Categories

Apple could buy the mobile phone industry | Updated

The last time I did this comparison (Apple could buy the mobile phone industry | asymco) was in June after the end of the second quarter. The following chart is an updated look.

 

Here is a discussion of the changes since the last analysis:

  • Sony Ericsson was valued through its acquisition by Sony. We did not have a way to value the enterprise before as it was not traded independently. Last June I estimated a 14x multiple on its trailing twelve months’ profits and got $3.0 billion. Since then half the company changed hands for about €1.05 thus yielding a total company value of $2.8 billion. The enterprise value should be therefore slightly lower but I’ll stick with the current transaction value as the EV.
  • Motorola Mobility has entered into an agreement to be acquired by Google for $12.5 billion by Google. The company’s enterprise value jumped as a result to about $8.6 billion.
  • RIM’s share price collapsed and it’s now also trading at an EV of about 7.3 billion (Yahoo finance).
  • Nokia’s price has also dropped and it now has an EV of about $13 billion (Yahoo finance).
  • HTC recently dropped significantly in price and is now worth about $15 billion EV. (Note that pricing of its equities is subject to suspended trading due to drop limits).
  • LG’s phone business is still losing money and it’s still difficult to value. In November it was revealed that the company was seeking to raise $890 million in capital to fund new initiatives including smartphones. The share price fell by 14%. In June I suggested a nominal value for the phone business of $10 billion. I think that’s very generous and with recent events I would place that value at $9 billion today.
  • Samsung’s fortunes have increased. In June I applied a 14x multiple to their trailing 12 months’ operating earnings. Given overall discounting of the sector I applied a multiple of 13 today. That yields a business value of $78 billion. Interestingly, that is larger than the value of all other competitors apart from Apple. That also makes it six times more valuable than Nokia.
  • Apple’s cash and cash equivalents and investments grew by about $12 billion and were worth about $82 billion as of October.

In summary, in June Apple’s cash was about 53% of the sum of competing phone vendor enterprise values. Today it’s about 61%. Excluding Samsung, Apple could buy the industry and still have $25 billion left over. This makes the claim that “Apple could buy the industry” even more believable.

This analysis is mainly academic. It does not imply that any such transaction will take place. As the purchase of Motorola shows, control has a premium and individual buyers may be less “rational” than markets. What it does show however is that the entire industry is in a state of crisis. Valuations for phone companies are collapsing and two major brands (Motorola and Sony Ericsson) are being absorbed and could disappear.

At the same time entrants are arriving with completely different business models. Amazon, Facebook, Baidu, Alibaba are intent on selling phones or platforms to be valued as enablers for asymmetric business models rather than as phones. One could argue that what Apple itself sells is more than hardware and that its value-add “on top” of hardware is increasing. This is a sign of commoditization. Certainly the voice business is well beyond that point but it now appears that even the smartphone business is already in an advanced state of value compression.

All the while the overall market is growing. I had separately looked at the profit pool and concluded that the brands are suffering. Summing up the votes from stock markets, the sentiment is even worse. 2012 is looking more and more as a year of inevitable and dramatic industry change.

  • Kan

    Why have you used the same colour for Apple and Samsung it come across as confusing or are you making a subtle statement?

    • http://www.asymco.com Horace Dediu

      The colors are automatically chosen by my software. I have edited the color for Samsung to now be Orange.

      • Anonymous

        For some people, everything is a conspiracy.

  • http://twitter.com/lemonsanver Jamie Lemon

    I hope they put more of their money into ecological green energy!

  • http://twitter.com/lemonsanver Jamie Lemon

    @ Kan: Orange and dark blue ?

  • Kan

    So you post how Apple share price is not reflective of its true value then go along and use EV which uses current market prices to calculate. A disconnect no doubt.

    The only thing to take away from this is that Apple dominance is bad for the industry as is Googles, MS and Facebook.

