Paid Content reports: A Spanish Android Tablet Maker You’ve Never Heard Of Beats Apple In Court
Apple has been going tooth and nail after big Android device makers, especially Samsung, accusing them in courts worldwide of lifting designs and other features from Apple products like the iPad and iPhone. But one case decided yesterday in Spain illuminated a couple of key facts: Apple’s been targeting much smaller Android licensees, too; and despite initial success against Samsung in markets like Germany and Australia, Apple is not winning everywhere.The case in Spain started a year ago, when a small firm based in the east of Spain, called NT-K (short for Nuevas Tecnologías y Energías Catalá) received a letter from Apple, claiming a new Android-based tablet that it developed, called the NT-K Pad, copied the iPad tablet. In the letter, Apple ordered NT-K to destroy its stock. When NT-K refused, it was landed with an injunction.
As part of the process, the company’s devices got seized by Spanish customs officials and NT-K found itself listed on a piracy register, according to a blog post from the company (translated here). Then Apple’s case got expanded to a criminal suit, filed in December 2010.
Yesterday, however, a court ruled that the devices in question do not infringe the Community design rights that Apple claimed.
... NT-K now says that it will be filing an antitrust complaint against Apple, claiming loss of earnings, and loss of potential future business.
...The implications of this case could go beyond NT-K, too. Foss Patents, which brought this case to paidContent’s attention, points out that the Community design right is the same one that Apple asserted against Samsung in its cases in Germany.
What does that mean? The fact that this got overturned in Spain could come up again in those cases that Apple is bringing against Android-based device makers in Europe and potentially elsewhere, all of which are still ongoing.
I have said many times over that this litigious patent aggression is a dangerous, yet necessary game for Apple. Apple is first, and foremost, a smartphone and tablet vendor, as defined by both revenues and profits. It cannot, and I repeat,,, cannot afford a mistep and lose a strategic case, for it is already signfiicanty behind the technology curve and the market share curve as compared to Android and its top three vendors. It has already lost its app dominance, and it will be a signfiicant loss if it loses a case and is hit with punitive sanctions. As excerpted from Apple on the Margin:
... Thus, in continuing with my attempt to educate my readers on the folly of believing Apple's position to be unassailable, I am illustrating exactly how vulnerable Apple is to either a compression of margin on the iPhone or a slow down in sales. Apple is just penetrating the market and has a fertile field to conquer, it is just that it will not be able to pursue that field devoid of competition as it has over the past 3 years. This should dictate an adjustment to the highly optimistic aura attached to the multiples used in forecasting economic results.
The graph below illustrates the importance the iPhone represents to Apple's franchise. Believe it or not, this graph actually understates the importance of the iPhone to Apple for while it brings in 45% of the revenues, it is responsible for about 70% of the profits. Apple has become too reliant on one product, although that reliance was borne from the fabulous success of said product. While Apple will probably derive some much needed revenue diversification from iPad sales, the iPad will face the same hurdles that the iPhone is coming up against - and that is competition from Android-based devices and potentially even Windows Mobile 7 8 (albeit this is an admittedly much more speculative statement).
Breaking the argument down even further, you see how the iPod and the iPhone have literally transformed this company. While I am sure it will continue to be fantastic company with cool products, I doubt very seriously that it will be able to grow in the future as it has in during the last 7 years.
The saving grace is that the smart phone and portable computing market will grow quite quickly, allowing companies with dwindling market share to still capture increasing revenues. The ugly reality is that those revenues will have to be burdened with increasing R&D, marketing and distribution costs since the amount of competition will probably scale faster than the market itself. That, my friends, is a very good thing for you and I, the consumer!
All paying subscribers are welcome to download the mini-model which shows Apple's earnings sensitivity to margin compression through competition. This is the very crux of determining the extent of Apple's success or lack thereof, in the near to medium term. Click here to download ( Apple iPhone Profit Margin Scenario Analysis Model), and click here to subscribe.
... Apple said that while iPhone sales fell off last quarter, the holiday quarter will be its best yet. First-quarter per- share earnings will be about $9.30 on sales of about $37 billion, Apple said in the statement.
That surpassed analysts’ projections, suggesting that iPhone sales are bouncing back with the release of the iPhone 4S, which set a record with debut-weekend sales of 4 million.
