Saturday, October 30, 2010

The big Apple

Apple could soon be the largest public company in America - overtaking the current biggest, Exon - and think says something interesting about our society, i.e. that the biggest US company is no longer a fossil fuel 'old economy' giant, but a company whose current success is based not just on modern technology, but personalized consumer gadgets. Talk about the 'me' age having arrived when i-this and i-that can be such big business!

Apart from the fact that personalized, completely new gadgets can take (modern,western) society by storm so rapidly (iphone only around 3 years), it is significant that non-necessities can be such an economic powerhouse. A positive take on this is (modern, western) society is so well equipped in the basics, it has money to burn on such non-essentials, but perhaps a more negative view is in order, since what does this say about that society, that it is so obsessed with the latest gimmick, especially given the fact that it is not so homogenously wealthy as the fact suggests (without even considering the poverty which is the norm in a lot of the rest of the world).

Still though, no company is going to succeed to such a scale by being angelic, and I overall think it quite cool that a company such as Apple (much as I still disagree with their restrictive approach) can be bigger than an oil company. Neither are exactly pinnacles of worthiness, but at least Apple is state of the art technology focused more on enjoyment than exploitation. If world peace and deep universal satisfaction are out of reach for now - I think i'd rather show off an Ipad to the universe than an oil refinery. We may not have a great idea where to go, but we're heading there in style...



Apple poised to become largest public company in America

Success of iPhone and iPad could boost Apple past Exxon to the top of the Standard & Poor's 500 by market capitalisation

Apple CEO Steve Jobs holds the iPad
Apple was worth $2bn in 1997, shortly before Steve Jobs took over as chief executive – it is now worth around $274bn. Photograph: Kimberly White/Reuters

As Apple prepares to announce its fourth-quarter results tonight, analysts are forecasting that it will have sold another 5m iPads, and around 12m more of the iPhone 4 it released in June.

If the numbers are good, then it is quite possible that the share price will jump further above the $300 (£190) mark that it broke last week – and the company could become the most valuable in the world, measured by market capitalisation, surpassing Exxon, and capping its remarkable rebirth under the aegis of founder Steve Jobs.

Though at the end of last week, the gulf in valuations seemed large – Exxon's $331bn, against Apple's $274bn – the gap has been closing for more than a year. Even if tonight's results are not enough to propel Apple to the top spot, many on Wall Street think it is just a matter of time. Its profits will get another boost in January when Apple will begin selling iPhones through the largest network, Verizon, as well as AT&T, its partner since 2007.

Apple is forecast to show revenues of around $19bn for the quarter and $5bn of profit – with the iPhone and iPad, products you could not buy four years ago, generating about $10bn of sales.

It is a dramatic reversal from May 1997, when Jobs – who had recently rejoined the company after been fired in 1985 – was manoeuvring to take over again as chief executive. The share price put a total value on the company of just $2bn, "reflecting Apple's loss of market share in an increasingly Windows-dominated world", as analysts put it. Jobs told a team of software coders at the time: "You've got to start with the customer experience and work back to the technology – not the other way around."

He drove out the dead wood, his new recruit from PC-maker Compaq, Tim Cook (now the chief operating officer) streamlined its supply chain, and the company did as Jobs suggested, focusing relentlessly on its customers.

He also set targets – such as surpassing Dell. Asked in October 1997 what he would do in Jobs's position, Michael Dell retorted: "What would I do? I'd shut it down and give the money back to the shareholders." Jobs chastised Dell privately – and then celebrated with an email to staff when in January 2006, with a value of $72.1bn, it did finally pass Dell . In May this year, Apple achieved a huge milestone, passing Microsoft in market capitalisation, at £222bn against £219bn.

Apple's computer business has steadily improved, coming third behind HP and Dell in the personal computer market in the US in the three months to September, according to research firm Gartner, although it still has a relatively small share of the global market.

But it has been the newer products that have driven growth. Apple took ownership of the MP3 market with the iPod, where the integration of hardware and the iTunes software proved to be a success and baffled those who had expected Microsoft to at some stage overwhelm it with an "iPod killer" – based on software from one company, hardware from a second, and music from a third.

Then in January 2007 Jobs unveiled the iPhone, and Apple began to eat into the smartphone market – previously the sole preserve of Nokia, Research In Motion (with its BlackBerry) and Microsoft, with Windows Mobile. Sales took off again, and Jobs's comparatively modest target of 10m phones sold by the end of 2008 was easily surpassed, with 13m sold by September of that year.