    • http://www.asymco.com Horace Dediu

      I don’t know what “true value” means so I don’t know how I could have suggested that Apple’s share price is not reflective of it. Apple’s value is calculated millions of times every day during each transaction of its shares. A company’s value may be irrational, inexplicable, low or high but it’s always true.
      But more the the point, the comparison of EV with cash is a standard way of assessing whether an acquirer with cash can buy an asset that is valued by the market. If the question is “Can A buy B?” then the answer has to be in function of how much money A has and how much B is worth. EV of B shows the minimum financial value needed to buy B.

    • http://pulse.yahoo.com/_KEVQDCIMSOI6AFXXFFS5ZFFWBA PeterK

      I think Apple’s dominance is good for the industry.

      Wow, I must be wrong.

      • Kan

        http://www.theverge.com/2011/11/23/2584019/apple-removes-subscription-game-streaming-app

        Yes you are. Apple is becoming like MS – turfing out the competition from its app store. How practices like that are good for the industry boggles the mind unless you want the industry to become a walled garden?

      • jawbroken

        In what world is a subscription video game service a competitor to Apple?

      • Kan

        When Apple bring out their own subscription video service.

      • jawbroken

        It’s not a subscription video service, though.

      • http://www.facebook.com/profile.php?id=555905220 Juan José Sisti

        They don’t have a dominant position in the market yet. Even android surpasses them.

        I think Jobs wanted to keep market share low to be free to control the experience as he wanted, not having to worry about the government must be a big relief.

      • Walt French

        There’s lots of evidence that Apple thought they had a 5 year lead on competitors, and that Google used its considerable talent and market power to try to disrupt Apple, gaining lots of share if not (yet) profits.

        Now that the battle lines have stabilized in the battles we’ve seen, the next moves will come in the services, ecosystems, UI innovations such as Siri, and PERHAPS in removing the carriers’ stranglehold on wireless.

        I, for one, can’t see any evidence that Apple doesn’t want the type of market share/profit share/growth for phones that they have had with music players, and now enjoy with tablets.

      • Anonymous

        All Apple devices fully support W3C HTML5, the most open API ever created, and ISO MPEG4, the most open audio video ever created. There is no walled garden. There is an open garden and a managed garden on all Apple devices, and the user chooses either or both. That was not true of Microsoft when they were dominant. That was not true of phones that dominated before iPhone.

        So your line of reasoning is flawed. Apple did not gain a position of power via dirty tricks. They earned it. The users are not locked in a jail, they are lined up outside the most popular club in town, waiting to get in. You are concern trolling the only truly satisfied users the tech industry has ever had.

      • Kan

        Rubbish. Can I install my own apps outside of this walled garden without a hack. Your metaphor is simply wrong. As to your final answer shows your narrow view.

      • Just Iain

        Good Day Kan,

        I beleive you can as a developer if you mean literally “my own apps”. If you mean Apps not approved for the App Market, then you are right.

        But isn’t your argument comparable to someone who wants a 454 V8 in his Honda Civic. Not sanctioned but possible.

        Buying a Apple phone or Android phone doesn’t mean you can install the anything you want. Just that it is going to require effort, work arounds and quite likely some exquisite engineering.

        So cut the guff and install Android on your iphone or vice versa.

      • Kan

        No that is not my argument and its not comparable. But say it is then your implication is that there are better apps outside the walled garden then inside it? The V8 being far better than the Civic engine.

        It’s my phone and if phones are becoming more like computers shouldn’t I like on my PC be able to install what I want? Or are you saying users are not sophisticated and need protection?

        Android you can load un-approved apps from outside the market it’s a setting in the menu. There is no simple option for Apple. Windows lets you do that with the MS approved Chevron install. I owned a Symbian phone about 2 years ago and I could install any app I want.

        The only way to take control of your Iphone is through jail breaking it.

      • Tatil

        >Or are you saying users are not
        > sophisticated and need protection?
        Most IT departments say “yes” loudly…

      • Kan

        So instead of educating the user you suggest that controlling them within a walled garden is the best approach. You do what you are told to do. Very draconian and kind of flies in the face of Apples seminal advert all those years ago.

      • Kizedek

        No, the educating of the user consists of showing them that computing simply “doesn’t have to be that way”. There is no reason whatsoever that computing has to be as difficult and frustrating as it has come to be.