“In our wildest dreams, we couldn’t have gotten off to as great a start as we did with the iPhone 4S,” Cook said on the call. The drop in demand for iPhones in the second half of last quarter was “substantial,” said Cook.
This may very well be the case. I don't doubt it, but it also doesn't negate the generally stagnating growth trend - see Google's Android Now Leads In Market Share, Growth Rate and Potential Buyer Preference. Apple released a new product on two new carriers, which at best matches (and that's at best, I believe it falls far short) the Android flaghip device from 6 months ago! This much wider distribution network coupled with the iPhone popularity is bound to boost sales, but the popularity of Android (now the number 1 OS, globally and domestically, with the highest growth rate, to boot) make it unliekly Apple can regain the growth crown through marketing alone. It is now quickly becoming common knowledge that high end Android phones such as the Samsumg Galaxy S II series handily outperform anything from Apple thus far. As a result, the sales are becoming more fad generated and less technology/usability driven. We all know what happens to very fad, don't we? Apple will have to invest heavily into the tech, and that ain't free nor is it a guarantee for success. Hence the margin compression thesis. Look to my writings from last summer to determine the common sense reasons why Apple is at risk despite the lovefest that the media, the sell side of Wall Street and the equity markets have for it: 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. After nearly a year of showing nearly incontrovertible evidence that Apple has seen its heyday, the mainstream media is catching on.
Watch out, Here Comes the The Fiery Sword of Truth! Contrary to the popular opinion that Goldman is the best and the brightest, Goldman Can't TRADE!!!
The financial markets are in a sense of déjà vu with widespread panic. Markets are as volatile as ever and Goldman Sachs is yet again challenged to demonstrate its ability to create alpha. The beta gazers (those who charge 2 and 20 to simply lever up on the broad market), or more commonly put, MoMo Chasers (those chasing the most popular stocks or strategies), would normally be seeking asylum given the state of recent financial markets. Unfortunately, despite the entire “God’s Work” syndrome attached to Goldman Sachs, its prop desk is yet to exhibit the ability to generate true alpha in highly volatile market, let alone match the success of BoomBustBlog.
Let's get something out in the open immediately so there is no misunderstanding. Goldman cant' trade! It can manipulate its dominant positoins in the markets. It can take advantage of the ignorance of its customers. It can front run those who don't have the reach or ability to defend themselves. It can (and obviously does) take advantage of privileged status in our political system. Those are the things that Goldman can do and apparently is skilled at, yet contrary to the popular opinion that Goldman is the best and the brightest, Goldman Can't TRADE!!! Not only that, but that inability to trade bangs the GS shareholder EVERYTIME volatility roils the markets, and causes many to overvalue GS over the long term.
For a little historical proof of this rather unpopular assertion, let's refer to the BoomBustBlog archives, namely A Few Questions on Goldman Sachs 3rd Quarter 2010 Results That No One Thought to Ask...
Trading revenues under pressure
Goldman Sachs posted Q3 net revenues of $8.9bn, a y-o-y decline of 28%. This is despite strong growth recorded at its investment banking and the asset management division which grew at 24.5% and 7.0%, respectively. The decline was principally led by dismal performance of the trading and principal transaction segment which declined 36% y-o-y as a result of weak market conditions. The decline in overall revenues despite strong growth recorded elsewhere underscores the importance of trading revenues in Goldman Sachs overall performance. Historically, trading and principal transaction segment contributed c60-65% of total revenues underpinning inherent risk in Goldman’s business model which is nothing short of a corporate hedge fund. We have expended considerable ink in demonstrating the overvaluation of Goldman Sachs and the volatility inherent in its revenues, particularly as they have been so dependent on trading - as many hedge funds are. As a matter of fact, I have been issuing this GS warning since 2009 when Goldman had perfect trading quarter and record trading profits. Reference last quarter's quarterly update: The BoomBustBlog Review of Goldman Sach’s 2nd Quarter, 2010 Performance: I Told You So!
About three months ago, Boombustblog forewarned that GS will stand out to be the worst hit in the event of trend reversal in the financial markets and the company will have little means to escape the implications of the same on its profitability and solvency. The company generates 60-70% of the revenues from trading activities which is largely dictated by the unpredictable turn of financial events. While the financial markets were celebrating the US officially coming out of recession in the 1Q10, the subsequent Eurozone crisis (see the Pan-European Sovereign Debt Crisis series) and the slowdown of expectations in 2Q10 has beaten down the irrational exuberance and the markets experienced a spurt in volatility and drop in prices. The consequent softening of trading revenues in 2Q10 vis-à-vis 1Q10 drove 31% drop in revenues and 82% drop in net income.
