The Northern Spy
Blossoms Today, Apples Later
April's "Last Column" generated
feedback from the editors whose publications carry this screed, as well as from all ten of its readers. Guess they didn't peruse the whole thing. The "last lecture/column" concept does not preclude there being yet another--it's an exercise in "what if", and a chance to get what may be a heavy load of lumber off the speaker/writer's shoulder (to borrow phrasing used by a newspaper editor who printed a column this scribe wrote at the tender age of fourteen).
Mind you, the Spy was wondering this past weekend whether there would be a column this month--why not add to the rumours of his demise? As his reader is aware, he's had ongoing chronic infections that only partially and temporarily respond to massive doses of just a very few antibiotics (curl your hair with the doses and combinations that have been tried, some to zero effect, some to allergic results). This past weekend something like a gastroenteritis or food poisoning issue got added to the mix for about six days. He frittered away four afternoons in bed when he could have been writing. He's functional again, but this column might be shorter than otherwise.
Feeding on your own mindshare
At the top of the news worth commenting on, Apple's most recent quarterly results were just announced (revenue of $13.50 billion, net quarterly profit of $3.07 billion, or $3.33 per diluted share compared to revenue of $9.08 billion and net quarterly profit of $1.62 billion, or $1.79 per diluted share in the year-ago quarter). Those numbers don't sound so large when your say them fast, but we're not talking pocket money here. Some analysts who'd made lower estimates seemed taken aback, but the Spy can't understand why. Apple is merely cashing in on mind share generated eighteen months to two years ago. Given that much more mind share has been developed since, and more is developing with the iPad, sales and profits should not only keep on growing, but continue to accelerate for the next few years.
The fact that Mac sales were up despite Apple taking a technology refresh holiday in this line for some months is very telling--this is almost all halo effect, not driven by upgrades to the latest and greatest. The Spy expects a bump in sales from the latest portable models, and another when the towers are updated later in the year. 'Course, that's if the latter are updated again, and not simply abandoned by iSteve as an obsolete form factor.
Another consideration for amateur analysts trying to determine the relationship among mindshare, market share, and stock prices is that, while a Mac may be replaced every five to seven years, a cell phone (like a PC) tends to be replaced every three or fewer. As long as those customers remain relatively happy, they are likely to drive sales to ever higher heights down the road.
Of course, mind share is a fragile thing, and a few missteps can erase it all (why we change governments, after all). Moreover, the lag time between mind share and market share is dwindling, and may eventually approach a single year. It will never become as immediate as in politics, though, because it depends in part on the installed base of satisfied customers already out there, and they don't change their minds readily when they are using the company's products successfully day after day, year after year. One doesn't used a politician daily in the same sense unless one is a lobbyist, and their loyalty isn't to the office holder anyway.
Meanwhile, Apple shareholders are being rewarded by handsome price run-ups and new record highs on a near daily basis. One might question, on traditional grounds like price-earnings ration, whether these prices are justified. Large increases in future sales and profits seem to be already fully priced in. Of course, mind share has a more immediate and more volatile affect on share price than it does on sales. Immediacy and speculative futures rule in the stock market realm, not so much either past history (soon forgotten--why we have bubbles) or logic. Thus any perception of failure by Apple would result in an immediate reaction in share price, but not necessarily much of a change in sales right away.
Another consideration in Apple's record share price is the total market capitalization (share value times number of shares--what it would cost to buy 100% of the company at market value). As of 2010 04 22, this was $234B, in third place among publicly traded U.S. companies, behind Exxon Mobil at $326B and Microsoft at $275B but ahead of Wal-Mart at $204B and fifth place General Electric at $202B. Once arrogant Dell is no longer to be seen in these rarified circles. However, these relative numbers and positions don't have the right ring to the Spy in terms of today's marketplace, though they might in terms of tomorrow's.
Is Apple really worth more than GE and Wal-Mart? Yes, in the eyes of investors, but is that logical? What about relative to MS? Perhaps so. Here's a company that for many years has sold stale sizzle rather than fresh steak. The profits are still there, but the company has lost mind share to the point where on the next technology refresh customers are as likely, or more, to switch than to continue fighting. The extent to which this is so will not be seen until the economy is well into an upswing, when aging PC's must be replaced and corporate capital is freed to do so. When that happens, we could see the beginning of a rapid decline in installed base percentage share of Windows machines in favour of Apple. After all, business is the last holdout in a changing market scene that has already seen Apple capture the home, educational, and high end segments with superior hardware and OS, and it's only a matter of time before it follows the trends.