        A two-year old and a ninety-two year old should just about be able to pick up the device and do “something”, without ANY education. Oh, that’s right, they can with the iPad.

        It’s about UNdoing all the cruft that users have had to pick up and put up with along the way for the last thirty years. They shouldn’t NEED educating… They should be able to focus on their tasks without the computer getting IN THE WAY. Just dealing with the computer or device is an unecessary distraction from getting on with whatever it is we need or want to do, whether it is work, social, play, entertainment, education, or whatever.

        But apparently, all that cruft and busywork that has become necessary just to use a computer or device has become some kind of crutch or sign of productivity and expertise to some people, like it is something to be proud of. Pulease. Get a life. That’s what “computing for the rest of us” is designed to achieve.

      • Kan

        Using your metaphor then we shouldnt need educating to drive a car and the gears accelerator steering wheel get in the way of what we want to do that is travel.

        Last time I checked we all learned how to read and write or does reading and writing get in the way of the tasks we want to achieve.

        The Ipad still uses a UI design and metaphor based on apps, buttons etc – it is not as simple and clear as you think or is swiping your litmus test of ease of use.

        Wait on if I am using photoshop how is my PC getting in the way? When I want to write something how is my PC getting in the way?

      • Kizedek

        I didn’t use a metaphor. I said exactly what i meant to say.

        You, however, have used an analogy, and a poor one at that… last time I checked, you weren’t likely to kill someone with an iPad when you took it out for a spin.

      • http://www.facebook.com/profile.php?id=100001578926066 Coward Anonim

        First, smartphone hardly kills you.
        Second,you don’t need to know how to install new engine firmware to get driving license.
        Third, as Walt explained, you can create any HTML5 application for IOS you dream of and you don’t need Apple’s approval for.
        Thank you.

      • Anonymous

        The car is a good metaphor, but instead of looking at the control system you look at its components.

        Like a car, with the iPhones software you can install new components if you have the technological education to do so. Like a car, 99.9% of the population do not have the education to do this, and adding new components would be endangering the integrity of the preintegrated product if they did so. Like the car manufacturers, it’s in both apples & the users best interests for apple to make it as hard as possible to mess with the phones software.

      • Terri MacMillan

        Yes! thank you for expressing this so clearly.

        It baffles me a bit: if you feel that Apple is not for you, well, Android exists. So why not simply the tools you enjoy and let people who would prefer a different experience get on with doing so?

      • Walt French

        Not to get all meta here or anything, but @Kan, please let me understand your purpose in complaining about the Walled Garden (® Copyright by Google, Inc.).

        I’ll assert that *everybody* who comes to Horace’s site is aware of it already. Many of are enough so that we personally use Androids or have jailbroken our iPhones, but many more who think it’s an issue roughly comparably important to not being able to get a Lexus ISf in British Racing Green.

        I personally think that the Walled Garden is part of Google’s (and originally, also Verizon’s) logical business plan for competing with Apple after Verizon failed to anticipate how the smartphone trend would disrupt its business, and after Google thought how to compete against the huge technological advantage that Apple had against Android 1.x. (Verizon’s other parts were by allowing tethering and temporarily unlimited data budgets; Google’s included violating their claims for “standards” to get Adobe into their camp, which increasingly looks like a short-term red meat item for partisans and a strategic disaster for products like the Xoom that relied on late, buggy software.)

        But just because these positions were helpful and even necessary to try to slow down Apple’s successes, doesn’t mean that they help us understand disruptive technology. And by George, that’s what the site is supposedly for, not for flame wars between partisan camps.

        So you seem to think you need to proseletyze to a very educated crowd, one that (alas, only mostly) cares about many other issues much more than those you’re raising. You don’t seem stupid or OC. What am I missing?

      • Anonymous

        You can’t force Walmart to sell Target’s house brand can you?

      • Guest

        That’s what I said too in 1990′s
        !
        Bill Gates

    • Walt French

      Would you agree that Verizon’s and AT&T’s market dominance is just as bad, or even worse for the wireless industry?

