Daily: On Apple’s margin/share quandary and more on the Libor Scandal

Daily commentary: Tech sector

OK. So this is the last links post for today. The headline is on the tech sector but I am putting the remaining links in here as well. The great thing about micro is that when you step away from the scary macro headlines, there is a fair bit of competition and innovation going on in the world. The technology sector is a big part about that. What are the negatives there? Valuation for some of the high flyers like Amazon or Facebook. I also see the acceptability of patent trolling by big tech companies as an anti-competitive sign that could wreck the sector’s innovation. But on the whole, tech looks good. Valuations are relatively low, more in line with the market than at any point in the last two decades. And slower growth tech like Microsoft and Cisco are paying dividends. Even Apple is distributing money to shareholders. That’s a sign that there could be fewer value-destroying takeovers like the one that Microsoft has just written off.

For me, the worry has to be macro because on the micro level, there are still a lot of good storylines in tech.

On Apple specifically, my call has been that Apple will eventually face a point where it will be forced to go for share or maintain margins. When it decided to maintain margins in the PC business two decades ago, it was disastrous. But, now Apple has a market leader status in mobile, so maintaining margins rather than share won’t be fatal. It will, however, negatively impact growth.

Mobile users with cheapie phones will switch to Android. Apple is not going to chase share in that market. But in the tablet market it could do. While Amazon is creating problems for Google by customizing Android and forking it into a non-Google dominated platform, Amazon powered hardware still requires Android software and apps and that gives Android economies of scale and network effects which will erode Apple’s dominance (see my comments from last year). Google’s entering the tablet market itself increases this more directly. The reason that Apple is suing the pants off of Samsung is because they want to stop the Android menace, not just because Apple thinks Samsung has infringed. I see Apple going down-market in tablets and we’ll have to see how well they execute and whether it cannibalises sales.

P.S. – this has nothing to do with the passing of Steve Jobs. Apple was always going to face a margin/share quandary.

That’s it. Here are the other links.

Links Commentary: Libor Scandal

I think this Libor Scandal has the potential to be the nail in the banks’ coffin as far as public opinion is concerned given other bank shenanigans.

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More