You are currently browsing the category archive for the ‘Apple’ category.
The first two sectors for 2013 are beginning to overlap in a lot of ways – but for this purpose when we talk cloud we are focusing on providers and the data center while mobile is more equipment and service providers. In general, we continue to be positive on technology spending as a whole. There are not a ton of pie-expanding investments out there – tech spending is all about ROI now and the faster the better. Technology investments are enabling more efficient and nimble companies and helping profitability (and even morale in many cases). There are more themes and more specific niches to consider – but here are the major groups.
1) Cloud
a. Premise: I want what I want, where I want, on any device I want…
b. Delivery: leaders in the cloud services space are AMZN and GOOG. Names to watch: MSFT, RAX, CTXS, and HPQ (last hope). Specifically – CTXS, RAX, and NTAP get attention as acquisition candidates by Cisco
c. Data Center: the “cloud” is a generic term, but in general the idea of housing all of your data at remote data center and delivering it on a global basis instantaneously puts heavy demands on computing resources. The ability to cost effectively scale the data center and deliver speed is critical. Top names: EMC (has VMW and will spin out Data Analytics), CSCO, IBM
d. There are some consultant type plays that would include CTSH, IBM, SAP and ORCL
e. Salesforce.com (CRM) falls into the “cloud” and I love what they are doing, but the valuation, like Amazon, is difficult to digest. CRM represents the SaaS (software as a service) space which saw several M&A deals this summer. The recent darling IPOs are Workday (WDAY) for HR Solutions and ServiceNow (NOW) for cloud infrastructure management
2) Mobility
a. Premise: Freedom; flexibility, and the same premise as cloud only I want it NOW
b. Delivery: telecom networks are traditionally high div paying and we still think VZ and T are fair plays on sell offs – but nothing to be exicted about
c. Infrastructure: as the world seeks to build out 4G networks the lead players are CSCO, ERIC, …
d. Equipment: there are only 3 names to watch: AAPL, GOOG, Samsung. Hail Mary plays in RIMM and NOK
e. Components: QCOM, ARMH, BRCM
f. Mobile Ad Spend – the only pure play is Millenial Media (MM) – but the big guys to watch are Google, FB, and Amazon – Apple is trailing.
3) Data Analytics
a. Premise: the world is generating data on a exponential scale – but what does it all mean?
b. The only way to describe this space is to say there are lots of people working the solve the problem of extracting information from data – across nearly any end market – healthcare, utilities, retail, tech…etc. There are hundreds of small, private companies working on solutions –most are getting gobbled up by the bigger players: IBM, ORCL, SAP. This space is likely to see several smaller IPOs this year and many more acquisitions.
Niche to Riche?
1) 3D Printing – initial market for industrial prototypes becoming saturated – key to the story is first, low cost home/office printing. Second, improved material possibilities leads to new “mass customization” market: only two real public plays are SSYS, DDD – expect HPQ to try something (they currently license SSYS); Autodesk (ADSK) for software – they will be a part of this.
a. Unknown what Trimble may do – they bought the 3D CAD software from Google (SketchUp) – they likely want to integrate with construction GPS aided equipment but something to keep an eye on. We like Trimble as a productivity enhancement play for construction, agriculture and fleets
2) Social Networking – yes, overhyped and underdelivered in many cases… a lot of this has to do with the misconceptions of what these firms actually DO vs the optionality you are buying. Moving forward, LNKD and FB are interesting, they have the ability to monetize their users and to expand the optionality of their platforms. LinkedIn has an actual market, job placement, and is expanding its offerings. FB is facing lots of problems, the biggest being mobile. The good news is they were able to generate $3-4b in revs without trying – currently they are rolling out new services, revenue models like mobile ads and ad exchange networks at the fastest pace to date. YELP not working. Hail Mary in ZNGA on gambling legislation
3) Housing meets Data – Zillow (Z) and Trulia (TRLA)
Favorite large cap names:
GOOG, IBM, QCOM, ORCL, AMZN, EBAY, EMC, CRM
Turnarounds: MSFT (data center), INTC (servers), YHOO
SMID Names: high valuation – prone to blow ups but like the technology
FIO, FTNT, SPLK, WDAY
We want to discuss Apple’s recent product history and what those products meant to those end markets and to consumers and then continue into a discussion on the TV market and what an iTV might be and mean.
iPod
What did Apple really do for the music and computer industries considering the conversion of music to MP3 and the acquisition of music both legally and more importantly illegally was already well underway?
