# Apple - 500 Billion dollar company



## sags (May 15, 2010)

They did an interesting bit on Apple today, that opened a few eyes on the CNBC anchors........

Apple went over the 500 Billion dollar market cap, and joins 5 other companies who reached that lofty peak.

The others included Intel, Microsoft, GE, Exxon Mobile and it was interesting to note that all the other have fallen back substantially since reaching that level.

Microsoft and Google combined are worth less than Apple.

All of the major car companies combined are worth less than Apple.

All of the media companies such as Disney and CBS combined are worth less than Apple.

One has to wonder................if Apple doesn't come up with sizzling new products every year..............how far could they fall.


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## andrewf (Mar 1, 2010)

Their fundamentals are decent. I would not say Apple is overvalued so long as they can at least maintain current sales and margins, much less growth. They are not Nortel. The biggest threat I see to Apple is margin compression on iPhone. The cheapest iPhone is currently ~$700, while the cheapest Android device is ~$150 (yes, it is probably rubbish). If Apple wants a piece of the bottom part of the market rather than abandoning it completely to Android, they need to offer a lower priced flanker model (like an iPhone 3, as some people suggest) and offer it for <$300. I wonder if this is a durable strategy. Why buy iPhone 5 when the 3 will do for most people and you can save $400+? So releasing lower end models is fraught, as it will cannibalize some of their high margin business selling high end phones. As it is, I'm having a hard time imagining what compelling features will be offered past iPhone 5. All I have heard about the 5 is that it will have a quad core processor. Most consumers don't care. What apps or functionality will make it a must have device? How will they top it in the 5S or 6? When each new generation has less marginal improvement in user experience, it becomes a tough sell to get people to upgrade or to buy the latest version. This is why selling a cheap iPhone is a damned-if-you-do, damned-if-you-don't situation for Apple. I expect them to stick to higher end phones and leave the bottom end to Android. We might see 50 or 60% marketshare for Android and Apple keeping its 20-30%. In some markets in Europe, Android marketshare is >80%, because carriers push plans without contracts, requiring an upfront purchase of a phone. That makes the $200 vs $700 difference pretty stark to people.


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## Jungle (Feb 17, 2010)

Yup, Apple might be above 500 billion for now. Maybe in a couple years it will go higher. But be careful in believing this will hold on forever. Steve Jobs is dead and he turned the company around back in 1997 when it was about to go bankrupt.


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## OptsyEagle (Nov 29, 2009)

I would actually argue that if Apple was not a $500 billion company it would trade at a much higher multiple of earnings. Since it is, investors are indeed worried about the "law of large numbers" creating a resistance to any over-valuation. 

I do agree. Apple will succumb to this, just like all the rest. The only question I can't answer is when and from what price will it start it's downfall from.


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## Brad911 (Apr 19, 2009)

Or they could pay a dividend & attract MORE investment


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## doctrine (Sep 30, 2011)

Go ahead and short apple - they may only post a $15 billion dollar profit next quarter. Their $98B cash store could be $150B by this time next year. Take that away from their market cap, and their P/E looks silly.


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## londoncalling (Sep 17, 2011)

Currently Apple is making the entire tech sector look good. It's p/e is lower than most of the other stocks in this sector. For years, people have been calling for a dividend. Now that King Steve's reign is over it might be a possibility as they have the cash and have for a long time. To me it seems more likely that they would issue a special dividend to reward loyal shareholders than to admit that their continued growth expectations are less likely to be achievable. I don't hold or follow Apple too closely as I truly do not understand tech and am scared of another tech bubble. This is more from lack of understanding of the sector than fear of lightning striking twice. 

By comparison some have argued why hold the tech sector when apple make up a huge portion of the sector. I can see a few reasons as apple is not just a tech play as it is more than a tech company. Apple is also a retail play, a media play, a play on a legacy company and part of Americana. Conversely it could be argued why own the tsx index as it is mostly energy and financials.

