Apple vs. Research in Motion, 6 months later - Vancouver Sun (blog)

Six months ago, I blogged on Apple vs. Research in Motion and which stock would be the best investment going forward, following a debate with my father-in-law on the merits of each company and the devices they manufacture (original post). The post seemed to strike a chord, generating lots of hits and comments. At the time, Apple shares were trading at $341.64 and RIM shares were at $62.15. I thought that Research in Motion stock would outperform, reasoning that a $34 share price rise for each company would be a 10% gain for Apple but a more-than-50% increase for Research in Motion. At the time, BlackBerry was increasing its international market share and outpacing analyst expectations on revenue and earnings.

Boy, was I wrong.

It's been quite a half-year for Research in Motion, whose shares have cratered to the $27 range -- a more-than-50% drop -- in the wake of product delays and the loss of market share to Android and Apple smartphones. The Ontario company has issued profit warnings and analysts are taking turns writing obituaries for the maker of the BlackBerry and PlayBook, which was belatedly unveiled in April - a month after Apple launched its iPad 2.

Today, angry shareholders descend on Research in Motion's corporate headquarters in Waterloo for the annual general meeting, wondering if the former Canadian technology icon has met its Waterloo. For months, co-CEOs Jim Balsillie and Mike Lazaridis resisted calls for an executive shakeup before grudgingly forming a committee to explore the possibility of restructuring the board. But activist shareholders are on the warpath for quicker action so the technology pioneer can rediscover its mojo.

Are you a value stock picker? RIM shares trade for a trailing 12-month price/earnings ratio of just 4.6 and the company -- which is sitting on a cashpile of about $3 billion -- has a market capitalization of just $14.6 billion.

Apple stock, meanwhile, is trading for about $354 a share, a 4% gain from six months ago, as Steve Jobs's creation continues to churn out cool new iPhones, iPads and iPods. Apple's cash pile is $70 billion, enough to swallow RIM with barely a burp, and the fast-growing tech darling is trading at a trailing 12-month price/earnings ratio of 17, not expensive for a company that is growing as fast as Apple is.

At least the two archrivals are cooperating on the acquisition of new techonology: a consortium that includes Apple, Research in Motion and Microsoft just spent $4.5 billion to buy several Nortel patents. Remember Nortel? That Canadian technology icon at one time had a $398-billion market capitalization, accounting for more than a third of the value of all companies on the Toronto Stock Exchange.

So is Research in Motion a sequel to Nortel Networks, destined for oblivion and stripped down to be sold for spare parts after a meteoric streak across the technology sky? Perhaps. But RIM's rocky road reminds me a bit of the speed bumps encountered by another technology company. This company was founded in 1976 and sacrificed one of its co-founders in 1985 as Microsoft ascended to the No. 1 position in computing. The company's share price flatlined for much of the 1980s and 1990s and it was written off by investors who fled the stock. The co-founder returned in 1997 to spark a renaissance that continues to this day with a suite of innovative products unrivalled by competitors.

That company, of course, is Apple.

Follow me on Twitter: @jameskwantes

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iOS 'stickiness' grows as average Apple user has $100 in content per device - Apple Insider

iOS 'stickiness' grows as average Apple user has $100 in content per device

By Neil Hughes

Published: 04:00 PM EST

With an average of $100 in content purchased on every Apple mobile device, it is increasingly difficult for users to justify the switch from the iOS ecosystem to a competing platform like Android, a new analysis has found.

With a current installed base of about 225 million iOS-powered units, Apple customers have invested about $22 billion in content, cumulatively, for those devices, analyst Chris Whitmore with Deutsche Bank said in a note to investors on Monday. He sees the install base growing to more than 300 million units by the end of calendar year 2012, with sales more than $30 billion by the end of next year.

"This averages to (about) $100 of content for each installed device; suggesting switching costs are relatively high (not to mention the time required to port)," Whitmore wrote. "While Apple's best in class user experience is combined with these growing switching costs, the resulting customer loyalty is unparalleled."

