A New Buyer For BlackBerry?

A New Buyer For BlackBerry?

It was recently reported that struggling retailer BlackBerry was going to be bought by Fairfax Financial in a $4.7 Billion deal (I wrote about that here). But it has recently come under speculation that Fairfax would not be able to raise the necessary capital to purchase the company. As a result, some big names including Cisco, Google, and SAP have entered into conversations about purchasing at least part of BlackBerry. The most appealing parts of the company are their secure server network and patent portfolio.

BlackBerry’s struggles have been well documented on this blog and can be read as part of this post on launching its most recent smartphone, and this one on cutting 40% of its workforce and facing $300M in charges.

 

Boehner ties the federal budget and debt ceiling to cutting the deficit.

Boehner ties the federal budget and debt ceiling to cutting the deficit:

Republican House Speaker John Boehner says he won’t introduce legislation to finance the government or raise the debt ceiling until Democrats agree to talks about cutting the national debt, which is currently at $16.75 trillion dollars and is growing due to compounding interest the federal budget deficit. The federal budget deficit has shrunk substantially, but the government will still spend about $650 Billion more than it took in this year. Yes, that is an improvement and it is largely due to an increase in government revenue.  Boehner also said the U.S. is headed on a path to defaulting on its debts, which is contradictory to the stamen he made last week refusing to let that happen.

For more on this issue, see What To Expect During The Government Shutdown and Government Shuts Down as Congresses Misses Deadline

 

The Weekend Hangover: 20 Links To Help You Get Through Saturday Morning

At one time or another, I had great ambitions to do full blog posts inspired by each of these articles. Unfortunately there is only so much time in the day, so now you get to enjoy them while you try to mitigate your hangover. Hint: eschew the coffee, drink a ton of water, take a b12 vitamin, eat something, and go back to sleep (after you’ve read through these articles).

Malcom Gladwell did an interview and it turns out he and I share a favorite author in Michael Lewis. He also said, I am everything I once despised.

The Data on Teen Dating – Fathers, now you have data to show why your daughter shouldn’t date until she’s 30. You’re welcome.

Mapping the Dishonesty of the World – Don’t lose your wallet in Spain or Portugal.

Why Small Businesses Should Offer 401k Plans – It is more than just to attract and retain employees.

Reuters really doesn’t like JPMorgan or CNBC – Awkward…

The Three Tribes of Social Shopping – Are you a Thruster, Thinker, or Leaper?

Going through a break up? It goes better if you’re nice to yourself.

The one key to ace any college class: be proactive

General Motors is going to take on Tesla Motors in the luxury electric car market – I don’t see this fight going well for GM, even if Tesla cars keep blowing up.

Six Myths About Renewable Energy... I won’t spoil the surprise for you. 

Google has conquered just about everything else, so now it’s taking on death. Seriously.

We didn’t learn enough from the financial crisis. That is a fact. We’re I the same situation all over again.

The New York Times also argues that we wasted a recession.

Organizations should be like ant colonies. The reason is not that both should be centered around a queen with thousands of workers doing her every bidding.

Motivating employees is a tricky task for leaders. There is a definite right and wrong way to do it. Here is some advice for doing it the right way.

How to use your social media accounts to impress potential employers – If anyone reading this post is hiring I/O Psychologists… Call me!

The Ten Things That Happen When You Start CrossFit – This is a post from my favorite financial blogger The Reformed Broker. This will probably be a larger blog post at some point.

How to have an awesome work career – is that redundant or is it just me?

Why happiness at work is declining – I just thought it was because my honeymoon period was over.

Have a great weekend!  

Jamie Dimon Out as Chairman of JPMorgan's Main Bank Unit

Jamie Dimon out as Chairman of JPMorgan’s main bank unit:

Reports are saying that Jamie Dimon reportedly stepped down as Chairman of the unit of JPMorgan responsible for deposit and consumer banking operations in July. Dimon reportedly gave up the title because attorneys recommended it for “technical reasons” and not due to pressure from regulators or investors. Board member William Weldon has replaced Dimon in that capacity; however Dimon remains Chairman and CEO of JPMorgan at large.

 

Twitter Unveils IPO Details

Twitter unveils its IPO details:

Twitter is looking to raise $1B in capital as part of its initial public offering the company disclosed in a filing yesterday. It also announced it will trade under the ticker symbol TWTR, which caused TWTRQ the stock symbol for defunct Tweeter Home Entertainment Group, to jump nearly 2,000% before trading was halted to protect idiots from themselves.  The filing also indicates the current valuation of the company is $12.8B, despite a net loss of $69.5M due to large amounts of research and development spending. Most of Twitters $253.6M revenue came from mobile advertising.