The chart below demonstrates how the volatility of the revenues from the trading and principal investments trickles down into volatility of the total revenues and profits of Goldman Sachs. I don’t call Goldman the world’s most expensive federally insured hedge fund for nothing!
As you can see above, volatility ramped up in 2008 and Goldman reacted like any other beta-chasing, long only hedge fund (although they aren't long only) - they lost money!
Now, with the benefit of BoomBustBlog hindsight, I'd like to announce to the release of a blockbuster document describing the true nature of Goldman Sachs, a description that you will find no where else. It's chocked full of many interesting tidbits, and for those who found "The French Government Creates A Bank Run? Here I Prove A Run On A French Bank Is Justified And Likely" to be an iteresting read, you're gonna just love this! Subscribers can access the document here:
As is customary, I am including free samples for those who don't subscribe, so you can get a taste of the forensic flavor. Here are the first 2 pages of the 19
page professional edition, with illustrative option trade setups soon to follow.
Is Goldman Sachs stock really the front running, Mo-Mo traders wet dream?
Given the high correlation of Goldman’s prop trading desk to equity markets and taking into consideration the state of equity markets in Q2-Q3, it would be interesting to see how Goldman Sachs share perform in the coming quarters. Those who would have followed the traditional school of thought and bid the price up would have already seen their capital erode by 20% during the last quarter and by 12% over the last one month alone.
Oh, and while we're at it...
I noticed ZeroHedge (one of the few sites that I syndicate BoomBustBlog content through) caused a tiff with the Canadian academia and pop media by calling attention to the abysmally low TEC ratios of Canadian banks, and comparing them to European banks. For those who didn't have the spare time to catch the cross border banking media soap opera, see:
- Is The Next Domino To Fall.... Canada? for the first salvoo
- Who is Zero Hedge, and why should we care? for the passive aggressve retort
- (as put by Tyler himself) "followed by a more coherent attempt to debunk the claim that a painfully low TCE ratio is never a good thing": Is Zero Hedge looking at the wrong numbers?"
I must say that the argument by those up north is wanting and ZH made a valid point, primarily in that the RWA (risk weighted asset) methodologies are simply too open for manipulation. Of course, that is probably why they are favored by the banking institutions. Let's end this morning's post by illuminating the fact that although, Goldman Sachs capital ratios have improved, it has nothing to do with a reduction in risks weighted assets. Risk weighted assets, to the contrary, have increased to $451bn as at end June 2011 from $384bn as at the beginning of 2009. One of the key reasons for increase in capital ratios have been dilutions. As a matter of fact, Goldman Sachs’ diluted shares outstanding have increased by c24% since beginning of 2008!
So, if Goldman really has a problem, why haven't we heard about it from the rest of Wall Street?
Because investment performance is not the Street's business model. If it was, they would have easily foreseen thier own demise back in 2008/9. The street's busness model is churning spreads, fees and commisions from clients and customers. I truly believe BoomBustBlog bests ALL of Wall Street's sell side research, reference Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best? After all, who else is currently warning of Goldman's risk on the Street? Answer: No one! Then again, who warned back in the summer of 2008 before the share price got cut by nearly 2/3rds? I can only think of one shop....
Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street: ...t shared by most of the analyst community and those that follow them. This brings me to the issue of Goldman Sachs. I have been bearish on commercial, mortgage and investment banks for over a y... Saturday, 05 July 2008
Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis: Here is my detailed opinion on Goldman Sachs. Be sure to review my precursor to this report: Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street. Anybody who is interested in how I Thursday, 24 July 2008
Even after a clear pattern was formed, who on the sell side warned when the markets got rocky in 2010? Hmmm. I sense a trend here... If I may prompt one to reminesce: In What Do Goldman Sachs and B.B. King Have in Common? The Thrill is Gone…,, I made the following note:
GS’s considerable leverage provides a means (the lever) of high returns to shareholders when asset prices are appreciating but the same becomes a very material economic concern when the asset prices lose value. With low trading revenues, GS has little cushion to absorb write-downs on these assets, leading to erosion of equity. As of March, 2010, the GS’s investments portfolio amounted to $339 billion (nearly 566% of the tangible equity). Referencing my previous posts, “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look” and “When the Patina Fades… The Rise and Fall of Goldman Sachs???“, we can reminisce over the fact that Goldman BARELY earns its cost of capital on an economic basis, and that’s before considering the potential horrors which may (and probably do) lay on the balance sheet (for more on BS horror, referenceReggie Middleton vs Goldman Sachs, Round 2) .