      Sprint and T-Mo are quite uncompetitive and losing share to the two behemoths. In contrast to these $400–$600 phones (check the sales tax when you get a “free” phone on contract), we are talking about voice/data/text plans that cost three times as much over a 2-year typical period. And cannot be resold on eBay, or easily changed to get TXT from one vendor and voice from another.

      I think the issues are NOT unrelated. Apple would be very happy to cut out the carriers; I suppose Google would, too, but sense they need them more than Apple does, witnessed by the fact that Verizon was critical in positioning, designing and selling the (An)Droid brand. But there are HUGE barriers to replacing the carriers: every neighborhood’s NIMBY policy on towers, just to name one reason that no firm has attempted to do it.

      Can we count on your thoughts of how firms could successfully disrupt this much more harmful market concentration?

  • Kan

    How much interest is Apple getting on its cash horde? They dont pay a dividend so what benefit is there to just let it grow and grow?

    • http://www.asymco.com Horace Dediu

      Cash also has option value. You can read more about how that can be calculated here: http://www.asymco.com/2011/10/31/apples-residual-enterprise-value-is-less-than-7x-earnings/

      • Kan

        Yes there is an opportunity cost but perhaps if you consider your article does innovation have value and tie it in with the cash horde and disruption. I can only see the value of the cash horde being an ability to move quickly and change course.

      • Just Iain

        But isn’t the value of that cash horde lay in being able to just buy it without having to get a bankers approval first? And no brokers fees!

    • Anonymous

      Cash is used to broker deals on components and manufacturing equipment. In some cases Apple puts money up for their suppliers to tool up. Just because Apple isn’t doing it the same way as everyone else, doesn’t mean that they aren’t doing it right.

    • http://kaizenity.blogspot.com/ FalKirk

      Jefferies analyst Peter Misek believes that Apple has sunk a lot of money — as much as a billion dollars — into a new supplier (most pointedly, not Samsung) and new screen technologies to build the next generation of iPads and iPhones with resolutions, battery life and prices its competitors will be hard-pressed to match.

      Source: Sharp and Apple: What the Jefferies report really says – Apple 2.0, 11/24/2001.

    • GeorgeS

      Ken:

      Apple actually uses a good bit of cash. You may not see it directly because part of it is capital expenditure, which isn’t shown on a profit and loss statement. The RESULTS of the expenditure (e.g., plant and equipment) are shown on the balance sheet, but can be complicated to determine. You have to delve into the company’s SEC filings to figure it out. Horace has done just that, as I recall.

      Another part is in pre-purchase of components. Those may or may not show up in the P&L as cost of good sold, depending upon the accounting method, but, again, one has to dig into the filings to figure out what was done, unless Apple specifically mentions it.

    • Walt French

      Apple has defended its cash hoard by stating that in the very dynamic industries in which it competes, Apple might want to make some huge investments and the cash would be available.

      That’s the option value that Horace cites. In many other firms, the shareholders get antsy because so many acquisitions are crap, negative synergies all around. And it’s worth noting that if Apple had to go to the markets for a major deal, it could borrow at a VERY favorable rate, and/or issue stock if they could claim that the deal was so good. The premium benefit of the cash is a bit control, and a bit the ability to act in ways that those hated analysts ;^> might not agree with.

  • Pingback: Apple könnte fast die komplette Mobilfunk-Industrie schlucken | iOS.mag

  • Pingback: Apple now has the cash to buy the whole cell phone industry save for Samsung | Blog intoGsm

  • http://www.facebook.com/profile.php?id=555905220 Juan José Sisti

    Horace, how are you considering Samsung’s price? because they also sell computers and accesories and TV’s, etc. Is the 78bill valuation not considering that?

  • Graham /Finanstankar

    Very interesting comments at the end of the post regarding commoditization. I guess this is the ultimate fear for Apple shareholders. It would be great to read or hear more thoughts on that subject here or on your podcast! Are there some “laws of nature” type forces that will drive smartphones and tablets to be commoditized around a standard like android? Or will the market be fragmented with different business models and standards like FB/Amazon subsidized hardware? Have hardware manufacturers learned from the PC industry commoditization or is it bound to happen again? Do we have any models we can use to think about these things except for those provided by Mr Christensen? What can we learn from history?