Apple did 4 things: 1) made it legal and priced attractive 2) pushed the emotion of endlessly portable music (already a feature but advertised it); 3) connected hardware and software automatically (huge for mass market); 4) made an elegant, differentiated device that was “cool.”
Was the ipod itself transformative? No, the device was distinctly better, but nothing revolutionary. Was selling MP3s big? Not really, selling them securely was. The big volumes came when iTunes was launched for Windows. The transformative aspect was the seamless marriage of iTunes + iPod – digital ferrymen for the masses.
iPhone
Was the iPhone a revolution? Yes, it changed the smartphone. It added full touch screen capabilities and a web browser experience was similar to desktop. The biggest changes to the iPhone vs other smartphones were 1) the design and GUI; 2) web browsing; 3) apps. So the combination of apps and browsing took something that was “cool” and made it necessary.
iPad
Was the iPad transformative? Yes, tablets were not new, but tablets the way we use iPad was new. A different more visceral and intuitive experience combined with Apples app and iTunes markets. It altered our perception about what is computing vs consumption. What do I want / need in my device. It replaced or supplemented other content mediums.
The iPad, in addition to its role to replace traditional mouse and keyboard type operations for web surfing, light messaging etc. also opened up and entirely new, more visceral experience for gaming and multi media apps. Lastly, form and function can be applied in the enterprise where countless custom apps are being designed to allow sales people, pilots, warehouses to utilize the mobile devices.
What will the Apple TV be?
Lets start with what TV is…
Traditionally it is an entertainment medium for TV shows, movies and news transmitted in a broadcast fashion utilizing specified time schedules for content. The method or setting for consumption is traditionally the family room, bedroom or other location in the home. TV is a selected passive medium. You are almost always seated or reclining with a method of selecting the specific broadcast (or “surfing” from one to the next), but there is zero engagement after selection.
Modern features like the DVR and VOD have altered certain behaviors. The most important aspect is time-shifting. Consumers are no-longer required to consume on a schedule, the DVR allows selective recording with playback at anytime, while the VoD service allows you to search a catalog of content (catalog currently limited in size, but expanding). The consumption still takes place in the home or living room, but is “improved” by the increased customization options. Live TV, like sports and certain voting shows still command audiences.
Most recently, mobile and tablet devices are being used (much more than laptops ever were) for consuming both in the home and on the go. The service to enable this is fair, but needs improvement. Thus, TV now resembles a hybrid of models. We are still reliant on the broadcast for live TV and for the distribution of content for the DVR service. VoD catalogs are improving but still exist within the overall broadcast service and thus have limits. Typical consumption packages are bundles of TV + Internet (or TV + Internet + Phone). Additional services like DVR and special VOD are extra. Channel selection is wonderful for tail content and discovery, but is largely wasted on the masses. Future interactivity in terms of social and potentially commercial is in the works but not yet deployed to the masses.
In addition, the conditioning of consumer by the DVR and VOD to control viewing is sparking an emphasis on cord cutting (eliminating the broadcast bundle, opting for a la carte web video). Over-the-top (OTT) video which is online viewing like Netflix and Hulu Plu are leading the charge, and in some cases developing their own proprietary content. These services are great and enhance the consumers expereince – but the fundamental fact is they still need the high speed data connection which is predominantly supplied by cable and telephone companies. So by hook or by crook you still need them. In addition, the content companies are accutely aware of this and will not give up the store like the music industry did.
What does the consumer want?
Any show or movie ever created, anytime, and we want to watch it on any device. For new shows, we (today) want them the next day after they broadcast on any device… and soon we want to stream it live. For current movies we want to stream it to our houses, or not negotiate the various different services for which movies are where and during which window. Just because consumers are getting more adept at shuffling between services doesn’t mean we want to. We also want to be able to view our own content on our TV or mobile device at anytime – and not have to connect any wires or worry if I’m on the right network or OS.
