Displaying items by tag: technology

My cocaine dealer versus medical device manufacturer product margin article from earlier this week bruised a lot of sensitive skin.


I aim to wake people up and cause contusions in the politically correct veneer-like epidermis that serves to protect the gross distortion that is the 3rd party payer system healthcare economic bubble.

operating room

I made a 9 minute video that debunks the major rebuttals to the premise made in my article.

  • In the first minute or so, I attempt to illustrate that I have a fairly firm grasp on this market share/profit margin/tech trend thing. Either that of I've been very lucking with Blackberry/Apple/Google/Facebook/Groupon etc.
  • After 1:20 in the video I outline how much more of a markup the medical product in question exceeds that of illegal cocaine!
  • I then have an illuminating discussion with a prominent intensive care surgeon who demonstrates this 4,300+% marked up product as I use glass to do a intubation (put a camera and oxygen tube down a patients windpipe).
  • We then go on to discuss how Glass can assist an experienced practictioner such as himself to walk a less experienced practitioner (remember, don't go to the hospital in June, right after graduation) through a difficult surgery/procedure using Glass - from his or her home.
  • Next up we demo two products that are less than 1/10th the cost of the Glidescope, and work just as well.

For those of you who argue that you can't achieve mass volumes with Glidescope production hence my margin article logic is faulty, I suggest you read the article again. The prices that I used were for single purchases or lots of ten or so. That's right. I can build a single Glidescope with those part prices. The prices go down as volume increases. 

For those of you who attempt to justify a 4,300+% markup on the FDA approval process, I query how someone can make $24, $80 and $800 products that essentially do the same thing. They're in this video and their demonstrated to work just as the Glidescope has. 

Just as with Apple, a market leader emerges and its marketing actually convinces consumers to make to ludicrous justifications for ludicrous product markups (hint: the iPhone is one of the few products that actually best the mark up on cocaine in high volume, it's not just the Glidescope).

Published in BoomBustBlog

The NY Times reports Sony and Viacom Reach Tentative Deal to Stream Cable Channels:

In a deal that may signal the start of a new era of competition for entrenched cable and satellite providers, Viacom has tentatively agreed to let its popular cable channels — like Nickelodeon and MTV — be carried by an Internet TV service that Sony is creating.

The agreement is believed to be the first of its kind between a major programmer and any of the technology giants that are trying to disrupt traditional modes of TV delivery. If other programmers follow suit, Sony’s as-yet-unnamed service would let paying subscribers receive live cable channels the same way they use on-demand libraries like Netflix or Hulu. Intel and Google are working on similar services, but try to make it more user-friendly, perhaps the way Netflix does with personalization features and a fancy interface.

Most households today have only a few choices for television service: whatever cable company serves their local area, be it Comcast, Time Warner Cable or others, and two satellite providers, DirecTV and Dish Network. In some parts of the country, television through Verizon or AT&T is also available. Analysts say cable delivered through the Internet could give households many more choices — if the new services give customers more for their money and if cable incumbents don’t smother the services.

What the article fails to explain is that the often combatant traditional transmission/pipe providers and the content companies have very little choice but to expore new business models. These companies are essentially dinosaurs attempting to live in the age of modern man, they simply haven't admitted it yet. Let me drive the point home with a few simple statements and a pretty graphic.

These are televisions.


According to Wikipedia, An Emmy Award, or simply Emmy, recognizes excellence in the television industry, and corresponds to the Academy Award (for film), the Tony Award (for theatre), and the Grammy Award (for music).

Netflix won 14 Emmy nominations this year!

Here's the catch, Netflix is a website. It's not a television station, company, producer, studio, network, or anything of the sort. It's video streaming website that sells rentals at a flat rate. Reference Netflix Makes History With 14 Emmy Nominations and realize the level of the threat this poses to both the big studios such as Viacom and the overpriced (in comparision to Internet delivery methods) pipes such as Time Warner, Cox or Cablevision. Wall Street may have poo-pooed  the wins, but it's a real and significant threat to the status quo. They had better get their act together, and soon, or more nimble, entrepenuerial and creative companies such as Netflix will make their entire friction-filled business models obsolete.

Published in BoomBustBlog


 In NYC, a kilgoram of cocaine goes for about $23,000, or $20,000 if you get a good price. This is about twice what it costs 25 years ago. As you can see, inflation hits the drug trade as well. Only serious drug dealers buy kilogram, for that's the amount you need to buy to gain real margins and economies of scale when moving product retail. This can add up to decent money! A gram of cocaine, which is what the retail user who regularly consumes buys, is about $60 in NYC (remember, prices vary by location and availability, just like any other commodity). Sixty dollars times 1,000 units (a kilo is 1,000 grams) is $60,000, or a 200% markup - or 66% profit margin. The ability to mark your product up 200% is common to very, very few industries. This is one of the major reasons why people sell drugs, the profits are.... damn near illegal.


 Whether you are into drugs are not, let's face it... Drug dealers are in a high margin business which very, very few can match. The evidence supporting this premise is prevalant.


Of course, there are higher margin businesses and not all of them are as fraught with the frictions and risks of the cocaine trade. Here's some metrics from one of them...

Cost to produce  $193 
Retail price on the street $649
Product markup 336%
Gross margins 70.2%

So, what is this product?

MartinHajek iPhone 5 fakes 1 

Of course, those who follow me know that Apple's outsized margins will not last, and as a matter of fact have been trending down for well over a year - reference Right On Time, My Prediction Of Apple Margin Compression... 

Reggie Middletonss Ultimate Apple Value Infographic

So, why is it that a $496 billion business such as Apple succumbs to margin compression over a relavitely short period of time, but cocaine dealers don't (cocaine prices nearly doubled over the last 25 years while portable tech fell by as much as half)? Well, the answer is that natural market forces have full access to Apple's business model. The cocaine industry is protected, in part, by government intervention. By outlawing cocaine, there's a guaranteed demand and a guaranteed limitation of supply. So, which business is more profitable? Why, it's health care silly?

I know you're saying... Healthcare???!!! WTF?!

You're damn skippy. Take a look at these margins. This is a Glidescope. It's used to view down a patient's trachea. It consists of a wired camera enlcosed in a curved plalstic probe and a low resolution screen. It doesn't have any other sensors that I can discern, no discreet processor, random access memory, CPU, memory or anything else that I can find that materially adds to the production price, save an onboard tutorial. What it does seem to feature is a well throught out design to the physical probe, which apparently has an anti-fogging feature and is low temperature to prevent burning of the surrounding tissue (very few modern mini and micro cameras/LEDs produce that level of heat nowadays anyway).

Now let's attempt to back into the cost of production. The screen would likely be one of the most expensive components. A cursory (as in not exhaustive) search yields a 7 inch screen available for between $1-$10! One could assuming we had to have it custom manufactured to include the hard buttons at the bottom, which would mean a minimum of about a 5,000 lot order, so let's add an extremely conservative 50% premium which puts us at about $10 to $15.

