If you had 290 billion dollars.....

[rkbabang]

Clearly Apple has a moat.  The question is how wide and deep is it?  Eric's comment is spot on

I'm not saying they don't currently have a moat. I'm just saying that in technology the moats are never as wide or deep or as easy to maintain as in other market segments.

Buffett has said that the test of a moat is whether a determined competitor with as much money as needed can knock you off.  I see Apple as having a narrow moat around iTunes and a narrow and shallow moat in the iPhone business.  Once Jobs is gone or he stops producing hits, look out below. 

 

You hit upon the other reason Apple can't be compared to Coke.  Coca-Cola (the product itself, not the company) has changed very little in the last 100+ years, but Apple needs to constantly and consistently come up with the "next big thing" again and again, year after year, or else.  This isn't possible to pull off forever while staying on top.

 

I see Apple as having the largest moat I've seen in any tech company since Microsoft circa 1990's, but even Microsoft isn't what it used to be back then.  It is being attacked on all fronts from every direction.  I see a time in the very near future when Microsoft is irrelevant, where most computer OS's are not Microsoft, and the average user doesn't even know what an OS is.  I think you will see many different OS's, including Google Chrome OS (linux based), many flavors of Linux or BSD re-branded by Dell, HP, Sony, Acer, Toshiba, etc running their laptops, in the same manner that Apple took BSD and re-branded it OS-X, and  Android (another Google linux based OS) may evolve to become common on laptops as well as mobile devices.  Office software is already free from openoffice.org and online google docs tools. Microsoft's moat is suffering massive erosion and it is only a matter of time.  Think of the media frenzy that was the release of Windows 95 and the big yawn that was the release of Windows 7 or Windows Vista. 

 

I don't hate Apple, they have some pretty cool devices, even if I think some are overpriced, I just don't think they can remain top-dog forever.

 

Yes, Apple is on top now....for now.

 

--Eric

 

[ExpectedValue]

I'm sorry, but you simply cannot compare the Apple moat to Coca-Cola.

 

Coke has been around since forever, it's simple to understand, it hasn't changed in 100 years and has been completely dominant since inception. Coca-Cola hasn't been improved upon in a century, can you honestly say that the Iphone or Ipod won't be improved upon or made obsolete in the next century?

 

This is flat out incorrect.

 

For a period after the 1930s, Coca-Cola slipped behind Pepsi in terms of sales when Pepsi decided to increase the size of their packaging while maintaining the same price. Furthermore, Coca-Cola has improved/modified their formula over the years with small iterations. The company could have been behind even more, had it not been for Roberto Goizueta. I believe Warren Buffett's own investment in Coke only occurred after the changes guided by Goizueta.

 

I'm reading a book about Coke at the moment and would be happy to provide you with passages and page numbers. 

[bargainman]

Right, I didn't say they had a moat based on the mp3 format, they don't.  That said, until recently sales from the iTunes store were in Apple's proprietary format, so at the time they did have a lock on the format.  Ie if you bought a lot of songs from their store, you would be stuck buying iPods into eternity.  That changed a while ago.  But...

 

what I was referring to was the iPhone and iPod Touch, and iPad.  They have a ton of applications.  10s of thousands or more. (maybe hundreds).  People buy applications on their iPhones, they want to keep using them the next cell phone they get.  Developers want to sell to high end consumers like iPhone users.  Apple creates and owns the distribution network.  That == moat. 

[tooskinneejs]

Some used to be convinced of the never ending dominance of Palm and their Palm Pilot.  Then things changed.

[Ballinvarosig Investors]

I'm sorry, but you simply cannot compare the Apple moat to Coca-Cola.

 

Coke has been around since forever, it's simple to understand, it hasn't changed in 100 years and has been completely dominant since inception. Coca-Cola hasn't been improved upon in a century, can you honestly say that the Iphone or Ipod won't be improved upon or made obsolete in the next century?

 

This is flat out incorrect.

 

For a period after the 1930s, Coca-Cola slipped behind Pepsi in terms of sales when Pepsi decided to increase the size of their packaging while maintaining the same price. Furthermore, Coca-Cola has improved/modified their formula over the years with small iterations. The company could have been behind even more, had it not been for Roberto Goizueta. I believe Warren Buffett's own investment in Coke only occurred after the changes guided by Goizueta.

 

I'm reading a book about Coke at the moment and would be happy to provide you with passages and page numbers. 

Ok, but I think you're being pedantic. My point is that Coke has been around for an awful lot longer than Apple, has a product that's a heckuva' lot more predictable than anything Apple have and won't be going away anytime soon.

[rkbabang]

I'm sorry, but you simply cannot compare the Apple moat to Coca-Cola.

Coke has been around since forever, it's simple to understand, it hasn't changed in 100 years and has been completely dominant since inception. Coca-Cola hasn't been improved upon in a century, can you honestly say that the Iphone or Ipod won't be improved upon or made obsolete in the next century?

This is flat out incorrect.

For a period after the 1930s, Coca-Cola slipped behind Pepsi in terms of sales when Pepsi decided to increase the size of their packaging while maintaining the same price. Furthermore, Coca-Cola has improved/modified their formula over the years with small iterations. The company could have been behind even more, had it not been for Roberto Goizueta. I believe Warren Buffett's own investment in Coke only occurred after the changes guided by Goizueta.

I'm reading a book about Coke at the moment and would be happy to provide you with passages and page numbers. 

 

I think you just made all the relevant points to reinforce what he said, and what I've been saying, quite well.  1) Coke's products have undergone small iterative changes over more than a century, whereas Apple's products need revolutionary and radical changes every year.  2) Even Coke has occasionally slipped up in an industry where it is infinitely easier to protect your brand than the in tech industry.  3) Bad management can kill any company even Coke. The difference is that in the tech industry bad management can kill a company in months rather than years or decades.

