Linked by Thom Holwerda on Fri 23rd Mar 2012 15:09 UTC
PDAs, Cellphones, Wireless I'm currently reading Jerry Kaplan's excellent book "Startup: a Silicon Valley adventure". In this book, Kaplan, founder and CEO of GO Corp., details the founding, financing and eventual demise of his highly innovative company, including the development and workings of their product. What's so surprising about this book is just how timeless it really is - the names and products may have changed, but the business practices and company attitudes surely haven't.
Thread beginning with comment 511729
To view parent comment, click here.
To read all comments associated with this story, please click here.
kwan_e
Member since:
2007-02-18

"You don't call that a distortion of reality? A company with a MARKET CAP is bigger than entire sectors of the economy.


Do you know what a P/E ratio is? That is price to earning ratio. Apple's is low - if you adjust their stock price based on the average P/E in their sector their stock price goes UP... Most investors consider their stock to be undervalued.

The next you'll tell me is that housing bubbles or credit bubbles are evidences of real value. That the Dot Com bust never happened.


Economic Bubble (investorydictionary.com): An economic bubble occurs when speculation in a commodity causes the price to increase, thus producing more speculation. The price of the good then reaches absurd levels and the bubble is usually followed by a sudden drop in prices, known as a crash.

Apple's stock price has absolutely no relationship to a bubble. It grew fairly smoothly over over the last 10 years - in fact Apple's stock price growth trailed their profit growth by quite a bit most of the time. The dotcom bubble was investors throwing absurd amounts of money at stocks with no real positive profit outlook - Apple is remarkably profitable. If you think Apple's stock price is a bubble you have no idea what a bubble is. Apple is simply extraordinarily profitable - there is no denying this - their market cap is a reflection of this, it isn't inflated by speculation.

When people start making arguments based on market cap and share prices and not real economic value - sorry, but you've just deceived yourself. You further prove that people willingly buy into propaganda.


Please, define "real economic value"...
"

Considering all economic indicators and theories keep failing in practice, this amounts to nothing more than cargo cult reasoning. It's easy to look at a successful company and point to a few things and claim that's a sign of this and that. And then the company crashes and suddenly it's "Oh we knew all along this would happen". Same happened with Enron and many other companies with similarly good looking figures.

If there's one thing history shows us is that the cynics are always right. Most investors of any company consider their stock to be undervalued, but investors always consider their stock to be undervalued until it all comes crashing down. It is simply stupid to trust anything any investor says. They'll say anything.

Real economic value. How about this: have they actually sold $500 billion worth of iPods, iPads, Macbooks, etc and do the relationship with manufacturers actually amount to a significant percentage of that and adding to that the total salary/wages of Apple employees?

As you yourself pointed out, Apple has a market cap larger than entire SECTORS of the US economy. Do you REALLY REALLY think iPods and iPads and Macbooks etc are intrinsically more valuable than the goods sold in those entire SECTORS of the US economy? Do you REALLY REALLY think the price of Apple products accurately reflect the actual worth of the product rather than what people are actually willing to pay for now? Do you REALLY REALLY think that there are more employees working for Apple than there are for entire SECTORS of the US economy, as you keep pointing out? If an average Apple employee gets paid twice the amount of the average employee of entire SECTORS of the US economy, does that really mean that the employee actually creates twice the value for Apple than the employee for that SECTOR of the US economy?

Maybe I don't know what a bubble is. But then again, you financially savvy types keep telling us "oh, it's different this time, this time it's not a bubble because we're focusing on the right numbers this time". And then POP! Still hindsight's 20/20 and that translates to 20/20 foresight, right?

I'm working on a theory - the more figures financial types brings in to a discussion, the more wrong they are.

"They cornered the media device market. iPod. iPad. They were doing all right with their Macbooks and iMacs. But they really have cornered the market that netbooks used to be aiming for - portable but reasonably useful computing.


You may have some argument with iPod, but only to the point that their competition there is weak financially (because they already killed most of the big names off)..

iPads? Everyone and their brother makes tablets, and quite a few of the competitors in that market have very big pocketbooks...

Netbooks? How can you say something like "they really have cornered the market that netbooks used to be aiming for" - Everyone is competing in this space. How do they have the market cornered?
"

The iPad is clearly dominant in mindshare and in sales growth, as you and your numbers show. This doesn't mean there aren't competitors. They still carved out a market and cornered it. Sure, people were making tablets before Apple, but there simply wasn't a solid market for tablets until Apple used their iPhone/Touch numbers to make what is basically an oversized iPhone/Touch a more acceptable purchase despite the cost.

"What do you mean "so what?" People here were making the argument that Apple is special in a way that wasn't due to marketing (and hence psychology). I was countering those arguments. Did you not think there were other people commenting on this article?


