Karl Denninger makes the case that Amazon and Apple are toast in the long run. You can read the whole thing here. Some notable observations from the post follow –
Now on to Apple. There was a report out Monday that the firm had cut supplier deliveries by 25% out of Asia. There was a mad analyst scramble during the day to try to refute the damage that was rapidly accumulating in the stock, which was mostly successful. In my view, this was a fool’s errand and you were a nut if you followed people into the stock on that “dip.”
Apple gets a lot of its sales in Europe. But Europe is a train wreck economically. To believe in the forward story and that the production cut is not “real” you have to believe Europe will avoid a Depression. Given what’s going on over there, such a belief is an act of pure insanity.
Oh sure, they might not get the worst of it right now, but this is a forward projection, not a call for a crash in the morning. You also have to believe that the United States will not suffer the knock-on effects and that sales here won’t get hurt. And finally, you have to dismiss the fact that HP (HPQ) effectively destroyed pricing power for tablets with their “blowout” of the Touchpad.
The latter may well be a stake through the heart. HP’s “blowout” put the $99 price point in the mind of consumers and that is not going to go away. This sort of “ratchet” mechanism has a well-documented history in America, and once it takes hold it is almost impossible to get rid of. There are already signs that this pricing pressure is eroding the edges of everyone else’s tablets, with the first to succumb being RIM (RIMM)’s “Playbook.” This will reach Apple and margin collapse is a well-documented phenomenon that has a habit of trashing stock valuations.
First of all you might not have been a `nut` to have bought on the dip. Even if Xmas is flat, tablets are going to be the hot thing in tech this year. I suspect that Apple will sell all it has its hands on. So long as you intend to sell out near the end of Apple’s quarterly results one might make a small profit. Not a small feat in a down market.
But long term I think Denninger has it right. Jobs, the pirate that he is, had the pulse of what was hot as human factors and customer feel. Its been a signature mark of Apple and its CEO. But Jobs is bowing out now. His style of management only comes around about every 20 years or so. Not only that his imprint on Apple is probably its own curse. It been more than one company that lacking its signature captain has been cast adrift and floundered on the shoals of NoVision.
That ultimately will be Apples’ fate.
Amazon will also blow up; it shares Netflix’s former screwball P/E (currently 101).
Prior to passage of the bill obligating collection and remittance in such circumstances, prominent online retailers including Amazon.com and Overstock.com had threatened to terminate relationships with affiliates, if the legislation became law. Now that it has, and affiliate relationships are being severed, something critics of the legislation say was entirely foreseeable is occurring: Online businesses and entrepreneurs are leaving the state, thus risking an actual reduction, as opposed to marginal increase, in California’s tax revenue.
Last month, news broke of one California-based online entrepreneur who had decided to ditch California and move to Nevada in the aftermath of Gov. Jerry Brown signing the law. ”I always figured that in California, home to Silicon Valley and a million tech startups, they’d never pass a law like this,” said Nick Loper, who formerly operated ShoesRUs and has now opened a new venture, ShoeSniper.
Per the piece in which Loper is quoted, more than 70 affiliates had at that stage already left California, according to online businesses.
Then, last Thursday, another online entrepreneur, Erica Douglass, posted a mock “It’s Over” letter to California on her blog. Douglass, who sold an internet company she had built for $1.1 million in 2007 when she was just 26, cited multiple reasons for moving to Austin. Among them were unnecessary paperwork requirements mandated by the state, and high taxes as well as business fees. However, the straw that broke the camel’s back, was according to Portfolio, Brown signing the Amazon Tax into law.
This is one of those, `I see the wall, I see the wall, Oooh where did that wall come from?` events. When will politicians learn that everything they do has an equally troubling reaction?
Nearly five months after filing for Chapter 11 bankruptcy protection, the once huge chain of Borders bookstores has finally found a private investment firm willing to buy it for $215 million. Alas, the buyer would also be assuming $220 million in debt from the busted bookseller.
However, while the deal has been agreed to, it’s not yet set in stone. The AP explains:
The agreement is tentative and what is known as a “stalking horse” bid for a company under bankruptcy protection. The bid will open an auction for the bookseller and its assets, so a higher bid is possible.