The camera would be the next expensive item to source. Although this is not the appropriate form factor for this application, the resolution should be about right. I'm confident that I could source the appropriate price for the same price as an iPhone 4 front camera, which is about $6 - or less. Including a low heat LED light, would add about $.11 - $2 on top of the price, as well as anti-fogging mechanism (another $2 or so) so let's put the whole price at the $9 peg. FYI, an 8 mp camera [4x the resolution] can be had for $19.  The wire connecting the camera within plastic probe would have a negligible production cost, of let's say.... $1

There's a rechargeable battery and a plastic housing. These costs are quite variable, so let's go in the middle of the road and choose a 2000 mah battery ($8 or so, about two to three hours of use - Glidescope currently only good for 90 minutes per charge) and injected molded housing ($10).

 The only components left would be the tripod stand and the probe. The probe would cost about $2, and stand would cost about $17.20 (yes, it is expensive).

Adding this up at the midpoints, we get:

Camera & assembly  $9 
Screen  $12 
Connecting wire  $1 
 Probe $2 (x24, # of probes in a package)
Battery $8
Housing $10
Stand $17.20
Total Part






 So, in a nutshell, I could put this device together for under $120. I'm fairly confident in these numbers, but let's assume that I'm off - significantly off - in my cost estimates. To err on the side of caution, let's put a 100% premium in EVERYTHING! That's right, assume everything was twice as expensive as I thought it was. That still puts the cost to manufacture at under $226.40. Using this new, inflated number, what do you think the markup on this device is? The key to cloning this product is to avoid patent infringement on the blade (probe), which has a specific curve. A curve that can be replicated sans a few degrees or better yet have user adjustable angles. This should avoid the patent and leave room for increased performance.

I will give you time to ponder this, considering how much drug dealers can get away with marking up their product, and how much Apple succeeded in marking up theirs, even through auntie economics is bringing the fruit company back in line with reality...


 The Glidescope is available from Verathon for only a 4,361% markup. Yeah, you heard that right! The product retails for $9,825 and it has plenty of buyers. It's actually considered cutting edge tech. The profit margin on this product is literally 98%. That's almost PURE cash! I verily query thee, why in the world would anyone sell drugs when they can sell medical equipment to hospitals? This insane, damn near criminal level of profit puts Tony Montana to shame!


So, how is such a level of profit achievable in a capitalistic society where the forces of free market economics come into play? Who the hell knows? Free market economics likely do not have a heavy hand in this company's profit margins. Near guaranteed  (if not indirect) revenues from insurance companies... A moral hazard economy from end users that do not bother to shop for price since they are totally insulated from pricing due to insurance company payments... A government that uses the health care industry as a job creation maintenance engine that ulitimately erodes economic activity instead of increasing it by making job redundancy and inefficiency more of a goal than an impediment.

I can go on for quite some time. Even more interesting is the fact that I believe I can break this cycle of inefficiencies. I'm actively experimenting with Glass as an interface to existing equipment that will both significantly extend the usefulness of said equipment while simultaneously cut the costs of siad equipment by negating the need to purchase/upgrade said equipment.

The possibilities are near endless. You should have seen my face as I walked through one of the biggest hospitals in NYC and was made abreast of the cost of some of the equipment widely used, ex. the Glidescope.


Stay tuned for a list of companies soon to be disintermediaried, as well as what I will be doing with Glass, specifically. Any healthcare professionals who feel they have value to add are welcome to reach out to me, reggie at boombustblog dot com.

Published in BoomBustBlog

As I said in 2010, 2011, 2012 and this year, the less than free Android business model is killin 'em - Apple in particular. On Friday, 02 September 2011 I posted Google's Android Now Leads In Market Share, Growth Rate and Potential Buyer Preference. I made it clear that Apple's slowing of Google's growth was paramount to their continued success. I take it they didn't get that memo. Earlier this year I posted "Is Tim Cook Cooked? Market Share vs Profit Margin, part 2 - Follow What I Do, Not What I Say!" and it went something like this:

Tim Cook was in the media yesterday weighing in on market share. It's as if he is in a delirium, that is if you believe his words, which I don't. He states that for Apple, quality is more important than quantity (or something of that sort). As per Endgadget:

Apple's head honcho Tim Cook is chatting up Android's growth explosion, and it turns out he's not flustered. "Do I look at that? Of course, I don't have my head stuck in the sand," said Cook." But for us, winning has never been about having the most." Instead, he stands by the old Apple line of quality versus quantity. "Arguably, we make the best PC, but we don't make the most," he added. "We made the best music player, and we wound up making the most -- but we didn't initially."

Mr. Cook is ignoring his own ex-boss's words. For those who didn't read my piece yesterday, "Blackberries, Apples & Fruit Borne Successitis - The Problem With Excess Profits Is Hubristic Management Tends To Take Eyes Off The Prize!!!", I quote:

What ruined Apple was not growth … They got very greedy … Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible … they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share.

You see, my post yesterday clearly showed that the financial metrics, over time and in handset companies, heavily favor market share over initial profit margin. As a matter of fact, I demonstrated that as market share decreases margins drop commensurately, or in other words "Quantity is quality in a fast moving, technologically dynamic market!"

In early 2010 I warned on Blackberry (then RIMM), with market share loss to Android being the prime determinant... . I put significant data out in the public domain to illustrate my point and put explicit price points out for subscribers, ie. RIM Smart Phone Market Share, RIP? Was I right?

Blackberry market share vs margin correlation analysisBlackberry market share vs margin correlation analysis

The has been the case with IBM, Nokia, Dell, HTC, Apple, Blackberry, etc. Mr. Cook, take the advice of Mr. Jobs if you don't wish to follow Mr. Middleton. I actually do believe that Cook understands these dynamics and is just putting on a dog and pony show for the media but his corporate actions don't bear this out. I strongly suggest they start spending that $174B cash horde on something other than massaging hedge funds.

Fastforward to today and reference this IDC press release:

FRAMINGHAM, Mass. August 7, 2013 – Despite beating Wall Street expectations in terms of shipment volumes, Apple's share in the worldwide smartphone operating system market posted a year-over-year decline during the second quarter of 2013 (2Q13). Meanwhile, Android and Windows Phone both managed slight increases during the same period. According to the International Data Corporation (IDCWorldwide Quarterly Mobile Phone Tracker, vendors shipped a total of 236.4 million smartphones in 2Q13, up 51.3% from the 156.2 million units shipped in 2Q12. Second quarter shipments grew 9.3% when compared to the 216.3 million units shipped in 1Q13.

"The iOS decline in the second quarter aligns with the cyclicality of iPhone," says Ramon Llamas, Research Manager with IDC's Mobile Phone team. "Without a new product launch since the debut of the iPhone 5 nearly a year ago, Apple’s market share was vulnerable to product launches from the competition. But with a new iPhone and revamped iOS coming out later this year, Apple is well-positioned to re-capture market share."

