Apple vs. Samsung: Why the advantage goes to Apple the innovator

“While there are hundreds of models to choose from, the smartphone war increasingly is a two-horse race between Apple and Samsung Electronics. Together, these two companies will sell 49% of the planet’s smartphones this year, but account for nearly all the profits, and the Web overflows with noisy opinions about whose is superior,” Kopin Tan reports for Barron’s. “Investors face a more intriguing choice: Which will be the better stock to own over the next year?”

“While Samsung may be the underdog, Apple is the more underappreciated stock. That gives Apple the edge in a bout between these two heavyweights — a winner not by knockout, but by decision,” Tan reports. “Yes, Earth’s No. 1 brand just may be its most misunderstood company.”

Tan reports, “In late October… while revenue grew 27% and profit expanded 24%, Apple beat analysts’ targets by the slimmest margin in years. Management told investors to expect per-share earnings of just $11.75 this quarter, well below $13.87 a year ago. It also cut projected gross margins from 40% to 36%, which money managers took as a sign that Apple is losing its competitive edge. The word on Wall Street was that Apple had slipped from hypergrowth to merely healthy growth, and that it was time to bolt. But what investors fail to grasp is that this margin compression really is part of Apple’s long-term strategy.”

Much more in the full article here.


    1. For a while? It’s been at least 7 years now, and they’ve been sustaining those margins all this time. Do you have any support for your statement, or is it just another parroting of common “wisdom”?

    1. Yea. The columnist is around $100 billion off here. On top of that he posits that Apple’s decision to drop Google maps was “petty”, despite common knowledge that Google would not allow Apple to use turn-by-turn navigation in their map app. How is it that this guy writes for Barrons? Basic errors here!

        1. Maybe that is where the 20 B figure closes from, but it is the writer that still hasn’t done his homework.

          “Cash” and “short term investments” are always lumped together… ie., “cash and short term investments”. That’s how it needs to be looked at, and Apple does indeed have 120B in “cash and short term investments”.

          What does the writer think? That companies stick stacks of cash in suitcases in the back room like Al Capone? Of course the money is placed somewhere appropriate… But it is placed somewhere that is not tied up too long that Apple can make quick use of it or liquefy it as necessary, such as negotiable bonds. Good grief. This is basic stuff.

  1. The $11.75 figure is guidance for this quarter. The $13.87 figure was the actual performance from last year. I think last year’s guidance was nine dollars and change so Apple is expecting growth, not contraction.

    1. If someone was drowning and Apple single handedly walked on water to save them, the pundits would all beat their chests and proclaim that “Apple can’t swim.”

      No matter what Apple does, someone is quick to not only say that Apple can’t do it but that they are doomed because they didn’t do it as well as the pundits said they would. There is now winning at this ‘analyst game.’

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