True, MS is selling a better product now than it was a few years ago, but the Vista fiasco won't easily be forgotten. Many even have the view that Windows 7 is just a service pack over Vista. Moreover, those who can do the math know that the short-lived and buggy Windows machine actually costs more per year than a long-lived and reliable Mac over the total span of ownership. Sooner or later corporate accountants are going to start insisting on logic rather than emotion when purchasing IT assets.
The bottom line: Microsoft's market cap reflects long past glories and expiring mind share. Apple's reflects recent successes and mindshare. Barring any odd accidents, both should continue to go in opposite directions. The question is no longer whether there will be a crossing point, but when. (Some technical analysts claim the crossing point has been reached, but that's only if you confine yourself to shares being actively traced, rather than basing the market cap on all shares.)
Yes, the Spy realizes that he hasn't really answered the question of whether Apple's market cap makes sense, say, relative to Exxon. But even if he had, our reader wouldn't take his advice on the market, would she?
the rumour mill is working overtime trying to persuade us that Apple is in talks to buy chipmaker ARM, a company it once helped start, but later sold. iSteve's little outfit with the bulging bank account bought PA Semi two years ago, and a product from that acquisition has already become the iPad's A4 chip. Later, some of the PA Semi employees left to form another company called Agnilux, which was recently Googled down the throat of the search engine giant, themselves now also gone into the telephone business. Imitation is the sincerest form of flattery, though it's hard to imagine Google going so far from its core business as to build chips.
Returning to ARM, a purchase by Apple does make some manner of sense, especially if the A4 or a variant is to end up powering the iPhone G4. It would also give Apple a hammerlock on the major supplier of silicon to many other smart phone manufacturers (and so generate possible anti-trust issues).
However, it might make even morse sense for iSteve to put the arm (sic) on AMD, supplier of chips compatible with the Intel line (and likely to be first to market with a six core chip). There seem to be rumblings that Apple and Intel are no longer the bosom buddies they were when Apple made the decision to drop IBM's Power chip line due to the excessive power (sic) consumption that made it unsuitable for portables.
[Thinking out loud warning] Why not snap up both while you have the shopping cart in the aisle, iSteve? It's chump change for Apple's piggy bank, and would give you the ability to control your own CPU supply without any possibility of being held for ransom from a greedy supplier or one who succumbs to political pressure from rivals.
Besides, you still have rights to the Power chip design--one of the best in recent decades in the Spy's HO. Perhaps that could be dusted off, and with a priority imperative IBM never had, modified in house to achieve lower power consumption with increased speed and multiple cores. As long as developers stuck to Apple's API, switching back to a next generation chip for either or both Macs and the pocket/pod lines would be a matter of a developer hitting a compiler switch. iSteve has the motive, the opportunity, and the means to pull this off. Does he have the will? Will regulators allow him this control of supply? Would it make sense to expand PA Semi to a giant in house supplier? Is this why the recent push to ensure developers do adhere solely to the Apple API? Will you have dip with those chips?
While we're thinking outside the box
the Spy notes that the Apple board, already quite small for a corporation this size, now has a vacancy. Might be a good time to appoint an academic to help solidify the advances in the educational sector that have happened so far more as a side effect than because of an deliberate marketing by Apple. iSteve could raid one of the big schools for a high-end tech guy in either computing or business, and get lots of free consulting on how to make hay on purpose in this sector. The Spy's been on lots of boards, and knows they're far more useful for a CEO wanting cheap sector expertise than as mere window dressing to showcase alliances.
No longer an early adapter,
the Spy's only recent out-of-the-gate purchase was a 64G iPod Touch to replace his Palm cellphone and thus sever his fractious relationship with Rogers. Why, he still uses a quad core G5, and continues to run system 10.5.8 on both that and his Intel laptop. Why no Snow Leopard after all this time? The answer is not simple, and involves a chain of causality.
Under one of his hats, the Spy is a church treasurer. He has been unable to locate accounting software with (i) fund accounting for non-profits, (ii) sufficient customizability to adapt from the corporate defaults, (iii) payroll, (iv) Canadian tax tables and GST/HST accounting rules for non-profits, and (v) running on a Mac. Why, he'd go for fund accounting, the Mac and one of the other three. Anyone out there with a product he can beta?