No - they were giving rationales of why they believe Apple products are good. You were denouncing their reasons and dismissing them all on the basis that it is pure "psychology" - as if they are all brain washed. My point is that sure, Apple markets themselves and creates a brand image - but so does everyone else. You could just as easily apply your argument against ANY company. But Apple is worth over $500 billion dollars - and you say they "are just like any other company". Sorry, but they most certainly are NOT - that is just plainly obvious.
"

I didn't say they were just like any other company. Get your quotes right. I said they are just like any other company who have CORNERED THEIR MARKET. Not many companies successfully corner a market. But those that do have unprecedented expansion in said market.

If you haven't noticed, the output capacity of the entire world's economy has always been increasing. It's only going to be a matter of time that a company gains dominance and breaks records. So they are NOT special. Special is not "better". Special implies some amount of uniqueness. There is nothing unique about a company dominating and breaking previous records of domination.

And a thousand times the point that, no, Apple REALLY aren't worth $500 billion. A good percentage of it is perceived value and that can be wiped out overnight. We haven't fully seen the effect of Steve Jobs' death yet. You can hide in the comfort of your numbers all you want, but you haven't really demonstrated that you are any different from people who was sure the subprime mortgage economy would last forever, or that Enron was the ultimate investor's dream.

Reply Parent Score: 1

galvanash Member since:
2006-01-25

Considering all economic indicators and theories keep failing in practice, this amounts to nothing more than cargo cult reasoning. It's easy to look at a successful company and point to a few things and claim that's a sign of this and that. And then the company crashes and suddenly it's "Oh we knew all along this would happen". Same happened with Enron and many other companies with similarly good looking figures.


Enron cooked their books - they were LYING. It was NOT the "same" at all. Regardless, companies do fail. In fact I almost guarantee that Apple will too eventually. But they are not failing now - far from it...

Real economic value. How about this: have they actually sold $500 billion worth of iPods, iPads, Macbooks, etc and do the relationship with manufacturers actually amount to a significant percentage of that and adding to that the total salary/wages of Apple employees?


Well they had $50 billion in revenue last quarter - but that was rather exceptional. Total for 2011 was somewhere in the neighborhood of $100 billion. That puts their stock price somewhere around 5X their annual revenue (conservatively) - that is not at all out of the norm for even a slow growth stock, but then again Apple is not performing like a slow growth stock...

As you yourself pointed out, Apple has a market cap larger than entire SECTORS of the US economy. Do you REALLY REALLY think iPods and iPads and Macbooks etc are intrinsically more valuable than the goods sold in those entire SECTORS of the US economy?


No. Because Apple's stock price is not a reflection of the intrinsic value of their products. It is a reflection of their ability to MAKE MONEY. That is my entire point - they are most certainly not just "any other company"... IBM, Microsoft, whoever - name any company who has EVER demonstrated the ability to generate the kind of profits Apple routinely pulls in.

People are willing to pay a substantial premium for Apple products - and they do so repeatedly and predictably. It isn't just marketing or psychology - they make things people want to buy. And after people buy them - they come back and buy MORE. Attributing the whole thing to group think is just sticking your head in the sand. There is something else going on...

The iPad is clearly dominant in mindshare and in sales growth, as you and your numbers show. This doesn't mean there aren't competitors. They still carved out a market and cornered it.


You keep using terms you don't understand the meaning of. Microsoft has the desktop OS market cornered. IBM has the mainframe market cornered. Apple does not have ANY market cornered (with the possible exception of the iPod - which is a rapidly shrinking market anyway).

Cornering a market (as a product maker) is quite simply having the largest marketshare without having a monopoly. These are Apples marketshare numbers:

Computers 12.9% (growing slowly)
Tablets 54.7 (was falling rapidly but seems to be flattening)
Mobile Phones 11.2% (growing slowly)
Music Players 78% (fairly flat)

The whole point of cornering a market is so that you can charge higher prices (and you are implying this is why Apple is able to do so). Look at their historic pricing... Apple's margins have NO RELATIONSHIP WHATSOEVER with their marketshare. Apple ALWAYS has high margins - even in the computer and mobile phone market where their marketshare is tiny.

In short you don't know what the hell you are talking about...

Sure, people were making tablets before Apple, but there simply wasn't a solid market for tablets until Apple used their iPhone/Touch numbers to make what is basically an oversized iPhone/Touch a more acceptable purchase despite the cost.


So you are saying they essentially entered the tablet market by leveraging the strengths of their other products. So what? That isn't cornering anything - that is simply not being stupid. Again, everyone does this.

I didn't say they were just like any other company. Get your quotes right. I said they are just like any other company who have CORNERED THEIR MARKET. Not many companies successfully corner a market. But those that do have unprecedented expansion in said market.


I'm still waiting for you to back up, with some actual facts of any kind, how you can keep saying they CORNERED their market...

Reply Parent Score: 2

jsolares Member since:
2005-07-06

The real test for apple will be when its iphone/ipad bubble burst, they can't keep growing the phone and tablet market at that rate forever. will they have introduced a new product with the same growth and profit the iphone and ipad have today?

They might make hundreds of billions a year but if they aren't growing, then the market doesn't give a crap, just look at microsoft today.

