Greg Autry

Fighting for space, not over it.

No iWatch Is Required to Tell Time for Apple Corporate Biz

Apple (AAPL) recently reclaimed its highest-ever stock valuation at a post-split price of $100 and change. This price is mostly predicated on expectations of a big rollout of for the new iPhone 6 and the speculation around a wearable “iWatch” device for consumers. What is not discussed nearly as much are the firm’s growing opportunities in the corporate world.

Apple’s latest quarterly results confirmed something a lot of anecdotal observers have been thinking for a while: the Macintosh is quietly taking over the PC market. That conclusion is strikingly at odds with reports from the analysts at IDC and Gartner, who have been reporting declining Mac shipments, even in the most recent quarter when sluggish PC sales supposedly picked up. These firms reported year over year unit drops of 1.3% and 1.7% percent while Apple insists there was double-digit growth. Who’s right? Because Apple controls much more of their chain with retail and online sales Apple has much better sell through data than the analysts at Gartner. It also has much higher margins than its competitors. When in doubt believe your eyes.

“But wait!”, you say, “That’s a consumer story and you’re ignoring the vast corporate market where most PCs are sold.” If you’re over 70 you might add something like, “you can’t run a business on Apple equipment.” Guess what? The world’s most valuable company runs on Apple equipment. Doh!

Now, I’ll admit that if you wander the cubicles of corporate America you’ll find them dominated by Dells and HPs but you will also find a lot of fax machines and copy machines. Investors should be talking about future growth and the Macintoshes are well past the “sneaking in the backdoor” phase. Does anyone seriously believe that there has been a reduction in Macintosh penetration at the corporate level?

Further, does anyone love his or her Dell? I mean other than that ancient “Dude, your getting a Dell” dude. I can’t say I’ve ever heard anyone rave about the latest corporate black box and say, “I’m going to get me one of those virus infested puppies for home!” No, these folks are grumbling about the latest iteration of Windows  or even still bitching about Vista. With support for Windows XP dropped, are rushing to the Apple store. If you have any doubts about this, after your visit to your local Mall, take a gander the vast empty spaces in the Microsoft Store, if you can find one.

Class of Macs smLet’s take a moment to look to the future. Here is class of undergrad business students at a major university where I teach. Notice anything? Frankly, being “stuck” with a windows machine has become a stigma in college. I’ve observed the same story at the MBA level and even the executive MBA classes. These folks are the future and often-current managers of the global corporate world. They will soon be driving purchasing decisions from New York to Shanghai and they do not want to do windows.

While the consumer channel may be stuffed full of really cheap Androids tablets every fall, most of those grandma bought gizmos are going to rot under a pile of dirty clothes in a dorm somewhere. Lately it seems about half the small retailers I visit are using iPads are cash registers. Many chain restaurants are using them to seat clients, take orders and again as registers. Comparatively few are choosing less expensive Android tablets. Why is that?

Virus, hassle, option and thumb drive free, Apple’s locked down, high-margin tablets make a lot more sense for corporate and retail environments than their Windows or Android competitors. For one thing Android tablets come with all sorts of physical connectors and options to support peripheral devices and optimize user options. However, this plethora of possibilities, which look like a competitive advantage on paper, is actually a disaster for the distribution channel and constantly undermines the Android echo system. While all those options are awesome if you’re a uber-nerd who gets off on having that one-of-a-kind configuration, from a business standpoint, simple is secure and Apple wins hands down.

There are only two physical configurations of the iPad – full size and mini – and updates are methodically slow and iterative. This means makers of docking stations, card readers, cash draw adapters, podium stands etc. can provide solutions to a large number of potential clients with two versions as opposed to accommodating the dizzying array of hardware from a hundred different Android manufacturers. These hardware firms lack control over the real user experiences in the OS and therefore they must compete by lowering cost (and quality) and adding features and options. Consequently, they update their products so often that as soon as an accessory designer has stuffed the distribution chain with their latest wares they find that half the announced tablet models were either never really distributed or were quickly discontinued. The unlucky accessory manufacturer must take back that useless inventory and when they go bankrupt the distributor is stuck with the plastic waste. Apple rarely strikes out with a product. Even a “failure” by Apple standards, the iPhone 5C, is one of the best selling phones on the planet. Corporate IT and the resellers who support big retail don’t want to get stuck with junk.  It’s sooo much safer to just push their clients toward Apple. Once Apple solidifies its corporate foothold, the opportunities for backend products and services are enormous as well.

