image015As most who follow Apple know by now, management has decided to return approximately $45 billion of cash to shareholders over three years. Of course, given Apple's recent historical free cash flow generating performance, this is not a very big sacrifice assuming Apple can continue its meteoric growth (which we actually doubt).

Observations and opinions of interest:

1. Cook et. al. have made it abundantly clear that they plan to run Apple differently than that of Steve Jobs Company. This can be gleaned from Jobs insisting that Apple accumulate cash for a rainy investment fund as a growth company. This would have actually have been my preference as a shareholder, assuming I believe management had both the clarity and the vision to foresee new revenue streams as well as the managerial execution to see said revenue streams through. Under Steve Jobs' reign, Apple excelled in such. Under Cook's helm, I fear less so. Contrary to popular opinion, I don't necessarily believe that this is due to Jobs being materially superior to Cook in execution and/or vision, but due to the fact that Apple's primary revenue driving product lines are maturing and competition has increased immensely (read as Google, Samsung, HTC, etc.) in the very short period since Steve Jobs incapacitation.
2. Apple's management as openly and obviously declared their days as a "high growth" company are most likely numbered. This is evident because Apple has made the managerial decision that best interest of the shareholders would be better served in returning a substantial portion of its cash horde than attempting to invest it directly in ongoing (or new) operations or M&A. In other words, they believe that investors could make more or better use of the money than Apple management can. This is typical behavior for maturing companies, those that are leaving the high growth stage and entering the mature corporate phase. What is not so typical is to have a company that has been growing at the rate of Apple make such a decision, unless of course I was correct in my assumption that Apple's growth will see material growth headwinds in the near to medium term. If that is truly the case, then Apple's management is doing (by far) the best thing as per the interests of the shareholders.
3. If one has to return cash to shareholders, then the actual and explicit "return" of cash is the way to do it, ex. pay a dividend. Share buybacks, although hugley popular amongst the Fortune 500 crowd, is an ineffecient and in my opinion unproven method increasing shareholder value over the long term.

Listen up you Muppets!!!!! I'm rehearsing from my Goldman Interview, applying for retail stock broker, pushing Apple inventory :-)

The update to our Apple analysis is now available to subscribers Apple Margin & Valuation Note. This is a more comprehensive, more "scientific" update and approach to our piece from last year Apple - Competition and Cost Structure. Next week, pro subscribers will see a downloadable version of the model behind this that will deliver more Apple stuff than you can ever digest in one sitting. In review, it is interesting to note certain viewpoints in the previous Apple research note, particularly considering Apple's stratospheric rise in price, ex:

"At current price of $347 Apple trades at 2011 calanderised PE of 12x on our estimates and 14x on consensus estimates. Yes, we are more optimistic than consensus, but more realistic concerning future prospects as well."

We were considerably more bullish on Apple's fundamentals than the consensus, but alas we were off the mark, and Apple's share price has went stratospheric - stratospheric to the point that it deserves its own conversation (more on that later). But (yes, there always is a but), the hypothesis behind the afore-linked note still holds. As a matter of fact, not only is it as strong now as it ever was, it is actually playing out now as I type this. I will delve into this, but before I go on I must acknowledge that the mere topic of Apple seems to bring out the immature and impolite in the blogoshpere. So much so, many are literally afraid to mention anything that is no "Pro Apple". That's right, literally "AFRAID", as was pointed out in this recent WSJ article "Apple: Deutsche Dares to Doubt".

The subscriber document is evident on its face with a variety of valuation scenarios, an indepth that the original research document didn't have - an error in execution. So, for those that don't subscribe, let me toss out food for thought, and even more telling, proof that clearly proves the premise behind articles such as: 

• How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue
• Sliced Apple Margins For Dinner?
• Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof! 

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 to open source software to profitability 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...

Did Android overtake iOS in marketshare and growth – Yes,  Even With Apple’s Successful Launch On Verizon, Google Continues To Increase It’s Lead In The Smarthphone Space 

Did Apple miss in 4 to 8 quarters – 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!!! 

I've had many commenters say things such as "You've been crowing about Apple crashing for two years!" The fact of the matter is simply "no", I have never said such a thing. What I did say was that Apple will deliver an unpopular and unforeseen miss and margin compression due to competition. I said this in Oct. of ’10 live on CNBC, and I also said on BoomBustBlog that miss will occur 4 to 6 quarters. It is telling that they couldn't get anyone else to say what should be obvious (reference the fear and loathing surrounding the Deustch Bank analyst note, Deutsche Dares to Doubt). Well, they did miss and they are starting to feel the effects of margin compression from competition. this effect on margins is well hidden due to management's excellent execution (Kudos to you guys, btw) combined with the fact that the mobile market is growing so wide, fast and deep that it easily conceals margin compression behind massive unit sales. Although I did start to issue warnings in 2010 about Apple margins, but I made it very, very clear that this will occur over many quarters. I also made it clear I was not short at the time of the declaration. Short term traders were able to profit from my initial short notes with tight stops that I suggested...

.. but alas, the time to short was premature for a strategy guy (as opposed to a trader), and obviously so. That does not obviate the validity of the compression theory though.

I’m a fundamental and forensic strategist, not a short term trader. In addition, I run a subscription site, hence I do not – and will not – give valuation bands or price targets to the public for free – plain and simple. As a strategist, I make medium term projections, and they have been – on balance – rather accurate. This article started out with For some absurd reason, the mere topic of Apple brings up the most immature in the blogosphere. For instance, I started saying Greece would default considerably before I warned of Apple margin compression –both stances indicated that this would be a medium term occurrence. Well, exactly two years (8 quarters) later Greece defaulted, see Greece Is Trying To Convince Portugal To Make F.I.R.E. Hot!!! For some reason, that is a lot easier to swallow than waiting even less time for Apple margins to shudder, even though the miss that I called for came at the first month of the window that I anticipated and market share and margins are exhibiting behavior congruent to what I anticipated. Of course I know what the issue is, the share price has spiked. Alas so did Greek bonds at a point, and so did the shares of RIM, who faced the same margin compression scenario that Apple faces, see RIM Gets RAMMED! Again... Remember That Contrarian Call 1st Quarter of 2010. Apple's management is head and shoulders over that of RIMM's (who should have been replace two years ago, alas it's too late now), but compression is still compression. 

