Search term: valuation

Apple retail vs. Amazon retail

As part of a continuing series on the iTunes economy I described how iTunes fits within Apple’s overall revenue and cost structure. The operation is a modest contributor accounting for single-digits percent of revenue and operating margins.

One additional question is how does iTunes compare with other non-Apple retail businesses. The obvious comparable businesses are Google Play and Amazon’s digital content businesses. Unfortunately we can’t compare iTunes with Google Play because Google does not reveal any details about Play revenues (or units sold/downloaded or payments to developers or any other data.)

Also unfortunately, we can’t compare iTunes with Amazon digital sales because Amazon does not provide that detail either.

What we do have is Amazon’s overall revenues (and operating margin.) So that’s what I have compared:

Screen Shot 2013-03-27 at 3-27-2.09.30 PM

Since we have Amazon’s overall retail revenues it seemed fitting to also add Apple’s physical store retail data on top of iTunes for additional perspective.

Here are some observations:

Why doesn't anybody copy Apple?

Apple’s products are the envy of the world. They have been spectacularly successful and are widely imitated, if not copied. The expectation that precedes a new Apple product launch is only matched by the expectation of the replication of those products by competitors.

This cycle of product mimicry was succinctly summarized by Marc Andreessen regarding a rumored Apple TV product:

And once the television launches, everyone will scramble to copy it. ”There’s a pattern in our industry, Apple crystallizes the product, and the minute Apple crystallizes it, then everyone knows how to compete.”

This idea that the basis of competition is set by Apple and then the race is on to climb the trajectory of improvement is so well understood that it’s axiomatic: “It’s just the way things are.” Apple releases a product that defines a category or disrupts an industry and it becomes obvious what needs to be built.

But what I wonder is why there isn’t a desire to copy Apple’s product creation process. Why isn’t the catalyst for a new category or disruption put forward by another company? More precisely, why isn’t there another company which consistently re-defines categories and repeatedly, predictably even, re-defines how technology is used.

Put another way: Why is it that everyone wants to copy Apple’s products but nobody wants to copy being Apple?

Note that I don’t suggest that there isn’t a capability to copy. It may or may not be possible, but capability comes after desire and without desire there can be no capability. What I’m suggesting is that there isn’t a desire to “be like Apple”. If there were a desire, we would be seeing a massive search and debate into what makes Apple successful. Management consultants would be pounding the pavement pitching the “Apple way”. Wall Street would be sizing up companies to a standard of “Apple-ness” and rewarding those who conform and punishing those who don’t.

None of this is happening. I can think of two reasons why:

  1. Apple is not to be imitated because it’s not worth copying. I.e. Apple is not a successful company.
  2. Apple is successful but Apple cannot be copied because its success is a magical process involving sorcery.

It's a wrap. Asymconf California

My thanks to all those who made Asymconf California the best Asymconf ever. We had over 200 attendees and, for the first time ever, 50 workshop participants and a panel session. The venue was spectacular: IBM’s historic Almaden Research Center and special thanks to Paul Brody of IBM for making it available.

Engagement was stronger than ever and I believe we moved the ball forward on a range of topics: The workshops helped solve some of the mysteries related to Amazon valuation and the main event looked at the limits of growth. The State of the Union took a look at the post-PC world and Apple’s inflection point. The panel session took on the future of TV and, including the audience, we had input from some of the most influential companies in the space.

We will scramble to make the proceedings (in the form of an iPad download) available as soon as possible.

Normal blogging and tweeting will now be resumed.

The policymaker's dilemma

Here is an exchange with Robert van Apeldoorn, Journalist with Trends Tendances Magazine in Belgium. ( The exchange took place in early September via e-mail.

Robert: -Information and Communications Technology (ICT) is considered in Europe as a way to push growth, and is a target of national and EU policies (digital growth,etc), but the result seems to be a failure: the European computer industry (hardware) is almost dead (ICL, Siemens computers bought by Fujitsu, Olivetti almost out of computer business, Nixdorf dead) since the 90’, and the telco industry seems to be in crisis. All European companies are out of the handset business (big and fading exception is Nokia, but with  American software), and Alcatel is suffering with telco equipement manufacturing. It seems that at best, Europe can be a good niche player, with companies like ARM (chips). Technology seems to be reduced to localized services (computer services), some software businesses. What do you thing about that point of view? Is it correct or exaggerated ?
What will remain to the European companies ?

