Monthly Archives: July 2012

Let us go shopping! How to spend Apple’s pile of cash

A great article in the NY Times about how Apple could acquire some new assets with that pile of cash they are sitting on…$117billion worth of cash that is. Some interesting and great ideas. A couple I would argue should be Apple’s list:

  • Netflix – I have said this in the past that Netflix would be a good asset for Apple. The NY Times article has them on the “outside” of the list. However for $6b (2x market value), Apple would get the perfect content library to add to their iTunes store. This would be a strong asset to add as they battle with Amazon for content. They could also leverage this content library into the Apple TV service.
  • Barnes and Nobles – Holy Brick and Mortar batman…yes…there were rumors that Apple had sniffed around B&N. Here is why it would make sense. The Nook. You call me crazy, but the Nook is the perfect foil to go after the Kindle and the Google Tablet. Apple would not “dilute” the iPad but offering a smaller version of the Apple tablet. Instead Apple would get right into the 7in screen tablet market. Incorporate the content library from B&N as well as getting all those locations and Apple now has another channel. The Barnes and Nobles stores would also allow Apple to have another distribution channel – maybe even close the music sections and have iTune distribution via the store wifi. I am sure Apple could get the book store for a cool billion…chump change for Apple.
  • Nintendo – What is missing from Apple offerings that Microsoft and Sony have? Game console. I realize this might be a stretch. But the one area many of these firms are still battling for is the home entertainment hub. Apple is trying to get in there with the Apple TV, but that is one product that has not taken off. Nintendo has the Wii, which revolutionized gaming and moved away from the static button controller to using motion. Apple has that as well with the iPhone, iPod and iPad. Could there be some synergies between those and the Wii console? Why not? Granted the price tag could be steep – $11b + but that is less than 10% of what Apple has on hand!
  • Yahoo! –  Okay okay, they internet giant just hired one of Google’s stars, so why would they look to be acquired now? Because everyone has a price! An acquisition of Yahoo! could become the platform for Apple’s social platform. Yahoo has a number of assets – IM, email, content, Flikr, to name a few, that with some Apple magic dust might live up to their potentials.

Just some thoughts on which toys Apple could add to their arsenal. Much hinges on the direction Apple wants to take – make a greater play in corporate? stress social? add content sources? They have plenty of cash to take on multiple avenues. But as history has taught us, no matter how much cash you have if you cannot focus and do not keep your eye on the goal you will eventually slip up.

Apple is currently in lofty company. Hopefully they use their cash wisely to maintain this stature.

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So much for DotCom 2.0…Apple and Facebook dissappoint

Oh yeah and Zygna is also heading in the wrong direction – stock price wise. I digress. This week we say Facebook “beat” their estimates, well beat them because they had set such a low bar to the street. Their shares opened at a new low today as well. During this week Apple also missed some numbers, causing some mild panic in Appleland. Add to this the rumblings about the Samsung v Apple smartphone battles and it was not a good week for the consumer electronic giant. But not all is bleak in the land of DotCom 2.0…

What…me worry?

First, Facebook. Not really surprising that Facebook, stock wise, is under-performing. Facebook revenues were $1.18b, most from advertisement, nice chunk of change…but pales in comparison to the $11b Google did in the same time period. Granted the amount of users is reaching immense proportions – getting close to 1billion. But that no longer matters. Sorry Facebook. Investors and the market want to see how you are going to exploit and make money from those 1billion users. Based on the numbers, if each one just gave you $1.18 a quarter you would match your current revenues. That is not really a good business model for growth! Not to over simply the situation and I realize that hindsight is 20/20 but the reality is Facebook IPOd too late. Had Facebook IPO’d a few years ago, when they were hovering around 300m in users they would have been able to ride the user growth curve. Investors and the like would have rewarded Facebook for their growth curve – might not have scrutinized the economics as much. Now that would not have taken away the fundamental issue – how to make more revenue. However with a few quarters if not years of earnings under their belt, Wall Street might have been “kinder” to the stock. As is, the numbers of users leveraging Facebook does not get anyone excited. Whether it is 400 million or 500 million or a billion…so Facebook gets no “pop” from showing greater user growth.