Now, I hear many saying, "... but Apple's margins are at all time highs!!!" Really? Did iPad margins shrink due to competition – Yes. 

Okay - This is the part that the immature are bound to ignore, so I can save some of you some time and you can stop reading now. Those who are actually curious about how I come up with margin compression while others state record margins...

As it stands now, Apple is rapidly (much more so than can be gleaned from sell side analyst reports and the media) losing market share in both tablets and smartphones!

As Apple loses market share, its costs to manufacture are actually increasing due to massive competition…

Apple's losing tablet market share faster than it lost smartphone market share

Android has moved to over 44% market share in tablets from less than 3% in less than a year and a half. That's amazing and much faster growth than it exhibited in smartphones – a category in which Android literally dominated in worldwide and US smartphone growth (as well as installed base re: US) in just a few short years. Apple dropped from just over 96% to just under 55% in the same time frame. Again, as with the smartphones, the Android tablet tech is superior to that of iOS products and as iOS normalizes the difference, margins will suffer. Margins will drop (is dropping) faster for tablets because prices are coming down as fast as tech is increasing.

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Prices are dropping…

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Costs are increasing…

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So what does all of this add up to? Margins dropping!!! Just as I said last summer... Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof! 

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Hey, I would hope that I raised the specter of margin compression just now in all but the staunchest of fanboys, but why isn't it showing up in the reported numbers? Because Apple had what appears to be an unrepeatable blowout quarter that allowed them to shovel large quantities of deprecated iPhones to consumers at full price. In said quarter iPhones where just over half of the company revenue. With stiff competition from Android, they will have to show and prove in terms of R&D and/or discounted pricing and that's going to cost some margin reducing, real money. The upside? The iPhone 5 should be an amazing device. You see what a little competition provides?

Still, the iPad is 20% of revenues and if it grows, margins drop even more...

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Have I been wrong on Apple? – Not yet, at least not any more wrong than I have been on Greece, or RIMM. Granted the share price has soared, but remained within 10% to 13% of the recommended valuation bands for about 5 months, with benefits to nimble traders (of which I am not). The stock price has performed well, but I never said the stock price wouldn’t do well. I don’t discuss stock prices outside of paid subscriptions. If or when I’m wrong, I’ll be the first to admit it. In 4 quarters if there’s no further sign of my thesis bearing out I’ll admit it, but guess what’s happening already….

Will I be wrong on Apple? Of course its possible, but things are looking like they are following the thesis rather well. 

This is the story. Apple is a phenomenal story that makes a lot of money…. But… They make supranormal profits through supranormal margins in a highly competitive space wherein they have extremely competent competition since Google arrived on the scene. Until Google, everybody else was fumbling so Apple printed money Bernanke style!. Most importantly, though… They compete directly with their own suppliers! Does anybody who is not the staunchest fanboy truly believe their profit position is sustainable competing against the very same companies they have to rely on? They can still be wildly successful, and just have a normalizing of sales growth combined with a slip in margin and there goes the rosy share price projections. Is there a chance of this happening? Once more then, shall we

Well, they are currently losing marketshare (which the media never reports)

They are forced to drop the prices of their key products (which the media seldom reports).

They are losing margin (which the media never reports)

Despite this, the company is growing profits and revenues like bananas. Why? Because the market in general is growing like bananas. There’s a lot of risks to this growth though:

1. Patent litigation (the company was forced to remover the iPhone from German shelves just a month or two ago, and got it overturned)
2. Natural competition (should be self explanatory)
3. Margin normalization (ditto)
4. Direct competition with suppliers
5. Heavy macro headwinds (high unemployment, Euro crisis, China hard landing) for its two primary products, both of which are essentially luxury products

Despite this. Apple as a retailer, now has a larger market capitalization (at $542 billion), than the entire US retail sector (as defined by the S&P 500), as per Zerohedge: It's Official - Apple Is Now Bigger Than The Entire US Retail Sector

If the biz class 101 rules ring true, this could very ugly very fast... The Company had a slam bang quarter last, but much of that is essentially unrepeatable in the near term, reference Anecdotal Observations On Apple's Recent Quarter.

This is an update to our initial Facebook forensic analysis released before Facebook officially filed for an IPO  (still available for download - FB note final). With all of the Goldman and sell side hype, as well as many other sources focusing on nearly meaningless metrics failing to capture high growth cos. value, I decided to update my report to reveal usable knowledge and info.

This update incorporates the information now available from publicly filed financial statements. Accompanying this analysis for professional and institutional subscribers is a simplified, unlocked version of the valuation model used for this report available for download - Facebook Valuation Model 08Feb2012. The full forensic opinion is available to all subscribers here FaceBook IPO & Valuation Note Update. It is recommended that subscribers (click here to subscribe) review the original analyses linked above as well as the free blog posts on the topic:  

1. Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!
2. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
3. Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure
4. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
5. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!
6. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1

Much like the company itself, the Facebook IPO has generated plenty of attention from different quarters – print and electronic media, the analyst and investor community, as well as from people who have no interest whatsoever in the company except maybe that they all have a Facebook account!

The key questions lingering in BoomBustBlogger's minds include:

1. Is the company really worth $75-100 billion? Apple was worth $1.8 billion on its IPO in 1980; Microsoft worth $640 million in 1986 and the more recent example of Google, which was worth $23 billion on its IPO day in 2004.
2. Facebook was worth $15 billion when Microsoft bought a 1.6% stake in 2007 and with Goldman Sachs $450 million investment in 2010, the company’s valuation shot up to $50 billion!
3. Will it continue to lead the social networking industry the way it has been in the past seven years? Would Google, with nearly a $45 billion cash war chest and Google+ in its repertoire, allow this to happen?
4. Is the social advertising market as big as it is made out to be?
5. Will Facebook capture the mobile advertising space, something that it has not been able to do so far?
6. From a corporate governance viewpoint, is it not a concern for investors that one very young person with zero experience running or governing a public company holds as much as 57% of the voting rights of the board?