This post is not an endorsement for or warning against the owning of Apple, the Nasdaq, Canadian Financials, Canadian energy or the TSX but more so an observation from a relatively uninformed bystander. I have also heard that is more likely to get a 50% gain from almost any other stock in the upcoming years than apple based on the size of the corporation and the fact that it has had a huge run up. However, apple fanboys can be more than just owners of the products the company produces. Many owners have fallen in love with this stock and its easy to see why.


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## dave2012 (Feb 17, 2012)

If you've lived in both the PC/Windows world for years and the MAC world, you'd understand why AAPL is the place to be these days. Tech bubble? I think not. True though, it will be interesting to see how long they can achieve such amazing growth, but considering they still have small market share compare to Microsoft, there is lots of upside to look forward too. We have been very very spoiled though lately...


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## GOB (Feb 15, 2011)

Look into the AAPL thread in the individual stocks forum for some compelling reasons why Apple is going to grow for a long time to come. Also look at andrewf's posts in that thread and you'll realize how wrong he has been - don't take what he says about this topic too seriously.

I have gone over why margin compression is not inevitable in Apple's case, and also why market share is not the important statistic - profit share is. Apple takes in 80% of the profits of the ENTIRE mobile industry. Apple is selling the 3GS at $0 (with contract, obviously) in certain markets, and yet their margins are higher than they have ever been. Why go for market share when they already sell every single phone they can make? Their primary goal should be to increase production capacity of all their products, not lower prices to attract a part of the market that they don't need and isn't profitable. Android is welcome to have the zero profit market if market share numbers make them feel good.

No compelling reasons why the iPhone 5/6/7 etc. will be a must have? That just shows a lack of imagination. People would have been thinking that about computers ten years ago, yet they continue to sell. Perhaps the biggest leaps forward have already been done, but there is always room for improvement and innovation, especially with a company like Apple.


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## fatcat (Nov 11, 2009)

i agree with GOB that andrew, you have it wrong ..

apple has been masterful at managing it's iphone price point / model strategy and i see no reason why that won't continue with the 5/4S/4

they are in the sweet spot of an industry that is becoming more and more indispensable in our lives ... soon we will be buying things with our cell-phones on a regular basis ... we will just aiming our phone at all kinds of things to buy and use

the products they make are things we all use every day regularly and they make them better than anyone on the planet

on the other hand, the law of large numbers can't be ignored, jobs is dead and the mountain they need to climb is steeper than ever

i own them in QQQ but not their individual stock and i am happy to do that (they are about 14% of QQQ i think)


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## kcowan (Jul 1, 2010)

I am not sure where I posted this. Four of my wife's girlfriends were just in PV and they all have iPads. They are ecstatic. All these people have been PC users for years. Now they have an appliance that serves them: it shows pictures, plays video, and does the other stuff that they used to do on their PCs (mostly surfing and email) and it is fun. They are free of wires except to charge them at night. It is truly remarkable to see these ladies be free of geeks in their use of computers. One has some trouble with the iBook store and will be going into an Apple store in Vancouver to get that sorted out.

I think we are witnessing the greatest consumer products company of the decade. As with all such phenomena, it will eventually fizzle out but I think there is significant runway left. And I don't see them going after the low end. They will stick with high margin products as they always have.

I suspect that they will continue to resist a dividend since we all know that is a signal that the growth is over. Like me, I hope they continue to be happy with a hoard of cash until the right opportunity comes along. I have no idea what it might be. Maybe buying movie rights?


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## GOB (Feb 15, 2011)

I agree with most of your post, but not about the dividend. To me, a dividend does not signal the end of growth. What it does signal is the company's maturity and confidence in their future earnings. People always like to cite MSFT as an example of how dividends halt growth, but MSFT was drastically overvalued during the tech boom, and has returned to a more reasonable valuation. That is why the stock has flatlined - not the dividend. In fact, MSFT has been growing earnings quite well over the years. How about KO, MCD, countless others. Have they stopped growing since they instituted dividends decades ago?

A dividend that eats up a small percentage of FCF cannot really be a bad thing, in my opinion. Apple doesn't even have to touch their existing cash - they can keep that for any future projects. A reasonable dividend can be issued just from their income stream. Long AAPL either way, but I'll take a dividend if it comes.


