iPad versus kindle? everyone wins!

So theres a lot of noise around about the iPad, and how great it is, and how it will kill amazons Kindle Wireless Reading Device (6

Which it may do, I’m not too sure. The basic kindle is a lot cheaper than the iPad, and probably has scope to get much cheaper again, and Apple is after netbooks/low cost notebooks, and probably isn’t supremely concerned about the kindle.

There is a much more interesting fight happening, which no-one seems to be say much about.

In… the…. red… corner, we have the tag-team from heaven, the e-ink on the brink, the best from the West (Cupertino, CA and Seattle), the electric duo, the Mighty (brown) Kindle, and the Fabulous (and absorbent) iPad. Who would have thought they could ever team up? In the same corner, backing each other through thick and thin? Best mates 4eva, Jobs and Bezos. I’m not sure why Jobs just smacked Bezos with his shiny new iPad, but I’m sure theyve got each others backs.

And… in the blue corner… the boyz from the wood, the oldest team in wrestling, the Gutenberg Goliaths, the Publishing companies.

Lets… get… ready… toooo ruuuummmmbbble!

So, on one hand, we have the e-readers and e-books in general, and their associated e-stores. Theres a secondary fight there, but its not too relevant at this point. But the publishers… hmm. What are they offering now? Are they not in exactly the same place as the music publishers? So theres no shipping, no packaging, no printing, no up-front capital costs. Just some editing, and publicity.

Now the iPad will force this decision on more and more people. Paper or electrons? And if electrons, how much do you want to pay? And why do authors need publishers anymore? Previously, they needed someone to actually make books, and ship them all around the world, and bill bookshops etc etc. There was a whole logistical chain that a given author didnt want to deal with. But ebooks…?

So the publishers are on thin ice here. They are trying to maintain margins when more people are switching to ebooks. And people just aren’t willing to pay that much for a collection of ordered electrons. Its the The Innovator’s Dilemma repeated again. Except its too late for the publishers, they should have been the ones doing Amazon, or having a chunk of skin in that game. So the book market will slowly shift to the ebook readers. Both Amazon and Apple will benefit, and the old-time publishers will die. There will be a battle for mindspace between Apple and Amazon, but it will be about who gets the greater share of an increased revenue pool (thoughtfully contributed by existing book publishers). All books will be in all stores unless one of the publishers sign an exclusivity deal, which would be extremely hard to argue was in anyones best interests.

What interesting times we all live in!

PS. Has anyone tried to download ebooks via bittorrent? An ebook is going to be… tiny compared to music.

iPad rocks!

so, the iPad. Everyone has an opinion, and since I have an opinion on everything, even new technological tools I havent even seen, I should write a post.

My prediction: Another win for Apple, it might be a bit of a sleeper, like those damn commie agents during the cold war. Sure, theres things missing, namely a web-cam and a SD-card slot. These are the big omissions I think. And the geek boyz will whine about things like multitasking (lack of), and no flash. My responses, I couldn’t care less about multitasking, similarly to how I don’t care about multitasking on my iphone. Flash is rubbish, and its been in Apples sights for a while now. I think the iPad is the final nail in the coffin for Flash. RIP.

Version 2 of the iPad will solve all these issues (without the flash), and Apple will completely take over the sub-$1000NZD network market. The iPhone and iPad are computing done right, people are looking for simplicity and function, and Apple are the only company delivering at this point. Very nice.

Disclosure: I own Apple stock…

Apple 3rd quarter earnings…

Apple have just released their eagerly awaited 1st quarter 2010 earnings. Pretty exciting stuff!
Its kind of exciting

By any accounts, Apple had (another) pretty stunning quarter. Sure, coming out of the recession we were bound to see a pickup. But, net income for the entire 2008 year (ended Sept 2009) was 8.2 billion dollars. The net income for the 1st quarter 2010 was 3.4 billion. So in 1 quarter, Apple produced 41% of their previous years income. Thats pretty good, even if 2009 was a ‘bad’ year (which it really wasn’t).

(note: these figures are those using the new accounting practice for IPhone and Apple TV, so the 2008 year will differ considerably from that in the 2009 annual report).