As for the Canadian media's retorts on ZeroHede's credible article, I must dare, no... make that double dare, any one to ask in print or on TV, "Who is Reggie Middleton". As a matter of fact, I'll answer that question right now. He's the guy that called...
- The housing market crash in the spring of 2006 and publicly in September of 2007: Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
- Home builders falling and their grossly misleading use of off balance sheet structures to conceal excessive debt in November of 2007 (not a single sell side analyst that we know of made mention of this very material point in the industry): Lennar, Voodoo Accounting & Other Things of Mystery and Myth!
The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear? | After the collapse, a prudent bullish call as well... Joe Lewis on the Bear Stearns buyout Monday, March 17th, 2008: "The problem with the deal is that it is too low, and too favorable for Morgan. It is literally guaranteed to drive angst from the other side. Whenever you do a deal, you always make sure the other side gets to walk away with something. If you don’t you always risk the deal falling though unnecessarily. $2 is a slap in the face to employees who have lost a life savings and have the power to block the deal. At the very least, by the building at market price and get the company for free!" | BSC calls are almost free and the JP Morgan Deal is not signed in stone Monday, March 17th, 2008 | This is going to be an exciting, and scary morning Monday, March 17th, 2008 | As I anticipated, Bear Stearns is not a done deal Tuesday, March 18th, 2008 [Bear Stearns stock goes from $1 and change to $10, front month calls literally explode from pennies to several dollars]
- The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “Can they monetize those hedges?”. I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am. I bought them before Lehman was on anybody’s radar and I was still to cheap to gorge. Now, all of the alarms have sounded and I’ll have to pay up to participate or go in short. There is too much attention focused on Lehman right now. ) | I just got this email on Lehman from my clearing desk Monday, March 17th, 2008 by Reggie Middleton | Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008 | It appears that I should have dug deeper into Lehman! May 2008
- The fall of commercial real estate in general (September of 2007) and the collapse of General Growth Properties [nation's 2nd largest mall owner] in particular (November 2007): BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
- The collapse of state and municipal finances, with California in particular (May 2008): Municipal bond market and the securitization crisis – part 2
- The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
- The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton, Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
- The overvaluation of Goldman Sachs from June 2008 to present): “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look”, “When the Patina Fades… The Rise and Fall of Goldman Sachs???“andReggie Middleton vs Goldman Sachs, Round 2)
- The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis
- Ireland austerity and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!
- The mobile computing paradigm shift, May 2010: More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars! »
- The French bank run of 2011
Click here to subscribe to our premium research and opinion.
For all of those calamari fans.... Remember, I warned about "the Squid" before it was trendy to hate them!
More on Goldman Sachs
- The BoomBustBlog Review of Goldman Sach’s 2nd Quarter, 2010 Performance: I Told You So!
- On Goldman’s Latest Earnings Results…
- What Do Goldman Sachs and B.B. King Have in Common? The Thrill is Gone…
- A Realistic View of Goldman Sachs and Their Latest Quarterly Results
- The Brown Stinky Stuff is Splattering Off the Fan Blades and Landing on That Shiny New Building on the West Side Highway.
- No One Can Say I Didn’t Warn Them About Goldman Sachs, Several Times…
- Subscribers can find our most recent Full Forensic report on Goldman Sachs here - GS 4Q09 Final Review and Updated Valuation, current as of January 2010, the month I started reiterating my warnings about this company’s drastic overvaluation.
- Reggie Middleton vs Goldman Sachs, Round 2
- Reggie Middleton Personally Congratulates Goldman, but Questions How Much More Can Be Pulled Off
- Get Your Federally Insured Hedge Fund Here, Twice the Price Sale Going on Now!