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## indexxx (Oct 31, 2011)

I believe that Apple will grow for a long, long time, (though a plateau will be reached) and likely stay on the edge of whatever tech innovations come along. And they will also expand their business model into areas many haven't considered; take their entry into the electronic textbook world; who knows how massive that could be, and for how long? Or what if they ride the crest of quantum computing into some incredibly insane application that we cannot foresee? How about the cloud or Apple TV- who knows what Apple has up their sleeve for that or for anything else... I feel that given who they are as a company/brand, they will continue to attract the very best in creative minds and innovation, so why should they falter like the companies you mention? 

Remember this- Steve Jobs may be gone, but no other company has him, either.

Besides- four of the other companies that made it to $500B (Cisco, Intel, Microsoft, and GE) all did it during the tech bubble, (which is why they dropped so far afterwards) and Exxon did it when oil was at $147 per barrel. (They also had MUCH higher P/E ratios than Apple and had different valuations.) Apple did it through innovation, amazing management and strategy, and incredible products. And Apple has a bit of a moat with how they incorporate their ideas/products to work together. Many analyses project Apple hitting $1,000 in a few years.


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## ddkay (Nov 20, 2010)

Ugh textbooks, as if textbooks already aren't expensive enough at $300 or $500 each- that's all people need, a monopoly on education to make them cost even more...

I can't even think what Apple's plans are by giving prototypes of iTV to Bell/Rogers. Microsoft already has a widely used integrated IPTV platform called Mediaroom. Unless Apple is awarded a BDU license (and there are no signs of even an application at the FCC or CRTC so far), they cannot make a dent in market share of the cableco's. If becoming a primary content provider/broadcaster was in their agenda the ability to do so was there yesterday, so they should have done it yesterday...

The new Apple TV will be big a disappointment IMO, maybe they've given the interface and upgrade and included Siri so people can shout at their TVs to change channels. They're running out of steam too. Have you seen the reviews of Mountain Lion OS? Not a lot added there.

As for smartphones, the luxury market isn't unlimited, $650 cell phones for $99 with 2 year renewals won't be a thing forever. The tablet thing is just a trend, they are just laptops with low processing power and a virtual keyboard. They aren't going to cure cancer. Sure tablets are nice for watching movies or reading in bed, but it's not like every single person in your household needs one. I share mine with everyone, it's just chilling out on our coffee table... and to be honest nobody really uses it that much.

Does anybody still have a pager? Something better will come along eventually...

Mobile-high speed links (like Airplay remixed) seem to be the next 'big' thing. An all wireless living room. However, protocols like Airplay have DRM built-in, so you can't mirror anything you purchased from iTunes or physical Bluray's. Hulu is the exception, but that will probably be patched up soon with MPAA breathing down their neck.

As for the stock price, it's gone parabolic on daily and weekly charts now. The low multple is because fundamentals are outpacing people's willingness to put money in the stock. Either way, AAPL is clearly in a bubble of some kind. Enjoy it while it lasts, the pops are never graceful. You can't be talking about this and not compare it to 2000. Apple is doing all the work in unequal weighted indexes right now.


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## donald (Apr 18, 2011)

Somewhat off topic but on.Does steve jobs wife own all his stock holdings in apple still?Ive always wondered if there still active or have been pieced off ect(i know he had a sh*tload of disney also)Tim cook is getting very paper rich right now that is for sure.


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## indexxx (Oct 31, 2011)

Re: ddkay's post:

I have to respectfully disagree with the viewpoints.

Thing is, I'm quite certain that Apple has long considered all of those points and factored them in to their long-term strategy. As you say, you cant even think what Apple's plans are. Sure, maybe it's all going to collapse in seven months... but I doubt it.

From PCmag's preview of Mountain Lion:

"Bottom Line
OS X Lion is already the best consumer OS by far. When Mountain Lion ships, it will only increase Apple's lead. Anyone who uses a computer for both pleasure and work won't want to use anything else."