"Last quarter we witnessed Windows Phone shipments surpassing BlackBerry and the trend has continued into the second quarter," said Ryan Reith, Program Manager with IDC's Mobility Tracker Programs. "Nokia has clearly been the driving force behind the Windows Phone platform and we expect that to continue. However, as more and more vendors enter the smartphone market using the Android platform, we expect Windows Phone to become a more attractive differentiator in this very competitive market segment."

Smartphone Operating System Highlights

Android maintained its leadership position, with strong contributions from Samsung and its Galaxy S4. Not to be overlooked were LG and Chinese vendors Huawei, Lenovo, and ZTE, which each recorded double-digit shipment volumes in the millions. Combined, these vendors accounted for 62.5% of all Android-powered smartphone shipments during the quarter. Still, the remaining vendors within the Android ecosystem should not be overlooked, as many have developed a strong local presence within key developing markets.

...and this was exactly as predicted in Samsung Will Be Ready To Do That Fruit Thing ... and Smartphone Hardware Manufacturers Are Dead ...

iOS finished the quarter as the clear number 2 operating system, showing that, even without new product launches, demand remains strong. Moreover, Apple added new mobile operators to its camp, boosting short-term volumes and cementing long-term end-user relationships. What remains to be seen is how the new iOS 7 will be received once it reaches the market later this year, as much of the look and feel of the user interface has been revamped.

Windows Phone posted the largest year-over-year increase among the top five smartphone platforms, and in the process reinforced its position as the number 3 smartphone operating system. Driving this result was Nokia, which released two new smartphones and grew its presence at multiple mobile operators. But beyond Nokia, Windows Phone remained a secondary option for other vendors, many of which have concentrated on Android. By comparison, Nokia accounted for 81.6% of all Windows Phone smartphone shipments during 2Q13.

BlackBerry saw its market share decline during the quarter, reaching levels not seen in the history of IDC's Mobile Phone Tracker. However, BlackBerry has shown steady progress since the launch of its BB 10 platform, which has grown to three models, additional mobile operators, and a greater presence within its total volumes. It is still early days for the platform, however, and BlackBerry will need time and resources to evangelize more end users.

My opinion on Blackberry hasn't changed for 3 years... See Blackberries, Apples & Fruit Borne Successitis and BoomBustBlog Research Performs a RIM Job!


Top Smartphone Operating Systems, Shipments, and Market Share, 2013 Q3 (Units in Millions) 

Operating System

2Q13 Unit Shipments

2Q13 Market Share

2Q12 Unit Shipments

2Q12 Market Share

Year-over-Year Change













Windows Phone






BlackBerry OS






























Source: IDC Worldwide Mobile Phone Tracker, August 7, 2013

This chart is intended for public use in online news articles and social media. Instructions on how to embed this graphic are available by clicking here.

Top Android Smartphone Vendors, Shipments, and Market Share, 2013 Q3 (Units in Millions) 


2Q13 Unit Shipments

2Q13 Market Share

2Q12 Unit Shipments

2Q12 Market Share

Year-over-Year Change











































Source: IDC Worldwide Mobile Phone Tracker, August 7, 2013

Top Windows Phone Smartphone Vendors, Shipments, and Market Share, 2013 Q3 (Units in Millions) 


2Q13 Unit Shipments

2Q13 Market Share

2Q12 Unit Shipments

2Q13 Market Share

Year-over-Year Change





































Source: IDC Worldwide Mobile Phone Tracker, August 7, 2013

Note: Data are preliminary and subject to change. Vendor shipments are branded shipments and exclude OEM sales for all vendors.

So, does Mr. Cook's lack of adherence to Steve Jobs wisdom portend a potentially uber-successful company misunderstood by the markets (meaning time to buy stock) or is this the beginning of the end of an iconic corporate era?

I refer my subscribers to the research documents below for the answers... 

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescienct!

For Google...

Subscribers, click the following links for my updated price targets on Google (click here to subscribe) and read  Google Q2 2013 Update: Valuing Possibly The Most Powerful Co. In The World?:

The biggest risks to these price points are:

  1. A market that's being levitated by central bank magicians running short on magic spells...
  2. Regulatory pressure, which I feel is quite material and inevitable, but will not be a major factor in the near term.

Related links...

Was The Google Purchase of Motorola A Hardware Disaster With Overpriced Patents?

See also:

What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

 The short call - October 2012, the month of Apple's all-time high and my call to subscribers to short the stock:  Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All

Published in BoomBustBlog

Google has launched its first, conceived from scatch, phone - the Moto X. It was rumored to be priced between $200 to $250. This would have been a game changer for it meant that its competitors (who are also its business partners) would have had to slice thier margins to compete. As it turned out, the Moto X branded phones are priced at $199 on contract, ie. the same price as all of the other high end phones. The big problem with this is that the Moto X has middling specs as well as middling benchmark scores. That's a tad bit disappointing for us techie/nerds.

But then, I actually looked at the device and the business model around it. To beign with, Google/Motorola has focused on software rather than hardware. This is, in part, what Samsung has tried to do but Samsung is several generations behind Google Android, despite being able to piggyback off of Android functionality. By bringing the fight to the software cloud, Google can make drastic usability changes, some profound and some actually rather ubiquitous - simply not properly marketed.

A good example is reliance on Google Now, what Siri would look like if it actually worked. Ironically, this is probably the Moto X's killer app/feature. Google Now is by far my favorite mobile assistant. The catch is you can use it on any phone that runs Android 4.04 or higher - which is most phones. The difference with the Moto X is that it's always listening, and now you can use it without touching your phone. Even if your phone screen is off, once the command is given (video examples show "Ok Google Now") the Moto X will activate and offer the info you're looking for - which can be quite wide and varied. Android algorithms apparently learn your voice, so (theoretically) only a really good impersonator could activate your phone with voice.

Google has kept the device and the battery small, as well as the processor. This keeps costs down (ie. margins up), but more importantly left room for software innovations to shine without hardware overhead. Examples? The wake from sleep feature allows users to glance at the phone to get pertinent information without the phone fully powering up. If you look at most people commuting, walking, or just standing still, they glance at their phones very often. It's not as if this glance conveys tomes of information and besteller novels. By leaving the AMOLED screen dark and illuminating a small section to convey pertinent timely info such as the time, notifications, etc., significant power is saved (the screen is the signle biggest battery hog) while convenience and user experience is simultaneously increased. 

The choice of screens show that Google is aiming for the mainstream and not the bleeding edge. Although I prefer a 1080p screen for resolution, it drains the battery much faster than a 720p screen. I notice the difference clearly, but most people wouldn't, although they would notice the 40% difference in battery life.

Camera performance is increased, while costs are maintained, reference Moto X camera specs leak, 10MP stills and 1080p@ 60 fps video 

According to Taylor Wimberly, former editor for Android and Me, the Moto X will feature a 10MP Clear Pixel camera with a pixel size of 1.4 microns. This means the pixels will be larger than those on the Galaxy S4 sensor (1.1µm), but smaller than HTC One's (2µm). The bigger pixels, combined with the Clear Pixel technology should go a long way towards improving the low-light performance.