The bottom line is that the consumer market is filled with phones and tablets and that Apple’s high-end products already capture most of the profits there. Consumer growth is not what investors should be eying. Apple’s future is in the business world and no iWatch is required to tell what time it is.

Now, if we could just get more of this stuff made in the USA – and maybe California.

Note: I own Apple stock, develop corporate products for the IOS platform and also routinely criticize the firm for concentrating its production in China.

Apple Bashing: The Taiwanese Understand How Things Work in Beijing and Can Still Laugh!

Checkout this hilarious new video from a group of Taiwanese animators at NMA World Edition. Their take on China’s  hypocritical attempts to discredit U.S. brands and drive them out of the Chinese market, speaks for itself and it is a fun follow on to my recent post on the subject.

I love the way that these guys poke fun at unethical commie culture of IP theft and the holier than thou attitude that comes out of CCTV and Zhongnanhai. The bogus, Chinese made iPhone chargers killing people and the signs falling off the fake Apple stores while the cops shrug are all too real. Of course, corporate America is a big part of the China ethics problem and the way Tim Cook “beams over” to grovel in Beijing is particularly embarrassing for us activist Apple product fans and shareholders.

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Greg Autry serves as Senior Economist with the American Jobs Alliance, Economist with theCoalition for a Prosperous America and is co-author (with Peter Navarro) of Death by China: Confronting the Dragon – a Global Call to Action. He blogs regularly at: http://www.gregautry.us/blog  and on the Huffington Post.

Picking Apples on the Road to Serfdom

photo credit: Greg Autry

photo credit: Greg Autry

An article on HuffPo reports that taxes on the wealthy have reached a 30 year high while the middle class and poor are now paying diddly squat (that’s a technical term in economics). Tax inequality is no less immoral that income inequality and punishing the most successful for their very success while disincentivizing production is a non-sustainable model, no matter how smugly satisfying it may seem. Talent and capital invariably flee such a regime – see Cuba, Soviet Europe, Argentina, etc.

While the left anxiously ruminates about equality, the right is obsessed with growth at any cost. Equality without growth is equality in poverty. See Lady Thatcher’s powerful argument on that point. However, growth without equality invariably leads to resentment, in a democracy that means welfare and populist demagoguery which kills the growth. This is followed by the rise of an idiot like Hugo Chavez and deepening poverty. Two voyages to the same terrible destination.

Ironically, its the capitalist, captains of industry that charted our course to socialist misery by creating a society that would make Karl Marx salivate – one in which returns to capital are ever increasing and returns to labor dwindle. Stocks roar and wages fall. It’s full speed ahead for the 1%; America’s future and American values be damned! Let the rest of us save up our pennies and send our kids to Stanford so they can ALL design the next iPhone – sure.

The path to both sustainable growth and increased social equality will NOT be found in taxes and transfer payments. The solution both the left and right must embrace is the creation of a policy environment that that motivates businesses to invest in America and to hire American workers. We must do that even if it is a bit less efficient than our current model of funding Chinese communism in exchange for raping their environment and borrowing their slave labor. This means instituting a more competitive tax and regulatory environment, but doing so with an absolute refusal to join a “race to the bottom” in civilized standards of living for our citizens.

Consider Apple’s $140billion+ cash hoard. Most of it is overseas avoiding the US corporate tax (highest in the world). Very little of what is in the US is invested in creating good American jobs (sorry dudes in blue shirts). Our current political plan appears to be: tax the hell out of Apple and its wealthy shareholders and give that money to the chronically unemployed so they can sit at home and play video games on their Chinese made iPads.

Instead, we could abandon harsh ideology and simply make it fairly painful for Apple to invest further in China by penalizing them for the very benefits they gain via China’s illegal subsidies, currency manipulation, and environmental abuse. We should also throw in the cost of defending ourselves from the Chinese hacking, countering China’s massive military build up and dealing with the escalating regional tension in Asia that Apple is indirectly funding.

I propose that we cut Apple’s domestic taxes and then forward the bill for extended unemployment payments, our West Coast missile defense system, and Obama’s “Asian Pivot” directly to CEO, Tim Cook – with postage due.