There are also many upgrades in ML for Chinese users- a massive market that is just beginning for Apple.

As far as textbooks- well, so what if they monopolize some aspect? Don't current book publishing houses do that? Maybe there is a goal in mind to ditch the printing/transport/publishing etc costs of producing physical textbooks and passing the savings on to consumers- like a downloadable ebook via iTunes, or stored in iCloud, with interactive graphics and videos for $50 instead of $150+ for the paper edition. Contributing authors and professors could send in instant updates that students could download, based on recent discoveries and research. Students save a ton of money, resources are spared, Apple (and us lowly shareholders) benefit. I see no problem with that. So a possible scenario might be that Apple dominates eTextbooks for 25 years, until someone else comes along with an even better idea. Viva freedom!


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## ddkay (Nov 20, 2010)

Instant updates rofl. You don't know how the publishing industry works. New discoveries equal new edition. Old editions are good for the garbage bin. Nice dream though.. in an ideal world, that's how things would be..


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## indexxx (Oct 31, 2011)

sags said:


> One has to wonder................if Apple doesn't come up with sizzling new products every year..............how far could they fall.


Another thing came to mind- who's to say it needs to be sizzling new products? I mean, it does not have to be a physical invention that could foster continued growth cycles, it could be based on concepts like iTunes and iCloud and unforeseen ideas in information sharing that can be tapped by business, academia, and consumers. And what's to stop Apple from taking that one hundred billion and getting into or creating any type of business venture they please? What if they found some interesting way to profit from shopping malls, or transportation, or energy production? Or started buying large chunks of major corporations? I know I would, if I had that kind of cash at my disposal. Remember, Berkshire Hathaway started as a failing textile mill, and now shares are over $118,000 EACH. Buffett has never paid a dividend or done a split. Berkshire's per-share book value has attained a compounded return rate of 19.8% since 1965, and an overall gain of over 513,000%!!!! Yes, that is five hundred and thirteen THOUSAND percent.

I'm not in any way saying that Apple will follow anything remotely close to that trajectory or business model- I'm just saying that anything is possible with the vast sums of money and talent present in the company.


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## indexxx (Oct 31, 2011)

ddkay said:


> Instant updates rofl. You don't know how the publishing industry works. New discoveries equal new edition. Old editions are good for the garbage bin. Nice dream though.. in an ideal world, that's how things would be..


Why not? I agree, it is a nice dream. New discoveries equal new editions in the world of print, much to the delight of traditional publishing. But as an example, what exactly would be the hindrance to a research team uploading new data and getting a payment from Apple for publishing it, and the ebooks would be constantly updated- maybe the arrangement would be that the student has purchased the textbook, and is entitled to access any new material for that year. And I do, in fact, know a bit about how the publishing industry works (I'm a published writer), but what I'm extrapolating here is a new model, which your comment illustrates quite nicely. No need for the garbage bin. Fresh content, cheaper, easier, no waste. Of course, I'm not privy to the actual challenges and details of implementing such an idea, (nor do I care) but I don't see the problem with the concept. In much the same way that MP3s and iTunes fostered change in the business model of the music industry with pay-per-song downloads, thereby cutting out some of the middlemen, a related strategy could be employed with ebooks, possibly allowing for greater payment to the authors, and cheaper prices for the students, with Apple taking a middle cut. Could it not? And BTW, had you noticed that I said "maybe"?

And for what it's worth, I believe in striving for that ideal world, or some semblance thereof. I, for one, am glad to carry around 100 albums worth of music in a device the size of a matchbook as opposed to a stack of CDs (or tapes) while I'm travelling.


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## kcowan (Jul 1, 2010)

I think textbooks just reinforces Apple's strength on campus. The campus bookstores will have to sell Apple to stay competitive. It is a niche but a very lucrative one.