Whitmore sees the "stickiness" of the iOS platform growing even more later this year, when Apple offers automatic, free syncing of data with iCloud. The new service, which will back up purchases, application data and device settings while offering storage of documents and photos, will further differentiate iOS from competing platforms.

The analysis comes after Apple revealed that it has reached a new milestone of 15 billion applications downloaded through the iOS App Store last week. A separate report from earlier Monday indicated that 18 percent of applications on the App Store are paid.

It's the investment in those paid applications, along with the purchase of content through the iTunes Store like music or movies, that Whitmore believes will make it even harder for users to switch to another platform.

He expects the development of applications for iOS devices to accelerate even further this year, when the iPhone and iPod touch are expected to receive hardware refreshes. Whitmore predicted last month that Apple will introduce a new iPhone hardware model priced at about $350 contract-free, addressing a huge market of 1 billion pre-paid mobile customers worldwide.

"In addition to new hardware, we expect the combination of an enormous iOS ecosystem, iCloud and a lower priced iPhone will extend AAPL?s market reach and leadership with developers and customers alike, further enhancing the overall value of the iOS platform," he said.

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Google Blows It Big Time: Microsoft, Apple, RIM Get Nortel Patents - ZDNet (blog)

Google (GOOG) has pulled off a rare feat in business: blowing an opportunity so big that the company will be living with the fallout for a really long time. Microsoft (MSFT), Apple (AAPL), and RIM (RIMM) — in a consortium with Sony (SNE), EMC, and Ericsson (ERIC) — bought the Nortel patent portfolio for $4.5 billion in an auction. Google’s original bid of $900 million simply wasn’t enough.

You can debate whether the patents of the bankrupt Canadian communications company were intrinsically worth that much. However, value is relative. The winning group here will get more than its money’s worth because it’s managed to keep an important weapon away from its biggest mobile competitor. And Google lost its best chance to negotiate some healthy live-and-let-live agreements with rivals intent on putting it out of the mobile business — a business that is critical to Google.

Hit us, please

Google has had a sloppy approach to patents when it comes to Android. That has given Oracle (ORCL) room to allege infringement and demand $2.6 billion in damages. But even worse is that Microsoft and Apple have threatened Android’s existence with a series of patent infringement lawsuits.

Most have targeted Google’s hardware partners because they have less money to defend themselves than the search giant, and so could become a choke point for Android’s business. Make things too expensive for the hardware companies, and they might reevaluate whether the product is a commercially viable option.

It’s expensive being Google’s BFF

Microsoft already has at least four companies paying, one of which is HTC, a big name in mobile phones. Both Motorola (MMI) and Barnes & Noble (BKS) are fighting in court, but neither has Microsoft’s deep pockets. Add a significant per-unit cost for Android, and suddenly licensing Windows Phone might look far more appealing, particularly since Microsoft indemnifies its users for patent infringement actions.

That’s why the 6,000 Nortel patents were so important to Google. The entire mobile industry has worked on cross-licensing and the threat of mutual destruction. Only Google entered this nuclear arms race armed with a pea shooter. The Nortel patents would have given it a better negotiation position. (You also have to ask whether the consortium might now pursue Google and its partners for allegedly infringing any of the Nortel patents.)

Would Google’s problems have disappeared with the patent portfolio? Not a chance. But as intellectual property analyst and blogger Florian Mueller wrote to a number of us that cover IP issues, “Google lost an unprecedented opportunity to acquire a major bargaining chip that would strengthen it at the mobile industry’s intellectual property negotiating table.”

No second chances

His use of the term unprecedented is anything but hype. This was a one-time chance Google needed to protect its investment in Android, which represents the company’s entire future. The final price was stiff, and even with its big bankroll, Google would have difficulty in matching the combined resources of the companies in the consortium.

However, it should have been worth more than $4.5 billion to Google. This was a must-win for the company. Did it have the money to go higher? Without a doubt. Failing to ensure a successful bid is the single biggest mistake the company has made, because this is one from which it cannot recover.