The latest hit is the iPad. Launched in April, analysts think it could sell 25m in 2011. Gartner has made dramatic forecasts for the growth of the tablet computer market, which it said would triple in size next year to 54.8m units. The technology research firm is predicting that the market will grow to 103.4m in 2012 and 154.2m units in 2013. And despite intensifying competition, Gartner reckons the iPad will keep its lead until then.

Apple's longtime rival Microsoft (presently still valued at £219bn) became the largest company in the world by market capitalisation, for two years in the late 1990s during the PC boom. At the time, Microsoft did not pay dividends, though it does now. Apple still does not pay dividends but if it does reach the top, it might have to find some other way to make its stock look more attractive than simply the chance that it will keep rising in value.

However being the top-valued stock brings other rewards: billions of dollars invested in index-tracking funds will switch from Exxon to Apple if the Cupertino-based company does hit the top – and the switch could push down Exxon's value further, accelerated by hedge funds and technical traders who make bets based on the rebalancing of major indexes, and would be ready to short the oil company's shares.

Apple will come under increasing pressure to do something with its enormous cash pile of roughly $50bn, which was a necessary buffer when times were lean, but now looks like wasted opportunity. "Apple needs to do something with all of that capital," said Toan Tran, an analyst at Morningstar. "I could understand wanting to have something in reserve, but $50bn is such a ridiculous number that they should seriously consider returning some of it to shareholders in the form of share buybacks."

If Apple does surpass Exxon, it would mark a changing of the guard in the Standard & Poor's 500, where the top spot has been shared by companies including General Electric, General Motors, AT&T (before it was broken up in a monopoly investigation), and – 20 years ago – by IBM, which was also hit by antitrust investigations.

With suggestions that the world is approaching 'peak oil' as supplies begin to dwindle and increasing concern over the role that fossil fuels play in climate change, Exxon looks set to be replaced by perhaps the most potent symbol of the digital age.

Thursday, October 21, 2010

The UK 'spending review' - ideology or practicality?

The UK has at last announced it's 'spending review'. Given that all countries have deficit problems, but also need to somehow keep what recovery there is alive, how they approach it has major significance for our societies, so something worth giving some first impression comments. The future will show how close/far off the mark they are!

From what I've read recently am sceptical and actually concerned about the depth and type of cuts. It seems a lot of economists think it a dangerous thing to do given the world economy,and this makes a lot of sense to me. The idea of the private sector magically stepping in to fill the breach sounds very optimistic given the private sector isn't exactly booming currently. And I also suspect the overall approach is really ideologically rather than pragmatiically driven. The idea of freeing the private sector so it can come to our rescue reminds me very much of the idea of 'trickle down' wealth, i.e. justifications of conservative policies that we might (rightly) suspect of just benefiting the well off, but that we're assurred are actually good for everyone!

The bottom line is I can't see how the loss of half a million jobs,and decimating what people get from the government can lead to anything but dampened economy....and a vicious cycle downward. So even just from a practical self serving point of view, think a very dangerous approach, and risks prolonging the crises, not just in the UK but everywhere through knock on effects (it is the 6th largest economy).

And morally, it seems even worse. Since the focus is on cuts and not tax rises, then obviously hits the less well off who receive most from the government, which is not just unprogressive, but particularly unfair since it was the upper echelons in society, the banks and the financiers that caused the problem (and also probably practically worse as well, since has more of an effect on their spending power since they would have less disposable income to start with)..

So for all the talk of 'in this together' and 'for our future' think while some measures needed, the extent show it is largely the conservatives seizing an opportunity to decimate the state for ideological reasons and justify it as 'necessary'. Am just amazed the libdems are sticking with it. It really makes them seem a pointless joke -at least the conservatives are doing what they believe in!

The irony is the UK, being such a large economy, and with it's own currency, surely has more options than say for example Ireland, which is really broke and in a fix. I really think this is going to be a disaster for them. I hope I'm wrong, and hope even more if I'm not that the consequences are contained there and don't spread to continental Europe (and Austria in particular!). Though I guess what the big eurozone countries do is much more relevant to my own selfish position. Still sad to see such conservative ideology with such a free hand in Britain.