Apple has a monopoly on being Apple!

Blain’s Morning Porridge – 14^th September 2021 – Apple has a monopoly on being Apple!

“The light that burns twice as bright burns half as long – and you have burned so very, very brightly..”

This Morning: Highlight event today is Apple launching new bright-shiny-things. Apple is unique – it has a monopoly of being Apple! For how long?

But first…. Big Smiles this morning! I switched on Brek-drek (morning TV) and it was all about last night’s Met-Ball in NY. Hah! Let them eat cake indeed! The costumes were extraordinary – and must have cost billions. There was even AOC in a tax-the-rich dress! These “celebs” think they are the “puppies-bits” to be so glam. I laugh at their pretentions! 40 years ago we dressed better for pennies! I was a post-punk anarchist in a ripped t-shirt, baggy trousers and braided navy jacket. Surprisingly… it sort of worked!

This weekend we are at the Isle of Wight Festival where Duran Duran is the headline act. I challenge anyone to carry off New-Romantic like Simon Le Bon did then – and still does…!

Try singing this ditty to the tune of Rio: “Her name is Brillo and she washes up the pans…”

Back in the real world…. Apple is the Apple

US inflation data (which will remain high) aside, the most eagerly anticipated event later today is new-bright-shiny-thing announcement time when the most valuable company on the planet launches its latest batch of opioid tech.

Yay! Time for the new iPhone (which might or might not be called the 12s, or the 13), plus the launch of a new model iWatch, and Airpods version whatever. New Mac-Book pros are also on the way. And whatever wonderful bright-shiny-things Apple unveils – we know it will be bought by the container-ship full. (Global Supply Chains permitting.)

Years ago – in the dark days immediately after Steve – I wrote a hopelessly ill-informed double-plus-bad-think article about Apple – predicting it was a bubble about to burst. My thesis was well argued: without Steve Jobs’ disruptive vision endlessly inventing new concepts in tech (like iPods), innovating exciting new bright shiny products to excite us while emptying our wallets, Apple was doomed to be overtaken by newer, nimbler, more inventive, fashionable, cooler competitors. I could not have been more predictable and orthodox in my thinking.

How could Apple possibly command any extraordinary market value in a constantly evolving tech sector when it was a mature – effectively prehistoric – company founded way back in 1976? The evidence of the last 37 years since the original brick suggests it’s a brutal market. We’ve seen names like Motorola, Nokia, Ericson, and Crackberry effectively disappear, while a host of other producers are of statistical insignificance – even though they sell more phones cheaper. Today Samsung builds brilliant handsets, but is runner up in a one horse race.

I thought Apple was doomed to similar evolutionary obsolescence.

What a fool I was. Fortunately, I did not sell my stock – as I did when I decided Tesla was run by an unpleasant numpty. Elon remains a numpty… but a very, very rich numpty.

Apple not only remains dominant, but has effectively become its own unassailable Monopoly of being Apple. I reckoned without understanding the Tim Cook effect. No new disruptive products – but he has expanded the Apple multiverse, building a much larger ecosystem which Apple is successfully farming for increasing revenues.

Cook has been CEO for 10 years. He’s made headlines after receiving a $750 mm payout for his first 10-years success quadrupling sales and leading the firm to top of the global value table. He’s generated a return of 33% per annum for investors, double the return of the S&P 500. Apple is sitting on an enormous cash pile, yet has still spent $450 bln buying back its own stock. It can do, literally, anything..

Apple is no longer just a maker of bright-shiny tech. It’s become a business ecosystem with cloud, music and app subscriptions. Its bundling these services and trying customers into them. It’s a digital wallet via ApplePay. It’s a streaming service. At $54 bln its services business is now larger than its iPhone sales of $40 bln, while “wearables” like watches and buds come in at $31 bln. The earnings are sustainable.. There are around 1 billion iPhones, and they are recycled upwards around every 3-4 years. What’s not to like? What might replace them? Even if anything did – what competitor could replace the ecosystem of which the iPhone is just a part?

Tim Cook succeeded for two reasons.

First, because he positioned Apple to ride the “exponential” wave of “net-enabled” innovation over the last 10-years allowing the firm to harvest revenues from new markets and servces, and capturing the customers revenues they spawned.

Second, because he recognised what me and billions of other customers are…

• “Hi, my name is Bill and I am a hopeless Apple addict. I can’t resist. I’ve got iMacs on my desk, Mac-pros in a travel bag and on the yacht, iPads sitting around in bedrooms and lounges, an iWatch on my wrist, loads of iCloud space for my docs and photos, and an iMusic subscription… The most single important thing I own is my iPhone. New last year and it’s about to become obsolete. I need to buy the new one. Now! Please help me?”  

The new iPhone will be same as the old iPhone, but with… well even better cameras, photo-editing software and a “more advanced” screen. The tech analysts say it will be “more iterative”. Wow. How have I lived without these things? (Clue: I have never photo-edited anything, I wouldn’t know a better camera if it bit me in the leg, and I am singularly unaware of ever having used the 5G functionality on my now one-year old iPhone 12 pro-to-the-max.) More interestingly the new phone may have 1 terrabyte of data – and since I am always running out of memory….

Whatever…. My iPhone is indispensable. Without it.. I am proverbially what happens before you get pregnant.

On my iPhone I can do all my banking. I can watch markets. I can send and receive on all my multiple email addresses. I can blog and chat and order “stuff”. I can turn on and off my lights. I can look at all my photos. I can control our kitchen appliances from it (yes, I have switched on Mac’n’cheese in the oven while we’ve been heading home from sailing.) I can listen to podcasts, radios, watch TV and even films. I’ve written the Morning Porridge on it. I can check where I am on my yacht – much easier than nipping into the cabin to look at paper charts. I can play games. I can and do listen to loads and loads of music on it, and I can control my hi-def streaming from it.

Heck, I can even phone people on it!

But will I always buy Apple?

The threat to Apple is three fold:

1. Will Apple be able to keep up with the chaotically evolving possibilities and opportunities within rapidly spinning cloud, fintech and consumer tech. I don’t have a clue what tech marvel will emerge next to make our lives better, yet more complex. Apple’s current legislative battles over App costs could send developers to other vectors – if there were any.
2. Will Apple be allowed to remain so dominant by the regulators? Already its underpressure from anti-trust laws. Are the courts likely to test Apple’s monopoly on being Apple? The age of tech regulation to control data use is upon us. GDPR and Child Suitability rules are merely the first step.
3. Will exponential development of web-enabled products continue – or, have we peaked, or might a new revolution emerge? What if someone makes the smart-phone obsolescent overnight – like the iPod did to the CD Player and Sony Discman? (Or, will Apple just buy up any promising competitors and bury them?)

What I do know is nothing lasts forever. Empires rise and fall. Companies don’t remain in the top 10 for very long.. Apple has already lasted longer than most… But who would bet against Apple today?

Tomorrow.. well that’s a different story….

Five Things To Read This Morning

FT – Climate change risks triggering catastrophic tsunamis, scientist warns

FT – Brevan Howard to “significantly expand” crypto asset push

BBerg – Litecoin Foundation “Screwed Up”, Lee Says of Walmart Snafu

ZH – Endgame Begins: Evergrande Hires Bankruptcy Advisors As Furious Investors Protest Imminent Default.

WSJ – Global Oil Demand to Exceed Pre-Pandemic Levels Next Year, OPEC says

Out of time and back to the day job…

Bill Blain

Strategist – Shard Capital