While there has been plenty of analytical commentary both for and against Facebook in general and the IPO in particular, especially on the company’s valuations, the truth as always, lies somewhere in between. We make an honest attempt to answer some of these questions and assess whether the sky-high valuations are justified or not.

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Let’s take a look at all the good things associated with Facebook:

The sheer amount of growth the company has seen in terms of the number of subscribers has no match in the social networking space. With close to a billion subscribers and counting, Facebook has the potential to touch and change the lives of the people living in this planet like no other stream.

Some of the key facts that support this argument include...

• Industry sources suggest that one out of every seven minutes spent online is on Facebook
• Shift in technological trends making social networking in general and Facebook in particular a name to contend with in all aspects of life:

1. 1. Rapid spread of internet connectivity driving Facebook accessibility. The Boston Consulting Group (BCG) estimates that over 3 billion people would be using internet by 2016 as against 1.5 billion in 2010. With more people coming online and assuming the time spent by them on Facebook remains the same, then by the end of 2016, Facebook will have over 2 billion subscribers!

• We have factored this into our valuation numbers

1. 1. Increase in mobile telephony, especially in the emerging markets, which in some sense are also the key focus area for Facebook

• Over 425 million people accessed Facebook through their mobile phones in 2011 and with increasing number of people using mobile phone, this figure would only increase in the near to medium term
• Shift from primarily social networking to social advertising as well:

1. 1. Changing online consumption patterns with more and more people buying goods and services online reflecting the increasing importance of online advertising, especially through social media
   2. Consulting firm Booz & Company estimates that the total value of goods sold through social media would increase six-fold from $5 billion in 2011 to over $30 billion by 2015

• 85% of Facebook's revenues come from advertising. With over 845 million subscribers, the scope for "targeted advertising" is enormous enough to drive the company's revenues many fold in the years to come

1. 1. Nearly 4 million business have set up their pages on the Facebook site
   2. The number of ads delivered on Facebook increased by over 42% in 2011 while the average price per ad delivered increased by 18% in the same period

• However, a caveat here, the number of clicks received on banner ads on Facebook is 1/5^th the number of clicks received on the Web as a whole, according to Businessweek.com
• In comparison to other major websites, Facebook also has lower click through rates for ads

1. 1. Nonetheless, possibility of generating significant advertising revenues from mobile phone devices is immense

• Facebook is doing the “reverse Google” which focuses on the online search business, accounting for nearly half of online advertising revenues in the US

1. 1. Google has responded to defend its search turf, with the responding trend already underway by incorporating data from its social network Google+ into its search results.

• Venturing into the online payments services based on Facebook Credits, currently used extensively on games - PayPal, the leading online payment giant had revenues worth $4.4 billion!           

1. 1. Zynga, the online gaming company, accounted for around 12% of Facebook's revenue in 2011. This is a double edged sword, though, for Zynga’s expectations of sequentially slowing bookings in the first half of 2012 and core game monetization is slowing more rapidly than expected.

And now, the not so good part…

Continued in the subscriber download FaceBook IPO & Valuation Note Update.

This post is dedicated to those who do not see the obvious due to name brand blindness. It came about from a conversation that I had with two other prominent financial bloggers/advisors/asset managers who not only have a lot of respect for my contrarian accuracy in the past (Ex. Goldman, Research in Motion, Google, Bear Stearns, Europe, etc.), but are in near complete agreement with my analysis (the real analysis, behind the paywall) of Apple. When asked why they

don't review their opinions and findings more vocally in the media and their respective sites, they literally stated that they were reticent, if not outright intimidated by the cult-like deluge of Apple fanatiism that was sure to follow. Now, that is a damn shame. Those that run new media sites are actually being censored through intimidation. Well, as you may realze, the boy from Brooklyn loves to dance, so here we go...

In 2008 I warned my readers and subscription clients not to be blinded by brand names:

February 2008: Are you hooked on name brands? and As I was harping on relying on Name Brands..., as excerpted - 

It's been a busy day and I haven't had a chance to get to the blog. As all know, I've been quite bearish and I believe that the end of the beginning may be here soon. That means a true bear market where truly significant losses are common place for years on end, with intermittent bull runs. This is where value investors get burned because they can't tell the difference between value and price. Just because something is a lot cheaper doesn't mean it is a good value. Value is price as a function of future reward, not just a low price. There are some pretty big names that fell into this trap, primarily due to a lack of respect for macro shocks that stem from the residential/credit market crash. I have been very bearish on nearly everything that is connected to the macro crash, and I am basically a value investor.

... The reason I bring these points up is because I have been told several times by several individuals that because XYZ "brand name" investor has bought into ABC company that I am bearish on I had better cover, or I don't know what I'm doing, or blah, blah, blahhhhh!!!

... So, to make a short story long - no, I don't think a company is automatically a "no go" because a "name brand" took the opposite position. If I had that mentality, I would have lost out on the profit to be had taking the opposite side of all of those other "name brands" listed above. We all make mistakes, and I know my turn for a big mistake is coming up soon, but until them, or even after then we all need to keep in mind that all investors are human and they all make mistakes, name brand or not.

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Yes, simply jumping on board a popular brand make decision making easier and offers a feel good warmth when you partake since there is plenty of company in following the crowd, but the reality of the situation is that long term the decisions made by choosing the brand over the substance is often not the optimal one (for you that is, it's often quite a good one for the brand) and that warm fuzzy, follow the crowd feeling that you get often turns much colder as you find you have purchased much more marketing than actual performance or substance. 