Mac sales continue to increase (cos macs are cool!), but surprisingly, their desktop sales rocketed. ITunes is contributing around 1.1 billion, which is up 10% across the dec quarter. I would have hoped for a bit better there, since I see Itunes as one of their big growth areas – particularly due to iphone sales, but maybe I’m being greedy. The mighty IPhone (which is actually much better than you might have expected), contributed 5.6 billion, compared to 13billion for full year 2009, or this quarter produced ~40% of the last years entire iphone contribution. Very surprisingly, IPod sales were stable compared to the dec 2008 quarter, around 3 billion. Who needs an IPod when you have an IPhone?

But the IPod touch is a Iphone without the phone, so I’m guessing plenty of people are buying the touch. And, if you add skype, your touch becomes a phone.

I’m not quoting a target price for Apple, since I’m not that far through my valuation book! But if you take their earnings per share in the quarter of $3.67, annualise it by x4 (silly because december is the xmas quarter) and round it ridiculously, you get about $14 per share. How much would you pay for something that earns you $14 per year? Or to put it another way, how much would you have to invest to earn $14 per year? BNZ are quoting 4.8% on their term deposit, which means (ignoring taxes) that you’d need to invest $281 to earn $14 in interest. So, as a completely whacked out price guide that I think errs towards conservatism… $200-$300!

flames welcome!

total immersion, or how I learnt not to sink like a stone with a lead weight…

So in 2009, I started learning to swim.

“Learn to swim?”, I hear you cry, “you can’t swim? But you’re so amazing!”

Well shucks. But no, I basically couldn’t swim. Sure, I could splash to the end of a 25m pool with the elegance and grace of Michael Phelps (thats Michael Phelps the concrete electrocuted octupus (with a lead weight belt)), but that was about it. Gasping and choking, I’d grab the pool at the end, trying to suck in oxygen while simultaneously attempting to look like I’m…. just stretching my arms. Kinda like runners do with their legs when they’re really tired, leaning up against a lamppost. “Just FORGET IT!” I shout to you all, “WE KNOW. Its ok, you are tired. You don’t need to stretch, we know you want a beer and a chair!”. I’m like that with swimming.

So anyway, I decided to learn to swim, more out of stubbornness than any particular enjoyment. Never really liked the pool much. Splash, sink, inhale, swallow gallons of water, blow more water out my nose, lurch for the air, gasp in a huge breath, overextending my lungs until popping point, splash again, sink… etc.

The four hour work week blog served as some inspiration, waxing lyrical about total immersion, a method of swimming developed by Terry Laughlin (whose got all sorts of distance medals and basically doesnt swim like the above).

Total Immersion: The Revolutionary Way To Swim Better, Faster, and Easier

Buying from Amazon (did I mention I love amazon?), it arrived in 8 days, and then I was on my way to the pool. One of the best things about Total Immersion is it gives you very specific drills, so you don’t feel you *have* to swim when you’re at the pool. You’re allowed to not struggle to the end 3 times, give up and see you next year stinking pool! Progress without struggle. So I spent the next 2 months doing drills, learning to float (which is not natural unless you’re a 4 day old victim from a CSI show) and generally working out how to streamline.

A few weeks ago, I did 6 lengths of the pool (33m). Thats 200m without a stop. This is borderline miracle stuff really. I was expecting TV cameras to turn up, and feature me in the news right after the “miracle dog saves cute human child from burning building” story. That didn’t happen, no wonder I don’t watch much TV. Wankers, I hate them all.

But truly, its awesome. I’m still not ‘there’, theres times when its good and bad (like most exercise!), but… I’ve at least got rid of the lead belt and the splashing. And most of the water inhaling. My overall goal is to go swimming in the sea for a ‘reasonable’ length, and actually be able to swim!

so check out the dvd
and the book. The DVD shows you how, and the book tells you why it works. The DVD is probably more up-to-date (don’t get the 1st edition by mistake), and I’ll see you at the pool (I’m the one going slow!).

Electrifying New Zealand…

So early this year, John Key kicked off a summit to generate ideas to improve NZ. Not too much came from it, mainly a cycle-way. Its taken me a while, but heres my big idea:

Make all our cars electric.

Ok, its not a guaranteed success, but… heres some quick numbers:
2.5 million passenger vehicles in new zealand, travelling on average 12500kms/year, using (on average), 10 litres of petrol per hundred kilometres, at $1.69/litre… equals: 2.5mill*125*10*1.69=
so, every year NZ spends around $5 billion NZD in fuel.