Greg Autry serves as Senior Economist with the American Jobs Alliance, Economist with theCoalition for a Prosperous America and is co-author (with Peter Navarro) of Death by China: Confronting the Dragon – a Global Call to Action. He blogs regularly at: http://www.gregautry.us/blog  and on the Huffington Post.

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Memo to Apple CEO: Stop trashing the environment for profit

 

 

In another installment of what Nightline missed in their “exclusive” Foxconn City visit we look at the unsavory way the Chinese Communist Party uses environmental abuse as an economic weapon against the West.

We’ve said before, Apple does indeed make insanely great products. This blog is written on a Mac and the video below was edited on one. Taiwanese-managed Foxconn manufacturers them to a standard far above the normal crap we get from communist China. We have a great deal of respect for Apple’s brilliant business strategy and the business acumen of Hon Hai’s (Foxconn) inspirational founder, Terry Guo. That said, all is not well in the Middle Kingdom.

Foxconn and Apple have chosen to operate inside this Orwellian gulag of a nation in order to increase their short term profits. The fact that Apple and Foxconn folks sincerely care about the environment makes it all the worse, because by doing business in communist China they fund, empower and legitimize a system that is inherently evil. Clearly neither of these firms gives a damn about the unemployed and underemployed American workers (and Taiwanese ones) who cannot compete against a country whose brutal rulers secretly advocate environmental abuse while running a big lie propaganda campaign to paint themselves green. While they are far from alone and far from the most culpable Cook and Guo are the visible leaders in the global race to the bottom of environmental standards.

Check this out:

 

httpv://youtu.be/US5OJV5juOo

Or watch the video on our YouTube Channel

 

If you don’t like what you’ve just seen and heard, please forward it to anyone you know at Apple as well as to your US Congressperson and Senator. Do it over and over again until they finally get it. If you own Apple stock (like I do) please send a note to CEO Tim Cook telling him that you’d sleep better at night if you weren’t contributing to the destruction of the Earth and if your neighbors had jobs.

– Greg Autry teaches Macroeconomics at the Merage School of Business, UC Irvine and is co-author with Peter Navarro of “Death by China” and serves as senior economist for the American Jobs Alliance.

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Memo to Tim Cook: Foxconn is Not your Problem, Selling out American Workers is

 

 

The Nightline whitewash of Apple’s China relationship left us puzzled. What just happened here? Why didn’t this guy ask any real questions?

As we’ve mentioned Foxconn is probably the best factory in China. The suicide rate there is below China’s notorious national average and the issue of whether their employees are any older than Chinese Olympic gymnastics team doesn’t concern most unemployed Californians.

What should really concern Americans is succinctly summed up in this discussion I had with a Foxconn manager inside Foxconn City a year before Nightline’s “exclusive.” I spent a day there too, had the tour, talked to folks and was allowed to film too. However, I actually asked some informed questions. Want to know why most Apple jobs are in Guangdong Province rather than California? Ask and you’ll find out that it ain’t low cost labor (heck they’ve doubled salaries), its Chinese government policy that is gutting America. Check this out:

 

httpv://youtu.be/IYgS1ZI8Zj4

Or watch the video on our YouTube Channel

 

If you don’t like what you just saw and heard, please forward it to your US Congressperson and Senator, over and over again until they finally get it. If you own Apple stock (like I do) please send a note to CEO Tim Cook you’re not so worried about what goes on in Shenzhen, but you’d sleep better at night if your neighbors had jobs.

– Greg Autry teaches Macroeconomics at the Merage School of Business, UC Irvine and is co-author with Peter Navarro of “Death by China” and serves as senior economist for the American Jobs Alliance.

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Foxconn and The Fruit of Evil

Apple has been running for cover from harsh criticism of labor conditions at the controversial “Foxconn City” (Hon Hai Precision) assembly plant in Shenzhen, China. Basically all of Apple’s products are made at this giant factory and at another Foxconn facility in Chengdu. Suicides at that facility and reports of underage and over-worked assemblers have driven the California firm to publicize compliance audits and recently announce third party audits. The issue has grown to the point where Nightline is running special report on the subject. All of this misses the point that Apple’s real problem is not Foxconn, Apple’s problem is China.