Related:

Image: Flickr user Calgary Reviews, CC 2.0.

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Apple Has Worst First Half Since '08 as Investors Await IPhone - Bloomberg

People enter the Apple Inc. store in Shanghai. Photographer: Qilai Shen/Bloomberg

June 23 (Bloomberg) -- Lawrence Haverty, portfolio manager at Gamco Investors Inc., Burt Flickinger, managing director at Strategic Resource Group, and Frank Rose, author of "West of Eden: The End of Innocence at Apple Computer," talk about the outlook for Apple Inc. Rose, Haverty and Flickinger also discuss Apple Chief Executive Officer Steve Jobs. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

Apple Inc. (AAPL) shares dropped 3.5 percent this month, capping their worst first-half performance in three years, as investors await new products and fret that rivalry from Google Inc. (GOOG) will slow growth.

The shares, down 7.6 percent from a record $363.13 on Feb. 16, haven’t performed this poorly in the first six months of a year since 2008, when the worst recession since the Great Depression swamped the stock market.

Investors, already grappling with Chief Executive Officer Steve Jobs’s medical leave, say they are wary of the stock amid evidence that Google is gaining ground in smartphones. It’s also been more than a year since Apple entered the tablet market with the iPad, and the next iteration of the iPhone isn’t due until September. That’s left shareholders hankering for new products to propel the stock, even though profit has risen more than 75 percent in the past two reported quarters.

“They are so successful in their execution that they need the next huge thing to make the stock actually rally,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors, which manages $1 billion in Walnut Creek, California. “You’ve got to know what the next goldmine is going to be.”

Apple, based in Cupertino, California, rose $1.63 to $335.67 in Nasdaq Stock Market trading today. The shares have declined 3.7 percent since Jan. 14, the last trading day before Jobs, who’s battling a rare form of cancer, said he was taking his third medical leave since 2004.

“There is only one Steve Jobs; there’s nobody that can replace him,” said Walter Price, managing director of RCM Capital Management, which owned 2.96 million Apple shares as of March 31, after selling more than 820,000 shares.

Apple, the second-largest company in the S&P 500 behind Exxon Mobil Corp., has been one of the surest bets for investors over the past several years. It nearly quadrupled through the end of last year from Jan. 8, 2007, the day before Jobs introduced the iPhone. It’s up from a split-adjusted $5.48 on Sept. 16, 1997, the day Jobs returned to Apple after his ouster in 1985.

Large investors that have reduced their stakes in Apple this year include Goldman Sachs Group Inc. (GS), Janus Capital Group Inc. (JNS) and Wellington Management Co.

Given the gains in Apple’s share price so far, it’s inevitable that the pace of increase will slacken, said Giri Cherukuri, the head trader for OakBrook Investments, which manages $2.5 billion, including Apple shares.

“It’s hard for a stock of that size to move a lot at this point,” Cherukuri said. “For it go up 50 percent or double would be hard to imagine.”

Steve Dowling, a spokesman for Apple, declined to comment.

Apple’s ascent will undoubtedly resume, according to analysts, who on average predict that the shares will climb to $457.08 in the coming months. At least 50 analysts have “buy” ratings on the stock, and none of those tracked by Bloomberg recommends selling.

The gap between Apple’s stock price and analysts’ predictions reached a record $141.92 on June 20, according to Bloomberg data.

So far this year, Apple has underperformed the broader market. The Dow Jones Industrial Average has risen 7.2 percent, while the S&P 500 is up 5 percent. The Nasdaq Composite Index has climbed 4.6 percent this year.

Apple, which introduced the iPad 2 in March, may get a boost from the next version of the iPhone, due for release by the end of September, as well as demand for electronics in the year-end shopping season. Recent stock declines have created an investment opportunity, said Michael Binger, a fund manager at Thrivent Asset Management.

