News for apple is getting worse

trazer985's picture
Rank: Neanderthal | 2,180

Foxconn/ HON HAI precision industry (same company), basically produces every ipad, iphone etc.

They're infamous for keeping employee conditions low, and they've recently hit a new low, using 14 year olds as interns (what an intern can do at a manufacturing plant other than assemble stuff, which would be strangely similar to a cheaper worker, its not like they're in a recruiting crisis is it).

Now while thats not exactly going to change hte world, the big squeeze on apple at hte moment, isnt demand for its products, its margin. Prices are coming down, and costs are going up. Given that easily the biggest $ amount in apples costs are payments to foxconn, if their costs change, apples costs change.

If the current margins are only able to be created because of conditions that cannot be maintained, i can only see apples costs going up. Workers dont hand back rights/conditions once they have them. I'm not saying apple is finished, but I do think its margins it was taking off its CURRENT product stream are temporary. Supernormal profits are always competed away, and staying cool in the tech space is rare.

Comments (19)

Jan 25, 2013

I also hear that five of the toilets in their Cupertino HQ are blocked at present which means a long waiting time for the WC which will also lower productivity. Forget their products, the toilets tell me to short!

1percentblog.com

    • 1
Jan 25, 2013
redrut:

I also hear that five of the toilets in their Cupertino HQ are blocked at present which means a long waiting time for the WC which will also lower productivity. Forget their products, the toilets tell me to short!

are so the opinion on the stock and the toilet queues are inversely correlated. Install some CCTV and pair trade strategy

Jan 25, 2013
redrut:

I also hear that five of the toilets in their Cupertino HQ are blocked at present which means a long waiting time for the WC which will also lower productivity. Forget their products, the toilets tell me to short!

They produce nothing in Cupertino, so they will be fine. What I'm more concerned about is the loss of time spent on the toilet thinking up new ways to make the iPhone even thinner!

Jan 25, 2013
redrut:

I also hear that five of the toilets in their Cupertino HQ are blocked at present which means a long waiting time for the WC which will also lower productivity. Forget their products, the toilets tell me to short!

Maybe Apple needs to get Japanese-style hole toilets too, because it's time to HUNKER DOWN!

http://blogs.wsj.com/japanrealtime/2012/06/01/frus...

Jan 25, 2013

One of the best things I heard yesterday is that we can't consider AAPL as a growth stock anymore. My question - how many growth stocks sport a P/E of 10 and a 2% dividend?

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Jan 25, 2013

Everyone likes to kick the guy that's down, so I'd hold out for a little bit more of a drop. Watch as people push it down just to do it. Then, go long.

Why?

Just like facebook, there's too much institutional money involved for people to let this company die.

Jan 25, 2013

I know you are referring to a collapse of the stock price but no fucking way this company "dies" (at least in the near term). Apple is not RIMM. Apple is one of the greatest American companies of all time and while margins have compressed significantly over recent quarters they are still above the 34% that they used to run at. Smartphones only make up about 30% of the market so there is plenty of growth left as the market matures. Sure they need to innovate and acknowledge the concept of increased competition but to the extent that any of the drivers work out: China, Apple TV, cheaper models, etc. work out performance should stabilize. Apple consumers are some of the most loyal out there and I would argue that they still have the best mousetrap. It was only a few months ago that everyone and his mother was choking down on Apple. Thinking about building up a position in the coming months.

Jan 26, 2013
junkbondswap:

I know you are referring to a collapse of the stock price but no fucking way this company "dies" (at least in the near term). Apple is not RIMM. Apple is one of the greatest American companies of all time and while margins have compressed significantly over recent quarters they are still above the 34% that they used to run at. Smartphones only make up about 30% of the market so there is plenty of growth left as the market matures. Sure they need to innovate and acknowledge the concept of increased competition but to the extent that any of the drivers work out: China, Apple TV, cheaper models, etc. work out performance should stabilize. Apple consumers are some of the most loyal out there and I would argue that they still have the best mousetrap. It was only a few months ago that everyone and his mother was choking down on Apple. Thinking about building up a position in the coming months.

I believe that is what they said about NOK in the past

Jan 26, 2013

AAPL has a more differentiated/diversified product offering, integrated operating environment, and loyal consumer base. Is it the same innovative thought and product leader that it was under one of the greatest leaders of all time? Unlikely but it does have a stable business model and proven ability to create products that consumers demand. At some point any stock can become a value play and there is always money to be made ignoring what "they" have to say and making your owned informed decisions.

