REPRINT: Blackberry – The Problem (7/19/12)

Here is a reprint of my 2012 post on why RIMM (Blackberry) failed.


What Happened – A Lesson in Psychology

The simple answer is that they have totally flubbed the move from feature phones to the modern smartphone and tablets. The Blackberry Storm did not go over well, largely due to quality of interface issues, and the PlayBook tablet was a total flop.

But for the investor this information is not enough. This is 20/20 hindsight. By the time RIM dropped to a four year low on June 17, 2011, it was too late. We want to know: How did such a smart company make such a huge mistake? What where the early warning signs?


Full post here

 

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Understanding Apple: Three Keys To Stock Price – 3. Looking Ahead

Apple  share price has been slammed recently, falling as low as $92.43 last Wednesday. The question for investors is whether this downward trend will continue, if the price will remain range bound as it has for over a year, or if share prices will reverse and continue to appreciate.

I have identified three key factors in the future value of Apple stock. The first article focused on iPhone sales which many see as leveling off in growth, or even declining in the current year. Since this product currently accounts for well over 60% of Apple’s income, this would clearly affect performance. Fears over this are what drove the price down.

The second post focused on how the Services and Other Products categories – particularly the new Apple Watch – will likely drive moderate growth.

In this post we will examine what may be the most important influence on Apple stock price:

  • Apple’s forward guidance for the March quarter

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Economic Resonance: A theory for maximizing growth

Note: This paper is in progress and will take a few weeks to complete

Introduction

The economy of the country is an aggregate of the economic activity of the various components: corporations, public sector, small businesses, families and individuals. While the specific objective of a capitalist corporation is to maximize return to its shareholders, clearly most companies do best when the overall system is maximized.

This paper will introduce a concept we call Economic Resonance that shows that the overall economy works best when in a state of “harmony,” and that it can be negatively affected when  accumulation by one sector is taken to an extreme. We will show that the when a balance amongst sectors is achieved, an Economic Resonance occurs that maximizes growth and benefits for all sector.

resonance

Resonance

More –>

Note: This paper is in progress and will take a few weeks to complete

— Comments Appreciated —


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Apple Pay – Superficial Critiques

I really do not like to get snarky, but sometimes I see blog posts that are so superficial that I cannot help but be a little testy.

Case in point Apple Pay Has Finally Arrived! Great – But Here Are 7 Reasons It Won’t Be A Slam-Dunk Success by Robert Hof, in Forbes.

First – I totally agree with Hof when he writes

it’s apparent that Apple Pay is far from a guaranteed success.

This definitely is true. No one can predict with surety two basic factors:

  1. Will it work properly?
  2. Will the public accept it?

Typically, Apple’s products and services work pretty well, but there have been some notable exceptions. The move from .mac to me.com was a tremendous mess, and the introduction of Maps seriously flawed. Any system failure even vaguely approaching those will be a disaster. This is people’s credit cards and payments, not simply directions to the nearest movie theater.

As for number two, Apple seems to have a really refined system, and if it works as effortlessly as in Apple’s demo, it will certainly be the easiest method of paying yet available. A simple swipe of your iPhone or Apple Watch by the NFC reader while holding the home button (on the iPhone) and you are done.

But none of this is guaranteed. That is the nature of any business, especially one that is creating a whole new product.

But Hof goes on to list seven important areas where Apple Pay is lacking.

1 –You can’t use Apple Pay unless you buy an iPhone 6 or 6 Plus

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The Definitive Debunking of Touch ID Fingerprint Hack

When Touch ID was announced at the iPhone 5s launch, it was immediately besieged by detractors.

One area in particular for detractors is that the Touch ID system is susceptible is via spoofing an owner’s fingerprint. If true, this would  pretty much leave the whole system open to an attacker, and now, with the iPhone 6 and Apple Pay, spoofing would easily expose the owner to fraudulent charges placed on the his credit cards.

The most convincing  exposition on this was by the German Chaos Club group which quickly posted online video of how to spoof the Touch ID sensor system.

With the advent of Apple Pay based on Touch ID, this issue becomes even more critical.

Screen Shot 2014-09-24 at 8.19.58 AM

Two facts are clear:

  1. it works,
  2. it is not all that difficult.

However, there is one clarification to point #2. It ought to read:

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Apple Watch: ASP at $510 or higher? [Updated]

There has been a lot of interest in Apple Watch since it was announced last week. The two big questions for investors are

  1. How many will Apple sell? and
  2. What will the average selling price be?

An article at Seeking Alpha by Stone Fox Capital make the argument that it will likely not move earnings significantly.

They note that, with revenue close to $200 billion next year, the Watch would need to sell $22 B in order to account for 10% of the total.

Additionally, they note that Citigroup estimated Apple will sell 14 million units next year. They then go on to calculate out at a price of $349.

If my calculations are accurate, Apple must sell roughly 55 million watches at the average low-end price of $349.

While the writer’s point is made, the price is obviously absurd. This is the base price and we all know that it will only go up from there.

So, I have made some projections of price points and percentage of sales in each range. I created what I see as reasonable ranges for low, middle, high and ultra-high ranges, and I believe the distribution curves are both rather reasonable. In each price range I have expected that the average price is closer to the bottom than the top.

First I do a conservative estimate using the 14 million units estimate.

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