The deal will go before a bankruptcy court judge on July 21.
Amazing in my view. Borders is a pretty good outfit. But they have the B&M disease like many other book resellers. There are many in the publishing industry who think that there will be a golden age after the depression is over. Some how I don’t think so. The winners will be the Mom&Pop shops who got innovative and made their operations slim and trim and provided service and interests of a more regional basis. The problem is can they survive now? Most of the mass market will be direct Internet sale, ala Amazon.
That really could be the case if the industry follows her lead: Downloadable albums should be $1 or less. To be clear that is per album, not per song.
When if asked if her new album wasn’t worth more than 99 cents that Amazon charged, Lady Gaga responded, “No. I absolutely do not, especially for MP3s and digital music. It’s invisible. it’s in space. If anything, I applaud a company like Amazon for equating the value of digital versus the physical copy, and giving the opportunity to everyone to buy music,” she said in a new Wall Street Journal interview. (Hypebot)
For musicians, the only roadblock to the $1 album is the cost of processing the payment, but if you’re selling through Amazon, it’s cut is less than running a $1 transaction though Pay Pal. With Amazon on your side, who needs labels? At volume, this is still very big money.
On the consumer side: At a buck, it isn’t worth the trouble to steal it. I’m sure there will still be a few copies shared, but the numbers will be tiny. In fact, the market could for the 99 cent album could be infinitely larger than the traditional album market. Most people won’t pay $15 for an album to get one to two song’s unless they’re avid fans. At a buck, it’s an easy sale. If buyers end up liking more than a couple songs, they will much more likely to part with a larger sum for a concert ticket.
While Lady Gaga’s music doesn’t appeal to me much, I like her business sense. She’s obviously got a handle on what fans want. That means she’ll continue to be very successful while the big labels fade into the horizon…
You’ve probably heard the tales of the NetFlix swamping the interwebs. Right? Do you think it is so? Well give a read –
The portion of the network Netflix hogs is only the ISP’s edge connections – from a distribution hub to the house of Netflix’ subscribers.
The heaviest traffic is in spikes during one part of the day, which is irrelevant from a network-infrastructure standpoint. Even if the spike is only an hour, the network segment through which the spike passes still has to have enough capacity to handle it.
For the ISPs that is the good news, though they already know this and simply leave the good news out when complaining they must be allowed to throttle Netflix to avoid having their networks swamped.
Netflix doesn’t swamp the ISPs’ backbones or even their high-volume network spokes because its content is distributed and cached ahead of time. When it launches it travels only across the edge, vastly reducing the logic behind arguments by AT&T, Comcast and Verizon that they have to keep adding to their core networks to keep up with bandwidth-sucking competition from Netflix.
For the benefit of our readers who may not be net savvy. The ‘edge’ in net parlance is that last mile hop that has to be made from say the Dallas TelNet farm to my home in Arlington. There are several providers of ‘edge services’ where companies like Net Flix, Microsoft and others forward store content, files, programs, movies, etc. Akami and Amazon are examples of such vendors.
So in general, the backbone as the snippet above intones is hardly bruised. Fact what I think many ISPs complain about is that they did not think to get into the edge services business sooner. But then they thought that the entertainment channel bandwagon was going to go on forever. That’s where firms like Akami have eaten their lunch.
So the real gripe is that they did not think of it as a service offering. The fact that they are letting firms like NetFlix take the heat is just a salve for their bad marketing.
Evidently. South Carolina all but tells Amazon to go stuff it with a new distribution center. This is after Texas does the same darn thing two months back —
Amazon all but told South Carolina goodbye Wednesday after the online retailer lost a legislative showdown on a sales tax collection exemption it wants to open a distribution center that would bring 1,249 jobs to the Midlands.
Company officials immediately halted plans to equip and staff the one million-square-foot building under construction at I-77 and 12th Street near Cayce.
“As a result of today’s unfortunate House vote, we’ve canceled $52 million in procurement contracts and removed all South Carolina fulfillment center job postings from our (Web) site,” said Paul Misener, Amazon vice president for global public policy.
In the middle of the worst recession in 50 years? The State does not want those jobs? Who the hell is the State of SC working for?
It is certainly not the people.