Of course, as the rebellious, anti-establishment guy, I fly in the face of all of this, and actually relish in doing so. Let's run down a list of brand bashing analysis that I have done in  recent past. Keep in mind that when my contrarian opinion was initially released on all of these companies, the fundamentals were fully supportive of the groupthink consensus. The caveat is, groupthink is usually wrong.

Research [has lost its] In Motion

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Of course, as we know now, you often have to look past yesterday's fundamentals!

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Nearly all of my calls on equity, sovereign nations and industries are highly contrarian. At first blush, I get a lot of flack, negative feedback and very little attention save that small coterie of paid subscribers whom I cater to. In the spring/summer of 2010 with RIM trading in the $60s or so, I warned that this company had definitely seen its heyday. I put out very specific research to subscribers, including downloadable models and extensive reports. I was dismissed as having nationalistic beefs with Canadian companies (WTF???). Well, about 80% in market value loss later that short is still popping profits.

BoomBustBlog banking and tech research has been near perfect for 2010/2011. Subscribers who took advantage of this deserve kudos. To wit, and as excerpted from Another RIMM Job? It's Amazing How Many Institutions Don't Read The BoomBust!

Let's try this again: As Forecast Last Year and Clearly Demonstrated This Year, Research in Motion's Problems Are Far From Over

Research in Motion has been one of the most successful tech shorts of this blog's history (thus far). We first recommended a short last year and reiterated it in the fist quarter of this year. Reference:

1. BoomBustBlog Research Performs a RIM Job!
2. BoomBustBlog's Fundamental/Forensic Analysis of Research in Motion Has Returned 2x-3x Original Investment This Year!!

This is a snapshot of RIMM as of the writing of this article...

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As you can see, the results have been spectacular, particular if well timed puts have been put to use. In January I posted:

I personally see a clear leader in mobile computing becoming visible in 2012. Using options, a minimum of 2012 expiration OTM and ATM contracts can be purchase at the most optimistic break points demarcated by the model above after being populated with assumptions you feel most valid. I will have a proprietary BoomBustBlog option model available for download to paying subscribers by the end of next week, at which time we will revisit the analysis above.

A 50% drop in price later... On that note, Bloomberg reports: RIM to Cut 2,000 Jobs as BlackBerry Loses Share to IPhone

Additional RIM writings...

• As Forecast Last Year and Clearly Demonstrated This Year, Research in Motion's Problems Are Far From Over

• BoomBustBlog Research Performs a RIM Job!

Another Name Brand Bites The Dust?

On July 24, 2008 I penned Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis.

At that time, I was virtually ridiculed for even suggesting that the high and mighty Goldman could possibly take a loss. Why, they were best in class, cream of the crop, hired only the best there was (despite the fact that they hired the same guys that all of their competitors did from the same talent pool, same schools to do the same things). You see, unlike today, it was not cool to bash those doing God's work just a few years ago. As a matter of fact, no one would do it, despite the fact that their balance sheet screamed for a bashing... Well, I've put out a rash of research since those days, and guess who was right, Reg or those name brand junkies...

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A Few Quick Comments On Goldman's Q4 2011 Results

Here are some links that you are unlikely to find anywhere else...

Just As I Predicted Last Quarter, The World's First FDIC Insured Hedge Fund Takes A Fat Trading Loss

I'm Hunting Big Game Today:The Squid On The Spear Tip, Part 1 & IntroductionI'm Hunting Big Game Today:The Squid On The Spear Tip, Part 1 & IntroductionI'm Hunting Big Game Today:The Squid On The Spear Tip, Part 1 & IntroductionI'm Hunting Big Game Today:The Squid On The Spear Tip, Part 1 & Introduction	I'm Hunting Big Game Today: The Squid On A Spear Tip Summary: This is the first in a series of articles to be released this weekend concerning Goldman Sachs, the Squid! In this introduction (for those who do not regularly follow me) I demonstrate how the market, the sell side, and most investors are missing one of the biggest bastions of risk in the US investment banking industry. I will also...
Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?	Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored? Welcome to part two of my series on Hunting the Squid, the overvaluation and under-appreciation of the risks that is Goldman Sachs. Since this highly analytical, but poignant diatribe covers a lot of material, it's imperative that those who have not done so review part 1 of this series, I'm Hunting Big Game Today:The Squid On The Spear Tip, Part...
Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!	Hunting the Squid Part 3: Reggie Middleton Serves Up Fried Calamari From Raw Squid For those who don't subscribe to BoomBustblog, or haven't read I'm Hunting Big Game Today:The Squid On The Spear Tip, Part 1 & Introduction and Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?, not only have you missed out on some unique artwork, you've potentially missed out on 300%...
Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!	Hunting the Squid, part 4: So, What Else Can Go Wrong With Goldman Sachs? Plenty! Yes, this more of the hardest hitting investment banking research available focusing on Goldman Sachs (the Squid), but before you go on, be sure you have read parts 1.2. and 3:  I'm Hunting Big Game Today:The Squid On A Spear Tip, Part 1 & Introduction Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To...

Hunting the Squid, Part 5: Sometimes Your Local Superhero Doesn't Look Like What They Show You In The Movies 

What Was That I Heard About Squids Raising Capital Because They Can't Trade?

Reggie Middleton vs the Squid That Can't Trade!

Now, all should sit back and watch as those other two highly contrarian calls take root, involving the biggest NAME BRANDS of all!

Many commenters in blog forums query why I don't admit being wrong on Apple. My response is, "Where was I wrong on Apple?" In October of 2010 I said that although I wasn't short Apple they will eventually feel competitive pressure and they will deliver a rare but well deserved earnings miss. 

On my blog I gave a time frame of 4 to 6 quarters. Well, exactly 4 quarters later, guess what happened! The Only, and I Mean the Only, Investment/Research House To Warn Of An Apple Miss Is Vindicated!!! This is what I would consider being right, not wrong!