    I know you discuss many of these issues in most of your podcasts and posts, but I’d really like to see a dedicated analysis on the topic of commoditization and perhaps some educated guesses as to where the “post-pc” industry is heading!

    • kevin

      I don’t think this type of commoditzation is the ultimate fear of Apple shareholders. If hardware commoditization forces movement towards software and design, Apple can certainly compete. It’s those companies that have hardware competencies but no software/cloud platform competencies that will be left by the wayside or bought out. In fact, Apple has driven the handset industry into this situation, with Android accelerating the process.

      Note the rumor that the PC manufacturers (HP, Dell, Acer, Asus) are dropping out of the tablet market because they don’t own an ecosystem/platform. Will Facebook, even Samsung and the others start with Android and then fork off of it into their own ecosystem, just as Amazon has already done with the Kindle Fire? Is seeing that future the reason why Google bought Motorola?

      • http://www.asymco.com Horace Dediu

        Commoditization can be successfully countered (decommoditization). The remedy is to re-define the product by solving new jobs. The iPhone re-defined both communications and computing to be a convergence of the two.The Mac re-defined personal computing. The iPad re-defined it yet again. As long as you can keep moving the product into meaningful new uses, users will hire it.

      • Kan

        I assume you are referring to the original Mac and not the current incarnation.

      • http://www.asymco.com Horace Dediu

        Certainly the original. Though the newer version centered around portability is not a strict re-definition, it did move itself into a position where it can resist commoditization. I wrote about it about a year ago: http://www.asymco.com/2010/11/19/why-the-mac-keeps-growing/

      • Anonymous

        Mac OS X also redefined computing. The Intel Mac is 90% of high-end PC sales. iPhone and iPad are spinoffs.

      • Kan

        No it did not. You are conflating two issues into one. IPad and iPhone are not max spin offs.

      • Just Iain

        But they are spinoffs of the OS.

    • alberth

      Asymmetric business models are viable only if the associated value being tied into the subsidized delivery mechanism (smartphones here) are of sufficient size. Amazon sells books worth maybe up to $1K/yr and could use that to subsidize something. Apple might via their iTunes/iCloud franchise. What could the others really sell of sufficient value to subsidize their handsets? Microsoft/Nokia probably have some (enough?) salable assets, perhaps Google/Moto can sell enough ads; but what does Samsung, HTC, LG, HP, Dell have? I recall Cuecat where they gave a barcode reader away hoping you would scan magazine ads – Fail. If it really does become easy for people to pickup a subsidized handset it will be very tough for solely manufacturers to stay financially viable as margins race to the bottom.

      • Walt French

        Great comment.

        What an HTC or others could offer is the flexibility to produce a hundred million ___ phones for Google or Microsoft, perhaps on short notice. That has a lot of value, just not anything that the consumer sees.

        This reminds us of the pre-iPhone situation: the carriers told the manufacturers what features they wanted, and the manufacturers built the phones to the carriers’ specs. Some differentiation via design (Moto) or sometimes zero branding or other retail presence (HTC).

        Methinks that’s STILL the case in US markets, just that Google and Microsoft are in there, too. (Alas, from the carriers’ perspective, MS seemingly is not giving Google a run for its money and RIM is also imploding; Apple is famously unwilling to fight on these terms so Google gets more power, too.)

        I haven’t heard Horace address the carrier situation in depth, but I *know* he’s very aware of the opportunity they present to innovators who would disrupt them. But we haven’t yet seen the play, so the carriers look to stay in the driver’s seat for a couple more years more. Maybe that’ll give them time to figure out another approach from being converted into zero-value-added, dumb wireless pipes themselves.

  • Noah Berlove

    By time you factor in Motorola’s cash on hand and the value of their accumulated tax losses, the net cost to Google looks to be under $4 billion. Quite the steal when you consider the strategic value of the acquisition.

    • Guest

      It’s not straight math, sometimes is better to literally burn that much money, at least your losses are limited. A lot of things can go wrong when a search engine that hasn’t had the need to innovate for a decade tries to clone Apple.