That is my main problem with the "market" as it is today, endless growth is not sustainable, we live in a finite world.

Reply Parent Score: 2

kwan_e Member since:
2007-02-18

"Considering all economic indicators and theories keep failing in practice, this amounts to nothing more than cargo cult reasoning. It's easy to look at a successful company and point to a few things and claim that's a sign of this and that. And then the company crashes and suddenly it's "Oh we knew all along this would happen". Same happened with Enron and many other companies with similarly good looking figures.


Enron cooked their books - they were LYING. It was NOT the "same" at all. Regardless, companies do fail. In fact I almost guarantee that Apple will too eventually. But they are not failing now - far from it...
"

I never said Apple were the same as Enron. That's a problem with your comprehension.

I'm saying you're making the same mistake as the PEOPLE who believed in Enron's success. You pull numbers that support your case but ignore the other logical conclusions and numbers that don't. And you financial types always tell us that you're "looking at the right numbers this time, unlike last time when we also told you we were looking at the right numbers and we were wrong".

Well they had $50 billion in revenue last quarter - but that was rather exceptional. Total for 2011 was somewhere in the neighborhood of $100 billion.
.
.
.
Because Apple's stock price is not a reflection of the intrinsic value of their products. It is a reflection of their ability to MAKE MONEY.


And you say there's no distortion of reality going on. The total REVENUE of Apple is $100 billion last year, and yet Apple itself is worth $500 billion. If you had $1 trillion dollars, would you in your right mind buy Apple and expect it to recover your $500 billion in five years time? Remember, you said the $100 billion was REVENUE. To recover the $500 billion you spent, the money has to come from PROFIT.

The fact that you can understand that Apple's stock price is not a reflection of the intrinsic value of the products and at the same time believe their stock price is the value of their company... that's why I keep saying you are likely one of those people before 2007 who told us subprime mortgages were good for the economy.

People are willing to pay a substantial premium for Apple products - and they do so repeatedly and predictably. It isn't just marketing or psychology - they make things people want to buy. And after people buy them - they come back and buy MORE. Attributing the whole thing to group think is just sticking your head in the sand. There is something else going on...


When did I ever say anything about group think? What you've just described IS marketing and psychology. People are willing to pay premium prices. This causes Apple to be valued more than what it can actually produce in profits. Yes, there is something other than group think going on. It's called MARKETING and PSYCHOLOGY.

You keep using terms you don't understand the meaning of. Microsoft has the desktop OS market cornered. IBM has the mainframe market cornered. Apple does not have ANY market cornered (with the possible exception of the iPod - which is a rapidly shrinking market anyway).

Cornering a market (as a product maker) is quite simply having the largest marketshare without having a monopoly. These are Apples marketshare numbers:

Computers 12.9% (growing slowly)
Tablets 54.7 (was falling rapidly but seems to be flattening)
Mobile Phones 11.2% (growing slowly)
Music Players 78% (fairly flat)

The whole point of cornering a market is so that you can charge higher prices (and you are implying this is why Apple is able to do so). Look at their historic pricing... Apple's margins have NO RELATIONSHIP WHATSOEVER with their marketshare. Apple ALWAYS has high margins - even in the computer and mobile phone market where their marketshare is tiny.

In short you don't know what the hell you are talking about...


Tablets at 54.7% and music players at 78%. Yeah, THAT'S not cornering a market...

It's strange how people like you can read these numbers, and understand the fact that people are willing to pay premium prices for items that don't really cost much more than non-premium prices to develop and make, and NOT understand, therefore, that the rest IS being covered by marketing and psychology...

I don't think you understand how market economy works. When the sale value exceeds the actual cost of a product, the rest is PERCEIVED VALUE. People, in a market, pay what they think something is worth. What they THINK something is worth. The ONLY logical conclusion is that marketing and psychology is responsible for the overvaluation of Apple products and hence their massive revenues.

"Sure, people were making tablets before Apple, but there simply wasn't a solid market for tablets until Apple used their iPhone/Touch numbers to make what is basically an oversized iPhone/Touch a more acceptable purchase despite the cost.


So you are saying they essentially entered the tablet market by leveraging the strengths of their other products. So what? That isn't cornering anything - that is simply not being stupid. Again, everyone does this.

I didn't say they were just like any other company. Get your quotes right. I said they are just like any other company who have CORNERED THEIR MARKET. Not many companies successfully corner a market. But those that do have unprecedented expansion in said market.


I'm still waiting for you to back up, with some actual facts of any kind, how you can keep saying they CORNERED their market...
" [/q]

"Everyone does this" therefore "Apple is special". That's the power of the reality distortion field, not only of Apple but of anyone who believes what investors and economists say. Sorry, but you provided your own facts that shows Apple has the tablet and music player market cornered.

You, on the other hand, have not provided any good reason why Apple is special in any way. What you have provided is proof that you've been totally sucked in by the cargo cult religion that is finance.

Reply Parent Score: 2