The following quarter, Apple had blowout results which were not unexpected at the BoomBust. Alas, if you bother to peek under the hood, all was not indicative of a massive trend updards - see Anecdotal Observations On Apple's Recent Quarter 

Remember, I never said Apple would crash or go out of business. What I did say was that they would face margin compression as a result of competitive pressures. For any other company, this would be common sense, but because this is Apple, sense is most uncommon. If it were not, then the many indications that Apple will not be able to ride solely on marketing powers and trendy fashions would be obvious. Reference Risk Factors Threaten Apple Margins…

There there is the consistent undervaluation of Google and the likelihood that they will control smartphone mobile computing for the balance of the decade...

1. Looking at the Results of Google's "Negative Cost" Business Model Employed Through Android  
2. Did A Blog Best Wall Street's Best of the Best In Guaging The True Value of Google? We Have To Think More Like An Entrepreneur & Less Like A Wall Street Analyst

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.

This is a follow-up post to the Anecdotal Observations On Apple's Recent Quarter article written last week. Those that didn't read it, particularly those who manage institutional moneys should definitely take the time to peruse it before moving foraward. It clearly outlines the "one-time" event status of Apple's blowout quarter just past. This piece goes further to describe how that quarter's performance masks the trends that I have been highlighting for some time now. I will address market trends, network effects and margins later, but upfront let me pose the taboo question... What if Apple lost its cool factor? You see, that's the problem with fads, the followers are simply too finicky. This is screen shot of the recent viral Samsung Galaxy S2 phone.

Samsung_s2_ad

The commercial shows in its entirety belw. Despite very strong market numbers, tens of millions of satisfied users and tech reviews that are superb, the pop media (for some absurd reason) still insists on abject Apple favoritism. A good example is this piece from ZDNet: With Apple's U.S. dominance, smartphone race heads overseas. The article asserts that Apple's lead in the US is a done deal and any competition will be (fleetingly) found overseas. This assertion totally ignores the fact that Apple has been losing market share for nearly every quarter that Android has sold to the mainstream except for last quarter - a recent quarter whose extreme performance probably cannot be duplicated. It ignores the fact Apple has just half the peneratration of Samsung alone (not Android, just Samsung, its main supplier). It also ignores the fact that Android, despite Apple's stellar quarter, continues to march forward as the mobile OS of choice for the majority - to wit: NPD: Android attracting more than half of new smartphone shoppers:

Apple was named the best-selling U.S. handset brand during the fourth quarter, according to a new report from the NPD Group.

However, the findings suggest that while iOS has won this battle, Android is really winning the war.

Take a look at the graph below:

Not only do 48 percent of all smartphone buyers own Android smartphones (versus a close 43 percent on iOS), there is a much bigger disparity for first-time smartphone buyers. Android is attracting more than half of them at 57 percent, while Apple is considerably behind at 34 percent.

The quality of the OS has mythological lore in the pop media as well, as this article jives with my own personal experience with iOS on my iPad (which I ended up giving away) - iPhone iOS Apps Crash More Than Android: Report. App depth, pricing, dversity in offerings and superior tech have led to Samsung, Android continuing its U.S. lead through December, despite the blowout quarter from Apple...

RESTON, VA, February 2, 2012 – comScore, Inc. (NASDAQ: SCOR), a leader in measuring the digital world, today released data from the comScore MobiLens service, reporting key trends in the U.S. mobile phone industry during the three month average period ending December 2011. The study surveyed more than 30,000 U.S. mobile subscribers and found Samsung to be the top handset manufacturer overall with 25.3 percent market share. Google Android strengthened its lead in the smartphone market to reach 47.3 percent market share. Covering the three-month period ending December 31, Samsung remained constant without any changes in its portion of the market share — likely because the anticipated Galaxy Nexus did not make a debut on shelves until nearly the end of the quarter.

The only mobile OEM to post an increase was Apple, which ranked fourth with 12.4 percent of the market share and a 2.2 percent point change. 

Putting this in perspective allows one to see just how far Android has shot ahead in such a short amount of time. Last quarter was Apple's biggest quarter ever for a variety of reasons that are the result of the confluence of a swath of unrepeatable factors. Despite such an outrageous quarter that likely will never be repeated, Apple still has less than than half the market share of Samsung, its largest vendor (we aren't talking Google's Android here, we're talking Apple's own [other] vendor, Samsung). This is relevant for a variety of reasons. For one Samsung's tech is vastly superior to that of Apple's. Marketing and fanboisms aside, practically any objective review agrees with this assertions. We did a head to head comparison of the iPhone 4GS and the Samsung Galaxy 2S during the last BoomBustBlog meet and greet. For those who weren't there, simple peruse YouTube for the many professional comparisons to be found. 

You see, the cool thing about YouTube is that you can interact with the TV audience. There are nearly a million views of their comparison with nearly 3,300 likes/dislikes and 5,000 comments. I invite one and all to go through them cursorily to determine what the actual populace (not the slanted media or Apple's marketing department) feels about the phones, and more importantly, what their next phone will be. 

As for Android, there’s no stopping it anytime soon. The platform now covers 47.3 percent of the U.S. mobile market share. Again, in the top five only Apple saw a surge in its cut as iOS placed second with 29.6 percent.

OEM Market Share

For the three-month average period ending in December, 234 million Americans age 13 and older used mobile devices. Device manufacturer Samsung ranked as the top OEM with 25.3 percent of U.S. mobile subscribers, followed by LG with 20 percent share and Motorola with 13.3 percent share. Apple continued to gain ground in the OEM market with 12.4 percent share of total mobile subscribers (up 2.2 percentage points), while RIM rounded out the top five with 6.7 percent share.

Smartphone Platform Market Share

97.9 million people in the U.S. owned smartphones during the three months ending in December, representing 40 percent of all mobile subscribers. Google Android ranked as the top smartphone platform with 47.3 percent market share, up 2.5 percentage points from September. Apple maintained its #2 position, growing 2.2 percentage points to 29.6 percent of the smartphone market. RIM ranked third with 16 percent share, followed by Microsoft (4.7 percent) and Symbian (1.4 percent).