The Motorola Moto X camera is said to be capable of recording 1080p videos at 60 frames per second - a first for a smartphone. The camcorder will use pixel binning, combining information from 4 pixels to reduce noise and provide clearer videos.

Finally, the Moto X will pack three microphones and will be capable of recording 3D audio.

60 fps 1080p video is piercing professional video quality. This is coupled with an intuitive interface that uses the phones sensors to trigger and fire the app versus actual tactile manipulation, resulting in faster picture taking and more contextual use - all with the leading camera specs.

Here's more on this topic Here's a hint Ultra HD 4000 x 2000 pixels is the highest video specification available for consumer media products. Sony, Pioneer and Samsung have just released TVs that can display this stuff, starting at over $60k when first released.

The Moto X’s camera actually supports Ultra HD (you just can’t use it)

Motorola is counting on three things to make the Moto X a success: Google Now, multiple colors, and its Clear Pixel camera, and now some extra details about the latter have emerged thanks to manufacturer OmniVision. The new OV10820 [pdf link] sensor may not have a snappy name, but it’s a mighty capable chip, in fact able to capture 4k2k Ultra HD video.


That’s assuming the rest of the device is up to the challenge, of course, which right now the Moto X is not. The new Motorola is in fact limited to 1080p HD video capture – which it can do with both its front and rear cameras, no less.

On paper, though, the OmniVision sensor is capable of a whole lot more. It can record up to 3840 x 2160 resolution video at 30fps, or up to 1920 x 1080 at up to 60fps, both at a native 16:9 widescreen aspect-ratio.

The sensor itself – described as RGB Clear (RGBC) – includes a fourth color filter for better low-light performance, which Motorola claims improves things by up to 75-percent on the Moto X.

... There are indications that the 10.5-megapixel sensor is only the start of things, too; the OV660 is in fact capable of handling up to 20-megapixel RGBC sensors, in addition to a secondary, front-facing RGBC sensor.

That could mean the same sort of low-light performance for your selfies in future iterations of the Moto X, though we’d be more interested in the potential of recording Ultra HD footage from a smartphone. Late last month, hints of Ultra HD support were spotted in Android 4.3 code, while long-standing rumors have suggested that the upcoming Sony “Honami” will support video recording at that resolution.

That is very serious for a small smartphone, and even more seriosu considering Motorola is keeping component costs down, thus working on increasing margins. I believe Google will do what Apple should have done, and that is it will create fatter margins and then commences to compress them themselves, in lieu of waiting for a competitor or new comer to do it for them. If so, expect these prices to either drop very, very quickly or expect this relatively new and apparently demanded technology to increase dramatically over a very short period of time - or worse for Samsung/Apple/Nokia/HTC,  both will occur simultanesouly. Expect the smartphone race to heat up substantially in just a few weeks. Samsung and Apple are going to have to pull some pretty big rabbits out of their asses! 

The customs order features are a unique edge. It remains to be seen how well this will work in the smartphone field, but then it again its awhat made Dell what it was!

What should we expect next? Well, for one it appears as if Google is taking the Moto X very, very seriously. How seriously? Let's count the ways...

2013 google io rumor roundup motorola nexus x

 Google is launching the Moto X on ALL major carriers simultanesouly, with no major skinning to the OS. That's right, damn near stock Android on every major outlet in the most lucrative cell phone markets - with direct access through Google Play Store. Sans the playstore, the only other OEM to do this was Samsung with the Galaxy S4, and you see how that turned out. In addition, Google is about to spend half of Apple’s annual marketing budget promoting a single phone...

Google's Moto X advertising budget will be up to half a billion dollars, or half as much as the $1 billion Apple spent advertising ALL of its products in 2012. Of course, the current Android handset leader Samsung's marketing budget topped out at $4 billion in 2012There's no big mystery as to why Samsung came out on top, eh?

Samsung’s advertising budget makes other tech companies look stingy.Asymco

Quoted from the quartz.com article linked above:

There is some industry precedent for getting ahead by spending heavily on advertising. Some have argued that Samsung’s dominance of Android smartphones and its market share victories against Apple are due almost entirely to Samsung’s massive advertising budget. While Apple failed to maintain its advertising spend as a percentage of revenue on its mobile devices—essentially coasting on existing brand recognition—Samsung ramped up its ad budget to more than 15% of sales.

Samsung’s spending on advertising goes up every quarter to keep pace with revenue.Asymco

Similarly, Google’s half-billion dollar advertising campaign could threaten Apple, but it’s more likely to threaten Samsung, which until now has been the market share leader in Android smartphones. Consumers will benefit as Google begins to compete directly with the companies that made Android so popular—so long as they can see through the massive fog of marketing that’s about to roll their way.

BoomBustBloggers knew this was coming as early as last year, reference Thoughts on Glass, Fashion, Fads, Moto X and Samsung's Phenomenal Yet Brief Trip To The Top

as well as:

Subscribers, click the following links for my updated price targets on Google (click here to subscribe) and read  Google Q2 2013 Update: Valuing Possibly The Most Powerful Co. In The World?:

The biggest risks to these price points are:

  1. A market that's being levitated by central bank magicians running short on magic spells...
  2. Regulatory pressure, which I feel is quite material and inevitable, but will not be a major factor in the near term.

Related links...

Was The Google Purchase of Motorola A Hardware Disaster With Overpriced Patents?

Published in BoomBustBlog

As some may know, I'm launching a wearable computing venture. I need financing. Should I go straight to the source, my base, to get said funds. This is Spike Lee's take...

Some of my projects...

I will open these up to seed funding as well as crowdfunding. I also have a top secret project that I believe will be even more of a game changer.

Published in BoomBustBlog

I have yet to release my review of Google's most recent quarter earnings results, but thus far I've seen nothing that would materially sway me from the conclusions drawn from the last set of forensic valuations released to subscribers (Google Q2 2013 Update: Valuing Possibly The Most Powerful Co. In The World?). One question that I am getting is "Did Google overpay for its Motorola acquisistion?"
Quick answer, I seriously do not think so. Please understand, the Wall Street fee/commission churning machine along with the tabloid financial media which has to churn content for advertising eyeballs has taught many (if not most) to view the investment world one fiscal quarter at a time. This is not a prudent, not sustainable model for building long term success. One of the most admirable traits of Google's management is their proclivity to think longer term, and to plan and invest accordingly.
Below are excerpts from the big Google report that I put out two years ago. It outlines the acquisitions that Google had made to date. Among these acquisitions are investments that the financial media and the sell side analytical community swore were overpriced because they actually ate their own BS sandwiches, literally convincing themselves that one quarter at a time is the way to run a business poised to take over an industry.