 

--Eric

 

 

[rkbabang]

what I was referring to was the iPhone and iPod Touch, and iPad.  They have a ton of applications.  10s of thousands or more. (maybe hundreds).  People buy applications on their iPhones, they want to keep using them the next cell phone they get.  Developers want to sell to high end consumers like iPhone users.  Apple creates and owns the distribution network.  That == moat. 

 

This type of moat should hold for a 6 months or a year, but no longer if Apple misses the boat on the next generation devices, it will hold for a little longer if it doesn't. But regardless, it won't hold forever.  Every generation of devices (every 10-12 months or so) is another chance to slip up.  They can't win in this environment forever, no one can.

 

--Eric

 

[omagh]

As a thought experiment, look at the research and development costs required to maintain the moat. Viz: Coke << Gillette << Apple

 

-O

My point is that Coke has been around for an awful lot longer than Apple, has a product that's a heckuva' lot more predictable than anything Apple have and won't be going away anytime soon.

[Guest valueInv]

Apple hands down. Someone else put it the best - "When you buy Apple you are buying options on new products they are developing". This is in addition to their moat, cash flows, etc. I am willing to bet Apple will be more successful in developing new innovative products than anyone else in the industry.

 

There is also an additional factor to consider in their moat. Apple is not standing still, they are constantly evolving their products and putting distance between themselves and their competitors. They are also entering new business like mobile advertising. There are a lot of reasons why I see a huge upside for the stock. But I also don't see a margin of safety (as with most tech companies). The company is very dependent on Steve Jobs.

[nodnub]

Apple hands down. Someone else put it the best - "When you buy Apple you are buying options on new products they are developing". This is in addition to their moat, cash flows, etc. I am willing to bet Apple will be more successful in developing new innovative products than anyone else in the industry.

 

There is also an additional factor to consider in their moat. Apple is not standing still, they are constantly evolving their products and putting distance between themselves and their competitors. They are also entering new business like mobile advertising. There are a lot of reasons why I see a huge upside for the stock. But I also don't see a margin of safety (as with most tech companies). The company is very dependent on Steve Jobs.

 

How can you say "Apple hands down."  but then admit "But I also don't see a margin of safety (as with most tech companies). The company is very dependent on Steve Jobs"

 

Are you aware of Steve Jobs various and ongoing health problems since 2004?

 

[beerbaron]

Guys, it's time to stop fighting. Apple is a religion for the those who trust and an Anti-Christ for the ones who believe in open technologies. We would be on a geek's web site and the debate would be the same. The only difference is that Moat would be replace by GUI, PE by GHz and Growth by MegaBytes.

 

Apple makes perfect products for the believers and crappy overpriced products for the non believers.

 

For me, Apple's fan base is more of an insanity then anything else... but then again I can tell you about a few other organizations that sound insane to me but still lasted 2000 years or 6000 years.

 

In my opinion, food is a better moat then technology. Our brains are made to react to stimulus. Food is a very strong stimulus as it is a direct part of our survival.

 

It is also true that the more product creations you make the more you can make mistakes. Toyota has been the leader of Quality Control for the last 30 years and apparently they still made some mistakes...

 

BeerBaron

[rmitz]

Guys, it's time to stop fighting. Apple is a religion for the those who trust and an Anti-Christ for the ones who believe in open technologies. We would be on a geek's web site and the debate would be the same. The only difference is that Moat would be replace by GUI, PE by GHz and Growth by MegaBytes.

 

Apple makes perfect products for the believers and crappy overpriced products for the non believers.

 

For me, Apple's fan base is more of an insanity then anything else... but then again I can tell you about a few other organizations that sound insane to me but still lasted 2000 years or 6000 years.

 

In my opinion, food is a better moat then technology. Our brains are made to react to stimulus. Food is a very strong stimulus as it is a direct part of our survival.

 

It is also true that the more product creations you make the more you can make mistakes. Toyota has been the leader of Quality Control for the last 30 years and apparently they still made some mistakes...

 

BeerBaron

 

Apple does some things organizationally very well that other companies just don't do.  The fanatical care about design, and fit and finish, *do* make a difference in the quality of the end product.  (The lack of these things is exactly what caused the company to start tanking in the early 90s.)  Fit and finish (ease of use, etc.) is what people pay money for, not because they're a bunch of fanatics. 

 

MP3 players were around for a long time before the iPod; why did the iPod become popular?  Simplicity.  It was simply much easier to use, and wasn't *huge* like so many of the other player products with a reasonable capacity at the time.  Personally, I felt it was a flash in the pan at the time and hated it because it didn't have all the options I wanted.  Turns out, Apple knows how to sell products to the masses better than I do. :)

 

Simplify, Simplify, Simplify.  Another aspect is that Apple will simply refuse to release certain products.  If they worked on it internally and it doesn't meet their standards, and they don't know how to make it meet those standards, the project gets canned.  There's a lot more concepts along these lines. 

 

Now, none of this is a moat (except in the case of corporate culture -- when Jobs is not in charge we will see how much of the culture sticks) or rocket science.  But it is a real difference, and to copy it, Microsoft will have to change their entire outlook and culture.

[rkbabang]

Quoting my own post:

 I think you will see many different OS's, including Google Chrome OS (linux based), many flavors of Linux or BSD re-branded by Dell, HP, Sony, Acer, Toshiba, etc running their laptops, in the same manner that Apple took BSD and re-branded it OS-X, and  Android (another Google linux based OS) may evolve to become common on laptops as well as mobile devices. 

 

Sub-$100 netbook running Android:

 

World's first $99 laptop goes Android

 

--Eric