 

Boehner pledges he will not allow a debt default:

Boehner pledges he will not allow a debt default:      

Speaker of the House John Boehner has told Republicans he will not allow the United States to default on its debt. He asserted that he will use all means necessary, including using GOP and Democratic votes to increase the debt ceiling. He used the appropriate tone of shock when speaking of bipartisanship. Boehner would like to combine deals that would pass budget legislation and raise the debt ceiling, but but Obama has vowed he will not negotiate on a budget deal until the debt ceiling has been raised. There is currently a proposal in congress would fund the government, but repeal a tax on medical devices. Obamacare would be left unchanged.

 

The Importance of Innovation: Why despite strong numbers, Apple is in trouble

This is the third part of the three part series on Innovation. The first part talked about the role of Innovation in organizations, the second described how Apple has recently regressed in its innovative output. This piece talks about how Apple has used other tactics to compensate for its lack of innovation and why their current business model is not sustainable.

I’m not sure where the old adage, “If you’re not growing, you’re dying” came from, but it illustrates my message so I’m going to do as Steve Jobs would have, and steal it.

The primary goal of any company is to generate profitable growth, or simply to grow. A company has to grow to meet financial obligations to its shareholders and maintain a place in the competitive marketplace. Each quarter, companies project how much they will sell and how much money they will earn. How the company performs relative to these projections dictates the price of their stock and therefore, the value of the company.

Companies that miss their projected earnings tend to have their stock price tumble. Companies that beat their projected earnings tend to have their stock price rise. When Tesla Motors announced in May that it had grown well faster than expected and it was profitable for the first time, the stock price quadrupled in a mere four months.

If a company does not meet their projected growth mark, it is interpreted as a sign of distress or failure within the company and the stock price, and therefore company value, tumbles dramatically. Recent examples of that would be BlackBerry and J.C. Penney. In both of those cases, the dramatic miss of earnings illustrated the inner turmoil of the company and led to a crippling loss of value.

On the high end, the stock market grows at about 7% a year. This means that on average, you can expect companies to grow by 7% annually. Since financial markets and stock prices of companies tend to rise over time, if a company merely stays the same it is underperforming the market and therefore is declining relative to its peers. So as a company, if you’re not growing, you’re dying.

An organization can grow in two ways. The first is organically. Organic growth is a result of innovation. It is developing new to world or new to market technology that changes the competitive landscape. Apple had a great stretch of developing new to world or new to market products including the iPod, iPhone, iTunes, and iPad. These innovations were developed internally and transformed Apple from a computer company into the most recognizable technology company on the planet.

The second way organizations grow is through mergers and acquisitions. Companies can purchase other companies or technologies that will expand their overall sales numbers for a given year. Over the past several years as the world entered and now has started to recover from the global recession, companies had to do more mergers and acquisitions to meet their growth numbers. A company that did $10B in sales in 2011, but due to the slowdown was only projected to do $9B in 2012 would have to acquire businesses totaling over $1B to meet their objectives and continue to grow as a whole. Additionally, companies can find synergistic technologies that will support current offerings and purchase the company that developed and owns them. This is an alternative to developing new technology internally and a strategy that Apple has increasingly employed. The incremental innovations such as the fingerprint scanner and Siri featured on the newest iPhone and software were technologies acquired when in acquisitions. Sure, those are now Apple technologies, but they are not Apple innovations.

In addition to using mergers and acquisitions to compensate for a lack of organic innovation, Apple is also entering new markets. Apple has entered the iPhone into three large new markets. The first is China. After first entering China last year, China Mobile, China’s largest mobile provider, is now planning to partner with Apple to sell the iPhone. The second is Japan. Apple’s new partnership with Docomo, Japan’s largest mobile carrier, is further expanding the consumer base. This strategy has been successful as people lined up in stores to buy as many iPhones as they could in the Asian markets. Sales ended up being limited to two per person for fear of the high rate of resale.

Apple also put out a new product called the iPhone 5C to target a market of lower middle class individuals who otherwise couldn’t afford the iPhone 5S’s steep price tag. Calling the iPhone 5C a “new product” may be a bit of a stretch as it has recently been called, “Garbage” and “Nothing more than an iPhone 5 with a colorful jacket.

Nevertheless, these plans to enter into new markets are very effective at generating profitable growth. This release was considered, “The most successful product launch of all time.” The company sold nine million units, far outpacing previous launches. This success led them to raise their quarterly growth projections, but investors should be cautioned before jumping at these numbers. For the first time, Apple released two iPhones and entered into new markets.  Japan is getting an iPhone for the first time and this is the first time China has been able to get the most modern model at the launch. Sales in these countries counted towards the launch weekend numbers for the first time. Controlling for these new factors to compare each launch on equal terms, this one was nothing special for Apple’s flagship product.

