Wednesday, September 12, 2012

iPod Nano - A Red Flag

I watched most of the Apple event. It was probably the most boring presentation from Apple I've ever seen, not because of the products, most of them were incredible, but rather the numerous leaks proved correct and therefore there were zero surprises. 

What I found concerning as an Apple fan and shareholder was the iPod Nano. It was a complete change in design and looked like the Nokia Lumina 900 with its separate border colour. They even changed the icons to be fully rounded!? Why would they ever think that was a good idea. The reason people stick with the Apple ecosystem is it is easy to understand and they are familiar with it. I just don't feel the design changes would have happened under Steve Jobs and it's a red flag over their future design strategy. 

I'm still long Apple but I have been reducing it. The bear case in my mind remains margin compression due to the quality of their competitors products. Let's be honest, when the iPhone was introduced it was a major innovation, now the Android phones have caught up and are comparable in many ways; pricing will come under pressure and margins will decline at least on their existing products. 

Why am I still long? A very low valuation, a great ecosystem with strong customer retention which gives the company a competitive advantage in launching new products.

Disclosure: Long AAPL

See Also: Buying Apple at a High (February 16, 2012)

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Scott Hopkins said...

Awesome observation! I have given very little credit or exposure to Apple because I do not understand their market or their products all that well. However I am in a similar boat to you, although I am not an investor I have had a feeling that we are looking at the highs around $700. Now I did not say that when they broke $300, $400 and $500. Just recently when the stock was over $600 was I thinking this. Products from competitors are beginning to catch up in quality and are far cheaper like the Amazon Kindle Fire. So I have reason to believe that the innovation selling point is going to be cooled down for a little bit. As for continued innovation I continue to look for Google who I remain long on.

hardcorevalue said...

Scott, I still remain long Apple although the positioned has been trimmed over time. I had a look at Google earlier this year and liked what I saw as well.

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