Jan 26, 2013

UFOInsider, let me just replace AAPL with other companies and lets see how it sounds

Just like facebook, there's too much institutional money involved for people to let Bearstearns die.
Just like facebook, there's too much institutional money involved for people to let American Airlines die.
Just like facebook, there's too much institutional money involved for people to let Chrysler die.
Just like facebook, there's too much institutional money involved for people to let AOL die.
Just like facebook, there's too much institutional money involved for people to let Nokia die.

Just wanted to pointed out that the statement, it won't go bankrupt, it will drop a bit then go up a bit, doesn't help anyone. Sure they won't go bankrupt but what if they drop to 400 you buy and then they drop to 300 you will probably cut your position.

At the moment AAPL is on a downard trajectory because nothing in the pipeline tells me that they are going to grow at a rapid pace in the future. Apple TVs may change that though

1percentblog.com

Jan 27, 2013
redrut:

Just wanted to pointed out that the statement, it won't go bankrupt, it will drop a bit then go up a bit, doesn't help anyone.

Ok, I didn't explain what I was thinking very well and I have time to really flesh out what I've been observing for the last year or so.

They're starting to feel pressure from other companies on multiple fronts, and the founder and primary driver of their product development and marketing recently died, so the company is currently directionless. It's generally acknowledged that Apple prices were pushed a too high based on a variety of factors, and that the company hasn't really done anything spectacular in a while. Now that the price is going down to reflect these issues, the same cultish, herdlike mentality that bid the price higher than it should have been (IMO) is pushing them down further than they should be. I use the word 'should' because I think a LOT of pricing on this stock has and will continue to be less rational than the pricing on other companies would be. Stated another way, a huge amount of emotion drove the prices too high, and now that same emotion is going to push the price lower than it needs to be: people are overreacting to this company.

That having been said, Apple is too established in too many areas to become irrelevant. One company or another may begin to eke out an meaningful advantage in one facet or another, but Apple has too much momentum for people to reinvest of themselves in another direction completely: and a good chuck of this isn't rational. Remember that Apple isn't catering to the ultra elite or the discount store....they worked their way into the imagination of the middle and upper middle class. So there's a very profitable and loyal base that will hold on to the 5, 4S, even the iPhone 4 in anticipation of some new thing as opposed to buying a droid. So, sales will taper off as opposed to dropping off. This buys the company some time to plot a course for the future.

Aside from growing inventory pressures, the primary challenge for the company now is to fill the void that Steve Jobs left. The company has been in the position it's in now...leaderless...before, but they obviously can't bring Jobs back this time. So, they have to either find an exceptional leader or reform their corporate governance around some other principle that's visionary. In the long term (2-4 years), failing to do so WILL kill the company or force massive restructuring: they simply can't survive on momentum alone, and this is stating the obvious, so I'll stop there.

I see it like this:
(1) prices went too high, probably $50-100 more than they ever should have been, maybe even more than that
(2) they're coming down and will continue to do so for a few more months, maybe as low as $200
(3) prices will stabilize in a few months as Apple continues to sell units, perhaps in the $250-$350 range
(4) prices will likely then bump up when people realize they overreacted and apple generates headline noise about new products, strategy, or management: perhaps going to $300-400 range
(5) whatever that range is, it will stay there and then start to taper off until
(6) the aforementioned structural changes are made in the company...or aren't, leading to
(7A) new vision and mindset of company is installed/develops, disaster averted
(7B) the company becomes 'just another electronics company', and then the stock prices are going to take a serious beating.

If I were betting on apple, I'd short it for the next few months, wait for the price to stop dropping, and then buy and hold for the next year or so. Beyond that, no one really knows, it remains to be seen if Jobs' shoes even can be filled, either with a strong leader or overhauled corporate culture.

DISCLAIMER: these are total ballpark estimates. I'm not an analyst covering this company and won't even pretend that these are reliable. This is a very rough price trajectory drawn to illustrate a point.

The only less rational but more predictable thing I can think of than Apple share prices is gold prices, and I and a few others ran a small company focusing on gold and saw exponentially rising profits these last few years as gold prices kept going up. The principle driving gold prices is very simple and extremely predictable: FEAR. LOTS AND LOTS OF FEAR, and people flocked to gold to try to buy some peace of mind. The emotional state that drives Apple is a lot more complicated and I haven't really managed to figure it out, so I've avoided Apple trades completely. But the fact remains that primary driver appealed to people's imaginations, and they don't care so much about a more quantitative assessment of the company or its products as someone in the financial industry or tech/geek world might.