      • Noah Berlove

        True, but ultimately the question is how valuable are Motorola’s patents. Based on Job’s thermonuclear statement regarding Android, I am surprised Apple was not more active in keeping those patents away from Google.

      • http://www.facebook.com/profile.php?id=703848523 Harvey Lubin

        Apple buys businesses that are actually useful to their operations.

        Buying Motorola Mobility for it’s patents would be a senseless and valueless proposition for Apple.

      • Noah Berlove

        Apple was part of the non-Google consortium that bought Nortel’s patents as well as a group that bought Novell patents. Clearly Apple sees value in keeping patents away from Google and is willing to pay to do so.

      • http://twitter.com/nursegirlt Thea

        Google was invited in on at least one of the consortiums and refused. Apple sees value in having control of patents that they use, not necessarily to keep them away from Google.

      • Noah Berlove

        Right and they only buy the components they need and never over order to control the market and limit availability to competitors.

      • Kizedek

        Two different things, so hardly a logical rejoinder.

        Anyway, how is it over ordering if they can’t make enough to fill the demand? They keep getting blasting for not having enough phones and iPads at each product launch, despite the launches getting larger and larger each time.

        True, they have pretty much bought up entire capacity of flash RAM, but that was because they are first to go all flash on most of their products: iPods, iPhones, iPads, MacBook Airs. When others decide they are going to start following in that direction, then they are going to have to take left overs.

      • Walt French

        As a supporting anecdote: at the Berkeley Apple store last nite for a (warranteed!) crack in my screen, salespeople told other customers to try reserving a 4S at 9PM; they still run out every day.

      • Anonymous

        Actually no one knows whether Apple over orders components to control markets. I mean can you point anywhere in their 10K or Q which indicates an excess of inventory over the norm? Rather than a conspiracy, it may just be a side effect of being the largest buyer of certain components with plenty of cash on hand.

      • Walt French

        Noah, I’m far from expert on anti-trust law but I think that if those claims were true, Apple’s competitors would be in court against Apple. If not them, then the DoJ.

        You do appreciate that when a business is growing by 100% per year, and suppliers are not aware of strategic shifts (such as the iPad2 —> iPad3 transition everybody is all excited about today), there is first a huge natural uncertainty about needs, and second an opportunity — almost, a guarantee — that rumors will run rife with sour grapes, disinformation and all sorts of other trash claims.

        Certainly, if you have documentation of this, you would find skeptical, but highly interested readers here. Bring it on! Otherwise, you’ve quite likely been propagandized by somebody with an axe to grind.

      • Noah Berlove

        OK, I misspoke or exaggerated. My point is that Apple has, and should, make moves that are strategic in relation to their competition and not just related to advancing their core business.

      • Walt French

        As should all the other players, e.g. the “draconian future” claims by Google.

        But the fog of war can really distort our thinking and there is a bright line that people assume has been crossed when the evidence is actually to the contrary.

      • Guest

        Noah, MS already gets roughly $5 for most Androids and a few others are negotiating (Huawei.) Motorola may be the least major one standing due to Google’ pride but it may not matter if 75% pays MS.

        It’s also almost certain that Oracle is going to get a nice fee for each android due to blatant stealing from Google. So just here you have $10 for each Android, more or less. If Apple or others get a slice, you can easily go into $15 territory, or probably more than Windows Phone that comes 100% patent worry free. They are a lot of lawsuits about Android, plenty are 100% patent trolls and Motorola’s patents mean jack to them.

        What G did is panic and it will cost them.

      • Noah Berlove

        Both Samsung and HTC caved to MS patent litigation threats before they went to court. Moto did not and believes it has the IP to stand up to MS. In fact, Moto already collects royalties from MS. Moto’s strategy is to counter sue with its patents. Before Google announced they were buying them, Moto was contemplating suing other Android manufacturers.

        I do not know how strong Moto’s claims are, but I am sure they are stronger than anything Google could have made.

      • Guest

        “Believe” can be an expensive word but the courts will determine it. The other thing is that a patent war with MS might bite them in other products, that’s why companies are very reluctant to sue MS.

        Yes, MS, Apple and everyone but Google licenses IP, that’s normal.

