So, I noticed something very odd the other day. Folks take their “apple-holism” very seriously. I wrote a rather benign (I though at least) piece while having coffee the other morning about my observations on the new iPhone coming out June 11th. You can read it here. If you do not care to read it, the gist was that a $600 cell phone will not be a hit. I went on to explain some of my issues with it and finished by saying Apple (APPL)should “cut the price to $299 and you may have something”. The responses were so vitriolic you would have thought I cast aspersions on the virtue on their mothers, grandmothers and sisters all at once.
My favorite response was “you should be banned from the internet for being so gay. f-off dork face.” Well said, thanks for thinking that one through. If you are going to be insulting, let’s at least put some originality in it and make it a good one. My four year olds can do better.
Enough of that. Another response was “the overwhelming # of pro-iPhone responses received (i.e: potential iPhone buyers) thus far should make you want to reevaluate your opinion on the iPhone.” Actually is doesn’t. If it does anything, it makes me question the lofty prices level of Apple’s stock and the potential pain investors may be in for. Here is why.
In January I wrote when Google was approaching a new all time high, “You should expect the multiple for Google to contract to a range commensurate with its growth rate. If that rate this year is around 30% expect the pe to shrink to about 30 times 2007 earnings. That give us a price for Google shares of about $450 a share. In other words, Google is overpriced. It is priced for its current growth rate, when that rate slows as it must (law of large numbers) its price will fall.
Google is a great company with a wonderful product, its stock is just too expensive.”
The responses I got from “Googlites” was no different that what I got from Apple holders yesterday. Just substitute the company name and the gist of them is the same. I am an “idiot”, “just do not get it”, “Google hater” (this despite me saying it was a wonderful company). I followed up with another piece days later and this one recently. The responses have all been the same.
Google (goog) share price since first article? Down $40
In February I penned this article on Starbucks (SBUX). Again the responses where the same as the Google and Apple episodes. Again I said “great company with a wonderful product, it’s shares are just overpriced”. No matter to the “Starbazis”, I apparently hate everything Starbucks (not true). Then in March, Founder Howard Schultz penned a memo echoing the sentiment in my first post. This is not to say Mr. Schultz reads me but to say that my piece was not the apparent Starbucks bashing article it was accused of being. For a current take on Starbucks, visit my friends at the StockMasters
Starbucks share price since first article? Down 20% to a 52 week low
What is my point? Emotion. It is the enemy of every investor. When people feel so strongly about a company or a product that any criticism of it causes such anger and hostility, they no longer have the ability to take a rational look at their investment. I have no position or ever have had any in any of these three companies so the eventual outcome of my opinion means nothing to me financially. That also allows me to look at them for what they are, not what they have been. It is ironic that most of the responses I got focused on the past and have a blind confidence in the future. I also find it funny that almost to a person they have owned shares in the companies “for years”, “since they went public” or “at $10 a share”. Has nobody bought them in the last 5 months? Who is buying and selling all of those shares everyday? Another favorite response has been “people like you have been saying stuff like this for years.” Okay, I do not know what “like me” is (I will assume it is not complimentary), but I have not said anything before Jan. and Feb. 2007.
Comments like those are my very point. Warren Buffet said “if you spend too much time looking in the rear view mirror, you will not see the potholes coming up in the road”. Google and Starbucks shareholder have either missed them or refused to see them.
Now to the “Apple-holics”. The Motorola razor at the time it was introduced was “cutting edge” cell phone technology and priced at $500 and up. It did not sell well until it could be bought for $199. The original iPods were only moderately successful until they could be purchases for under $200 and then $100. The Blackberry recently saw its share of the pda market go from 4.9% to 20% in one year. What happened? I can now get one for $99 rather than the $299 they were previously sold for. They have not increased their share of the business (professional) market, (which is 50%) they have increased their consumer market. No matter what anyone thinks, consumer cell phones are a commodity and in commodities, price rules. Especially with an almost disposable product like a cell phone that gets washed, dropped, sat on, lost, etc.
It should be noted that I gave Apple huge credit saying that they do not even need to go down to $99 for the iPhone to sell, just $299. That does mean I see value in it, just not $600 worth. Will it sell, to the “apple-holics” yes, to the masses? Not at $600.
One also has to consider that it will only be available initially to the 47 million people who have ATT wireless. According to the presentation, Apple expects 10 million units sold by the end of 2008(it will be available in Europe at the end of 2007 and Asia sometime in 2008). So we expect 1 in 4 AT&T users to have a iPhone? Won’t happen….