So, the big idea is… spend it on something that has a big payback. Electrify the car fleet. All of them.
Heres a super-quick cost/benefit, based on made up numbers:
1. Remove our dependency on foreign fuel, release about $5 billion in overseas spending
2. Spend the $5 billion on upgrading our electricity network, R+D into new/better ways of generating electricity. We need to do this anyway, since our electricity demands will continue to increase. No coal plants, but green-tech.
3. Centralise pollution to the electricity generation centers, rather than the impossible to police distributed pollution centers that are cars.
4. Reduce our greenhouse gas emissions, actually achieving something re: kyoto, instead of some random “spend money to make ourselves feel better” emissions trading scheme or some other nonsense.
5. Sell our new-found expertise in green-tech, electrification, R+D to other places. Actually kick start some R+D, and niche expertise that is actually worth something.
6. Continue to save $5 billion. Per year.

So what would it take? A lot of leadership, and some capital spending. We need:
1. Infrastructure. Electricity generation would need to be increased a lot. However, we need to do this anyway to cope with increased demand. So we have to answer the question.
2. More infrastructure, electricity outlets. Probably in service stations.
3. A selection of electric vehicles.
4. Increases in petrol tax to pay for subsidies to change to electric vehicles.
5. R+D funds in the identified areas.
6. A million other things… I know.

This is the kind of big thinking I want to see from New Zealand. Not just a cycle-way (although I love the cycle-way!), but someone with the guts to have a ‘big idea’, think it through, and to do it.

What do you think? Is this crazy? Problems? Greg for Prime Minister?

Iphone thoughts…

I finally bought a shiny new iphone 3gs, firmly cementing my apple fan boy status, to go my my macbook pro and multiple mac minis, and ipods.

I like apple products. The main reason I like them is you get a feeling that somewhere, someone actually cared about the users experience. Truly cared. We love you Steve!

To the Iphone! The iphone (is it IPhone, iphone, iPhone…?) is a nice piece of kit. My major concern, that I wouldnt be able to type on it as fast as on my treo 600 (with keyboard) proved to be groundless. The keyboard works really well, like the entire phone.

So its the greatest thing since sliced bread. Even makes phone calls.

But the astonishing thing about the iphone for me is the the appstore. Buying games, music, getting pod-casts. Really, really easy, and cheap.

I have bought 3 games for the iphone. I hardly ever buy games, because I don’t play them that much, and they’re pretty expensive. So 3 games for me is a lot. Except, under the covers, something fundamental about the game (and software) industry has changed, through my shiny new iphone.

My 3 games cost me in total, $6.47. And… these games are … good. Nice graphics, gameplay, more or less what you’d expect on a console. $6.47 in total, less than I pay in parking in a week.

So, we have high quality games, selling for mm, over an order of magnitude difference. Why buy a PSP? or a Nintendo DS?
PSP – $328 average game costs $30-$80
Nintendo DS – $257 average game costs $40-$60

Sure, the games you get on a PSP/DS might be better. But… I don’t care. I rarely play games, almost never complete them, and only use them while waiting for flights (or pretending I’m not on a phone call when picked up by the cops for driving and talking! just kidding!). And I think there are many more people like me.

So the iPhone is great. But… I think sneakily, under the covers of the iPod (which is destined to die very soon), apple have scored a massive, major, world-changing win. iTunes, and the integration with the iPhone. People will start very soon to expect to pay $2.59NZ for a quality game. This I believe is the true game-changing power of the iPhone, and I think its an astonishing testament to apples vision. I know, I sound like I have “I (heart) SJ 4eva” tatooed on my chest. But when you think about the scope of the vision, that started with MacOSX, and the IPod, then iTunes, then the iPhone, all in order to make the apple products, and the app-store the easiest, cheapest way to get applications, redefining an acceptable price for software in the process, taking on Nokia and Sony and Nintendo and Microsoft and Dell and HP in spaces that those companies thought they owned, and had a massive head start in? whew. Thats ballsy. Will see what happens with google.

So my question is, why would you buy a blackberry/HTC/android phone when the iphone is the same price?

disclaimer: I own apple stock

Amazon, the power of scale.

I recently ordered some books from Amazon.
In the current situation, this should be a bad move, the NZ dollar is buying $0.64US, the amazon shipping charges are a significant component of the price, so why would I do that?

I bought 4 books that were recommended on the fourhourworkweek.com blog, from amazon, 56.73USD + $24.95 shipping. So, $132 NZD + how ever long it takes to get here.
I ordered on the 28th June, and it arrived on the 9th of July.

