“Undoubtedly, Apple is distinguished for the iPhone,” Pantho Investments writes for Seekigng Alpha. “But since 2014, Apple has also been working on an electric car via Project Titan. And just yesterday, WSJ reported that Apple has set aside $1 billion to produce original content, essentially competing with the likes of Netflix and Amazon.”
“Considering that Apple’s core competency has historically been electronic hardware and easy-to-use user interfaces, are Apple’s ventures into entertainment production, electric vehicles, and complex AI starting to become a case of diworseification?” Pantho Investments wonders. “To those unfamiliar with the term, investing legend Peter Lynch wrote about the concept of diworseification in his 1989 book, One Up On Wall Street.”
An excerpt from page 148:
Instead of buying back shares or raising dividends, profitable companies often prefer to blow the money on foolish acquisitions. The dedicated diworseifier seeks out merchandise that is (1) overpriced, and (2) completely beyond his or her realm of understanding. This ensures that losses will be maximized.
Every second decade the corporations seem to alternate between rampant diworseification (when billions are spent on exciting acquisitions) and rampant restructuring (when those no-longer-exciting acquisitions are sold off for less than the original purchase price).
Read more in the full article here.
MacDailyNews Take: Is Apple diworseifying?
No.
If anything, Apple is late to the idea of developing compelling original content. Of course, Apple has the money to buy up the entire entertainment industry, so being a bit, or even a lot, late won’t hurt them in the long run. People constantly underestimate Apple. That is a mistake. People also cannot seem to wrap their heads around Apple’s considerable resources. They are, to say the least, extensive. Apple can do whatever they want. If they want to buy A-list Hollywood, they can buy A-list Hollywood – and B-list, C-List, D-List…
Ditto for the “car” industry. It’s not outside of Apple’s core competency as vehicles today are really rolling computers and will only become more technical.
SEE ALSO:
Hollywood, Apple are said to mull feature film rental plan, defying theaters – August 18, 2017
Apple blocks Apple Pay support on sites selling white nationalist apparel – August 17, 2017
Apple rejects game featuring ‘objectionable’ Pepe The Frog cartoon – June 12, 2017
Apple App Store rejects pro-Trump ‘Build the Wall’ game over ‘Pepe The Frog’ cartoon – October 21, 2016
Apple App Store rejects satirical Hillary Clinton game, despite offering dozens of anti-Trump games – July 27, 2016
In wake of London stabbing rampage, will Apple replace their knife emoji with a plastic spork? – August 4, 2016
Open Thread: Should Apple code their OSes to block video games that glorify guns and murder? – August 3, 2016
Apple jumps the shark by removing the handgun emoji; Gun owners might want to reconsider buying Apple’s products – August 3, 2016
Apple removes handgun emoji, replaces it with a squirt gun – August 1, 2016
Apple’s politics may be hurting its brand – June 29, 2016
Apple quashes rifle Emoji – June 20, 2016
[Thanks to MacDailyNews Reader “Phil” for the heads up.]
Healthcare is the next growth industry for Apple. If they remain focused they can upset the whole system for the better.
I work at a hospital. It’s utter hubris to think that Apple can improve the disease management system that decades of independent businesses, governments, and other self indulgent imbeciles have jacked up.
Kolache, it is utter hubris for you to think that Apple has no chance of improving healthcare in the U.S. Just because others have tried and failed does not mean that Apple will fail.
In fact, I believe that Apple has a strong chance of materially improving healthcare by connecting people to the system on a more personal level. As opposed to the previous failed attempts to effect change from the top down, Apple will empower patients and nurses and doctors to change the system from the bottom up – a grassroots approach much like BYOD to work has taken the iPhone and iPad into corporations across the world and made MBPs prevalent in meeting rooms. Apple will improve healthcare because Apple’s tools and solutions will work better for people, and people will demand that the healthcare system adopt those solutions.
P.S. Please let us know where you work so that we can avoid that hospital. I would hate to be dependent upon you for healthcare support. I cringe even to think about it.