Three examples come to mind also happen to be three of the largest acquisitions - YouTube, AdMob and Android. Were they worth it? What single company controls and/or leads in internet video content distribution, computing OS (not just mobile OS, but all computing OSs), and mobile advertising? All three of these acquisitions amounted to less than $5 billion and for that amount and additional investment, Google literally and absolutely dominates each and every one of those industries. 
Google Final Report Sep 29 Page 53Google Final Report Sep 29 Page 53 copyGoogle Final Report Sep 29 Page 54Google Final Report Sep 29 Page 54 copy

Compare and contrast this to the Microsoft/Apple/Blackberry consortium that paid $4.5 billion for 6,000 telecomm related patents from Nortel. These companies are ALL currently lagging in growth and reach compared to Google, even if you just consider this one investment or if you look at their entire enterprise. The reason? Google's management is considerably more entrepenurial and are more adventurous at risk taking.

Google purchased Motorola for its cell industry patents for protection of its Android OS. Everything else that came with the deal was gravy. Factoring the handset/hardware biz, the set top box biz (recently sold) and the patents, the patents were purchased extremely cheap (17,000 of them) compared to what the RIMM/MSFT/Apple consortium paid for the Nortel patents ($4.5B for 6,000 patents). Even with the patent value significantly downgraded, it's still was a better deal than its competitors. Motorola can now be used to directly drive down the cost of hardware and hardware profit margins.

Motorola sales price in billions
Purchase  $(12.50)
Sale of Set Top Division  $2.35
7 years tax loss carryforward  $5.60
2012 Motorola Mobility US NOL  $1.00
2012 Motorola Mobility Foreign NOL  $0.70
Net Purchase Cost for 17,000 patents & Motorola Mobility handset business  $(2.85)
Cost per patent  $167,647 This is a rough estimation to use as a gauge. Each patent is different, of course!
Recent Microsoft Rulling against Google demands $1.8M annual licensing fee for 2 patents.
Using this ruling, which was widely considered a loss of Google, we get the following ANNUAL yield on investment 537%
One must realize that Google Purchased 17,000 patents and the first cell phone manufactuer as well as one of the top tier manufacturers for nearly half of the their competition paid for just 6000 patents - RIMM/MSFT/Apple consortium paid $4.5 B for 6,000 Nortel patents.
Google will use the Motorola Mobility unit to further push down smartphone margins and costs instead of using it to make more profitable phones. Remember, Google is in the data business, not the smartphone business. The more people that have smartphones at any cost, the more money Google makes.   

One of the reasons why I think Google's missing of the mean analysts forcasts this quarter is not that big a deal is the extremely value rich product pipeline of product's nearing launch. As a beta tester and early explorer of Google Glass, I'm convinced that Microsoft, Blackberry and Apple have absolutely nothing to compare. Expect Google to expand its advantage over these companies materially over the next fiscal year.

Here I present...

Glass for the Hospitality Industry

Glass for Real Estate

Subscribers, click the following links for my updated price targets on Google (click here to subscribe) and read  Google Q2 2013 Update: Valuing Possibly The Most Powerful Co. In The World?:

The biggest risks to these price points are:

  1. A market that's being levitated by central bank magicians running short on magic spells...
  2. Regulatory pressure, which I feel is quite material and inevitable, but will not be a major factor in the near term. 
Published in BoomBustBlog
Wednesday, 17 July 2013 10:50

Options Trading - Using a Risk Reversal on Apple

This is a guest post from Marcus Holland. I don't endorse nor necessarily agree with the opinion and research expressed herein, and it is supplied as an OpEd piece only.


Apple Stock (NYSE:AAPL) is trading slightly lower despite news that the company colluded with five major U.S. publishers to drive up the prices of e-books in the months ahead of the technology company entering the market in 2010.  Option volatility in the wake of this news, has declined slightly and sentiment surrounding the company has remained strong.

In a civil antitrust lawsuit, the Department of Justice claimed that Apple agreed with the 5 publishers in January 2010 to allow them to increase prices for best sellers and new releases in response to publisher Amazon.com $9.99 price point for those books on Amazon.com Inc.

The judge will likely schedule a hearing on a request by the Justice Department for injunctive relief, which could include requirements that Apple not enter into another agency agreement to sell e-books for a two-year period.

aapl stock range

Despite the blow to Apple the stock technically remains sound after recently testing support near 390 per share.  Resistance on the stock is seen near the 50-day moving average near 433.  Momentum on the stock is gaining traction as the MACD has recently generated a buy signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.  The RSI (relative strength index) is printing in the middle of the neutral range near 50, well below the overbought levels of 70 and and above the oversold levels of 30.

aapl stock volatility

Implied volatility on AAPL edged higher, prior to the release of the decision and ahead of earnings in the coming weeks.  The recent lows near 25% represent an excellent opportunity to purchase volatility, while levels near 45% reflect a robust place to sell volatility.  At the current levels near 30%, options traders who are bullish on the stock could use a risk reversal and use the skew on the puts to benefit from the structure.  The structure mitigates the effect of implied volatility on a directional play.

In a risk reversal the investor will purchase a call and use the proceeds of a sold put to finance the trade.  A trade that would allow an investor to earn theta is an August 450-390 risk reversal in which the investor collect 10s cents by purchasing the 450 call for $5.20 and selling the 390 put for $5.30.  By using recent support at $390, and investor has a good spot to purchase the stock if Apple’s stock turns lower.

Comments from Reggie on the fundamental side...

The Apple Profit Engine Has Stalled & Is Rolling Downhill

Apple is facing a shart decline in the margins of its top two value drivers. May I also add that these two value drivers are 83% of Apple's revenues and an even greater portion of its profits. Such a drastic concentration in only two products who have reached their zenith is not a good thing!

Click the graphic once to view, twice to enlarge to printer quality...

Reggie Middletonss Ultimate Apple Value Infographic

Apple's Competition Is The Greatest It Has EVER Been!

Apple's competition is the greatest it has ever been, and features companies who are literally at the top of their game. We are talking a lot of companies, and at the top of a very difficiult game as well. Reference What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!

Apple is Materially & Quickly Losing Global Market Share! Clear Indicators Of Permanent Downward Moves In Its Peer Group

Apple is rapidly losing global market share over and the trend is worsening. This has ALWAYS signaled the beginning of the end for its peers. Reference Is Tim Cook Cooked? Market Share vs Profit Margin, part 2 - Follow What I Do, Not What I Say!

For those who don't subscribe and/or haven't already seen it, here is the video that tells (nearly) all about Apple, from beginning (Q3 2010) to end.

Of course, there is a point at which Apple is a good buy. After all, they have a lot going for them. The question du jour is, exactly what is that point? I refer my subscribers to the research documents below for the answers... 

Subscribers, download the Q3 2013 valuation reports (click here to subscribe).

The update from two months ago is also of value for those who haven't read it. It turns out that it was quite prescient!

  1. File Icon Apple 1Q2013 update - Pro & Institutional
  2. File Icon Apple 1Q2013 update - Retail


Published in BoomBustBlog

Glass vs iPhone subsidized

My latest appearance on the Max Keiser show at 11:52 in the video.