What can Apple deliver?
Apple helped reinvent the computing and media ecosystems – can they extend this to TV? Yes, but not without cooperation from the content providers and a major improvement in the current economics of television and movie content over the web. Sure, Apple could extend its ecosystem and smooth OS to the television (and largely has already with Apple TV) – but a true innovation for consumers only comes with the right content and pricing scheme. This about how big the 99c individual song was at the time. We envision apps along with voice navigation, seamless sharing and push/pull between Apple devices, multi-screen and split screen viewing…and an a la carte content menu. ESPN for $6.99 per month. Major networks bundle $19.99. TNT and TBS for $5.99 – etc…
Does Apple need hardware to do it? Not necessarily, but they traditionally make money on hardware, and the TV is a significant furnishing feature of the living room. The retina display for smaller screens is amazing, but the technology to scale up to 40+ inches is not there yet. Assuming it does improve, what price premium can Apple fetch? Will high speed internet providers subsidize TVs? The TV industry is one of the worst for CE companies. I do think Apple is very interested in this market – as well as all extended content markets.
An Apple TV would likely look and operate a little differently but the key for consumers is how different the content experience would be. And that is the issue. Read into the supply chain all you want. Without the content, Apple will not do it, and the existing content players and high production costs make it very difficult to negotiate new deals.
With that said, I don’t expect an “iTV” until late 2013 at the earliest. Apple likely has enough on its plate with a 4G iPhone and new iPads (mini?). The existing Apple TV product allows them to test content layouts, menus etc at a low risk.
What could change this outlook significantly? Economics of producing and distributing content and or the development of a secondary revenue stream on the TV platform like the App Store.
I want my, I want my…
The big difference in the adoption of any new technology, gadget, service, or any change really is the “total pain of adoption” (hat tip to Pip Coburn). What level of anxiety is relieved or caused by that change. Am I willing to change certain other aspects for the perceived benefit. We see this as an evolving issue in the privacy vs online world experience scenario. The world at your finger tips comes at a price particularly in the freemium model economy. The personalized experience we get on the web is a direct result of the ability to monetize our data stream, activity and potential for sale/upgrade. The privacy battle around that data is getting heated as more and more of our lives are spent and shared online. To the extent that consumers resist this intrusion, their experience will suffer. However, to the extent that companies overstep their trust, the same pain will be experienced in reverse. Security and privacy are very sensitive and convoluted topics. In general, people are willing to allow the data flow as long as the experience is enhanced. It is clear we need better tools to analyze the seemingly disparate data streams and enhance the experience; the old models are just not enough.
You want the world to be as open to you as possible…but at your discretion. If the web is to continue its evolution as part of our very human fabric, then the ability to turn on and off our privacy will be increasingly necessary. Yes, we want to share more, and by sharing data we improve our experience, much like entering a store and explaining what you want to improve the service…but, I also reserve the right for discretion and privacy – a very human feeling. This is as much about sensitive financial and health information as it is about what information I am sourcing and from where.
We anticipate that there will be more high level security breaches in the near future that cause consternation among regulators and consumers. One avenue we see as interesting in the future is the ability for a consumer to control, or even profit from the release of their personal information. Currently you get a discount on a product in exchange for the data, but you are not aware of what data they are collecting and how frequently. Think Google’s apps or Amazon’s $79 Kindle with ads. Instead, we see an opt in world where you are paid to provide accurate details regarding your habits and preferences in exchange for a fee and a more tailored experience, which could also include deals and ads that matter to you – like %50 off at a steakhouse instead of another spa treatment.
You see something you want to buy, done. You want to share something with one person or the entire world, done. You need information and to get something, done. The ONLY way to do that is with a smart device with dynamic security and privacy controls and high speed networks – otherwise the user experience is too subpar and will drive a negative feedback loop.
Positive: security software, data analytics, IBM, Splunk (private)
Negative: any privacy mishaps are bad for Google, Facebook and Apple
Note – of the three big personal data collectors, only Apple doesn’t NEED your info. Apple makes its money sell you devices, and takes a cut of apps and content. Google and Facebook rely solely on advertising and the ability to customize those ads to your data.
The Change Investor 