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:

On 5/24/11 I recorded a podcast interview with the Sound of Money, an interesting financial show that airs on NYC's WNYE radio. You can listen to 46 and a half minutes of my viewpoints and opinions via this link, Sound-money-interview-of-reggie-middleton-05-24-11. Be sure to peruse the blog of the show as well.

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

Okay, Reggie says "Margin Compression"., What does the most esteemed of the esteemed of Sell Side Wall Street say? Let's reference that Bastion of UnProfitable Advice, Goldman Sachs!

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 eve 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:

1. Apple – Competition and Cost Structure Forensic Analysis and accompanying Apple iPhone Profit Margin Scenario Analysis Model - suggested use with Apple Earnings Guidance Analysis
2. Google Final Report and the accompanying Google Valuation Model (pro/institutional subscribers)

Apple's iPhone launch on Verizon did a lot to boost market share, reference Apple chews away at Nokia, posts best smartphone share growth in Q1 and Android increases smart phone market leadership with 35% share. It's success was enough to push it to 2nd place in terms of US handset vendors and 3rd place globally. Despite this success, it is still losing considerable ground to Google's Android, reference Even With Apple’s Successful Launch On Verizon, Google Continues To Increase It’s Lead In The Smarthphone Space Friday, May 6th, 2011, and Google’s Android Market Share Explodes As It Expands Its Reach To Cars, Toys, Home Automation, Music & Movies – All In The Cloud Wednesday, May 11th, 2011 Verizon’s Earnings Confirm The Economic Impact of Android vs iPhone In Regards To Carrier Profitability Thursday, April 21st, 2011.

Many don't realize why the amassing of significant dominance in market share makes such a difference. Basically, its the reason why Apple has historically been able to charge a premium (although not currently due to Android - high end Android phones are either at par or slightly more expensive than the iPhone yet Android's market share increases at en ever more rapid pace). Apple's key advantage lies in the network effect stemming from majority market share (embedded in its iTunes and app store ecosystems). Wikipedia on the Network Effect:

Summary: I called it the coming RE Depression in 2007! I put MY money where my mouth was and sold off all of my investment real estate. I put YOUR money where my mouth was and shorted all that had to do with real estate (REITs, banks, builders, insurers). I called almost every major bank collapse months in advance. I warned the .gov bubble blowing does not = organic economic recovery. Now I'm saying we need to, and will, continue what's left of the crash of 2009, with ample global company. There will be no RE recovery this year, and there will be a crash. OK, you heard it here!

First, let's go through the headlines for the day then proceed to breadcrumb trail that clearly led us to where we are now and where we will ultimately end (oh yeah, In Case You Didn’t Get The Memo, The US Is In a Real Estate Depression That Is About To Get Much Worse Wednesday, February 23rd, 2011)

...

Commercial Real Estate

US Commercial Real Estate Prices Decline to Post-Crash Low ...‎ - Bloomberg

U.S. commercial property prices fell to a post-recession low in March as sales of financially distressed assets weighed on the market, according to Moody’s Investors Service.

The Moody’s/REAL Commercial Property Price Index dropped 4.2 percent from February and is now 47 percent below the peak of October 2007, Moody’s said in a statement today.

The national index has fallen for four straight months as sales of distressed properties hurt real estate values. Investor demand is strongest for well-leased buildings in such major markets as New York and Washington as vacancy rates decline and the economy grows.

The index “continues to bounce along the bottom as a large share of distressed transactions preclude a meaningful recovery of overall market prices,” Tad Philipp, Moody’s director of commercial real estate research, said in the statement. “Indeed, the post-peak low in price has been reached in the same period as a post-peak high in distressed transactions has been recorded.”

So-called trophy properties in New York, Washington, Boston, Chicago, Los Angeles and San Francisco are helping those markets avoid the drag caused by distressed asset sales nationwide, Moody’s reported. Prices of properties of $10 million or more have risen 23 percent since their July 2009 low, according to a separate report issued today.

No Recovery Signals

The overall index shows “no sign of recovery,” Moody’s said.

Almost a third of all March transactions measured by Moody’s were considered distressed, meaning the properties’ owners faced foreclosure, had difficulty covering their mortgage payments or experienced other financial problems. It was the largest proportion of distressed property sales in the history of the index, Moody’s said.

For all of those wondering how CRE can be doing so bad while REITs are doing so well, well I explained it in explicit detail several times in the past. Once we eliminate rampant fraud and bring back mark to market, all will be good again...

1. The Conundrum of Commercial Real Estate Stocks: In a CRE “Near Depression”, Why Are REIT Shares Still So High and Which Ones to Short?

For all of those who felt I was too bearish on the Euro region in 2009 and 2010, thus far nearly every proclamation that I have made has come to light or shown a direct path to doing so. I believe I was unequivocally clear in my assertion that Greece will default at least a year or so ago (even if said default would be marketed by some other name for the sake of political expediency). I would consider this a must read for anyone in the mainstream media reporting on this topic, or any investor/stakeholder who may fear the Grecian domino effect, even if you feel you have seen some aspects of it before.

Well, now its time to call Greece out on its perversely circular  reasoning being used to justify its alleged stance that it will not default. I read a humorously crafted ZeroHedge article this morning which immediately cause the following image to pop into mind...

For more on the origin of said circle, I first refer you to an article ran yesterday in Bloomberg:

Technology Bubbliciousness Is Back With A Vengeance!

LinkedIn (LNKD) went public with an absolutely unrealistic valuation that illustrates the dangers of ZIRP policy that has carried on for too long. The marketing machinations of investment banks combined with a total lack of respect for risk and the cost of capital has allowed such to happen – and we all know how this is going to end!

In 2010 LinkedIn generated $15m of PAT (profit after taxes) as quoted by the popular financial media. But that’s PAT. What the media and pop media readers are forgetting is what’s available to common share holders, you know the guys holding that stuff trading on the exchanges. LinkedIn has total redeemable convertible preferred stock of 10.8m (4m Series C and 6.8m series D, Convertible preferred stock of 38m (17.2m series A and 17.5m Series B). After accounting $11m for undistributed earnings allocated to preferred stockholders the PAT attributable to common share holders was $3.4m. For those perpetual pessimists who are not well versed in calculating 5 digit PEs… The math already denotes LinkedIn trading at a PE of… well... I’m actually damn near embarrassed to print this… 29,000x.