        I think Motorola might have blackmailed Google into buying them: “We’ll sue other Android makers…”

      • Anonymous

        According to Florian Muller’s website, it appears that Motorola may soon be investigated along with Samsung for using FRAND patents in an abusive manner against Microsoft and Apple.

      • Walt French

        There’s another reason for Moto to have contested the claims where others did not: they had the option to get out of the business and let Google make the actual call. The buyout deal precludes them from settling in any lawsuit without OK from Mountain View.

        Moto’s management (and almost certainly also, the board) had been made painfully aware that they were not going to succeed with their higher cost structure; the Microsoft deal would have made it even MORE impossible to compete and merely accelerated their demise. HTC and others have credible and (slightly) profitable product offerings in other areas besides Android.

      • Guest

        not all patents are the same. MMI’s lack of traction in the courts (to date) may indicate that MMI’s portfolio doesn’t contain all that much that AAPL needs to worry about (or, to state it another way, all that much that would be useful to GOOG)

      • Walt French

        Apple wouldn’t be the first firm to think that those MMI patents are at all valuable in the way that Google said. The popular alternative theory to Google’s (by definition, self-serving) press release campaign is that Google needed to keep MMI from going nuclear against other Android partners, utterly destroying the “openiness” image that has been Google’s number one selling point.

        Izzat so? We may never find out.

        But it makes a lot more sense to me, than the idea that Google, which is acutely aware of how little money is in hardware, and how easily other firms will step up to produce designs, would suddenly want to get into the low-margin hardware business by buying a firm that was losing market share of Android AND losing money. Despite the reminders from firms like HP that are dropping mobile product lines, and no-alternative firms such as Nokia and RIM are falling to new multi-year lows. In direct contradiction to the statement that developers and partners would never have to worry about Android being made proprietary.

        Oh, BTW, Apple pointedly has NOT used the $40 billion it had in the bank to litigate Android to Hell; if anything, it has plowed it into advanced technology at Sharp, FoxConn, Siri, its data centers, its retail operations and all sorts of other places (which Horace has documented nicely). Seems to me that the “thermonuclear” response has actually been to have *customers* fight the battle by choosing superior technology.

      • Noah Berlove

        Though certainly not $40 billion, Apple is certainly devoting considerable resources on litigation. I agree that their primary focus should be on increasing production capacity and product advancement, but clearly they have more than enough money to do that.

        Also, I never meant to suggest Apple should have bought Motorola. It was a good move for Google for reasons that do not necessarily apply to Apple.

      • Walt French

        “Considerable resources” is waaaay short of a $42 billion thermonuclear option. Take the latter tale as an expression of anger, not something that a Board would necessarily approve.

        Re Apple buying MMI? My mis-write; I meant to say Apple would have thought the MMI patent portfolio NOT very valuable for the purposes Google cited. As have others. The good stuff is FRAND. I’m amending my post.

        As a by-the-by, it seems little-reported that MMI has gotten a preliminary judgement against Apple in Mannheim for violation of MMI patents. And apparently it’s not uncommon to require the victorious party to put up a bond against defendant losses if the prelim hearing doesn’t stand — and Apple has said it could be a couple of billion Euros. MMI, to enforce the injunction, might need to risk a fair pile of cash. Whole thing somewhat reminds me of Ali’s Rope-A-Dope strategy.

    • http://www.facebook.com/profile.php?id=703848523 Harvey Lubin

      As we’ve witnessed with the HTC-S3 deal, buying another company for its patents can end up with a “strategic value” of Zero (as a defense against their infringements of Apple’s patents).

      Patent analysts believe that the Google-MotorolaMobility acquisition will result in being just as worthlessness.

    • Anonymous

      Android is already billions of dollars in the hole and Motorola is a hole-drilling machine.

    • http://twitter.com/jamesesaldana studentrights

      I fail to see what they got for their money besides a company that is not making any money and a threat to Google’s relationship with it’s partners.

      Everyone does realize Motorola Mobility is running in the RED.

  • poke

    Should we be thinking of the iPhone as a $199 token that you buy to get access to Apple’s ecosystem?

