Competitors hitting Apple in Asia
The conventional wisdom has been that Apple’s vaunted ecosystem will protect it against the competition. The conventional wisdom is a myth.
The ecosystem that surrounds iPhones, iPads, and Macs consists of iTunes, high quality facilities for external developers, thousands of well-developed apps, Siri and iCloud. Once a user gets locked into this ecosystem, the user is not likely to switch to competing products, or so goes the widely-held thesis.
It makes all the sense in the world. It is certainly a lot easier if one is using an iPhone, an iPad and a MacBook Air laptop.
Until recently I also subscribed to the conventional wisdom. My investment method focuses on change and attempts to quantify qualitative items such as Apple’s ecosystem moat into numerical values using a methodology that is consistent across all stocks.
I consistently attempt to validate my analytical research with empirical research. During a recent trip to Asia, I discovered that the conventional wisdom is wrong and now in a rare instance I will need to change my long-term model for Apple.
I saw that the favorite device combination most often used by movers and shakers was Samsung Galaxy Note II for a phone, iPad 2 for a tablet, and a Windows laptop. These are three disparate systems; Samsung Galaxy Note runs on Google (GOOG) Android, and Windows is from Microsoft (MSFT).
I witnessed first-hand how easily these movers and shakers were able to synchronize all their work between three disparate devices.
These are wealthy people and money is not the object. They have tried an iPhone and abandoned it. They have tried Samsung tablets and abandoned them. They own MacBook Air laptops but they gather dust.
Here is another negative for Apple. I saw them upgrading from Samsung Note to Samsung Note II and it was widely believed that Samsung Note II would help them more in their work. On the other hand not many saw a need to upgrade from iPad 2.
The foregoing has no effect on Apple stock in the short-term, but I will be revising our model for the long-term with a negative implication.
About Me: I am an engineer and nuclear physicist by background. I founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report, which publishes four newsletters to help investors profit from change. Write me: Nigam@TheAroraReport.com. Follow me here and get email notification when I publish a new article.
Full disclosure: Subscribers to The Arora Report are long Apple from $131 and have taken partial profits at $360, $525, $629, $568 and $610.
