Thursday, 27 September 2012 20:00

Which Is The More Sustainable Business Model - Selling The World's Information or Selling Shiny New Things??? Featured

Apple Margin chart

As you can see in the chart above, the margins on the iPhone are soon to be under pressure. I have included a simple model to allow my professional/insitutional subscribers to plug their own numbers in and decide for themselves - see File Icon "iPhone Margin worksheet - blog download (click here to subscribe/upgrade). Between the iPhone and the iPad, we're talking about 82% of Apple's profits! Think about this.

In the first quarter I lamented on the drop in both margin and market share of the iPad, see Apple's iPad Is Losing Market Share And Profit Margin As Apple Hits All Time High. I included plenty of pretty pictures to get the point across...

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Prices are dropping…

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Costs are increasing…

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ipad_costs

So what does all of this add up to? Margins dropping!!!

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Now we have other publications catching on as well. as can be read on the Business Insider site. In 2011, I made clear that the days of the fat margined tablet are numbered, see Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof!  That was over a year and a half ago. Check out this headline from a few months ago... There's Been A Huge Drop In The Average Selling Price of Tablets... - Business Insider

The average selling price (ASP) of tablets keeps falling. The ASP fell 17 percent from 2010—when it was pretty much just the iPad—to 2011. Through the first six months of this year alone, the ASP has fallen another 17 percent. The drop is driven partly by the introduction of $200 mini tablets like the Kindle Fire, but also a fall in price of the dominant large-screen devices. As we discussed earlier this week, the ASP of iPad's has fallen significantly from a year ago. 

Tablet ASP


BI also chimed in (a year later) on the iPad margin thingy, albeit about a year and a half after BoomBustBlog broke the story...
 The iPad's Average Selling Price Continues to - Business Insider -Aug 14, 2012 – The Average Selling Price (ASP) of Apple's iPad has fallen more than $100 in the past year. The iPhone's ASP, on the other hand, has been remarkably stable since the beginning of 2009, despite Apple's introduction of lower-cost options. The disparity probably reflects the relative maturity of the smartphone market versus the tablet market, where Apple is starting to shed its near-total dominance.

chart of the day, the ipad's average selling price, august 2012

Well, now its the iPhones turn, and this was foretold at least a year and a half in advance as well... 

What many fail to understand is that what Google as released with its reincarnation of Android is not a new mobile OS, or a flexible handheld technology, but an innovative business model that harnesses open source software for a path to profitability and turn the suppliers and vendors of fat margined leaders against it - literally ingenious and very, very difficult to counter without compressing your own margins. Those interested in reading more can reference Looking at the Results of Google's "Negative Cost" Business Model Employed Through Android. So, let's get started by reviewing portions of my hypothesis from last year... enter the Google Cost Shift

Did Apple miss in 4 to 8 quarters after my first warning? Yes, as a matter of fact, they missed exactly 4 quarters later. The Only, and I Mean the Only, Investment/Research House To Warn Of An Apple Miss Is Vindicated!!!  As a matter of fact, Apple missed twice in that 12 month period - telling since it hasn't missed since 2004!!!

This October will mark the 8 quarter period that I gave publicly since the original CNBC interview for Apple to start feeing the heat from Android competiton. It's looking pretty good thus far...

Reggie Middleton on CNBC's Squawk on the Street - 10/19/2010

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Mr. Middleton discusses JP Morgan, bank risk and technology and is the only pundit in the financial media that we know of that called Apple's margin compression issues and did so successfully just hours before they reported! Clickhere or click below to see the video.

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Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

Google still exhibits the likelihood that they will control mobile computing for the balance of the decade.

Subscription research:

file iconGoogle Final Report 10/08/2010

A couple of bits from our archives...


There are currently 7 Google reports available. Select the "Google Final Report" and click the "Download" button. You will receive a 63 page analysis that looks like this on the cover...

The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as  valuation for each business line.

Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

Unique, Indpendent and Accurate Apple Research

 

Last modified on Friday, 28 September 2012 13:12

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