The reality is that Facebook is no Google, the ability of Facebook to generate revenue from ads will be a major uphill battle. The major issue for Facebook, is that is really a walled garden. It is really a personal phone book via social media – unlike Twitter or Google, which are open to the entire public. You tend to go to Facebook to see how many marathons your friends are now running, how cute and wonderful their children are, that their pets are adorable or how fat your ex-boyfriend has gotten. You do not go there to search…looking for a product or service. Until Facebook realizes this and more importantly how to make revenue off a non-Google model their stock and valuation will continue to suffer.

Now what about Apple? Apple failed to meet what have become incredibly lofty expectations. Is this a malaise that will only affect Apple or more of an indication of the overall market? I think the latter, as do others click here. Of course the amazing fact is that iPhone revenues for Apple

No pressure…

are greater than all revenues for Microsoft…ouch ($22.7 b v $17.4b). Apple’s financials remain strong and cash on hand is slightly ridiculous – $110b, click here to see what “toys” they could acquire with that cash.  Of course it was not that long ago that someone else had that problem…Microsoft. And they did not know what to do with all that money, buy SAP? Stock repurchase? Dividend? So Apple will have to navigate some tricky waters to keep the halo it has worked so hard to create.

The main issue for Apple, what next? The market for the iPhone remains strong, but is has some serious challengers in Samsung and Google. If Facebook gets into the mobile game add them to the mix, not that I think a Facebook phone will do what the iPhone did, but still a device linked to a strong brand name. What about the iPad? Google announced a new tablet, granted it appears to be going head to head with the Kindle and Nook, but still a device that will inevitably scrape off market share. Apple is rumored to be looking at creating a “mini” iPad to get into this market. The new MacBooks are supposedly wonderful (I love my older generation MacBook!) but not sure that will excite the masses.

Apple, I have faith, will weather this “storm.” Will they continue to reach for stratospheric like levels…probably not. That pace is impossible to maintain. With the new iPhone due later this year, they have a chance to once again grab top dog stature. With the cash on hand, they can invest in and make some plays and take some risks. The real worry for me is can they weather this storm without their inspirational leader Steve Jobs? Time will tell.

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World domination…not from Facebook or Apple…but Amazon

Another warning shot to the big box players – Best Buy and Target – Amazon is looking to provide same day delivery! Yikes. Companies like Best Buy are already feeling the pinch from the combination of smart phones and Amazon. Consumers love to “showroom” basically visit stores to look at products and try them out and then…poof either use their smart phone right there or go home to a internet ready device to order the product at Amazon. Take advantage of lower prices and delay the instant gratification of having the product delivered. The instant gratification part is that was a saving grace for a Best Buy – really want a new XBox, order it and wait a few days or buy it at Best Buy and start your Madden season that afternoon. Could this change? Yes.

According to reports, Amazon is exploring how they can start to offer same day delivery. Yikes. I am sure that is exactly what embattled retailers like Best Buy want to hear. Of course this will be a logistics challenge for Amazon. They will need to position inventory close to populated areas and have the appropriate amount and mix. They will need to create new partnerships with the likes of FedEx and the USPS to have access to the transportation – mostly small parcel distribution. Add to this the need to understand how to replenish the distribution centers themselves. Gives one a head ache just thinking about it!

Maybe there is another solution…what if Amazon partnered with the likes of Best Buy, Barnes and Nobles, Target and the like. Amazon would provide the same day deliver service while the retailers would act as the warehouses. Amazon could charge customers a premium for same day delivery as well as take a percentage of the sale of product. The retailers would get the other percentage of the receipts and be responsible for holding the inventory. Mom and Pop retailers could eventually join in with Amazon…using the eCommerce giant to provide same day delivery, to that specific region.

Brick and mortar retailers would see an increase of merchandise velocity, Amazon would avoid having to build and maintain distribution centers as well as penetrate markets at a faster pace.

Amazon could keep this to a select number of vendors – figure out who can fulfill the majority of the product needs.

I am not sure what Bezos’ appetite is to work with the likes of Best Buy and Target, but at some point he has to be gunning for WalMart. Partnering with other enemies of WalMart might make sense in the near term. The enemy of my enemy….

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Happy Bastille Day

Let’s all go eat some cake!

One of the best Marseillaise I have seen/heard!