Mobile Content Usage

In December, 74.3 percent of U.S. mobile subscribers used text messaging on their mobile device, up 3.2 percentage points. Downloaded applications were used by 47.6 percent of subscribers (up 5.1 percentage points), while browsers were used by 47.5 percent (up 4.6 percentage points). Accessing of social networking sites or blogs increased 3.8 percentage points to 35.3 percent of mobile subscribers. Game-playing was done by 31.4 percent of the mobile audience (up 2.6 percentage points), while 23.8 percent listened to music on their phones (up 2.9 percentage points).

For those of you who claim that Android can have majority market share as long as Apple enjoys the marjority of the profits, I fear you may not understand how Apple garnered those above market profits in the first place. Keep in mind the power of the "network effect"  which exponentially increases the value of a service or product as more people use it, often creating universal standards where there were none. Apple created a defacto standard through its ecosystem, thus used the network effect to boost margins. Google is attempting to do the same, and if it succeeds, will eat heavily into Apple's margins as the network effect will no longer serve Apple, but its new master (until dethroned), Google. This is why Google's onslaught must be stopped by any means necessary - hence the legal assault team at Apple.

Click here for a full explanation of how the network effect works in the smartphone industry.

The second factor is that Apple's biggest advantage over its competitors is its "Cool" factor. That is, Apple is simply better at marketing than its competition - all of its competition. Of course, this begs the question "How long will it take for said competition to get a clue?" Well, this may answer that question.

Samsung moving up on Nokia as Apple passes LG for 3rd place in global phone share

Samsung cut Nokia's worldwide lead from 10% to just 4% in 2011 and Apple passed up LG. 2012 will likely see continued rise of Samsung and Apple in the global phone market. 

Samsung closed the gap with Nokia from 10% to just 4% though and we may soon see them take the lead. Apple moved up, actually doubled their market share in a year, and passed up LG in 2011.

Apple's smartphone business now generates more revenue than all of MSFT's software businesses, compbined. Taking note of this, it is impossible not to consider Apple a smart phone/tablet company. Apple's primary profit machine sales were off the charts. Apple is, from a revenue and profit perspective, essentially a smartphone company (subscribers reference  Apple – Competition and Cost Structure)

So, what happens when your primary product, revenue and earnings driver is banned from being sold? Crash???!!! 

Motorola wins iCloud injunction; iPhone, iPad temporarily pulled from online store

This is a big deal. You see, while this ruling was temporarily suspended (ex. more litigation) it displays the power the world' largest and deepest mobile phone patent portfolio holder wields under the guidance of Google. This combined with Apple fighting its largest vendors cannot be considered a good, nor safe bet for the company. If you shut down, or significantly hamper Apple's smartphone sales, you practically shut down or significantly hamper the company itself. After all, it esentially a smart phone company.

Now A Question To Get The FanBois Riled Up

Which CEO had the greatest effect on the world to date, Steve Jobs or Bill Gates? I welcome all opinions and answers, just stay polite and professional.

Remember, I never said Apple will go out of business, I said they will have to spend more to remain competitive against Google's less than free business model, see Looking at the Results of Google's "Negative Cost" Business Model Employed Through Android.

Cook has even said himself that one shouldn't expect the margins Apple exhibited last quarter again, and the reason he said it wasn't because he was reading BoomBustBlog that morning - How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue or Sliced Apple Margins For Dinner? or Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof! 

Other links of interest...

Now that Facebook has actually filed for an IPO, it's time to revisit our previous analyses. BoomBustBlog subscribers are prompted to review our Facebook Forensic Analysis from this time last year - FB note final 01/11/2011. I will probably review the Facebook IPO filing and update my opinions Friday and/or over the weekend to product a part two of this article. I say probably because this is competing for resources with the REIT research that we are doing, namely calculating the likelihood of bankruptcy. Yes, our opinion has been downgraded to the point where we are questioning its ability to remain a going concern. The opportunity actually has options trading on it as well. Alas, in the meantime let's look at how we got to where are now by excerpting my previous opinions and analysis on this deal.

1. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private! Monday, 03 January 2011

2. “Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure“ Tuesday, 04 January 2011

   Yesterday, I attempted to pull the wool from some of the more complacent eyes of news media consumers by outlining the potential goals for Goldman's half billion "investment" in Facebook while at the same time pondering the market for a different type of media concern. A media concern that is heavy on the analysis and investigation, yet light on the political correctness and conflicts of interest (see Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!). I definitely don't want to be condescending, but there is obviously (at least to me) a need for such an entity amongst the mainstream rags for as I read through the comment sections of the articles written on the topic, I see such naivete as, "Wow!!! If Goldman is putting their money in this, it must be serious!" I say do myself, "It's a damn shame if that is actually a real person's viewpoint and not a Goldman equity underwriting employee".

…

I would like you, dear reader, to let me know why or why not such a media concern as the one I intimated above should not make as much or more money than Goldman, et. al. and the financial engineering bunch, for the media concern actually imparts useful knowledge that actually adds to society, know? Am I being to idealistic in my search for the Utopian world or is there truly a market for real knowledge and insider info. I'm all ears. Now, back to the topic at hand...

For some background into my work on Facebook's offering, go to 13:55 in the video to see me discussing Goldman's Facebook offering that never was.

Yes, its a little late but I had a few pressing matters that took priority. Apple had a remarkable blow out quarter in Q4 2011, basically knocking almost everything out of the park. Those who follow me and study my research realize that this was not necessarily unexpected. Those who pay attention realize that Apple has made a lot of money, but the theory behind the margin compression still stands. As a matter of fact, it stands stronger now than ever before. Let's peruse a few anecdotal points, but before we do I want to reveal that I've had more institutional interest in my Apple/Google research (primarily asset management and hedge funds) than ever in the history of my writings. It appears as if some of the thoughtful money sees the writing on the wall as well.