The main problem is perphaps the creation of European platform/ecosystems. Almost all are American today: Apple IOS-iTunes, Android, Amazon,…

Why Symbian didn’t succeed as a competitive platform ?

Is it possible to create European platforms? After all, IOS succeed after a short period of time.

What are the European tech companies that could play an important role in the near future ?

5by5 | The Critical Path #46: The Next Victim

We cover the valuation question regarding Apple and tech in general as seen through investors’ eyes. This discussion ranges a bit on P/E compression and the psychology of investors–which might change with Apple TV.

We also look at who is most vulnerable in the ongoing mobile computing disruption and who are the up-and-coming challengers. Finally, I introduce the Perspective app which I used for all my live presentations.

I’ll post more about Perspective in the future as it will be my platform for publishing complex or rich data.

via 5by5 | The Critical Path #46: The Next Victim.

What will happen to Nokia?

There is no shortage of information about what happens to companies in distress. The cause of distress varies widely and is often not well understood but the actions and symptoms of distress are very consistent. We can look at examples in each industry, even in each product category for a rich set of distressed company data.

For over a year I’ve been chronicling the decline of incumbents in the mobile phone industry. However, decline cannot continue indefinitely. At some point a company “exits” the industry. Either through a sale or divestiture or, rarely bankruptcy. The list of exits is already long. The length and the correlation between exit and the lack of recovery implies that Nokia will also exit.

But how, exactly?

Will Nokia be acquired? If so, then by whom? What other options exist? How can we analyze this?

Android's contribution to Google

Yesterday I presented the estimated Android income statement vis-à-vis Apple’s income statement. In this post I’ll compare Android as a part of Google’s overall business.

Recall that Google has already been compared in terms of overall revenue, growth and profitability to Apple and Microsoft here.  The argument can be made that mobility has not yet had a measurable impact on Google (certainly not noteworthy enough to be reported by management).

The impact on Google of Android can be shown in the following diagram:

I used color coding to identify non-Android (Green) and Android (Brown) segments of the business. Overall, Android could amount to about 3.5% of total Google revenues and about 5% of operating earnings.

Google and Microsoft speak volumes with silence

The following charts show Google and Microsoft revenues and operating income:

Both companies showed healthy growth. Revenues: Microsoft 6%, Google 24%. Operating Income: Microsoft 12%, Google 48%. Google had a particularly weak margin Q1 2011 so its income growth appears very strong.

The surprise in Microsoft’s performance was

When will smartphones reach saturation in the US?

Nielsen has already noted that more than half of US consumers have smartphones. comScore’s data seems to point to that threshold being crossed sometime this year.

If that point is crossed then it would mark the smartphone as one of the most rapidly adopted consumer technologies of all time. I plotted the time it took for a set of technologies to reach 50% penetration of US households.

I also showed the time it took for some of the technologies to reach 80% penetration. 

Apple at $600. Who knew?

Apple’s share price has increased rapidly in the last few weeks. The rise to $600 was swift and broke the pattern of slow growth the the stock was able to obtain over the past few years. The level, however, shouldn’t have been a complete surprise.

I think Apple is going to $600…It’s really not that complicated. Apple has a number of key drivers in its business model which have yet to be properly priced into the stock because I think it’s very cheap at this level.

-Stephen Coleman, chief investment officer at Daedalus Capital

This prediction was made October 26, 2007. On that date Apple’s share price closed at $184.7. It may have seemed like a bold bet, but as Coleman noted, the reason why it would reach $600 was easy to spot.

The real story on how I get to that valuation doesn’t even involve the sale of (the Leopard operating system) or the growth in the Mac business. How I get there is through the iPhone itself.

What was not easy to tell was when it would reach $600.