As for Android, Google, Glass, security and privacy, I took the liberty of posting the discussion from the my last article on this topic. It should be of interest to both the paranoid and the techy types....

0#14 Continuing what I said on Google Glass — John Boyd2013-07-16 12:02
Reg, As to your replique to my comment about Google Glass being a real time snooping tool for the NSA, I would say that what you say is true for those of us with the technical skills to build from the Android source code and then load it on to our phones (maybe there is a business opportunity there). The other issue is whether one can control what gets automatically loaded on the phone subsequent to deploying one's own build. Most people would not be up for the challenge. But I'm seriously thinking there's an opportunity there! :-)

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0#13 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — me 2013-07-15 19:28
Reggie, love your posts, mostly. Just one comment. Android is open source. Google apps are not.

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0#12 Spying — tfs 2013-07-15 07:44
There is no safety in using Andriod vs IOS vs Windows.

Everything you do is being monitored at carrier level. The NSA taps the cables.

Anyone who thinks DuckDuckGo and StartPage are safe are delusional. Entry and exit points to these services are again tapped at the wire level. The NSA would have no problems in illiciting the certificates supporting https.

You can see why American telecom companies want the contracts to rebuild communication infrastructures in countries their Wmpire has just dismantled.

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0#11 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Nat 2013-07-15 04:39
Yet through disinformation borne ignorance, we already have the masses clamoring for a "safe' closed proprietary OS like iOS as compared to an open tool chest exposed to oh so many eyes.

That's not true. No-one is choosing iOS or Windows OS in order to be "safe". Similarly, next to no-one is choosing Android in order to be safer either.

OS's are chosen because of the hardware people think they want after seeing the promotion. If not the hardware, people choose the OS because of the apps they've seen their friends use, or promoted 'cool' apps.

As you say Reggie about the banks, no-one cares until some large section of society really suffers a loss. When it comes to surveillance and police states, waiting for that loss means you've already left it too late (unless you're watching from another country..).

As an aside, I really don't see people warming to being so constantly connected to hardware/communication etc. You will get a lot of people adicted to it like they are the internet, 24 hour news etc but I think it will wear a lot of people down and they'll reject the idea in the longer term - even you took off the headset in the Keiser Report interview the other day as I presume it was a distraction?

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0#10 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 21:06
>You don't have the ability to submit 
>changes to even be considered for 

Your precious Google bozos made a mess of their Open Source modules. They scooped up open source, made copies of it in such as way changes can't be freely propagate back and forth to the original Open Source they took.

They just scooped up Open Source, copied it and moved it into their brand new projects. Really just a copy and paste type hack. 

Google are using Open Source, but have done so it such as way as not to contribute back to the ecosystem they are using. Yes, they have their own brand new Open Source project with a brand new name, but the original modules they scooped up won' have changes easily propagating back and forth.

This is what happens when Google hires people straight out of college with no real world experience. Like hires like.

Google Chrome is hardly a beacon of engineering brilliance on Google's part. The hard part was done by Apple - WebKit.
Apple produced the first fast JavaScript compiler.

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0#9 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 19:23
>Windows and iOS all have the same 
>problems, except for the facts that 

Isn't the core of iOS based on the Open Source operating system FreeBSD? FreeBSD rocks.

Apple's Safari web browser is based on the Open Source component WebKit, which is turn in based on the Open Source web browser Konqueror. Apple's JavaScript to machine code compiler (used in their web browser Safari) is again Open Source.

WebKit is a HTML5 and CSS renderer and supports multimedia and much more.

Google based their Chrome web browser on Apple's WebKit. If it wasn't for Apple, Google Chrome would exist in its current form.

By the way when I've developed websites, I've noticed the exact same JavaScript bugs in Apple's Safari and Google's Chrome. I wonder how that could have happened. It could just be a coincidence.

As I said before even if you have the entire source of Android read by people around the world, it still isn't secure. There are so many other lines of attack outside the handset.

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0#8 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 19:15
OK you do have a valid point. A mainly Open Source operating system has to be more secure.

But really there are so many lines of attack.

By default Android does not have good security - who you communicate with can still be tracked. You need to get 3rd party software to be really secure on Android.

Building an operating system from source code is a difficult operation. There will be so many dependencies. Not many people will be able to do this.

I may make mistakes in some of my points, but you are meant to read all of what I say and take it as a whole.

> Your multiple posts here 

Isn't that an ad hominem attack?

I am not a fool. Nor am I something that has crawled out of the woodwork.

I run a small business that sells a relatively inexpensive product to a very large number of people. I've sold my product to Microsoft, Intel, Apple and a vast number of other companies. I am not a fool. I've even sold my product to at least two companies that Google has taken over.

You are incidentally one of my favourite guest speakers to appear on the Keiser Report. You concisely summarize Google's business model as cost-shifting. I can see the smartness is saying things concisely.

I do advertise on bing.com and on other websites as well. They charge $0.05 to $0.15 per click. As a lot of companies only get 1 sale per 100 website visitors, this is a fair charge.

Google charging $0.80 to $5 per click is excessive. I don't know why Google does this. Surely the number of potential advertising customers they have is vast. They should aim to have low costs and make it up on the volume. To extent this is what I do.

Look I am really trying to make a valid point here and what I say is echoed across the Internet.

Google charges advertisers too much. All their money for acquisitions and their internal army of people that can't write software anymore without getting a check book out and buying it has a cost. That cost is borne by advertisers.

All I am saying is that Google is a hard man over money.

I have studied all the other companies in my niche. I see competition selling products at a very low cost if they don't use Google advertising. I see competitors charge 50% more than me when they turn on Google Adwords.

I just want to get a word out that having everybody use Google has a cost. That cost is the increased cost of products sold by everybody that is not Google.

Google spanks you if you use the display network as they say your click-rate is lower and so your cost per click on the search network has to go up.

If you use an exact phrase match with the words x, y and z and another company with nothing to do with you occasionally advertisers with the words a, b and z, then Google will spank you again as they say the competition is paying more, when they aren't really your competition at all.

I see the cost of products sold on the Internet go up 50% and all the cash rolls into Google.

Monopolies are bad. People need to use other search engines such as ixquick.com and duckduckgo.com

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#7 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security —ReggieMiddleton 2013-07-14 15:59
I have a very balanced view. Your multiple posts here show that your view may be less than balanced. If you have a problem with Google's advertising methods, you should choose another provider. There are alternatives, particularly in social media. You can also alter your approach to Google. The algorithm change was likely more to improve the credibility of search results than to hurt your business. Either way, you can find experts that maximize efficacy of coding for Google search results. Comparing to Bing, Yahoo, etc. is less relevant they have inferior products when one factors in capabilities, which is likely why they have less market share.
The network effect creates an unfair advantage, yes.... but to obtain the network effect advantage you likley had a superior product to begin with. Ask users of Microsoft Office...