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## ddkay (Nov 20, 2010)

http://www.wolframalpha.com/input/?i=combined+market+cap+of+all+publishers

They could buy out the top 22 names in industry and still have play money left over


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## GOB (Feb 15, 2011)

ddkay, you made a lot of assertions with no facts to back it up. Tablets are a fad? On what grounds? They are not just devices to surf and watch videos on the couch - they have a multitude of personal and business uses, with more being discovered each day. Tim Cook says tablets will soon outsell PCs - I think those kind of numbers are a little more than just a fad that will fizzle out. 

And who's to say Apple won't lead the way with whatever eventually replaces the tablet? They are the one company that doesn't mind cannibalizing their own products when they know it's time for the next best thing. Look at what the iPhone did to the iPod. Most other companies would try to hang onto the success of the iPod as long as they possibly could without innovating something even better. I think this attitude is what puts Apple at the forefront of technological innovation.

Regarding the TV, it may or may not exist, and nobody knows what it might do. It's like everyone predicting how what the iPhone would be was dead wrong.

I don't see how the stock is in a bubble when fundamentally it's still undervalued. AMZN, NFLX are examples of stock price bubbles, because they are not supported by earnings. Apple is earning ridiculous amounts of cash every day, and people are finally realizing that. It's also been growing 50-100% a year, so how is assigning it a P/E of 15 a bubble?


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## Spudd (Oct 11, 2011)

kcowan said:


> I think textbooks just reinforces Apple's strength on campus. The campus bookstores will have to sell Apple to stay competitive. It is a niche but a very lucrative one.


If you can win on campus, you've got them for life. It's a brilliant strategy.


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## andrewf (Mar 1, 2010)

On textbooks, does anyone really think that schools or publishers would give Apple an exclusive on this market? When Android has higher marketshare? I can imagine the howls if schools forced people to buy Apple devices to use course materials.

I don't doubt that Apple could do a textbook business quite profitably, but the scale of the market is so small. It seems out of place for a company that likes to focus relentlessly on a few product lines. Most of the cost of textbooks is for the IP, not the physical material and logistics cost. So 75% decreases in textbook retails? I'm not seeing it.


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## londoncalling (Sep 17, 2011)

I am currently on a project in the education realm that is trying to offer education online. In almost every meeting, the techies chime in, we can't do that, we can't use that, because it doesn't work on an Ipad, Iphone, or whatever incarnation of Apple is hyped that day. Originally, we had other courses that were not accessible by Apple products. This is no longer possibile as Apple dictates what their products will and will not use and since they have such a moat others have to bow down or go the way of the "do do". I do not own any tech as I have trouble understanding it as an investment. It is constantly changing, is capital intensive and seems speculative in many ways to me. That doesn't mean I am a neophyte in tech use. I just can't connect the two worlds.

Is Apple in a bubble? I guess we'll see. I think the loss of Steve Jobs will have a huge long term effect on the company. How can it not he was a visionary as a company head. Currently they are king of the world and it will be interesting to see what they do next. Apple is carrying the tech sector as we seem to be paying a lot of attention to tech start ups which are clearly overvalued but with high reward comes high risk. 

In regards to "cyclicality" of markets, out of recession comes innovation and new ideas so one can see why there is an interest in companies such as APPLE et al. after the problems that went on the past few years and currently in Europe. 

I also find it interesting that once upon a time Apple was a thing of the past and Jobs was on the outs. Such an interesting story for me. Yet I will never own this stock.


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## indexxx (Oct 31, 2011)

andrewf said:


> On textbooks, does anyone really think that schools or publishers would give Apple an exclusive on this market? When Android has higher marketshare? I can imagine the howls if schools forced people to buy Apple devices to use course materials.
> 
> I don't doubt that Apple could do a textbook business quite profitably, but the scale of the market is so small. It seems out of place for a company that likes to focus relentlessly on a few product lines. Most of the cost of textbooks is for the IP, not the physical material and logistics cost. So 75% decreases in textbook retails? I'm not seeing it.


How about if Apple set it up so that any OS could integrate and access the textbooks- like how iTunes works on a Windows platform. Say (hypothetically) that Apple did buy out all those publishers (never happen I know- this discussions is- _ahem_ - academic...), and cornered the market on just the content side, allowing any user with any device to access the material. 

