Would you pay a premium for an Apple product? How about for Apple stock?
The first question was raised by April 11 presentation at Electronics New England, at which Bill Betten, medical technology director at TechInsights, described teardowns of an iPad Mini vs. a Nexus 7.
Betten pointed out that the iPad Mini is significantly more expensive than the Nexus 7. He noted that while the Nexus 7 uses a few lower cost components, the BOM, manufacturing, and test cost differences are similar and don't account for the disparity in selling price. He said he reserved the exact figures for TechInsights' paying customers, although one other source has said the $329 iPad Mini costs about $188 to build, and yet another put the $199 Nexus 7 costs $151.75 in materials.
Betten made no recommendation on whether the iPad Mini is worth the higher price, leaving it to the consumer to determine whether being part of the Apple ecosystem is worth the premium.
The question about stock price relates to recent business press columns making the bulls' and bears' case for Apple. Jay Yarow and Henry Blodget of Business Insider make the bulls' case: With Apple 40% off its peak, the stock is seriously undervalued. In addition, they write, among other factors excitement will soon build around the iPhone 5S and other product refreshes, Apple may be working on a revolutionary product like a TV, and Apple is well placed strategically—unlike PC companies.
Peter Cohan at Forbes takes the bears' view: Apple stock is still expensive, based on Q1 2013 earnings, forthcoming products aren’t sufficiently exciting, management can no longer innovate without Jobs, a predicted cheaper iPhone that may be in the pipeline would shrink margins, and betting on lower expectations is not a good investment strategy. Also, he doesn't think people will pay a premium to replace their TVs, and they won't buy a smart watch when their smartphones tell them the time.
This morning, in advance of Apple's quarterly earnings report today, Professsor Loizos Heracleous of the Warwick Business School weighed in, sounding relatively bullish. In an email, he writes, “What many forget…is Apple's safety net of $137bn cash and liquid assets. Apple could easily buy any new technologies that appear to pose a threat to it, that offer synergies to its own offerings, or that can open up new markets for it.
“Lower margins would be expected given Apple's rising sales in emerging economies, introduction of iPad mini and appearance of more competing products that are much cheaper. Apple revealed in its last update a 38.6% margin in the markets where it operates, which are still extraordinary.
“Further, its products are on different stages of the product life cycle, a pretty robust risk management strategy.
“The main issue for the medium and long term is whether Apple has sustained its innovative capabilities, which seems likely given that it's part of the company's DNA. But the proof will be in the pudding, and we'll know over the next 12 to 18 months.”
As for me, I'll leave it to trained professionals to manage my money. There are plenty of casinos around if I want to gamble.