So once this rolls out how do we judge my accuracy? Easy, anything less than the 10 million units sold at $600 by then end of 2008, I win. If they drop the price? I win. If they ditch AT&T prematurely and open it up to all wireless companies? Partial win for me as they will do this eventually anyway. If they sell more than 10 million at $600 by then end of 2008? Tell me how wrong I am, you will know where to find me.
With the emotion these folks exhibited, there has to be froth in Apple shares. No matter who runs a company, they make a mistake and stumble. Steve Jobs and Apple will eventually. With the froth and emotion in the shares and with the shareholders, that eventual mistake will result in a very hard lesson for people. Unbridled exuberance on the way up results in desperation on the way down and those two emotions make for a wild ride for shareholders.
I will repeat a comment I gave to almost all the Starbazis, Googleites and Apple-holics after their comments and email. I hope I am wrong if you are a shareholder, I do not want people to lose money and hopefully potential investors have resisted the urge to buy and have saved themselves significant losses and maybe some current ones sold out and saved some angst. I hope I am, it is just that, I haven’t been.
I await the angry emails and comments. You can call me whatever you want, just not “wrong” đ
22 replies on “Emotion And The "Apple-holics"”
Actually you leave out the fact that you were so far off base on so many of your ‘facts’, which is what was being pointed out in the comments.
That is what you are being called on, not because you said the phone would fail.
Learn to do a little, I mean even some, research before you post your pieces and you won’t look such a fool.
Even if your suggested outcome is correct, you still look foolish with all your mistakes.
Have a nice day.
just in case anyone was not sure what i meant…
What makes you think the iPhone has anything to do with the current valuation of AAPL?
Lets say that the iphone sells 0 units. Does that stop AAPL from making money(well over %10 in profits on each thing they sell) in computers, software and ipods? no.
But its fine with me. The more people knock down the expectations the higher the bid.
You talk about the 47million ATT customers, yet you don’t even talk about brand new customers ATT could pick up. Could ATT pick up 10million new customers in 2 years? maybe. So the math is lacking there.
GOOG is not expensive.
If you’re looking for a way to drum up a few hits to a fledgling blog, congratulations you found it. If you’re hoping to be taken seriously as a source of smart information for investors, you’ve got a ways to go. I won’t argue that AAPL is trading at a premium price right now, but your two posts have been filled with enough misinformation that they discredit any salient points you might have made.
If Apple drops the price below $600 before 2008, you “win”? You do realize there’s a $500 model from day one right? Besides, didn’t you claim that “there’s no need for 8GB on a phone”? You will be very surprised to see that Apple will sell 8GB models over the 4GB models by about 2 to 1.
And of course there will be lower priced models in the future. Moto did the same thing with the RAZR, Apple did the same thing with the iPod. Did those products fail to return shareholder value? Let the early adopters buy at a premium, who in turn become evangelists for the product. As the product becomes popular, the economy of scale allows it to be produced at a lower cost. Trying to claim some sort of victory out of that is laughable. If your blog is still around in September, I’ll try to stop by and mock you for being so wrong.
You asked for us to think through any insults, so here goes: You look a lot like the “pc” from Apple’s commercials. Perhaps you’ve taken that a bit too personally. I’ve been long on Apple since 2001 (sorry, I know how you hate when people claim that), and I’ll sell as soon as I see them misfire on execution. This is certainly not that moment.
“You look a lot like the “pc” from Apple’s commercials”
Is that it????? come on….
you are correct that I miss-printed the price at $600, it should have been $500. my point though still stands. if they drop this thing to $299 (or close to it) to sell it…. then how else can you say anything but “he was right?”
you folks are so busy playing semantics that you miss the real point, a $600 cell phone will not gain mass acceptance..
No one is say it will always be $600, not even steve jobs.
Todd,
I wrote my previous comment from your original article on the iphone before I read this one….and once again you hit it right on…… and once again here come the slammers.
I believe you are absolutely right about the Googles, Starbucks, Apples, etc., but they sure do have their followings…I just don’t understand why everyone is so emotional, almost cult like.. They are only companies and vehicles to invest in to hopefully make money….people forget that is all they are.
I learned a long time ago to wait 24 hours when buying anything over $500…to rule out emotion as my sole reason for buying it. Emotions, when controlled, can be one of the best things in life(both financially and personally), but emotions without reason leads to disaster.
I also learned a long time ago, I do not need to be the first one to have the newest toy, especially if I can wait six months and have 3 of them for the same price.
Most of these bloggers here will go out and get the newest toy at the highest price….hmmmmmm… I wonder what the phrase means “buy low, sell high”…….
The people slamming you have it wrong, no matter how much logic you show them, their emotions are ruling them.