Maybe not 75% decreases in cost- but how about 30%, or 40? Even 20% would be a boon to cash-strapped students whose tuition is always rising. The point is the underlying concept; students save money, not lugging around stacks of heavy books (that are a waste of paper and fuel/water etc to produce and transport in this scenario), access to updated, interactive content, authors and editors get a slice of the pie, as do Apple and its shareholders.


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## lefilter (Mar 4, 2011)

andrewf said:


> On textbooks, does anyone really think that schools or publishers would give Apple an exclusive on this market? When Android has higher marketshare? I can imagine the howls if schools forced people to buy Apple devices to use course materials.


This is happening right now where i live. In some schools, you have to buy an ipad to your kid. Just imagine the market if this new way of theaching proves to work.


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## ddkay (Nov 20, 2010)

GOB "a lot of assertions with nothing to back it up". This entire thread is opinion/specuvesting. You guys are dreaming about products that don't even exist. The textbook business is an "if", getting into broadcast is an even bigger "if".

But Apple could make a robot that cooks me breakfast. They could, but they haven't. So why are you investing on a hypothetical basis?

Fact: Apple's revenue is largely being driven by a credit-fueled smartphone boom in carriers attempts to grow their subscriber base and getting customers hooked on expensive data service ontop of voice and messaging. That percentage of subsidy (currently around 85%) will not continue to grow forever, it's already unsustainable as is and there are many stories of this popping up. Sprint paid $15.5 billion to bring the iPhone to their network?... Apple's last quarter revenue was $38.91 billion. So how much of last quarter's revenue was Sprint? What? 40%?! Unless Apple are adding a new network with 55 million customers every quarter FOREVER it's going to be hard to keep up. They are already having trouble supporting 5 bands now with carriers like T-Mobile being locked out of Apple's platform for 5 years, LTE will bring even more fragmentation.. devices will need like 48 band chipsets to be used in Europe lol.

Quiz: Where is Apple's next explosion of revenue going to come from? If you guessed China Unicom you guessed right. FREE iPhone 4S with 3 year contract! - Engadget, January 2012



> In September 2011, we entered into a four year commitment with Apple, Inc. to purchase a minimum number of smartphones, which on average, are expected to carry a higher subsidy per unit than other smartphones we sell. Our minimum commitment under this arrangement is approximately $15.5 billion; however, we expect our actual purchases will exceed this amount. This will result in an expected increase in cash outflow and reduction in operating income in the earlier years of the contract until such time as we may recover the acquisition costs through subscriber revenue.


As more and more carriers realize they're getting shafted, and less expensive quality alternatives start coming out, they will stop carrying half a thousand bucks subsidies for premium devices like the iPhone and sell it with a smaller sub or just outright. A lot less people can afford to buy iPhones outright. Right now everyone is just fake rich. So back to my earlier remark, there is a bubble of some kind (in subsidies).. enjoy it while it lasts.

I'm not bearish on Apple right now. In fact I'll even come out say I expect it to hit $650 within a few weeks/months and that should co-incide with a market top.

Tablets cost less money to manufacture than a full featured laptop PC or macbook air. They use lower power, lower performance SoC components. The only reasons people are buying tablets are because they have most of the same consumption and input capability of a notebook at 1/2 or sometimes up to 1/3 of cost. Which is fine, but they will still never be a reasonable replacement for power users. Don't know if you've noticed, but it's not very easy to multi-task in a mobile OS when you can only have 1 app opened on your screen at a time. This slows down your work flow. The multi-task in iOS doesn't even have programs run in the background properly because its designed to save memory and battery resources. If you open an SSH session and switch to Safari for a few minutes (about 10) your SSH connection breaks because iOS kills the first app. Similarly, many apps you have in your app bar that haven't been opened in awhile aren't really "in the background", they were inactive & closed so tapping them opens a fresh instance. This is all decided by app states as part of the OS power management techniques. Full featured PCs and macbooks don't have to deal with this because they have 9 or 12 cell batteries that run for 9 to 12 hours on moderate use and are plugged in to the wall most of the time.