They said the same thing about Apple in regards to phones, stores, iPods, selling music, etc.
Hey, sarcasm-impaired folks! Did you notice the END of Kolache’s post where he said “self indulgent imbeciles have jacked up” ?
Did that not give you the slightest HINT that his post was sarcastic? Damn, you’re obtuse.
By that logic Apple would never have got into phones, we remember how some of the ‘experts’ warned them off.
Who’s the hack blogger who wrote this cr*p, lol.
SERVICES IS GROWING BUB.
And Healthcare is a service!
What you call healthcare is merely disease management.
It does annoy me a bit to hear of a new industry they’re entering when I feel they don’t seem to have the bandwidth to perfect their current products/projects.
I experience bugs in iOS that have been present for years that I report regularly.
Random things like Safari autofill seem like they were produced by a child.
Apple Maps still feels years behind Google Maps in the ways I use map apps, so I dislike it being the only native app.
I can’t even reach the back button anymore in half my apps when using my phone with one hand.
Etc.
Sometimes I wonder if Apple employees even use their products and don’t experience the same issues I do. And I sometimes wonder what 20,000 HQ employees do all day when little issues persist for years.
I’d love for Apple to focus on perfecting their current lineup before taking on ambitious new projects.
Sadly there is some honest truth to this.
Apple are at their core a hardware sales company and they perfect their user experiences that then allow the creatives of this world to use and expand Apple products to the masses sales or promotion of the hardware or by creating compelling music/software(Apps) which Apple also get amazing income from.
Yes Apple has become a massive distributor of music and Apps but not of their own making They just glees 30% for the talents of artist with creative minds.
Apples success is to allow those who have the creative talent to create on their hardware and this has been their bonus but sales of their hardware has always been Apples core income and even though commission based income has become a major income driver for them Apple still doesn’t have the ability to become the artist in this diverse creativity field (think the planet of the apps show)
No leave the creatives to make Apples products shine with new creations and Apple just keep making great hardware that ‘Just works’ with the software that makes the hardware Just work.
Sadly (again) Apple’s software for their hardware has become closer to a bungling hash of its former self with their hands in too many pies trying to grow through out the world yet still trying to run as a garage company with a few heads (sometimes headless) executives becoming more and more reliant on external car salesmen like Jimmy Lovine who can easily convince them that he alone has the answer for iTunes (yet failing constantly).
Too big to fail is a word used when the banks imploded and i fear one mistake with the iPhone and Apple might become a fast growing sink hole.
For me Apple needs to get back to perfecting iTunes and their core applications and great hardware rather than trying to play the Spotify’s give away subscription game that is killing artists music sales and not making any profits for Spotify or the artist being pimped.
Media is not what Apple do and investing in Lovine’s pie in the sky crack pot ideas will constantly achieves nothing substantial for the billion dollar investment he gleaned. they need to see this and not go do it again on another car salesmen that claims to have the answer for supplying original show content.
Just focus on hardware and making that hardware great and let the creatives find ways to add original content where they can get paid for adding to your eco system.
Thats my 2cents for today.
the article says “Instead of buying back shares or raising dividends, profitable companies often prefer to blow the money on foolish acquisitions”
Tim Cook has spent near 100 billion on buybacks and dividends , as an investor I’m not complaining but compare this to the largest Apple acquisition which is Beats for 3 billion.
(the R&D budget though, probably for cars etc has gone up : in 2016 it spent about 10 billion on R&D and it’s still climbing ).
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Some notes on SERVICES:
I don’t mind Apple expanding to new areas but I like to point out that:
a large chunk of income from the ‘services’ segment of Apple’s financials is for warranties (which are lumped into ‘services’ ) . Apple Care makes a lot of money for Apple (warranties are profitable that’s why Best Buy etc always try to push you to get extended warranties). Warranty sales depend on NEW hardware sales — it’s not really ‘recurring ‘ revenue like ‘music’.
I don’t think Apple makes any money from streaming music at all as Spotify with double the paid subscribers loses money.