“We’ve been buying,” said Binger, whose firm has about $73 billion in assets under management, pointing to the iPad’s dominant position in the market. “All the competing products coming out don’t hold a candle to it.”

Even as investors fret about handsets running the Android operating system, some analysts predict it will be Google that may be in trouble.

Android will see market-share declines in the U.S. as customers move to a new model iPhone, especially subscribers of Verizon Wireless, which added Apple’s handset earlier this year, according to Needham & Co. analyst Charlie Wolf. In March, the iPhone accounted for 29.5 percent of the U.S. market, up from 17.2 percent in December, he said in a report this month. Android accounted for 49.5 percent, down from 52.4 percent in December.

Still, Android is expected to maintain its leadership position globally. It’s projected to account for 38.9 percent of the worldwide market this year, compared with 18.2 percent for Apple, according a report from research firm IDC.

The company’s financial results also will provide a boost, said Ryan Jacob, chairman of Jacob Asset Management. Apple’s profit is projected to jump 66 percent to $5.4 billion in the third quarter, which ended June 25, according to the average estimate of analysts surveyed by Bloomberg. Sales are predicted to grow 57 percent to $24.7 billion.

Given that rate of growth, Apple’s stock price is “perplexing,” Jacob said. “There are a lot of minor concerns with Apple, but to me they are all extremely minor.”

Apple also has outperformed other big technology companies, whose stocks have sputtered even amid profit and sales growth. Google, whose profit rose 30 percent last year, has slipped 15 percent this year, and Microsoft Corp. (MSFT), whose profit jumped 29 percent last year, is down 6.8 percent.

“I can’t remember valuations ever being as low as they are now for major large-cap technology,” Jacob said.

That’s not enough for some investors, who say the best days for Apple investors may have passed.

“It was easy until recently,” RCM Capital’s Price said of investing in Apple. “Now I think it’s hard to know if the stock is going to outperform the market.”

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Android 4.0 loaded Google Nexus 4G : This "monster" could chomp down Apple - International Business Times

Sporting a "monster sized" screen with high definition capabilities, dual processor, very thin size, and Android Ice Cream Sandwich OS, Google's Nexus 4G could give Apple's iPhone 5 some heavy competition as both devices are set to have similar release dates. 

The Nexus 4G rumors have sounded very attractive as the latest Android device may seem to be the most powerful smartphone to hit the market.  One of them says that the device will be powerful enough to run the Android 4.0 operating system which will include 3D features, Open GL head tracking for facial expressions and sensing.  For gamers, they can have USB capabilities enabling them to plug in external hardware devices such as an Xbox controller.  The open platform can allow developers to sync up various devices ranging from remotes, controllers, to bikes.  This opens a huge door of opportunities for apps running on the next generation Nexus 4G. 

According to reports, Apple has many features rolled up in its sleeve for the iPhone 5, including integration with the anticipated iCloud and ramped up iOS.  Speculations on iPhone 5 specs include an A5 processor with large end-to-end screen and very thin sized incorporating a teardrop shape design. 

If the iPhone 5 is to run with the same A5 processor found in the iPad 2, floating in the 1 GHz range, then the Nexus 4G will have an advantage with its 1.2 or 1.5 GHz dual core processor, possibly a 28nm Qualcomm Snapdragon Krait, and 1 GB of ram. 

The Nexus 4G design utilizes a spacious touchscreen but eliminates all the hardware physical buttons, possibly utilizing Google's continuing development of voice search and commands.  The iPhone 5 curved glass touchscreen has also been in talks with reports of Apple already processing machinery to create the touchscreen glass displays.    Apple also will launch their iOS 5 platform that incorporates voice technology through Nuance voice command app.  Apple's move may appear to be a counter to Android, which has already integrated voice features early on with much investment in improving the feature for Ice Cream Sandwich.    

It may still be too early to determine if Nexus 4G can truly take a bite out of its rival, but the specs and rumors have seemed very impressive for this fall's matchup against Apple's iPhone 5.   

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