Thanks for all your good articles.
maddog,
i think you nailed it…
Well, actually I only sided with you so that maybe I could get a free ‘Premium Portfolio Services Subscription’ out of it. bah. didn’t happen.
send me your email addr.
Now we have some apple nut pretending to be me. I did not make the comment about the free subscription posted May 16, 2007 3:49 PM . Enough!
And now someone is pretending to be me being upset about someone else pretending to be me posted May 16, 2007 8:53 PM. Stop the madness!
Two sides of the trade make a market!
Todd,
I must say, I’m slightly insulted by this post. I believe I provided a relatively dispasionate analysis of the issue, which you completely ignored. Not all of us “Apple-holics” are dogmatic. You are completely right in saying that $500-$600 is a hefty price to pay for a phone, and one that the market will have a hard time adjusting to. You ignore, however, the fact that there is a significant block of consumers who will recongnize that they are paying for a phone / blackberry / iPod, see the value in such a produce, and realize that the $500-$600 fee is appropriate, at least to start out with. There is no doubt that Apple would sell more iPhones at $200, but is that price really commensurate with the value of the product that is being sold? In my pocket, I currently have a Blackberry Pearl and an 8GB iPod nano. The total cost of these two product is $500. I would gladly pay an extra $100 to combine these two products, and I believe there is a sizable population that thinks the same way based on survey results conducted by 3rd party outlets.
Regards,
Jonathan
Johnathan,
please do not be insulted. clearly the post was meant for the other 95% of the folks who replied both here and in emails.
i did read you reply and did “not ignore it” but when the balance is so out of wack, time constraints direct my replies. sorry…
if you want, i will give you the same offer i gave the others who disagreed with me. give me 500 to 1000 words on why it will be a “hit” and I will run it. don’t tell me why i am wrong, be original and tell me why it will be a hit.
so far it seems it is easier for the apple lovers to call names than to do original work.
like i said, the eventual outcome of my thoughts here have zero financial impact on me, if you have skin in this game, go for it
as to your thoughts in this second post…
i would not pay or it all in one, maybe that is why i do not think it will be a hit.
i spend a ton of time on my blackberry and listen to my ipod when i do. the iphone would eliminate my ability to do this. now, i could buy both but why have the phone at $500 if i would rarely use the ipone feature?
Tell me Todd,
Do you listen to your ipod while your talking on the phone?
cutis,
yes, all the time. in my car when my family or people are in it, at my house, or when people are over. this is the reason i have no use for the ipod feature of it. i think many more people are like this than you think..
If I have understood you correctly your referring to listening to a docked ipod that’s broadcasting music to your ambient environment while you talk on the phone. You have to understand that buyers of the iphone certainly wouldn’t be attracted to it as a means of serving that purpose but rather will seek to use it more so as a portable personal music player on the side along with all the other features. Of course it would be
quite bizarre to have any phone play music simultaneously during a call, I think everyone agrees there. But you cant really call that one of the limitations of the iPhone at least not from an investment point of view because then it would be an engineering limitation that every competitor would face. By the way, lets not forget the iPhone has no real competitors yet in the sense that its in a class of its own.
I have never had a position in AAPL, and I certainly will not be buying an iPhone anytime soon (but then I have never owned a single Apple product either -guess I’m not an Apple-holic am I?). At the same time, I am not going to conclude the Iphone as a flop because I do think it is a wonderful product and know that there are a lot of people out there who would pay wonders for products that they think are wonderful.
As far as the price tag and the 10 million mark goes, all we could do so far as individual investors is speculate – nothing more. The reason is simple: many factors need to be taken into account, one of which concerns the details of the deal w/ AT&T which only the management should be aware of at this point. For instance who is to say what percentage of the 10 million iPhones will be sold for $500+? Jobs didn’t give details. Neither did Oppenheimer. No one has projected that unit sales by year-end 2008 shall maintain their initial market pricing of $600 (and $500 for the lower model, as Bart Lee pointed out). Eventual price drops for all consumer electronics is inevitable. Everybody knows that.
Besides all this, who is to say that the burden isn’t on AT&T? What if say, an AT&T order for 10 million iPhones by 2008 was a pre-condition for the carrier exclusivity incentive in the contract?
My point is – at this point it is speculation at best. Don’t be so sure of your position, especially when its miscalculated.
So it needs more to it then ‘no music during phone call’ & ‘anything less than the 10 million units sold at $600 by then end of 2008, I win’… for the iPhone to become a flop.
You should appreciate how little it takes to be wrong because of a premature judgment.