$46 billion in revenue

Yes, that's a big number. That's very big for annual revenues, but Apple hit it in just one quarter. The problem is that many believe Apple simply hit this number out of organic growth, the quarter after it missed analysts expectations, expectations which have been historically heavily managed. I'm sorry, but this business is just not that volatile, as can be seen below.

Below, I drilled down on the date and used a percentage difference view to illustrate the improvement in P/E stemming from the earnings beats.

Taken from BoomBustBlog Subscription material -  Apple Earnings Guidance Analysis

So, what was behind this surge in fundamental performance? 

Quite a few factors, namely....

Apple's primary profit machine sales were off the charts. Apple is, from a revenue and profit perspective, essentially a smartphone company (subscribers reference  Apple – Competition and Cost Structure)

Of course there's more to the story.

The iPhone Debuted On Three Major Carriers vs One in the Past

Apple, for the first time, had the iPhone offered on EVERY major US carrier - Verizon, Sprint, and AT&T. This is in comparison with just an AT&T exclusive, and then an offering on Verizon that just capture part of a quarter. When the iPhone (or any extremely popular product ) debuts on a a carrier, there is pent up demand from people waiting for the product availability in order to purchase it. This pent up demand on a product debut through a carrier is unrepeatable. It is a one-time event. Apple had this phenomena... X3!!!

The Delayed iPhone Update Occured in Q1 of the following year and happened to land in the biggest retail holiday (Christmas) quarter vs Q4 normally

This contributed to the miss in Q4 and substantially contributed to the surge in Q1

The iPhone 4S is a maringally minimal improvement over its predecessor, hence costs were kept to a minimal

The iPhone 4S was basically the same phone with a chip, camera and OS upgrade. As a matter of fact, this upgrade is still at least a generation behind Samsung's Galaxy SII series, which is already a year old. Thus, Apple was able to sell deprecated product like gangbusters to those who do not purchase on quality, but rather seek brand, vendor lock-in or simply purchase what's in. This contributed greatly to the margin boost to 44.7 percent. This is a temporary spike though. As I said, Apple has sold a shitload of antiquated product for top dollar that is still materially inferior to its year old competition. There's but so much that even Apple's vaunted marketing machine can get away with before driving away customers. Next quarter, you will probably see:

• a much more expensive camera,
• a much more expensive screen,
• a much more powerful quad core CPU and related GPU (graphics chip)
• much more expensive memory (RAM and ROM)
• and a much more expensive battery...

Why, you ask? Well, the tech in the Samsung Galaxy (or even the Motorola Razr thin 24 hour phone - that's a real battery, soon owned by Google) is simply no joke - and has significantly pulled away from what is available from Apple. Apple's management is too smart to allow themselves to be Nokia'd, RIMMed or Microsofted so early in the game - so they will pony up the investments and expenditures. For those silly people that believe Apple can buy Samsungs and LGs components cheaper than Samsung and LG can supply themselves - you are simply delusional. Apple broiled in litigation with its two largest vendors, who supply the most important parts to its most profitable products, with said vendor being the number one competitor to said most profitable product. Exactly how is this a positive thing for anybody other than the consumer (which is a very good thing BTW)?

How much will Apple have to ding margins by investing to improve product? Well, let's look at the phone Samsung has on tap, the phone that is easily the number one competitor to the iPhone...

Samsung's Galaxy S range of devices have come to symbolise the strength in competition faced by Apple's iPhone. They are highly powerful devices and offer the modern user everything they could want from a top-level smartphone. Anybody who doubts the quality of these devices is a) ignoring that they are the top revenue driver in Samsung's history, b) ignoring that they are the best selling phone in Korea and surrounding areas (besting the iPhone which benefited from a new launch) and c) have probably never even played with the phone because the difference is strikingly obvious.

In order for Apple to remain competitive with products such as these, they will have to spend money on R&D, components and software. That means lower margins, particularly lower than the margin spike they just experienced from selling all of those antiquated products last quarter. 

samsung galaxy s III

The leaked specifications of the Samsung Galaxy S3 are -

• 1.5 to 2 GB of RAM
• 1.5 to 1.8 ghz Exynos Quad Core ARM Cortex processor, extended energy management
• 32-64 GB Internal storage memory
• SD Card slot to expand memory
• 4.65″ “Super AMOLED III” curved and contoured display, 1,280×720-pixel resolution, extreme contrast and brightness
• 10 - 16 megapixel camera, most likely a 12 mp camera. The camera on the current Galaxy is the best in the industry save the 12 - 14 megapixel fringe phones from Nokia and Sony, which no one is even aware of.
• 1080p video recording at 60fps - outstanding, this is pro-sumer camcorder territory
• 2250mAh battery - nearly twice the capacity of today's average smartphone, at half the thickness and weight
• NFC Chip - Google Wallet credit card on the phone
• Ice Cream Sandwich OS with Touchwiz 5.0

Source

These specs are all literally twice that of the current generation iPhone, and unlike many previous iterations of the iPhone, Apple has real competition in the market for components now (HTC, Samsung, LG, Motorola, etc.) so it can't buy everything for pennies. As a matter of fact, its biggest competitor IS ITS MAIN VENDOR, whom they are suing in 7 countries (or more)! How's that for a stroke of genius business plan from Google.

Apple's losing tablet market share faster than it lost smartphone market share

Android has moved to over 40% marketshare in tablets from less than 9% in less than a year. That's amazing and much faster growth than it exhibited in smartphones - which it literally took over the world in smartphone growth in just a few short years. Apple dropped from just over 90% to just under 60% in the same time frame. Again, as with the smartphones, the tablet tech blows iOS products out of the water and there are enough consumers who actually pay attention to features and capabilities to cause this market shift. My current tablet (I have iPads, Windows tablets and several Androids) is the Transformer Prime. It literally competes head to head with ultrabooks, MacBook Airs, and iPad 2s and does so quite favorably - running circles around ALL of its Apple competition. You can actually do productive work with it. Believe it, because I'm actually creating this post with on right now. Am I the only one that feels this way? The Prime is sold out everywhere, except for scalpers successfully selling them at 30% premiums on eBay.