- Reggie Middleton on Goldman Sachs’ fourth quarter, 2008 results
- Goldman and Morgan losses in the news, about 11 months late
- Blog vs. Broker, whom do you trust!
- Monkey business on Goldman Superheroes
- Reggie Middleton asks, “Do you guys know who you’re messin’ with?”
- Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis
- Reggie Middleton on Goldman Sachs Q3 2008
- § As Reality hits, the Masters of the Universe are starting to look like regular bank employees
- Reggie Middleton’s Goldman Sach’s Stress Test: Breaking Ranks with the Crowd Once Again!
- Who is the Newest Riskiest Bank on the Street?
Premium subscription content and Goldman forensic analyis:
There has been a lot of noise in both the alternative and the mainstream financial press regarding potential risk to the ECB regarding its exposure at roughly 48 to 72 cents on the dollar to sovereign debt purchases through leverage, and at par at that. This concern is quite well founded, if not just over a year or so too late. In January, I penned The ECB Loads Up On Increasingly Devalued Portuguese Bonds, Ensuring That They Will Get Hit Hard When Portugal Defaults. The title is self explanatory, but expound I shall. Before we get to the big boy media's "year too late" take, let's do a deep dive into how thoroughly we at BoomBustBlog foretold and warned of the insolvency of both European private banks and central banks, including the big Kahuna itself, the ECB! The kicker is that this risk was quite apparent well over a year ago. On April 27th, 2010 I penned the piece "How Greece Killed Its Own Banks!". It went a little something like this:
Yes, you read that correctly! Greece killed its own banks. You see, many knew as far back as January (if not last year) that Greece would have a singificant problem floating its debt. As a safeguard, they had their banks purchase a large amount of their debt offerings which gave the perception of much stronger demand than what I believe was actually in the market. So, what happens when these relatively small banks gobble up all of this debt that is summarily downgraded 15 ways from Idaho.
Well, the answer is…. Insolvency! The gorging on quickly to be devalued debt was the absolutely last thing the Greek banks needed as they were suffering from a classic run on the bank due to deposits being pulled out at a record pace. So assuming the aforementioned drain on liquidity from a bank run (mitigated in part or in full by support from the ECB), imagine what happens when a very significant portion of your bond portfolio performs as follows (please note that these numbers were drawn before the bond market route of the 27th)…
The same hypothetical leveraged positions expressed as a percentage gain or loss…
CNBC ran an article this morning, Bank Shares Take a Beating, and It May Not Be Over Yet. Talk about obvious. We have been bearish on banks since they collapsed a couple of years ago. Yes, they soared 100% to 200% after dropping 80% (you do the math and see which side of the bet made the most money), but those share price spikes are the result of pure and explicit government manipulation. There are no fundamental reasons that come to bear to buy these companies. As a matter of fact, they are the new "tobacco" companies and are lightning rods for litigation, and that is the least of their problems. The big issue is that the cause of the their collapse in 2008 has went nowhere but deeper in into their respective balance sheets, hidden by captured government regulators and funny money accounting shenanigans. The bulk of most bank lending in this county is done for the purchase of real estate. How do you think that business is doing now? How about those ever so valuable legacy assets?
The chickens are coming home to roost, dude. When you send your chickens out in the morning, they return to your barnyard. Not your neighbor's barnyard, not the guy across the street, but your barnyard. Oh, I say it and say it again... You've had! Been took! Hoodwinked! Bamboozled! Led astray, run amok! This is what they do!
This is a very, very important article. It is important enough that it should easily go viral, for it clearly and meticulously illustrates both the ease of perpetuating inaccurate information through the mainstream media (in this case, the venerable NY Times) while simultaneously demonstrating the blatant conflicts of interest, the "profit off of the client's back" mentality and the piss poor performance of Wall Street's biggest and most well respected (well, at least some of them) investment banks. The ideology espoused here is in the same grain as that of "Goldman Sells Nearly Half $Billion Of Apple Stock Directly Into Their Client’s Conviction Buy Recommendation: Guess Who Really Agrees With Reggie Now!" and to be absolutely honest, should be considered a direct follow up to said illuminating piece. Every single Apple investor or Sell Side Wall Street customer needs to read this article at least twice and click on every single link in it, for it gets to the basis of the reason why I had the balls to pen "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" last year - and still stand behind each and every syllable of that piece. Yes, these are direct, pungent, and hard hitting words! Now, let's see if this analysis has the stuff to back them up and justify their use - after the break...
