February 2010
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Month February 2010

So Long, Flash

A devastating exposé on the incompatibility of Flash content with touchscreens.

Many (if not most) current Flash games, menus, and even video players require a visible mouse pointer. They are coded to rely on the difference between hovering over something (mouseover) vs. actually clicking. This distinction is not rare. It’s pervasive, fundamental to interactive design, and vital to the basic use of Flash content. New Flash content designed just for touchscreens can be done, but people want existing Flash sites to work. All of them—not just some here and there—and in a usable manner. That’s impossible no matter what.

The author, a Flash developers, goes on to describe how none of the work-arounds will solve the problem.

The implication is that Flash has evolved around an obsolete input method and it can no longer adapt to what is rapidly becoming the de-facto interaction method of hundreds of millions of mobile computing users.


The Apple of Traders Eyes

Of all the world’s companies, Apple ranks as the 11th most valuable. As a technology company its market capitalization is second only to Microsoft.

Of the top 20 largest companies, all of which are above $150 billion in market cap (listed in graph above), Apple has the highest volume of trading as measured by dollar value (average volume multiplied by last share price is $5.2 billion per day–see graph). In fact, it’s more than twice as popular as a traded equity than the next highest, Google and 2.6 times as popular among traders as Microsoft.

This trading volume might also be reflected in its beta (the correlation of price with the market with 1 meaning perfect correlation). Apple’s Beta is 1.59, nearly the highest of the super-large caps and the highest by far of the tech large caps.

Surely, this confirms that Apple is not only huge but hugely popular and highly visible among investors. Suggestions that its current discounted value is due to obscurity among IT buyers translating to obscurity among investors does not wash.

Source: Google Finance


Apple’s Enterprise Value Peaked in 2007

On Christmas Eve 2007 to be precise. That’s when the Enterprise Value/share was $181.5. These days it’s around $150. The Enterprise Value (EV) measures the value of future cash flows excluding current assets and is a better indicator of the potential of a company than its current overall value.

As you can see in the graph above, the cash per share (in green) has grown to $43 while back in late 2007 it was less than half that. As a result, although the market value for Apple peaked at $215 on 19th January this year (the blue line), the EV/share was only about $178 (the red line), below the all-time-high in 2007.

As Apple’s cash continues to grow, the gap between EV and MV will also grow. If the MV remains low (as the P/E is indicating) then the Enterprise Value, i.e. the net present value value of future cash flows, drops.

Did Apple’s prospects peak in 2007–six months after the iPhone was first launched–or is the current valuation still a function of sentiment of the overall economy, independent of the company’s fundamentals?


What 140k Apps Look Like

Click on image above (1.7MB .png file)


iPhone/App Store Now in 90 Countries

There are 193 recognized sovereign states, so they’re about half way there…

App Store now supports Armenia, Botswana, Bulgaria, Jordan, Kenya, Macedonia, Madagascar, Mali, Mauritius, Niger, Senegal, Tunisia, and Uganda.

Coming soon: Equatorial Guinea, Guinea-Bissau.

http://www.apple.com/iphone/countries/


Apple Ten Times more Profitable than Dell

Apple’s profit of $3.38 billion for CQ4 was slightly more than 10 times bigger than Dell’s $334 million on nearly equal Revenues of 15.7 billion and 14.9 billion.

In other words, Apple kept about 20% of its income while Dell kept 2%. Also worth noting is that Dell’s gross margin onconsumer PCs was 0.2% while Apple’s Mac margin (mostly sold to consumers) was around 28%. So on consumer PCs Apple’s margin was 140 times higher.

It should not be a surprise then that Apple is worth 6.5 times Dell.

To recover some of its margins Dell is rumored to be readying its iPad competitor.

I can’t wait.


Apple as Macroeconomic Counter-Indicator

Following up on the Apple Valuation Entry, I went to the data and pulled the historical P/E for Apple back to include all of 2004 (in blue) and did the same with the S&P P/E (in red).

A few notes:

  • Apple’s P/E was consistently above 30 until mid-2008
  • Apple’s P/E was consistently and substantially above the S&P until mid-2008 by at about 10 to 30 points.
  • A reversal occurred at that point with S&P P/Es reaching record highs (actually at over 120 in May) and Apple’s reaching record lows of 11 at a time when the S&P P/E was over 60.
  • Since the reversal, Apple’s P/E has been consistently below the S&P’s and indeed has stayed near historic lows while the S&P is returning to historic averages.

This reversal happened during a time of recession when, in contrast to most companies, Apple kept growing. The spike in the S&P P/E is due to a dearth of earnings, while Apple had increased earnings, sometimes to new records.

As a “premium” brand it’s perhaps perplexing that Apple seems to be acting as a counter-indicator to macroeconomic conditions.

Expectations for Apple to decline in times of economic contraction did not come true and as recovery seems near, Apple appears to be discounted.

In other words, when times are bad, Apple surprises and does well so therefore when times are good Apple should do badly.


Windows Mobile renamed Windows Phone Classic

The mobile operating system formerly known as “Pocket PC 2000/2002, Pocket PC 2000/2002 Phone Edition, Smartphone 2002, Windows Mobile (2003/5.0) for Pocket PC, Windows Mobile (2003/SE/5.0) for Pocket PC Phone Edition, Windows Mobile (2003/SE/5.0) for Smartphone, Windows Mobile 6[.1/.5] Professional/Classic/Standard” will now be known as Windows Phone Classic.

The last “Classic” nomenclature lasted from Windows Mobile 6 Classic to Windows Mobile 6.1 Classic and denoted the OS for Microsoft’s PDAs. It disappeared after version 6.5.

Windows Phone Classic will co-exist with Windows Phone 7 Series.

Simple.


Coming Soon: 1000 New Apps Per Day

According to 148apps.biz there are 823 apps being submitted to the app store every day for the month of February. If it’s maintained this will be a new record, beating the 821 apps per day for last December.

This rate implies 300k apps per year run rate. Of course, the submission rate has been increasing steadily so it might not be long before we see 1000 apps per day.

Source: 148apps.biz.


Headroom

On a planet with around 6.8 billion people, we’re likely to see 5 billion cell phone subscriptions this year.

http://www.itu.int/net/pressoffice/press_releases/2010/06.aspx

ITU expects to see the number of mobile broadband subscriptions exceed one billion globally during 2010, having topped 600 million by the end of 2009. With current growth rates, web access by people on the move — via laptops and smart mobile devices – is likely to exceed web access from desktop computers within the next five years.

Mobile broadband is a good proxy for mobile computing so it’s very likely that these 1 billion subs will use advanced devices if not smartphones per se.