Oh yes, one last thing. Good calls on Google and Starbucks, no doubt. But in regards to the use of that track record as even a partial justification of your position on Apple, I will just quote yourself:
“Warren Buffet said if you spend too much time looking in the rear view mirror, you will not see the potholes coming up in the road”.
curtis,
thank you for the comment.
i do see your point on the “You have to understand that buyers of the iphone certainly wouldn’t be attracted to it as a means of serving that purpose but rather will seek to use it more so as a portable personal music player on the side along with all the other features.”
i do agree. i must say in additional that if that is true, will they pay $600 for it?
the main thrust of what i have written on this is the price of it.
i continue to believe that until the price falls significantly, this will be nothing more that a niche product which i am sure is not what jobs wants..
time will tell…
again, thank you for the well thought out comment
I’m sure Todd is having fun laughing at all the angry emails and comments. Honestly, it’s hard for me to determine if he is presenting honest commentary or if he’s just messing with the Apple-holics.
The $600 Point.
As we saw with the ipods, razrs, treos, motoQs, PS2s, etc, the price will come down. Early adopters will pay the high price, the price will come down, and apple will then sell even more. Also, to focus on the $600 number and not the $499 number makes this point suspect. Todd could also mention that Palm Treos and PPC 6700s originally retailed at these prices. He either didnât mention it on purpose, or he didnât do his research.
Also consider that a decent PDA phone plus an 8GB nano will cost around $500-$600 anyway.
Touch Screen Point
If Apple determines that enough people want buttons, they will release a new iphone that has buttons. Products mature over time. Thus, thereâs no sense in harping over the initial specs of a rev 1 device.
Apple’s First Flop Point
Mac Cube anyone? Research isnât Toddâs strong suit. đ
Mp3 player phones
Mp3 player phones arenât big sellers for the same reasons that standalone, non-ipod mp3 players arenât big sellers. None of them can match what Apple does, which is a seamless integration of music purchase, music management, and music synchronization.
Multifunctional Devices
People already buy BlackBerrys, Treos, and other PDA phones. For Todd to compare these to TV/VCR combo devices and printer/copier/faxes is just hilarious. đ You canât âbreakâ the music capability of the iphone and still use the cell phone part! LOL
10 million units sold by EOY 2008
If apple doesnât sell this many, is the iphone automatically a flop? Of course not. If apple sells 9,999,999 units, you will have won a very weak point. Congrats!
anon,
the “flop” issue..
please read the first post more closely.
“The company has had a string of hits since it introduced the iPod and it’s shareholders have benefited sending shares from $7 in 2003 to the $100 they sit at today. The introduction of the iPhone will be the first miscue for the company and send it’s shares, priced for perfection tumbling.”
clearly i was talking recent history…
you folks are getting caught up in playing the semantics game rather than addressing my point..
many of you have already conceded, (though not admitting it)that i am correct that this thing will not sell at $500 or $600. you have also concede my point that the one carrier idea is a loser…
we agree the music shut off when the phone is in use (this is a huge semantic point for you folks) I said “i have to turn the music off to answer the phone”, in fact the phone does it for me. how does that change the inconvenience of this???
it seems the only thing we disagree on it what is considered success for apple or not. jobs is famous for picking a real low level for “success” so he can dance around and scream “success” if he hits his low #’s. good for him, folks have not caught on yet.
10,000,000 in 18 months…. even if he hits that, do you think he will consider that a “success”? me either..
that being said, if he reaches that #, it will be by selling these things for a fraction of their price now…. wasn’t that my point in the original post???
clearly i was talking recent history… (flop issue)
To say âclearlyâ is a reach at best. Perhaps you should title your articles differently. âThe iPhone: Apple’s First Flopâ can be a little misleading. đ You could have save this by saying ârecent historyâ in the article but you did not. Btw, the mac cube and the ipdo both shipped in 2001âŚ
many of you have already conceded, (though not admitting it)that i am correct that this thing will not sell at $500 or $600.
Concede what? When has a cell phone ever sold for the original retail price for 18th months? đ I just picked up a motoQ for $79 in less than a year! Seems like an empty point. Whatâs next? Water is wet? đ
jobs is famous for picking a real low level for “success” so he can dance around and scream “success” if he hits his low #’s. good for him, folks have not caught on yet.
We’ll have to see how iphone sales compare to other pda phones…
that being said, if he reaches that #, it will be by selling these things for a fraction of their price now…. wasn’t that my point in the original post???
I thought the point from the 5/15 article was that the iphone would be appleâs first flop. If your point now is that Apple wonât sell 10M iphones at $500-$600 then thatâs another empty point. We already know the price will go down so how can you argue that the price has to go down for Apple to meet this number? Madness I say!!!
– root