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Hey Gartner, Forrester and the rest of the analysts…don’t ignore the small players!

First full disclosure – I worked at Forrester Research from 1998 to 2001, I have also worked with Gartner, Forrester, AMR Research, ARC, Manufacturing Insights, Yankee Group and Aberdeen (when I say worked with, I had commercial relationships with all these firms)

So what do I mean by the small players? I have been doing some research for two projects I am currently engaged in, one is dealing with supply chain vendors not named SAP or Oracle…not even the likes of Manhattan Associates, JDA or Red Prairie. That is to say, smaller vendors, those with between $10 and $75m in revenue. What has struck me is what little information there is to find on Gartner or Forrester, picking on these two since they are the titans of the market research space.

Now if you want to learn about SAP, Oracle, IBM or Microsoft well they have plenty to say! Wonderful. But is this really helping the industry? No. I think that these market research firms are doing a disservice to the space. Why?

Sure, these large vendors spend money, A LOT of money with these market research firms. They also tend to have large marketing organizations that can harass…err…..inform the analysts about what they are doing. So this becomes a vicious loop – analysts hear from the big players all the time, that is what they know, that is what they write, that is all that users think is out there….and so forth. Now I realize this is over simplification. But, the value to me in market research is to get the “ah-ha” to get to some nuggets of information I do not have access to. Understanding that the latest extension of SAP’s APO module is mildly interesting, but learning of 4 interesting vendors addressing specific problems is interesting.

Now we will always need the analyst firms to inform us about the large vendors, they too can be difficult to navigate. In addition it is good for a Gartner or Forrester to be able to hold IBM or SAP’s feet to the fire. But users need to be informed about what is around the corner, which thought leading vendor needs to be on one’s radar….not what the last thing Oracle did with database management.

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Happy July 4th! Don’t forget your supply chain…

Okay I realize that I am a tad strange to associate the United States biggest day with supply chains but a conversation today sparked some thoughts….

The premise: I was chatting with friend today about the logistics that go around the July 4th barbeques – how much food is needed, what is the perfect mix of food and what about the beverage selection???? All this made me think about…you got it….supply chains. The barbeque dilemma is a microcosm of our supply chains.

  • Demand sensing – this hinges upon who we invite, their ages and their preferences…or our belief in what they “want” to eat. Do we have a large carnivorous group? Do they prefer hamburgers or hot dogs…what about chicken and ribs…..what about fish? Ar they vegetarian? What about kids? What kinds of cheese do they want on their burgers? Do they prefer mustard or…gag…ketchup on their hot dogs? We naturally calculate and try to determine what demand we might get from our customers…aka guests. Add to the equation potential desire for organic, low nitrate or hormone free options. When we go to the super market, we are doing some forecasting based on what demand we believe, our customers want.
  • Inventory Optimization – When all the food and goodies have been purchased, we also begin with inventory strategies…how much do we leave in the refrigerator/freezer (aka raw materials), how much do we throw on the grill (aka WIP) and how much is sitting on the tables ready for consumption (aka finished goods). Some of this inventory has a shelf life – try not to leave out potato salad in the blazing sun for 2 hours….As we work the grill we try to constantly gauge the demand, the pull if  you will of what we are manufacturing. Should the grill be going at full capacity? How many finished goods do we really want to let sit on the table?
  • Demand Shaping – As the grill is working…and no one is eating the chicken…do we start “promoting” how great a grill master you are, especially with chicken. Grilled just right without over drying the chicken. Oh and I just picked up the greatest barbeque sauce from South Carolina that I let this chicken marinate in for 48 hours….
  • Reverse logistics – well I will not get into this…but think about the accessibility of facilities….

I realize that most people tomorrow will not think about supply chain and the barbeque, but maybe for a split second tomorrow think about supply chain best practices and how they apply to your barbeque.

Just think, if you could get historic eating habits of all your invitees, coupled with some analytics of trends and consumption habits and you could purchase the right amount of food and the right mix. Having some manufacturing processes in mind you could ensure that once the burgers, hot dogs, chicken, etc that come off the grill end up right on someone’s plate for perfect fresh consumption. You would then ensure a fantastic experience with no left overs…oh wait maybe the leftovers are what make the barbeque fun for the hosts!

Happy  4th of July to all!

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