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#6 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security —ReggieMiddleton 2013-07-14 15:53
Quoting Betty B.:
> Who has the time to read through a mountain of computer source code? Computer source is difficult to read and understand. Reading source code written by other people and understanding it, will take longer than writing it yourself.

Nah! We are not protected.

Just listen to the objections you are raising and you can see how and why Android is safer to the populace than all of the popular competition. Windows and iOS all have the same problems, except for the facts that
  • You dont have access to the code

  • You don't have the ability to submit changes to even be considered for acceptance

  • With Android, you don't need for Google to accept your personal changes, you can simply roll your own personal version and use it for yourself which should be the preference for the paranoid types. You can't do this with any other popular OS.

  • The amound of independent eyes on Android trumps that of any other OS, by far. If something has a chance of getting caught (ex. spy code) it will likely get caught on Android code base. This has already happened, read XDA developers code posts for the HTC Evo

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0#5 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 14:22
Forgot to say, you can do anything you want with software.

There is nothing to stop someone taking Open Source software and just before building it into runnable code, adding a crack to make intercepting or decrypting communication easier.

How can one little change be spotted in reams of incomprehensibl y machine code assuming you even know what version of all the different source code modules to compare against? Even if you read through all the code it would take you a lifetime.
#4 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 13:20
> This means that anyone and everyone can 
> modify the code base and if those 
> modifications (improvements) are 
> accepted into the official code base

Yes, but there is still Google sitting as a referee deciding what gets into the official code base.

Suppose I want to triple the bit length they use for SSL / https, will Google let me submit the changes?

If all communication is being snooped then you have no protection. Even if you use encryption, the NSA will still have a record of who you are communicating with and how much traffic goes between you and where they are located.

Even if you use encryption, if the bitlength isn't high enough President ODumber will crack it. I don't know enough about cryptography, but if the algorithm has a flaw then you are vulnerable as well.

They can still tell what search terms you are using.

Do you use an encrypted email client? Encrypted voice over a phone line? How do you know for sure the software you download doesn't have a flaw in it. Very few people are smart enough to understand the level of mathematics to determine this, plus have knowledge of software as well. Who has the time to read through a mountain of computer source code? Computer source is difficult to read and understand. Reading source code written by other people and understanding it, will take longer than writing it yourself.

Nah! We are not protected.

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0#3 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 11:31
Perhaps Reggie should try to get a more balanced view of Google. I can't say enough monopolies are really bad for the world. Maybe consumers can get some free stuff in the short term. But free doesn't exist. If one person gets a freebee, someone else is getting screwed out of money.

The Internet freed people to produce innovative goods without high start-up costs of having to have bricks-n-mortar shops. I myself started up a company producing a product head-and-shoulders above all of the competition. My website used to be at the top of Google's search results. Whether it is intentional or not, Google have jacked up my advertising costs and bang! in one search algorithm update knocked me off the front page. On bing.com and other alternative search engines, I'm near the top.

When I started out, my website didn't have good natural search results. But I could reach a large number of customers cheaply via cheap click rates. That time has passed now. Google's greed is blocking off the Internet for small companies wishing to start up with limited advertising budgets.

Reggie get a balanced view of what is going on and look at the links below.



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0#2 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — Betty B. 2013-07-14 11:23
Reggie Middleton is a smart man and I always enjoy listening to his insights.

But there is a flip-side to Google and Reggie should think about this as well.

Reggie waxes lyrical about Google’s cost shifting and cheaper-than-free goodies. There is a real cost to this.

I have advertised on Google Adwords for years. That experience has made me dislike Google as a company. I got stung with obvious click fraud. I emailed Google at least twice. They denied click fraud ever takes place. I have paid Google vast sums of money over the years and as a long-standing customer they should have taken the time to examine the evidence I gave them. My whole daily budget was used up immediately at the start of each day on an Indian screensaver website. Yes, immediately. When I turned off the display network, my daily budget wasn’t used up in a whole day when my adverts displayed direct on google.com. Plus I looked in my webserver logs and I had no real visitors from this 3rd party publisher.

Google Adwords contains a mass of code trying to extract as much money as possible for Google from advertisers, even at the expense of making it uneconomic to advertise with them.

I displayed for a while on the display network, where typically the click-through rates are lower. I emailed Google about my eye-wateringly high click costs on the search network. I was told the display network was making my search network costs higher! This is wrong. There should be no linkage between the two as everybody knows the click through rates on the display network as lower than it someone was doing a specific search direct on google.com. If you get low click through rates, Google bumps up your cost per click.

For long stretches of time, I have had no competition in my niche advertising on Google. I sell low cost products and quite frankly none of my competition can afford Google’s high costs in a low product cost market. Yet my click-rates are uneconomically high in the absence of direct competition. This is so wrong. Google's auction model is opaque at best.

Google explains this via broad matching and synonyms. It seems if a big company – with a totally unrelated product to yours – uses broad matching for their keywords, then even only a 1 keyword overlap in a phrase of 3 -4 keywords, will bump up your click costs. This is wrong.

If bing.com can charge $0.05 for a click, then why doe greedy Google need to charge at least a whole order of magnitude more and often much more than that?

I should also mention that I set a daily budget. Google regularly went over that increasing my monthly costs to well over what I can reasonably pay. I searched the Internet and I found out Google has been sued over exceeding peoples’ set budgets.

My response was to set my daily budget 20% below that wish I wish to pay. Everything is geared up by default to sting people – perhaps unintentionally .

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0#1 RE: Irish Fraud, Google, Glass, NSA and a False Sense of Security — jason lantz 2013-07-13 16:35
this is one of the most uninformed statements I've ever heard.

 So, let's revisit Glass. Glass is a cool device, but from a hardware perspective, it's not expensive to build once engineered. If the Moto X can be sold for $200, that will likely be the ceiling for Glass, which would probably be sold for less if subsidized by Google. Throw in a half billion dollar ad budget (Glass is already extremely popular and is not advertised or even for sale yet) and you have a definite game changer in the mix.

Imagine if these computer glasses that changes the way we do everything sold for $150, with the full marketing awareness powers of Google behind them. Uh Oh, it's a whole new world.

Glass vs iPhone subsidizedGlass vs iPhone subsidized

Subscribers, click the following links for my updated price targets on Google (click here to subscribe) and read  Google Q2 2013 Update: Valuing Possibly The Most Powerful Co. In The World?:

The biggest risks to these price points are:

  1. A market that's being levitated by central bank magicians running short on magic spells...
  2. Regulatory pressure, which I feel is quite material and inevitable, but will not be a major factor in the near term.
Published in BoomBustBlog

As I canvass NYC to gauge acceptance of ‪#‎Glass‬, ample evidence the device sexier than it is nerdy abounds.CAM00841 copy

At the end of the day, it's who you are and not what you wear that makes you feel confident, secure, and/or attractive. Those that say they feel silly wearing #Glass may rely too much on what they are wearing and not enough on who they are. With that being said, fashion is a key selling aspect, but as #Apple can attest, fashion is tantamount to fad and what's in this year is often out the next. Difficult to build a tech business model that lasts on such a framework. #Android proves functionality and superior business model will reign supreme longer term over focusing on fashtion sense.