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## indexxx (Oct 31, 2011)

lefilter said:


> This is happening right now where i live. In some schools, you have to buy an ipad to your kid. Just imagine the market if this new way of theaching proves to work.


- I agree! Where are those kids going to keep going in the future for their music/ video/ phone/ computer/ textbook/ (future content and product) needs, if they already are invested in, know, and enjoy the Apple experience...

My guess is Cupertino, CA. For decades. And what's wrong with that? I'm not buying my computers anywhere else, I can tell you that, unless someone else blows Apple away with better products and ideas. But as I say, they can hire the best of the best, and no other company has Steve Jobs either, so my money's on Apple for a long ride.


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## GOB (Feb 15, 2011)

ddkay said:


> GOB "a lot of assertions with nothing to back it up". This entire thread is opinion/specuvesting. You guys are dreaming about products that don't even exist. The textbook business is an "if", getting into broadcast is an even bigger "if".
> 
> But Apple could make a robot that cooks me breakfast. They could, but they haven't. So why are you investing on a hypothetical basis?
> 
> ...


You're right, we are all speculating. Gathering facts and data and interpreting them sensibly, however, can make the difference between meaningless speculation and meaningful speculation. 

While I do agree that people spend beyond their means and would be less likely to purchase unsubsidized phones, I don't see the business model ending anytime soon. Carriers are not being shafted - they continue to make excellent profits. Also, the subsidy model is much more prevalent in North America compared to the rest of the world. Apple's larger share of revenue is increasingly shifting away from North America and becoming more international. Clearly, Apple is not relying on the subsidy model alone to make money off iPhones.

Your interpretation of the Sprint $15 billion dollar commitment is completely wrong. The article you quoted says the commitment spans four years, so why are you lumping the total cost into a single quarter? Sprint sold 1.8 million iPhones last quarter, which would be just over a billion dollars in revenue for Apple. That's about 3% - a far cry from the 40% you state and a much more sensible number. Can growth go on forever? Of course not. But at the same time, the only area Apple is struggling to keep up in is production - they sell every single phone and tablet they can make, end of story. All other numbers come back to this point. This indicates demand is huge and growing. Growth is not going to be an issue for some time to come. Even at zero growth, Apple will be pulling in $50 billion a year in earnings - that's a pretty juicy dividend as a worst case scenario of a megacap no-growth company.

You're correct that tablet users aren't power users, and that power users need more than a tablet. However, that fact has little to do with the fact that tablets will outsell PCs very soon. Why? Because most people are not power users, or even close to it. Most people want to surf the internet, use a few apps, listen to music and watch some videos. Isn't a tablet perfect for that? Clearly it is - look at the numbers and growth. Also, take a look at this link:

http://www.asymco.com/2012/03/02/when-will-the-tablet-market-be-larger-than-the-pc-market/

I am not basing my analysis on products that don't exist. The two main lines are iPhone and iPad, with obvious iterations to follow. There are also Macs which are growing substantially and outpacing PCs. The rumoured TV is just icing on the cake, but even if it never comes Apple remains a strong investment.

I speculate, but I do it wisely.


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## ddkay (Nov 20, 2010)

You're right sorry, that $15.5B was not paid last quarter. Sprint posted a $1.3B loss in Q4 so they seem to be paying out on a per device sold basis now. And if they don't meet their sales target they will still owe that total amount at minimum in 4 years time.

I think this model takes a significant toll on carriers, look at $CHU stock a few days after their announcement of giving away iPhones 4S for free.. down 16%. Using the iP4S $650 base model $CHU have to eat a loss of $18.05/month per device sold on contract. Since their minimum subscription is only $45 to be eligible they are only left with $26.95 to run their business. At this point their 3G unit is already unprofitable.

Here's what the operators are saying:


> TELECOM ITALIA SPA (TI) Chairman Franco Bernabe said the subsidies mobile operators use to attract customers to phone contracts are too high in Europe, and will likely come down in the coming years.
> 
> "We are subsidizing our own competitors--that has to change," Bernabe said during a press briefing.
> 
> Like other operators, Telecom Italia has been hit by the emergence of mobile apps such as WhatsApp and Skype, which allow customers to send messages and make calls over the Internet for free using their smartphones. The popularity of these services has taken a bite out of operators' revenue.