If I had bought those books in NZ from fishpond.co.nz (a NZ online bookshop), it would have cost:
Rules of thumb: $50.58, 6-10 days
8 weeks to optimum health $34, 3-5 weeks
Science of influence $73, 10-12 days
Vagabonding $31, 24hours

Fishpond give free shipping on orders over $50, so ignoring that, total is: 188.58. And it probably would have taken significantly longer.

So its no contest. Amazon wins, from the other side of the world, hands down. Faster, and significantly cheaper. It really is an amazing service.

Restaurant Brands CEO steps up

I’ve just noticed today that Russell Creedy, CEO of Restaurant Brands has bought 45,000 shares in the company he runs. This brings his total shareholding to… well… 45,000.

I think highly of senior management who take positions in the companies they run, and think this is a great move by Russell. Obviously, 45000 is not a lot of shares, and I will be watching to see if such purchases continue. At the moment, only the Chairman of Restaurant Brands, Mr Danny Diab (a director), and now Mr Creedy own shares in the company, and only Mr Diab has a shareholding of significance.

But a good move from the CEO, perhaps coming on the back of some criticism at the AGM.

FPH. How does that work?

I’ve been looking a bit at Fisher and Paykal Healthcare recently, an innovative company from NZ specialising in breathing related medical products. Ive always been interested in this company, and it has been a darling of the NZ sharemarket.

Its recently dropped in price, so I thought I would have a quick glance at its financials. When I look at a company, I quickly work out whether its making cash. Not net profit, but free cash flow. So, at the end of the year, does its bank account have more money than at the start, which can then be used for paying off debt, lavish parties etc. The theory is, so long as the company is spinning off cash, things arent going to go too far wrong.

Now, I was a bit surprised to find the FPH results. FPH makes a ‘reasonable’ amount of money from operations, 44 million in 2008 (2009 results not out yet). But they spent a chunk of that on capital expenditure, ie, expenditure that the company needs to make to continue operations, plant and equipment upgrades etc. So, you take that out of the money they make from operations. And then… they paid out 60+million in dividends. Now, if you only make 40 something million, and then spend 10-20 million on capital expenditure, and then spend another 60+ million on dividends, um, you’re left with a kinda sizable deficit.

So, where does that money come from? From borrowings. FPH does not appear to be able to afford their dividend payout, and this can be seen in the increasing size of their debt. Its not clear why their dividend policy is the way it is, but it doesnt seem sustainable, particularly if banks start being a bit more conservative in their lending policy.

Thoughts? Are FPH on the verge of profitting massively from their patents and innovative technology? Am I being way too bearish on a cool kiwi company?

2009 update: The 2008-09 FPH annual report shows the same trend. 62million cash from operating, minus 22 million of property/plant/intangible spending and 66million of dividends, leaves -26million in free cash flow, funded by… 37 million of new borrowings.

SGI, hit by the innovators dilemma bus…

When I was at Uni, SGI workstations were the workstations to use. I wrote my 4th year project, an Artificial Life simulation with 3d graphics, neural networks and the like on a SGI workstation, and it was like… woooo. SGI were big in graphics processing, and big in servers for big government organisations. Their hardware was seriously cool, and seriously powerful. And… expensive.

SGI was a computing icon, . Every geek knew about SGI, and they were cool. All the cool graphics apps ran on SGI processors. They bought Cray Supercomputers, the well known manufacturer of well… cray supercomputers. An icon.

And last week, their assets were bought by rackable systems (who?) for 25million. The end.

I find it fascinating, that a company that had such an iconic status, failed completely in about 20 years. 20 years is… a pretty good innings in technology terms, but SGI I think offers a lesson in the Innovators Dilemma.

SGIs market was high end computing. 3D graphics, moving processing from main frame computers to workstations for the first time. Unfortunately for them, the bus didnt stop there, but continued on to companys like ATI and Nvidia for 3d processing, and Intel/AMD for processing power. All the things that distinguished SGI became commodities, and their market became smaller and smaller as people shifted to those lower cost options.

Its a fascinating illustration of the innovators dilemma. What we can see now is that the bus still has not stopped, and companies like Nvidia struggle to reinvent themselves after years of growth led by increases in power. These companies might be the next victims of the innovators dilemma bus, as their products become commoditised. Unless these companies find new markets, it seems likely they will follow the path of SGI.