Note Netflix if you count expenses is also a money loser (cash negative).
MDN’s comment “Of course, Apple has the money to buy up the entire entertainment industry” shows that Entertainment is way less profitable that Apple’s hardware sales like iPhones otherwise Entertainment companies would be worth a lot more .
App sales revenue is also mostly from third party creators as most Apple apps are free
NOT saying Apple should not try to expand services but just like to point those things out.
( I wish Apple would take it’s tried and true products like Macs more seriously. Macs are the second largest hardware money maker for Apple after iPhone . It makes a bit less than services but more than iPad YET there are NO MAC ADS ! Macs by profit are near a Fortune 100 equivalent in size yet Apple doesn’t bother to advertise them. The new Kaby Lake macs are a good start in getting back their Mac Mojo but there are still Macs that have not been updated for 4 -5 years.
Apple wants to spend another billion bucks on original content but in the hundreds of millions spent who so far have got Planet of the Apps, Carpool karaoke. Maybe a bit more for Macs?
(with less than 10% market share now, Macs have room to grow)
Note Apple’s ENTIRE advertisement budget (for all the iPhone, iPad, Watch etc ads around the world ) amounts to a billion plus a year. Imagine if they spent a bit more from that original content budget (of a billion plus) on ads for Macs (which even without ads generate billions vs probably zero or loss for original content)
The underlying problem with reports about Apple is that those who publish articles about Apple have a very limited understanding about how Apple actually operates.
Journalists and analysts are always making comparisons with what other companies have done and assuming that it will work out the same for Apple. For instance, setting up their own retail stores has proven to be a bad move for a lot of other companies and I can see why people might have assumed that it would work out just as badly for Apple, but as we now know, it’s turned out to be a hugely successful enterprise. Similarly transitioning from PPC CPUs to Intel was widely predicted to be a Herculean task, but it went amazingly smoothly and many users never even noticed the change. When iPod was king, every other MP3 player was hailed as an iPod killer, but commentators ( and rival manufacturers ) hadn’t understood that what made iPod so appealing was the combination of the hardware, iTunes and the iTunes music store. They all worked seamlessly together in a way that others couldn’t equal. Smartphones without keyboards were unthinkable before the iPhone and now smartphones rarely have physical keyboards.
Apple doesn’t just expand in random directions. Any expansion either has to be profitable in it’s own right, or able to support sales of Apple products, which ultimately makes it profitable anyway. Apple buys small companies having expertise or personnel which Apple can use. New products, acquisitions and investments have to fit into a larger scheme of things.
Having followed Apple for many years, one thing that has been obvious is that Apple thinks long term. While they sometimes appear to be agile and able to turn direction rapidly, they also have a strong vision of where they want to be heading far in the future and lay those foundations well ahead of time. By the time that people have noticed that Apple has quietly got all it’s ducks in a row, the final move happens before rivals can properly react. We’re already seeing how Apple Watch is quietly transforming into a sophisticated health monitoring device, which could become a truly massive market.
AI is going to make a huge difference to gadgets and devices. Apple has always been about great user interfaces and what greater user interface could there be than a gadget that can learn and anticipate what you want it to do for you?
Entertainment production is not something that Apple was desperate to get into, but the existing owners of movie rights are not allowing Apple to use their content in ways which would allow Apple to solidly support expanded sales of Apple TV. One way around this impasse is for Apple to create their own content, which helps the short term problem, eases the mid-term problem by weakening the bargaining power of content owners and offers opportunities for the future as any blockbuster productions could be tremendously profitable in multiple ways ( rental, sales,broadcast rights, merchandise etc )
Electric vehicles are certainly a long way from Apple’s present core business, but it’s also an sector which is in it’s infancy and ripe for disruption. Of all the things that could benefit from sophisticated AI, a great user interface, custom chip designs and world-class innovative design, nothing fits the bill better than an Apple electric vehicle.
Far from diworseifying, Apple is doing what it has always done, which is confounding it’s critics by devising a long term plan combining it’s strong points to create even greater opportunities for the future.