As for the comparision to facebook: I'm thinking along the lines of facebook compared to every other social networking site out there. Facebook has vastly more institutional support to call on, and they'll go to great lengths to protect their investment. If that means hiring creative geniuses, aquiring profitable subsidiaries, or selling off chunks of their databases....the shareholders and the Zuk aren't walking away empty handed. Compared to legion of other tech companies out there with far fewer assets to leverage against financial ruin, it's very unlikely that facebook would suffer the same fate as previously oversold tech companies (BTW, facebook is another stock I just didn't want to touch. To quote EddieBraverman "I wouldn't touch that with your dick."). Your proofs are definitely valid in light of me not fully explaining the context I was thinking in, so you're right about that. To be fair, we'll probably never in our lives see such a spectacular nuclear meltdown like Bear again, so I'm not sure any analogy would really do it justice, but whatever, now I'm wandering off topic.

Anything is of course possible, and with bad luck or horrific management decisions, both facebook and apple could likely see total ruin very quickly, it's just unlikely. In contrast to the dot com era failures and compared to current social media, facebook has vastly more infrastructure, more brand recognition, more money backing it, more cash on hand, more people who want to work there, more apps competing for recognition, more companies that want to be included, and more overall momentum as a company. Just, more of everything. It would take 2, 3, even 4 years of zero innovation, literally doing nothing for facebook to begin to die. Apple's timeline is shorter, maybe a year or 1.5 years, but the same reasoning applies. I give apple until November of this year to begin figuring out their new corporate strategy before becomming a prophet of doom.

....but I'm still not putting money on either company because tech / social media just isn't my thing at all (hell, groupon confuses me, I don't even pay attention to their stock). It's just that these two companies have so much "human nature" driving them, it's hard to ignore. That's the part that fascinates the psych major in me.

And just because fate is a randomly cruel creature, both companies will explode on Monday's opening?

Jan 26, 2013

I'm so tempted to buy at 400.

Competition is a sin.

-John D. Rockefeller

Jan 28, 2013

Better argument UFO but still unconvinced..

They are not directionless, this is just groupthink gone mad. It fits the puzzle to say they have lost their leader and they have no idea what they are. They know exactly what they are and they know exactly what they are good at. My guess is that if Jobs were alive, their pipeline over the past 2 years and indeed the next 2 years would be EXACTLY the same. The guy knew exactly where Apple should go and I have no doubt the Jobs plan is still being worked on (Iphone 5 and iTV). Where Apple F**ked up is substandard product offerings and a competitor rapidly gaining pace.

The other interesting thing which FT commented on was that they are losing there cool. Apple grew as the must have gadget, an aspirational purchase that meant if you had an Apple iPhone, you were somehow 'cooler'... As the company grew from niche player to a global standard the multiple exploded and rightly so. Now everyone has an iPhone and if I want to be hip, edgy and different, I need a new phone that no-one has.

The share price has little to do with corporate structure and a tad to do with the leader. If they don't justify their huge premiums on what is essentially a commoditized product or innovate flawlessly once more, their multiples will drop to those of Samsung and HTC.

Re your gold comment. DIsagree as gold is the best fiat currency trade against beggar thy neighbour monetary policy

1percentblog.com

Jan 28, 2013

LOL my turn:

redrut:

They are not directionless,

this is just groupthink, they have lost their leader and they have no idea what they are.

Yes, hence the term "directionless", as in a groupthinking crowd lost their leader and has no idea where they are

redrut:

Re your gold comment. DIsagree as gold is the best fiat currency trade against beggar thy neighbour monetary policy

Correct, and when people fear that fiat money will decline in value, they always run to gold. Gold would be 50% of the FEAR index, if there were one.

I gotta be honest, it seems you're arguing just to argue, all fine and well, I do the same thing...

Jan 29, 2013

Youre confusing me, i said they weren't directionless. They have a direction.

1percentblog.com

Jan 29, 2013
redrut:

Youre confusing me, i said they weren't directionless. They have a direction.

which is what?

Jan 29, 2013

iPhone 5 / iTV / Cloud improvements / other secret projects that we probably don't know about

1percentblog.com

Jan 29, 2013
redrut:

other secret projects that we probably don't know about

http://roflrazzi.files.wordpress.com/2012/03/funny...

Jan 29, 2013
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