So, as mentioned once before here, he keeps those books on a set of personally designed custom spreadsheets, some of the code for which dates back to when the original models ran under Visicalc, and later The Spreadsheet from A.P.P.L.E.. These models are very heavily macroized to produce rapid entry forms, summaries, and reports--saves a lot of time despite VBA being perhaps the worst designed and documented language ever. Once he puzzled out how to write them, said macros do work tickety-boo on Excel 2004, but on no later Mac versions, so he cannot upgrade his Office suite without throwing away hundreds of hours of work. And, of course Office 2004 is incompatible with Snow Leopard. So....
He doesn't mind mentioning that when it takes this many years to port a code base, faulty software practice is the usual culprit. Did someone take home the only copy of the code base on a floppy and leave it on a bar stool? Was it accidentally deleted from the repository by a janitor? Was this a front office political decision by someone who never used Excel? Or, was the macro section so poorly written and documented by some long-departed former employee that it was indecipherable and had to be rewritten from scratch (a common occurrence in the industry, and shades of Lotus 1-2-3)? Well, he hears that Excel 2011 will restore macros to the Mac. Perhaps he'll do a massive upgrade then, if it all works.
He does regularly update
almost all the rest of his Mac productivity software--Nisus Writer Pro, Scrivener, BBEdit, Graphics Converter, Online Bible, Libronix/Logos, NetNewsWire, Maple, PopChar, SpellCatcher, Retrospect, Safari and FireFox. Undortunately, Interarchy (FTP) has been stuck at 9.0.1 for a year and a half, though maker Nolobe says a new version is coming RSN. The only other exception to his upgrading diligence is that he still uses Eudora 6.2. Though years old and no longer in production, he still prefers it to any of the more recent offerings, and its open source successor is still not ready for mainstream use.
Likewise he keeps his Linux/CPanel server doing automatic updates on a "release" basis, and his iPod Touch has settled down to actually running no more than ten or so of the many apps he's checked out.
On that latter score, he did eyeball the new Opera browser, but found its rendering engine woefully inadequate in handling php based sites--centering vertically by default in some frames, failing to render php-driven menus at all, mixing up the layout on other sites. Nice they're making the effort to compete, but this product isn't even beta quality, and no wonder Apple approved it--no duplicate functionality here yet.
An IP/T App he recently upgraded was iWHMCS, for tracking his hosting and domain customers via mobile. iWHMCS is a good, convenient product, though the user interface can be a little misleading at times. However, the upgrade killed the program preferences, which had to be re-entered from scratch. Not nice.
A third IP/T mention goes to the INGDirect app that allows access to accounts and transfer functions. Nicely done, convenient and free. A final nod to the Wolfram Alpha app, which now being reasonably priced, is worth getting.
But all this is very stable. Little brand new software gains entry to his daily routine, and most of what he does review seems unpolished, cluttered, hard-to-use, or redundant. He might someday use Apple's Numbers or the OpenOffice Calc if either gains the ability read and use the MS macros, and the next time he does a major website overhaul he will reconsider the site creation category, but the software realm on all three platforms he uses seems to have settled down to middle age--incremental maturity, but nothing groundbreaking, no radical new killer-app concepts. Send the Spy your products for review if you think you have built something that is so otherwise, though don't bother if it's Windows only.
Perhaps the fault lies at the developer level--not enough creative juice. Feed them more pizza and jolt, buy them better tools, offer more perks, pay them more money. Doing so just might take us on to the next stage of the technological revolution--the one where we aren't just automating and improving existing ways of doing things, but enabling truly new tasks. It might have the nice side effect of increasing enrollment in North America's beleaguered computing science departments.
Speaking of beleaguered,
an adjective once applied liberally to Apple, it's really stuck to Palm now. The company is alleged to be on the block, but who would buy it? There isn't much left there that's worth purchasing. How the mighty are fallen. SCO is in the last throes of merciful bankruptcy. How much life is left in Dell?
Finally (for this month)
as briefly mentioned before in this space, the Spy has gotten involved in a project to devise a new programming language. He was skeptical at first, but the new notation, loosely based on Modula-2, now seems to be growing legs. Stay tuned.
--The Northern Spy
Rick Sutcliffe, (a.k.a. The Northern Spy) is professor and chair of Computing Science and Mathematics as well as Senate Chair at Trinity Western University. He is also on the board of CIRA, operator of .ca. He's written two textbooks and several novels, one named best ePublished SF novel for 2003. His columns have appeared in numerous magazines and newspapers (paper and online), and he's a regular speaker at churches, schools, academic meetings, and conferences. He and his wife Joyce have lived in the Aldergrove/Bradner area of BC since 1972.
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