It appears few are willing to accept the mantle of that Fiery Sword of Truth and slice through the self-serving, conflicted, marketing and sales mantra commonly referred to as sell side Wall Street research. Well, we are more than will to take it to task. Join us as we wield this heavy blade of unbiased analysis to cut through the pork in the establishment, and cut deep we shall... Down to the bone! Down to the truth!
I have dedicated a decent amount of BoomBustBlog real estate warning of Apple's impending margin compression, most recently... “Is The Evidence For An Apple Margin Collapse Now Incontrovertible?“and “I Absolutely Dare Anyone To Read This And Still Not Consider The Probability (Not Possibility) Of Apple Suffering From Margin Compression“. Well, words is going around from Apple's S.E. Asian suppliers that market fundamentals are coming home to roost. As you read the snippets below, remember what both I and Steve told you months ago - Steve Jobs Calls End Of the PC, We Call The End Of The Fat Margin Tablet – Including The Pretty iPad, With Proof!...
From C|Net - Rumor: Apple already drumming up parts for iPad 3
Although the iPad 2 is only a few months old, Apple is already trying to gather up the necessary parts for the iPad 3, according to a report from DigiTimes yesterday. Citing industry sources, DigiTimes said that Apple has begun certifying components for the next-generation iPad, a process that's triggered quick responses from many Taiwan-based hardware manufacturers.
The sources said that Radiant Opto-Electronics has already won certification for its LED backlight units, while makers of backlight modules and light bars have received certification as well. One component still to be certified is the tablet's touch-screen panel itself. Companies such as Samsung and LG have typically supplied panels for Apple, but DigiTimes said that Apple is close to certifying panels made by Taiwan-based Chimei Innolux.
DigiTimes also mentioned rumors that Apple would use AMOLED (active-matrix organic light-emitting diode) panels made by Samsung for the next iPad, however, industry sources said they believe the tablet will still sport the same 9.7-inch LCD display used in the first two iPads. Apple and Samsung have also been embroiled in a couple of dicey lawsuits with each other, potentially making it difficult for the two companies to work together right now.
The AMOLED and Super AMOLED screen tech is vastly superior to what Apple is currently using in its iPads, and as such Apple's products will be lacking (relative to those that use said technologies) if they go with the more antiquated tech. This is a consequence and byproduct of Android's massive reach. Google has, in effect, turned Apple's largest suppliers (LG and Samsung) into its largest and most powerful direct hardware competitors - as clearly outlined last year in this blog. And back to Cnet...
To no surprise, component makers say the iPad 3 will launch in 2012. But some of the Taiwanese parts suppliers believe Apple will lower the price to compete with rival tablet makers.
And there you have it, logic and common sense. Lower prices will lead to lower margins. For those that are paying attention, it is evident that it is already happening. Let's reference the model behind the subscriber document Apple - Competition, Cost Structure and Forensic Valuation and go through the basic fundamentals, step by step for the iPad which is a very strategic segment for both Apple and the industry. First, the basic math:
A few months ago, I had a discussion on BoomBustBlog regarding security and Apple products. Basically it was my attempting to illustrate to acolytes that ANY system can be compromised and the sole reason for Windows disproportionate virus/malware attacks is due to the high profile of Windows machines. Microsoft is, despite being unfavored in the press, still the predominant technology provider to the consumer and corporate desktop, and arguably to the enterprise server as well. If one wants to make as big a splash as possible in terms of disruption, whom do you target - Microsoft, Ubuntu - Linux, or Apple?
Then we have the recent (and still ongoing) month-long Mac Defender/Mac Guard malware attack which targeted Apple desktops and notebooks. It took a considerable amount of time for Apple to respond with a solution. Once they did, they apparently tried to do so comprehensively by delivering as excerpted from ZDNet:
A BoomBustBlog reader forwarded me the following news item this morning:
9:44 AM Android's (GOOG) lead over Apple's (AAPL) iOS may have stopped growing, as new Nielsen figures indicate a "stalemate" in the U.S. smartphone battle among Google, Apple and RIM (RIMM). After shooting to the top spot in under a year, Google holds steady at 36% of the market; Apple and RIM remain at 26% and 23% respectively.