With an 18 hour battery, full keyboard and all necessary ports and plugs, 1080P graphics and the slimmest form factor of any tablet and nearly any netbook, this is a fabulous productivity product and will need real R&D and component sourcing to prevent it from rising even faster than it already is. I can actually do a commercial for this, because unlike practically all other tablets you can really get work done on it.

Transformer_prime_availability

Ask almost anybody who has used one if it is worth it. Go to BestBuy where they sell both Apple and Android and ask three or four salespersons which is the better tablet, by far! Ask them which is the hardest one to keep in stock. After that, ask them which phone is better, the Galaxy or the iPhone 4S, then ask them which their next personal phone will likely be. Go ahead, do some field work. The Apple thesis is based on what will happen in the near to medium term, not what happened last quarter.

Remember, I never said Apple will go out of business, I said they will have to spend more to remain competitive against Google's less than free business model, see Looking at the Results of Google's "Negative Cost" Business Model Employed Through Android.

Cook has even said himself that one shouldn't expect the margins Apple exhibited last quarter again, and the reason he said it wasn't because he was reading BoomBustBlog that morning - How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue or Sliced Apple Margins For Dinner? or Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof! 

Apple Had An Extra Week Of Sales In Its Most Recent Quarter 

The Q1 of Apple had an extra week of retail and channel sales in it as compared to the previous quarter, and when moving product at the pace that Apple does, that week makes a difference... A big difference. These nuances need to be noticed and taken into consideration (ex. the revenue miss from Google stemming from FX fluctuations, yet attributed to fundamentals). 

The Steve Jobs Effect

Last but not least, the unfortunate passing of Steve Jobs did create a boost in mindshare for Apple and Apple products. This is (fortunately) not repeatable unless another superstar CEO passes away - which is highly unlikely. The margin boost from selling decamillions of antiquated product will not be produced in the near term either. The simultaneous launch on multiple large carriers and the pent-up demand will not be repeatable as well. The holiday season quarter lag, probably not. 

Now A Question To Get The FanBois Riled Up

Which CEO had the greatest effect on the world to date, Steve Jobs or Bill Gates? I welcome all opinions and answers, just stay polite and professional.

Other links of interest...

I explain why Apple carries in excess of $80 billion in cash, competition with Google, Samsung, Microsoft, housing and commercial real estate.

Relevant reading:

The Evidence Of Android Dominance Continues To Roll In - iOS Looks To Have Stopped Growing Market Share

Nearly all of my calls on equity, sovereign nations and industries are highly contrarian. At first blush, I get a lot of flack, negative feedback and very little attention save that small coterie of paid subscribers whom I cater to. In the spring/summer of 2010 with RIM trading in the $60s or so, I warned that this company had defintiely seen its heyday. I put out very specific research to subscribers, including downloadable models and extensive reports. I was dismissed as having nationalistic beefs with Canadian companies (WTF???). Well, about 75% in market value loss later that short is still popping profits.

rimm 

CNBC reports RIM Earnings Top Forecasts but Outlook Is Weak, as ZeroHedge parses...

• RESEARCH IN MOTION 3Q ADJ. EPS $1.27    
• RESEARCH IN MOTION 3Q REV. $5.17B, EST. $5.22B
• RESEARCH IN MOTION SEES 4Q ADJ EPS 80C-95C, EST.$1.08
• RIMM SEES 4Q BLACKBERRY SHIPMENTS 11M-12M UNITS, EST. 12.8M
• RIMM SEES 4Q REVENUE OF $4600-4800bn, EST. $4854.30
• RESEARCH IN MOTION 3Q GROSS MARGIN 36.7%, EST. 37.1%
• RESEARCH IN MOTION SEES 4Q GROSS MARGIN 38%
• RIMM SHIPPED 150,000 BLACKBERRY PLAYBOOK TABLETS IN 3Q - that would be the since cancelled Playbook yes?

RIMM_after_hours_12-15

BoomBustBlog banking and tech research has been near perfect for 2010/2011. Subscribers who took advantae of this deserve kudos. To wit, and as excerpted from Another RIMM Job? It's Amazing How Many Institutions Don't Read The BoomBust!

Let's try this again: As Forecast Last Year and Clearly Demonstrated This Year, Research in Motion's Problems Are Far From Over

Research in Motion has been one of the most successful tech shorts of this blog's history (thus far). We first recommended a short last year and reiterated it in the fist quarter of this year. Reference:

1. 1. BoomBustBlog Research Performs a RIM Job!

   2. BoomBustBlog's Fundamental/Forensic Analysis of Research in Motion Has Returned 2x-3x Original Investment This Year!!

This is a snapshot of RIMM as of the writing of this article...

image002image002image002

As you can see, the results have been spectacular, particular if well timed puts have been put to use. In January I posted:

I personally see a clear leader in mobile computing becoming visible in 2012. Using options, a minimum of 2012 expiration OTM and ATM contracts can be purchase at the most optimistic break points demarcated by the model above after being populated with assumptions you feel most valid. I will have a proprietary BoomBustBlog option model available for download to paying subscribers by the end of next week, at which time we will revisit the analysis above.

A 50% drop in price later... On that note, Bloomberg reports: RIM to Cut 2,000 Jobs as BlackBerry Loses Share to IPhone

Now, all should sit back and watch as those other two highly contrarian calls take root:

• Where Are The Pundits And Armchair Analysts When It Becomes Apparent That Apples Is Indeed Susceptible To Google's Android Onslaught?

Endgadget report, by way of BGR: Android leads US market share, iOS may have stopped growing, RIM is still falling