“Apple’s cash may rise to $72 billion this year, according to a report that Gabelli analyst Hendi Susanto put out Friday,” Ray reports. “That’s $78 per share in cash, perhaps going to $103 in 2012, Susanto estimates.”
“Though the cash hoards will seem even more ridiculous next year, reasons for companies to hold onto their war chest will increase markedly. Apple, for one, will need to invest to meet a major challenge,” Ray reports. “No matter how many iPads and iPhones it sells in 2011, the competitive focus is shifting to the ‘ecosystem.’ This comprises not just computing devices and software, but also ‘services,’ which basically means content and functionality that is hosted on Apple’s own computers in its data centers.”
Ray reports, “Apple is certainly gearing up for big investments. Its capital expenditures are expected to jump more than 55% this year, to $4 billion, according to Caris & Co.’s Robert Cihra, mainly for online infrastructure.”
Full article here.
MacDailyNews Take: By SteveJack:
HBO has long produced compelling original content in order to retain and attract new customers. For example, Boardwalk Empire has an annual budget of $65 million. Other series are far less costly, yet still quite successful. Plus, HBO routinely tops critics’ lists and awards which generates free publicity and even more consumer interest.
Imagine if Apple took less than 1/50th of their cash on hand ($1 billion annual production budget equals 15+ Boardwalk Empires) to bankroll the production of exclusive content for iPhone, iPod touch, iPad and Apple TV? Last quarter – 90 days – Apple’s net profit was $4.31 billion. Take a mere 20 days of profit and roll it into exclusive, compelling content. As we all know, getting the old guard media to play has always been an issue with Apple TV.
Apple has already sold some 130+ million iOS devices. Apple could more than double that figure in 2011 alone (150 million more iOS devices). By mid-2012, Apple could have sold more iOS devices than there are people in the United States.
What if Apple began to invest in quality original content? What if Apple used the broadcast and cable networks as a testing ground and then began to outbid for hit series? Even better, and also far less costly/risky, what if Apple simply allowed talented producers and directors to go directly to an audience of hundreds of millions via iTunes (70/30 split with Apple, naturally)? Think the next Boardwalk Empire producer can make more signing a contract with HBO or by selling directly to their audience via iTunes? And, BTW, promising series like, say, Jericho, FlashForward, and many, many others that fail to reach critical mass within a traditional broadcast network model very well might be profitable in a direct-to-iTunes model. They wouldn’t have to be abruptly cancelled, they’d just move to the iTunes Store and continue production for as long as they remained profitable. Or, what if Apple and HBO/other networks partnered somehow? With quality exclusive content, how many extra Apple hardware sales would result? And how would Apple’s iAd fare? (Very well, if I had to guess.)
There are many more questions and possibilities, but almost all of the answers require a huge war chest.
SteveJack is a long-time Macintosh user, web designer, multimedia producer and a regular contributor to the MacDailyNews Opinion section.
At some point Apple will sign artists directly to iTunes, bypassing the record companies entirely … Not sure if they are into commissioning TV etc. but time will tell.
@ O & Lurker:
Sorry, the US congress is already owned by the companies that wouldn’t even exist in their present form without special government breaks: polluters, “defense contractors”, Big Ag, outsourcing Benedict Arnold corporations, and the like.
Nice take, MDN
But the flaw might be that other content providers would be less willing to be in bed with Apple if they are competing on content. And Apple already has a tough enough time trying to sign video & TV content folks…
The moat around Apple’s business model is very deep. In order to compete with Apple you would have to write your own OS and also slap together a hardware design and manufacturing organization. Then you’d have to integrate the 2 seamlessly, and at the same time procure content for the integrating services. Google isn’t going to be successful doing that. Their efforts so far are a complete mess.
The moat around Google’s business model is very shallow and narrow. Anybody can put together a search engine using GPL applications. A search business for Apple would be a trivial effort. The iAd service is already available. Apple has the cash to assemble the hardware and infrastructure to provide a world class search engine with very little effort. I see several factors which lead me to believe Apple might go that direction.
Apple traditionally likes to disrupt abusive and frustrating services, like music delivery and the smart phone as defined by the carriers. Search has become just such a service, now monopolized by two abusive companies, Google and Microsoft.
Apple has a penchant for vertical integration, not so it can raise prices, but so that it can provide the kind of quality user experience it desires. Having customers use Google or Bing must really frustrate SJ.
Google has thumbed its nose at Apple after spying on them for years. Microsoft has now all but gained ownership of Yahoo. This has to be a major thorn in SJ’s side.
Google’s clumsy attempts enter the OS world will not be successful in the long run, but their disruption of Apple’s efforts do hurt Apple’s sales. I’m sure Apple would like to swat that mosquito.