I strongly suggest my readers look a bit deeper into this than is suggested by this news clip. Android is set to explode. The numbers above are lagged and count smartphones only. In addition, Apple's market share benefited greatly from its launch on the Verizon Network, the 2nd largest in the US. That is something that cannot be repeated (although it will also benefit to a much lesser degree from distribution through Sprint and T-mobile as well). Meanwhile, the Samsung Galaxy IIs running Android is actually outselling the iPhone globally, isn't even for sale yet in N. America which is the deepest, richest smartphone market. It set sales records in Korea where it was launched selling over 1 million phones in 30 days or less.
Then there are the tablets, where Honeycomb is coming into its own. The Samsung Tab 10.1 is in significant demand and has yet to launch, and the Asus Transformer sells out within hours of any retailer getting supply. I have the Asus and it blows the pant off of my iPad and offers a very, very serious cost/benefit challenge to all of my wintel wares (see the video comparisons here - I Absolutely Dare Anyone To Read This And Still Not Consider The Probability (Not Possibility) Of Apple Suffering From Margin Compression). Have no doubt, the power of the Wintel Duopoly is materially threatened by Android. The Android hardware platform is due to quadruple in performance by the 4th quarter! In addition, the hardware vendors - after being freed from trying to develop an OS/ecosystem or shoehorn Windows into ultraportable devices - have truly started innovating with form factors.
Reference the extremely unique and innovative form factors that have been, and are about to be released - form factors which literally solve real world usability issues:
Do you remember my recent missive "There’s Something Fishy at the House of Morgan"? Well, in it I queried how it was that JP Morgan can continuously pull risk provisions and reserves to pad quarterly accounting earnings at time when I not only made clear that we are in a real estate depression but the facts actually played out the same. As excerpted from the aforementioned article:
I invite all to peruse the mainstream financial media and sell side Wall Street's take on JP Morgan's Q1 earnings before reading through my take. Pray thee tell me, why is there such a distinct difference? Below are excerpts from the our review of JP Morgan's Q1 results, available to paying subscribers (including valuation and scenario analysis): JPM Q1 2011 Review & Analysis.
Well, I’ve a confession to make. I really do know why there is such a distinct difference. A very similar situation was illustrated in my article on Apple's presence on the Goldman Sachs' "Convict"ion buy list, which I fear is a must read before you finish this article. Reference Goldman Sells Nearly Half $Billion Of Apple Stock Directly Into Their Client’s Conviction Buy Recommendation: Guess Who Really Agrees With Reggie Now! These shenanigans were clearly and plainly illustrated in two recent mainstream articles, believe it or not. Here they are…
Oh, this is getting good. For those investors and technology consumers who feel emotional attachment to publicly traded C corporations, brace your ass hairs, 'cause the truth is about to come barging out of your screen. Yesterday I posted the most recent of a long string of articles detailing the impending and inevitable margin compression coming to Apple. It is my opinion that the analysis and the logic behind the analysis is unassailable. Granted, most of the analysis is behind a paywall, but the logic is laid bare for all to see, as excerpted:
Last week I posed the question, “Is The Evidence For An Apple Margin Collapse Now Incontrovertible?“. I received some interesting, albeit, rather passionate answers - many of which failed to address the core core issue, which is can "Apple compete with the rapidly rising technological bar that is simultaneously facing rapidly dropping prices without suffering a hit to margins?". Phrased differently, "Can Apple’s brand allow it to charge materially more for less product in the face of over 400 competing devices connected by the fastest growing and most diverse ecosystem in the business?" Sounds like a tough sell, doesn’t it? This is not about who is better, who is worse, who will win, and who will lose. It is about margins. Apple may not even be in the race if it doesn’t run, and to run may very well mean margin compression.
Well, if margin compression wasn’t “Incontrovertible” last week, it certainly should be this week. Let’s walk through margin compression as a result of excessive competition step-by-step, starting by solidifying the thesis behind the recommended updates to the Apple Margin Compression Thesis & Google’s valuation model. Subscribers, adjust your BoomBustBlog Valuation Models Accordingly:
- Apple – Competition and Cost Structure Forensic Analysis and accompanying Apple iPhone Profit Margin Scenario Analysis Model – suggested use with Apple Earnings Guidance Analysis