    • Anonymous

      Interesting point. Some years ago I was trying to extrapolate the time when PCs would be essentially free. I figured that would be hard on MS since they couldn’t charge much premium for the OS and Office if the hardware cost next to nothing. In a sense that happened with netbooks. Some makers switched to Linux and provided replacements for Office to get the price in line with the hardware costs. 

      With the phone and tablet a different dynamic has taken place. Because of the premium on portability, battery life and such there is still a ways to go before the hardware price of an iPhone or iPad is near zero. Portability, battery life, performance and design esthetic will keep these at the leading edge of technology for a while yet. A competitor could throw together an ugly beige box, cheap power supply and a motherboard from who knows where to make a desktop PC. That task is much more difficult with tablets and phones as we have seen.

      I think that Apple is looking forward to the day when, as you suggest, the purchase of the device will be the entry ticket to Apple’s way of doing things. In other words, we won’t be attracted just by a better OS for running an office suite but by an ecosystem of OS, local storage, apps, cloud support, security, social interaction software, NFC interaction with stores, music and video purchase and support, television interaction and who knows what else. Buying an iPad/iPhone/iMac or what have you will gain you admission to this world.

  • Mike Kamermans

    You need to label the graph better. I can’t tell what each bar is at the moment because the axis text is just one continuous, and incomplete, string of text =)

  • http://twitter.com/lemonsanver Jamie Lemon

    For me i’d like to see Apple clean up their ecological reputation and invest their vast reserves of $ into becoming more green ( like an actual apple ) :)

    http://www.guardian.co.uk/environment/2011/nov/23/apple-green-solar-data-centre

  • Anonymous

    Why buy out companies in the same industry? In theory, it looks like it’s possible, but in reality it wouldn’t pass muster with the regulating authorities; and also it would create a lot of jealousies and animosities among Apple-haters and detractors.

    I will tell you what Apple needs to do: Apple needs to buy a bank. Banks’ assets are very cheap nowadays and Apple needs to choose a bank that doesn’t have too many encumbrances on its financial statement. By doing so, Apple could force changes in another critical industry. Banks have deviated from its fundamental duty to serve. It was supposed to help a nation to administer its wealth prudently, but instead what we have seen in the last 30 years is that banks have turned into veritable casinos. Instead of preserving wealth, banks have created all sorts of risky, speculative financial instruments. Banks have become greedy to the extent that they gouge their own customers by enticing customers to new services and then imposing exorbitant fees to service them.

    Apple could lead the industry by forcing it to go back to fundamentals. Apple doesn’t need to follow the herd of greedy bankers to chase after fools’ gold. Apple needs to attract the best people in the industry and train them to foremost serve its customers in an unorthodox way from the rest of the industry. It had been doing this with its present form of business where its counterparts have been led astray by Wall Street.

    Apple Bank (assuming Apple buys a bank) must separate traditional banking activities from its investment arm. Apple could introduce new services that does not rely on gimmicks and speculation. With its billions of loose change, Apple would have an advantage over its debt-ridden rivals and earned better returns by investing its huge pile of cash.

    Sanity needs to return to the banking industry and Apple could be the vehicle to reintroduce fundamentals which the banking industry has abandoned a long time ago. If there is anyone who could pull a rabbit out of the bag, it’s Apple. Go for it, Apple.

    • Anonymous

      The attack will be by credit card. Soon we will be known by our Apple ID, why have a separate interaction with Visa/MasterCard? Offer the vendors reduced transaction fees. Offer customers lower interest rates – or, better, an understandable agreement. In 5 years, build a bank with $1 Trillion opening assets;-)

    • Anonymous

      5 paragraphs of waste post

  • Pingback: Apple má tolik peněz, že si může koupit téměř všechny výrobce mobilů najednou | eZpravy.eu

  • Pingback: Apple hat so viel Barvermögen, es könnte alle Mitbewerber – außer Samsung – kaufen » m4gic.net

  • Pingback: Smartphone-Hersteller: Apple könnte alle bis auf Samsung aufkaufen | Appleunity

  • Pingback: Megapixel vs Nutzwert: Was die Mobilfunkbranche von Apple lernen kann « App Economy « AppAdvisors