The iPhone now accounts for about half of Apple’s revenue. Steve Jobs, like other effective leaders, cut poor performing products to focus the efforts of the company on a its most viable ideas. However, having one product account for 50% of all revenue is a dangerous business model, especially if that product is losing market share to competitors.

In fact, Apple has been losing market share to rivals as a result of having lost its innovative touch. Samsung recently became the world’s largest maker of smartphones by offering a wider variety of designs and prices than Apple. Google’s Android operating software accounted for 79% of smartphone shipments last quarter and Apple’s iOS only made up 13%.

These numbers are disconcerting for Apple and its shareholders because as this trend continues, App developers may focus more of their efforts on Google’s Android operating systems, which would eventually cause Apple users to defect further limiting sales and growth.

The growth strategy of most successful companies relies on a balanced approach, but with the majority of its profitable growth coming from organic innovation. After tapping the lower middle class market in North America and the large Asian markets, there isn’t much more Apple can do to grow except to innovate.

We have seen giant companies fail before, and while Apple is not in any danger of bankruptcy as it currently has $147B in cash on hand, which accounts for 10% of all corporate cash held by nonfinancial companies, this recent trend is disturbing for long term investors in the company. (Note: If Apple’s cash reserves were a country, it would have the 58th largest GDP). Remember the story of Wolworth’s? They created the modern retail business model and were once the world’s largest retailer. It didn’t innovate, so it declined and eventually went bankrupt. Apple, take note and please don’t be the Wolworth’s of my generation.

Check out the first part of the series here and the second part of the series here.

The Curious Case of Apple Stagnation: How Apple is aging backwards to 1995

"The Curious Case of Apple Stagnation: How Apple is aging backwards to 1995"

-By Andrew Schmidt

Editor's note: This is part two of a three part series on innovation. Click here for part 1

First off I want to thank Aaron for inviting me onboard to write for his blog. This site is about everything I believe in, education and the process of reasoning through both sides of an issue. Rational thought is the most important thing we as humans can do, and I hope this site advances that in some degree. As a Montana Democrat, I tend to agree with Aaron’s Vermont Republicanism more often than not. However, the nuances of our ideologies leave plenty to discuss and may help explain why Aaron has asked me to write for him. I hope that I can help bring another point of view to this site. Now, on with the show.

Let me start this column off by stating that I am an Apple fanboy. I have every Apple product you can think of; iPad, iPhone, iPod, iPod mini, MacBook Pro, Apple TV, I even have an Apple wireless router.  I received my first Apple computer in 1992 at the ripe age of 7 and have rarely strayed since. I love Apple, which is why their recent turn has me confused beyond belief. There has been a substantial shift in innovation for the worse since Tim Cook took over after the passing of Steve Jobs in 2011. I think that it would be lazy to just state that this is due to the passing of Jobs, so I will try to explain what exactly he meant to Apple. To really understand Jobs’ impact you have to go through some highlights of Apple’s history.

Apple’s history is well documented. Everyone knows the basics. Apple was started in Jobs’ parents garage by mostly somebody else, Steve Wozniak (a recurring trend). Jobs however knew how to market the product, and as we would see in the future, how to present it. Everybody knows this commercial, which changed the game in advertising. I can’t really overstate how big of a commercial this was at the time. It put apple on the map and changed the way people advertise completely. This was just a preview into the marketing genius of Jobs. During this time period Jobs piggybacked the work of others again by taking the ideas of the “desktop” computer interface and the mouse from Xerox (another recurring trend). These ideas were a revolution that changed the computer industry until touch screen computing came about. Jobs was then dumped by Apple in 1985 in what could be the most indefensible firing in corporate history.

Jobs didn’t return to Apple until 1996. Between those two dates Apple produced flop after flop after flop. It is important to note this time period because it gives us some precedent for Apple after 2011. Things were so bad that Apple nearly went bankrupt. Jobs even said this was because Apple failed to “innovate” during that time (more on this later). When Jobs finally did return he set the world on fire. First he started the “Think Different” campaign. How many heroes are in this one-minute clip? Has any commercial completely summed up the feeling of a company before? This was just a brilliant move by jobs to show that Apple would again be at the forefront of innovation. Apple then began its affinity for placing an “i” before words by releasing the iMac. This product made computers “cool” again by coming in an assortment of colors (a trick Apple uses far too often) and even appeared in the movie, Zoolander (there were some issues during this resurgence, the “hockey puck” mouse that came with the iMac is considered one of the worst computer products of all time).

