laser-focued on a better customer experience. Continue to take risks and be willing to take a few hits without letting fear limit the next opporunity. Follow the vision, not conventional wisdom. The question, of course, is did the vision die with Jobs?

Tim

Tim--I could not agree more. Focus, focus and more focus.

And the fact the Jobs is no loner there, while a detriment, is not necessarily a disaster. Great management and outside-the-box thinking is not necessarily an oxymoron.

 

[Phelonious Ponk]

rather they are returning the cash to the owners of Apple to redeploy in higher return investments.

What might those be? If I wanted to deploy Apple stock into higher return investments, I'd sell. But I've been having a lot of trouble figuring out when to do that, and everytime I've told myself that it has surely peaked, I've been wrong. Usually very, very wrong. And so I hold. I don't have a lot, but it's yielding a higher return than anything else I have...

Tim

 

[Steve Williams]

What might those be? If I wanted to deploy Apple stock into higher return investments, I'd sell. But I've been having a lot of trouble figuring out when to do that, and everytime I've told myself that it has surely peaked, I've been wrong. Usually very, very wrong. And so I hold. I don't have a lot, but it's yielding a higher return than anything else I have...

Tim

Right on Tim

I completely agree.

If I wanted other stock I would buy it rather than deploy Apple stock into higher return investments. I bought my Apple stock years ago at 1/20 of it's current valuation. I'm a happy camper

 

[Phelonious Ponk]

Right on Tim

I completely agree.

If I wanted other stock I would buy it rather than deploy Apple stock into higher return investments. I bought my Apple stock years ago at 1/20 of it's current valuation. I'm a happy camper

I only wish I had more, and a crystal ball to tell me when to sell. So far, the answer has always been "not yet."

Tim

 

[amirm]

I think it's great that they're paying dividends. Not so sure about buying other companies.

Both the A series microprocessor and Siri came from acquisitions. I think we both agree that those have worked out well for them. No matter how good they are, they won't have all the world's best ideas. I rather them use the $10B to make those kind of acquisitions than to buy their own stock back. At near $600/share, even if the stock price kept diluting due to options maturing, it is not in danger of looking too cheap.

What would you have done differently?

Anytime a company racks up $100B in cash, i.e. way past any rainy day needs, it indicates they are not thinking enough about ways to expand the business. They analysts take the same view.

 

[rblnr]

I only wish I had more, and a crystal ball to tell me when to sell. So far, the answer has always been "not yet."

Tim

Many analysts will argue Apple has plenty of room to grow (I think they are correct) And that's just in the markets they're already in. I'm not selling though I keep upping my sell stop loss # to protect my backside.

rather they are returning the cash to the owners of Apple to redeploy in higher return investments

hope they give us some suggestions about where to redeploy I don't see that this follows from the dividend and buy back at all.

Main thing to me is that while I'm happy to get a dividend, I don't want them to change their modus operandi until there's good reason too. Hopefully the dividend/buy back will not have of that effect. Cook's comments about main focus/investment being innovation, etc. are meant to address this concern.

 

[Steve Williams]

Amir

We need to get you into some Apple stock

 

[rblnr]

Anytime a company racks up $100B in cash, i.e. way past any rainy day needs, it indicates they are not thinking enough about ways to expand the business.

Don't know, I feel they've expanded pretty well.

The PA Semi, Siri, and Anobit buys were all significant outlays of cash for any company (hundreds of millions each) but just not enough to make a dent in 100B. As you say, Siri and PA seem to have been good buys, we'll see now about Anobit.

 

[amirm]

Amir

We need to get you into some Apple stock

I am into them! My bankers decide what to buy and they have either funds or direct purchases of Apple stock. While at Microsoft I could not do that based on conflict of interest but since I left, there is no issue there.

 

[Steve Williams]

Thumbs up then. Sit back and enjoy the ride

 

[Phelonious Ponk]

Anytime a company racks up $100B in cash, i.e. way past any rainy day needs, it indicates they are not thinking enough about ways to expand the business. They analysts take the same view.

Any company? Sure. This one? It means their category-defining ideas have racked up so much cash so fast that they haven't been able to find appropriate investments to make. Besides, almost none of Apple's growth is a result of acquisition. That's never been what they've been about.

I think you apply conventional business thinking to Apple at your risk.

Tim

 

[amirm]

Any company? Sure. This one? It means their category-defining ideas have racked up so much cash so fast that they haven't been able to find appropriate investments to make. Besides, almost none of Apple's growth is a result of acquisition. That's never been what they've been about.

I was working at Microsoft when we hit $50B in cash. Microsoft was also very cagey about using that money for acquisitions and did what Apple has done now in paying for dividends and stock buy-back. As with Apple, Microsoft could do no wrong with Windows and Office revenues and importantly, gross margins. Now where are we with that? I am pretty sure we could make a nice list of acquisitions Microsoft should have done that give back the cash.

I think you apply conventional business thinking to Apple at your risk.

Tim

Well, thanks . Per above, I do have experience as part of the executive team of one of the few other companies with that level of financial success. And heard enough of the analyst complains and our answers from CFO/CEO to have good context here.

 

[audioguy]

Apple announcement:

In an effort to continue the out-of-the-box marketing and innovation of Steve Jobs, we are introducing new products targeting children under 3 - the iPeed and iPooed

(Just to lighten things up a bit )