> TELEFONICA SA's (TEF) German unit chief said smartphones could cost as little as EUR50 in the foreseeable future. Rene Schuster said he expects some smartphones to be available for less than EUR100 in Germany by next year, adding that the time will come when they cost as little as EUR50, although he didn't refer to a specific country in the latter remark.
> 
> Schuster's statement mirrors news from Nokia Corp. (NOK). The Finnish handset maker's head of sales Monday said it hopes one day to launch Windows Phone devices priced around $100, as it grapples with fierce competition from Chinese manufacturers and their cheaper products.
> 
> ...


What creditors are saying:


> 03-02-12 0656ET LONDON (Dow Jones)-- [Goldman Sachs] cut its stance on telecoms to underweight from overweight, saying that southern European telecom companies' balance sheets look stretched given the weak growth outlook they face.


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## GOB (Feb 15, 2011)

True enough, but those examples you cite seem to be poorly run companies. Also a $650 subsidy is a marked difference over the ~$450 subsidy seen in the US. AT&T and Verizon, and our Canadian telecoms are all making good money using the subsidy approach. Sprint has been in a downward sprial and are still losing money, but if they manage to turn things around I'm pretty sure their decision to offer the iPhone will play no small part in it. 

Having $50 smartphones doesn't faze me, and it won't faze Apple. The low end of the market is unprofitable and undesirable. There is always demand for best in class products - the R&D, innovation and integrated services Apple provides cannot be matched by anyone, let alone a cheap barebones device. All of iPhone's major competitors cost about the same as they do, because good quality correlates to higher price. People want good quality in a phone. I know so many people who buy crappy phones because they're cheap, and then they get fed up with them and upgrade anyway.


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## indexxx (Oct 31, 2011)

ddkay said:


> Ugh textbooks, as if textbooks already aren't expensive enough at $300 or $500 each- that's all people need, a monopoly on education to make them cost even more...
> 
> I can't even think what Apple's plans are by giving prototypes of iTV to Bell/Rogers. Microsoft already has a widely used integrated IPTV platform called Mediaroom. Unless Apple is awarded a BDU license (and there are no signs of even an application at the FCC or CRTC so far), they cannot make a dent in market share of the cableco's. If becoming a primary content provider/broadcaster was in their agenda the ability to do so was there yesterday, so they should have done it yesterday...
> 
> ...


It's not about the specific products or concepts at all- it's about investing in the business as a whole. I guess I'm not confident or savvy enough to state what exactly the future product 'trends' will absolutely be, or which (if any) of their products will be a 'big disappointment', or that Apple are definitively 'running out of steam...'. And Apple's current has nothing to do with 2000. At all.

I (and others here) are postulating possible ideas- simply guesswork as I doubt anyone on CMF is an Apple designer. What is at issue is the strength of the intellectual property that Apple is capable of producing, and how they manage and grow their business to the stockholder's benefit. Their past record has shown an amazing grasp of what tech consumers will pay for, and now they are in a position moneywise to do whatever they want- and I'm 'specuvesting' that they can continue to grow their business based on new products and ideas and a solid foundation of capital, human and otherwise. 

I stand by everything I've said- Apple has every opportunity to continue to grow, based not just on their current product pipeline, but by expanding or investing into absolutely any business they are inclined to- banking, insurance, real estate, restaurants, transportation, energy and utilities, film and its tertiaries, health and medical, etc etc etc. Nobody knows; maybe they'll do nothing more than what they already do. But any way you slice it, we're a LONG way from done with this company.


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## indexxx (Oct 31, 2011)

Interesting articles:

http://www.fool.com/investing/general/2012/03/04/will-apple-introduce-an-icar.aspx

http://finance.yahoo.com/blogs/dail...mbarrass-hardware-makers-stiff-140040754.html


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