After the launch of the iMac, Apple transformed life as we know it with the revolutionary products: iPod, iPhone, and iPad. It feels weird to write “revolutionary” alongside these products because I feel we take them for granted, but watch those three videos for some context. At the time iPod was released there were MP3 players, but they were awful. Apple made the iPod simple, clean, affordable, and above all user friendly. Do you remember the days of carrying around a CD book, a Walkman, and extra AA batteries? This was the first time you could take 1000 songs with you wherever you go. At the time iPhone was released there were other smart phones, but they were also awful such as the Palm Treo. They couldn’t hold much music, were bulky and inconvenient, and Internet on them was a pain. Apple combined an iPod, phone, and Internet communicator into one sleek and easy device; the first of its kind. At the time the iPad came out there had been tablets as far back as the 1990s, but again, they were awful. For as much as Apple haters like to say the iPad is just a giant iPhone, chew on this: the iPad has nearly eliminated the desktop interface and mouse from daily use. In 5-10 years I’m not even sure if keyboards and desktop computers will be necessary outside the office. That’s three revolutionary products in nine years, amazing when you look back at it. 

Jobs had a quote he loved to throw around, “Good artists copy, great artists steal,” which is funny because he stole that quote from Picasso. He also loved to quote Henry Ford’s famous line “If I’d asked my customers what they wanted, they would have told me “A faster horse.’” These two ideas epitomized Jobs. He would find a nugget of an idea that somebody else had, wholesale rip it off, and then perfect it. Then the mass public would use this new product and not even know they needed it until it was in their hands. Now most people cannot live without these devices.

Fast forward to Apple’s iPhone 5 c/s event. Tell me, what is Apple actually bringing to the table? Colored phones? Cases with holes cut out? How is this not Apple 1995 again? I see merely incremental changes. There is no revolution or magic behind the curtain anymore. Two of the technologies touted by Apple were an improved Siri and a fingerprint scanner. Both of these technologies were invented by other companies and subsequently bought and incorporated by Apple. This problem goes back even further. Since Jobs’ death in 2011, Apple has released a new MacBook, a new operating system, a smaller iPad, and a glossier computer screen. Only one of those is made up, but they all sound boring and lazy. Right before Jobs’ death he claimed that he “finally cracked” the code to revolutionize TV. That product was supposedly in development but there has been no news or progress since 2011. I wouldn’t be surprised if Apple killed it. Instead Apple has been doubling down on producing an “iWatch,” an idea that sounds stupid because our generation has no need for watches. We use watches as status symbols and we keep time with our phones.

What is disconcerting is that other companies are now far more innovative, even if their technologies don’t work all the time. The Galaxy S 4 has gotten poor reviews on its new features, but at least they came up with them. This phone allows you to wave your hand above it to switch pages, answer calls, and read text messages. It also has a feature that allows the phone to read your eye movement and scroll down the page accordingly. If Jobs were alive, he would have stolen this technology and made it perfect, or in the alternative, made something completely better. However, that attitude is gone at Apple. Instead of creating something new, Apple either makes the product more colorful, smaller, or puts a different camera in it in an attempt to gain more market share. Gone is the idea that a better product should come first. This is the hallmark of a lazy company. If Apple thought their last event would fool people, they thought wrong. Click on the 1-month tab and you will see that Apple’s stock has dropped 50 points (at time of writing) since the announcement of their new phones.

The question remains, how did this happen at Apple?  After Jobs’ death there was a consensus that Apple would be fine due to the culture there. Tim Cook was seen as a consensus builder and a person that would drive home collaboration. Cook has stated that collaboration is the key to innovation. That may be true, but not at Apple. Innovation at Apple came from Jobs’ unrelenting pressure to create things that seemed impossible. It’s worth noting that the way in which Jobs did this was petulant, classless, and above all, fucking mean. But it was this constant dive that got products done. Collaboration was part of it, but thinking outside of the box came first. When Jobs died there was just one person in upper management exactly like him. He was smart, innovative, demanding, and also a prick. His name was Scott Forstall, and for being exactly like Jobs Apple fired him a year after Steve’s death. Cook defended the decision by laying the blame of Apple Maps’ failure at Forstall’s feet (fair), saying that Forstall was not a team player, took credit for other people’s work, and was a bureaucrat (all unfair). You know who was those last three things? Yep, Steve Jobs.  If in 1995 Apple had thought the way Cook does now, Jobs would have never been rehired.

Will Apple ever get its act together? That is a question I do not have an answer for. All I can show you is the history of Apple with and without Steve Jobs. My gut feeling is that Cook will be gone and Forstall will be back when it happens. What can clearly bee seen is that the revolutionary products are gone for the time being. Apple may very well be aging in reverse back to 1995 when the top hit in the U.S. was “Gangsta’s Paradise” by Coolio. That doesn’t should half bad until you remember you would have to listen to it on your Walkman as Jobs was six years away from inventing the iPod.

Andrew Schmidt is a Lawyer and certified NFL agent living in Denver, Colorado. For a good biography, see this story on him published last month in The University of Montana newspaper. 

For Part one of this series on innovation, click here