WORTH READING Apple's Spat With Google Is Getting Personal

[David Farber <dave () farber net>]

Begin forwarded message:

From: Newmedia () aol com
Date: March 17, 2010 9:38:59 AM EDT
To: dave () farber net
Subject:  Apple's Spat With Google Is Getting Personal

Jim:
 
Sorry that you completely misread my Gartner report.  What I said is that Apple should STAY in the hardware business 
and WORK with Dell in order to expand its PC market share to 10% or greater.  In particular, I suggested that Apple use 
Dell to sell and support Macs in enterprises and, in the extreme case, allow Dell to build Macs under a well supervised 
licensing arrangement.
 
The report was based on what I believe is good evidence that Jobs met with Michael Dell in mid-2006 and that they 
negotiated a series of optional business arrangements, to be exercised at Apple's choice based on how well the upgrade 
to Intel-based Macs progressed.  Following these discussions, Dell took on Mac support responsibilities for around 200 
corporate accounts but that seems to be the extent of the relationship to date.
 
I offered this as fundamental analysis about Apple's PC market position and I still stand by it -- not as a stock-tip.  
As you might not know, Gartner isn't a broker-dealer and, as a Gartner analyst, I never gave stock advice.  I did 
however get voted Jackass-of-the-week by the "fan-boys" who also couldn't read the report. <g>
 
That said, Apple's stock is where it is because of the iPhone/iPod/iTunes, not the Mac.  Apple has operated internally 
as two "independent" companies for many years and my view has consistently been positive about the iPhone company and, 
therefore, about AAPL.
 
Best,
 
Mark Stahlman
New York City
 
In a message dated 3/17/2010 9:15:33 A.M. Eastern Daylight Time, dave () farber net writes:


Begin forwarded message:

From: Jim Hillhouse <jdhouse4 () me com>
Date: March 17, 2010 8:55:46 AM EDT
To: "dave () farber net" <dave () farber net>
Cc: ip <ip () v2 listbox com>
Subject: Re: [IP] WORTH READING Apple's Spat With Google Is Getting Personal

This analysis should be taken in context with Stahlman's previous advice at Gartner issued in a report,

http://gartner.com/DisplayDocument?ref=g_search&id=497146

on Oct. 17, 2006 that called for Apple to abandon the HW business and sell Mac OS X to...say, Dell because Intel would 
no longer be able to prop-up Apple's 40% HW margins, as though Intel were some sort of charity. How'd that analysis 
hold up? Not so good. Anyone escaping Apple because of 2006 analysis would have left a great deal of money on the 
table. 

I've seen a lot of analyses of Apple during the 21 years I've invested in the company. This enclosed analysis, like the 
above mentioned, misses the mark in some pretty basic ways. For example, Google is in many ways acting as Intel's 
surrogate? That'll be the day.

Apple is going after HTC because that is the low-hanging fruit offering the biggest bang for the buck; stop HTC and you 
put a real dent into the future of Android both via IP and finding HW partners. CEO's don't wake-up daily with the 
intent of taking actions that present an excellent opportunity to have their company served with a civil complaint by 
another with over $30B simmering on their balance sheet, especially when that suit follows because the possible partner 
Google, which has done mobile since the early 2000's, doesn't have nearly the IP quiver of Apple, which has been doing 
mobile since before the famed Newton in the early 90's. If one just looks at the amount of patents filed of Apple v 
Google, the numbers favor Apple by multiples. 

My guess is HTC eventually bails, Google looses, and we get to see how well Android can compete with one-finger. Of 
course, as an Apple shareholder since 1997, I'm biased. But then, my record on Apple is better than Stahlman's.         
   

Sent from Jim Hillhouse's iPhone
jdhouse4 () me com
512-484-9489

On Mar 17, 2010, at 7:04 AM, David Farber <dave () farber net> wrote:

> Begin forwarded message:
>
> From: Newmedia () aol com
> Date: March 17, 2010 6:08:31 AM EDT
> To: dave () farber net
> Subject: Re: [IP] Re: Apple's Spat With Google Is Getting Personal
>
> Folks:
>  
> The issue for Apple is a simple one -- profits.  By virtue of its "closed" business practices, Apple's gross margins 
> are many multiples higher than their competitors.  These profits, in turn, support stock price multiples that are 
> higher than its competitors.  But is this a house of cards which must inevitably fall?
>  
> What is usually missed in the "closed vs. open" debate is the impact of crucial competitive forces.  In this case, 
> the most important actor-to-be is Intel.  When Intel is ready to compete against the ARM architecture with its 
> Atom-based x86 technology -- likely in 2012 and substantially assisted by its partnership with Nokia -- the 
> competitive structure of the smart-phone market will probably be upended.
>  
> Apple has always been an anomaly in business terms.  For years IBM and Motorola subsidized Apple's Macintosh by 
> providing below-cost silicon, in order to keep their Power PC production lines full.  IBM no longer needed Apple in 
> 2003 when they signed up the Microsoft and Sony game consoles and Motorola also abandoned them when it spun out its 
> semiconductor division.  Intel stepped in to rescue Apple's margins with special chip prices and massive engineering 
> help.  Apple said thanks -- but no thanks.
>  
> The real conflict here is between Apple and Intel -- not Apple and Google, which is in many ways acting as Intel's 
> surrogate.  Apple responded to Intel's "help" by buying PA Semiconductor, which has produced the processor in the 
> iPad.  Apple's "closed" margin structure is in Intel's cross-hairs and that is why Apple filed its lawsuit against 
> HTC, a company that is working with Intel on next-gen smart-phones.
>  
> Best,
>  
> Mark Stahlman
> New York City
>
> Archives              

=




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