On a separate, yet related note - numbers are coming out for the price, parameters and terms of Google's new Moto X customizable smart phone. It is allegedly highly customizable upon order, deliverable upon days, works with all major providers and unlocked, equipped with the best camera on the market, have the best battery life on the market and will sport both a $500 million advertising budget and a $250 price tag. That's right! $250! That's the complete purchase price, not the down payment to enter a contract. 

As per the WSJ: Google To Spend $500 Million To Market Moto X Phone

It’s set to spend $500 million or more marketing the showcase smartphone of itsMotorola Mobility MMI NaN% unit, according to a report late Monday in the Wall StreetJournal. Such a sum would easily top the mobile device marketing budgets of both Apple AAPL -0.38% and Samsung, the runaway market leaders in smartphones.

Apple and Samsung have the benefit of sizable marketing budgets. The two companies spent $333 million and $401 million, respectively, to advertise mobile devices in the U.S. last year, according to Kantar Media, a unit of WPP PLC. Google may end up spending more money than that on the Moto X phone alone, people familiar with the matter said.

Motorola's Mr. Woodside, speaking at The Wall Street Journal's D technology conference earlier this year, discussed some features of the Moto X, including its long battery life and ability to be "contextually aware," meaning it will adjust to its surroundings.

For instance, the device's sensors will know when a person is driving and automatically offer them the ability to give voice commands to get information from the device, including making calls or getting directions, said a person familiar with the matter. Mr. Woodside also said the device will be able to sense when a person is trying to take photograph and help them bring up the camera app more quickly.

Motorola also is hoping to appeal to consumers by letting them customize the device. In addition to being sold in wireless carrier stores, the device will be sold online, where people can choose from different colors for its back panel and front-panel trim. Customers also will be able to have a written engraving on the back of the device, similar to what Apple offers to customers of iPod music devices and iPad tablets—but not the iPhone.

From the Verge.com:


If the specifications don't impress, it's because Motorola is set to go after an affordable price point with the Moto X. As Woodside pointed out on stage at D11, off-contract smartphone prices have hardly budged since the original iPhone, and the company thinks it can carve out its own market of "high-quality, low cost" devices between $650 smartphones and $30 feature phones. From the rumored specifications we expect the Moto X could sell for as little as $199 off-contract.

Eventhough Google Has Officially Gone On Record To Confirm Reggie Middleton's "Negative Margin Business Model" Tactics, I still want all to rember that I warned about Samsung's fall earlier this year just as I forecast their rise against Apple (Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All)!

Friday, 15 March 2013 Samsung's Galaxy S4 Flagship Device Is Outed, What Does It Mean For The Industry? SoothSayer Speaks Truth To Tech!

As I State Previously, Apple Is Done, Samsung Sets the Bar, and Hardware Still Looks To Be A Razor Margin Business In a Few Years If Not Less.

Thursday, 07 March 2013 Samsung Will Be Ready To Do That Fruit Thing, Just Like Blackberry & Apple - Courtesy Of Google, #MarginCompression!

Two and a half years ago I declared in my mobile computing wars series that Google would commoditize the mobile computing space. Four months ago, I reiterated that assertion in Smartphone Hardware Manufacturers Are Dead and did so yet again the following month in Computer Hardware Vendors Are Dead, Part Deux! These premonitions cover not only the obvious also rans and marginal companies who's management complained about losing the forest due to tree bark obstruction, but the very darlings of the industry as well. This includes the "used to be" market darling Apple (What Sell Side Wall Street Doesn't Understand About Apple - It's Not The Leader Of The Post PC World!!!) and even the current reigning champion, Samsung. That's right, I said it! Samsung! Hey, I'll say it again just to drive the point home, Samsung! How and why is that, you ask? Well, the same Google Android generated, creative destruction pathogen that brings us such great technology at such a rapid pace at such quickly diminishing prices that has wiped out those companies that I have warned of so extravagantly doesn't just disappear when your current market darling get's knocked off its perch. Let's recap & excerpt the link above so we can clearly isolate the common thread...

So, you ask, "How is it that hardware is dead?" Well....

    1. The open source OS paradigm calls for rapidly improving hardware specs at ever lower prices. I have pointed to evidence of this above, as these Asian OEMs produce ever better product at ever lower prices - just like the old school PC industry. This drives Google's info-centric business model which is why Google pushes free Android.
    2. After years of outsourcing manufacturing tech and IP integration to low cost labor Asian countries, those countries have found a way to produce trinkets of their own. Of limited quality and value so you say? Well, remember the iPhone is a Chinese phone, through and through -at least Chinese built. So now you argue, it's American designed, just Chinese made! Please peruse the Oppo Finder 5, a phone that's drastically superior to the iPhone 5 in practically every single way, retailing for $100 less than the cheapest iPhone 5 made. Low cost, low margin products combined with Google's free OS will drive the price of hardware down to near zero, if not negative. Google even has its own hardware arm now (Motorola) to facilitate this downward march in margins and prices. Suppose Google decides to create best of breed Nexus devices and give them away just below cost? Imagine the best smartphone available in the world, unlocked, without a contract, for the cost of a single monthly wireless phone payment??? Google's Nexus program is acting as a training ground to teach Google's Motorola division to build best of breed! Google's biggest and most successful partner - Samsung, is an Asian company. Samsung Electronics of South Korea reported today that its quarterly profit  jumped 76%, as its Galaxy smartphones beat rival Apple's iPhone in each quarter of 2012. What many seem to have missed is that EBITDA, Operating and Gross margins all slipped QonQ though. A sign of things to come??? Remember, Google benefits most when the barriers to access information are least. Reference "Cost Shifting Your Way To Prominence Using The Network Effect, Or Google Wins - Apple, RIM & Microsoft Have ALREADY LOST!" as well as my videos below...

 So, let's revisit Glass. Glass is a cool device, but from a hardware perspective, it's not expensive to build once engineered. If the Moto X can be sold for $200, that will likely be the ceiling for Glass, which would probably be sold for less if subsidized by Google. Throw in a half billion dollar ad budget (Glass is already extremely popular and is not advertised or even for sale yet) and you have a definite game changer in the mix.

Imagine if these computer glasses that changes the way we do everything sold for $150, with the full marketing awareness powers of Google behind them. Uh Oh, it's a whole new world.

Glass vs iPhone subsidized

Subscribers, click the following links for my updated price targets on Google (click here to subscribe) and read  Google Q2 2013 Update: Valuing Possibly The Most Powerful Co. In The World?:

The biggest risks to these price points are:

  1. A market that's being levitated by central bank magicians running short on magic spells...
  2. Regulatory pressure, which I feel is quite material and inevitable, but will not be a major factor in the near term. 
Published in BoomBustBlog
Page 5 of 29

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Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts, engineers & developers to usher in the era of peer-to-peer capital markets.


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