Foxconn City isn’t quite the “Fear Factory” featured on The Daily Show.
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I’ve been inside, and frankly it is the best factory I have ever seen in China. It’s clean and well organized. The workers are well fed and housed. Their physical working and living conditions are not the Dickensian ones so common in modern China. That said, I don’t doubt there are under-aged workers there or that the staff is pushed into long shifts to meet the punishing demands of American consumers hell bent on getting even more stuff for even less next Black Friday.

However, the “suicide nets” are all too real.
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Every building from dormitory to snack shop to factory is festooned with the ubiquitous webs designed to catch plummeting Foxconn employees. After sitting in the Hon Hai executive conference room and listening to presentations from the corporate responsibility folks and reviewing reports from psychologists on the suicides, I believe these managers were genuinely concerned. Obviously, no firm wants trained workers killing themselves and yet it has happened there with frightening regularity. Why, If this is the nicest factory in China, are those ghoulish nets required?

Well firstly, there is the standard modern Chinese workload: twelve plus hours a day, six or seven days a week, fifty or fifty-one weeks per year. This isn’t some extreme Foxconn or Apple standard, this is normality for China’s workers. If they didn’t like it and organized a labor action or union, the police would beat them into submission. If they publicly protested or editorialized against such treatment they’d be jailed or much worse. That’s not Foxconn or Apple, that’s just how communist China rolls.

Then there are the living arrangements.
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The dorms at Foxconn are a bit crowded, but they are in modern high-rise structures that resemble American apartment complexes — albeit with four to eight men or women jammed into 10ft. x15ft. rooms.

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There are even swimming pools and gyms, though I saw no one in these facilities and they were so pristine it looked as if nobody has much time to. That’s still way sweet by Chinese standards.

So why the suicides?
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The answer that is so elusive for the Foxconn psychologists was starkly obvious to me. These nifty dorms are sex segregated. When I asked the delicate question of “what if a man and women wish to spend sometime together” the immediate response was “That is not allowed!” To put it bluntly, in China an employer can decide that 150,000+ 17 to 25 year olds will not be able to act on their most fundamental natural desires in a situation where marriage is nearly impossible to obtain or maintain. Again, this is not Foxconn or Apple, this is a broken national culture that has replaced Chinese tradition and all human decency with a twisted form of Communism.

This is a system where the “one child” policy denies reproductive rights to more than six hundred million women. It is a system that rips young people away from their families and customary social structures and ships them like chattel to factories thousands of miles away to better serve Beijing’s engine of state capitalism. It is a system that massively pollutes China’s environment in order to steal jobs from American workers and grab market share from American firms. It is a system that funds the largest military build up of a totalitarian regime since the 1930s.

This systemic Chinese problem that cannot be fixed by investigating, auditing, or even opening up Foxconn, or any other Chinese factory. Apple can never be compliant with any objective standard of social responsibility as long as it chooses to be dependent on the politically repressed labor of totalitarian dictatorship. Of course, this wasn’t a problem when Apple both designed and made its wares in California.

– Greg Autry teaches Macroeconomics at the Merage School of Business, UC Irvine and is co-author (with Peter Navarro) of “Death by China” www.gregautry.us and serves as senior economist for the American Jobs Alliance.

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Apple Juice, Dr. Oz and Death by China

In September, Pop TV doctor, Dr. Mehmet Oz reported on the dangerous rise in Arsenic concentrations in our nation’s apple juice supply. At the time big agri-business, and their goons in the press vilified the good doctor. The FDA backed the juice industry as well and sent a letter to Oz suggesting his lab results were incorrect.

Recent evidence, however vindicates Oz’s claim and we’d like to take the opportunity to point out that we warned the public of this threat and even identified the likely source of the problem – China – with the publication of our book, Death by China way back in May. Here is an excerpt from our chapter:

A Chinese “Apple a Day” Keeps American Oncologists Fully Employed

Consider, for example, the sweet and cuddly “juice box” you might pack in your child’s lunch. There’s a good chance this ostensibly “healthy” alternative to soda pop might be dosing your kid with arsenic, a heavy metal that can cause cancer. Here’s why:
Over the past 30 years, Chinese exports of apple juice concentrate have soared from 10,000 gallons a year to almost half a billion; and today China commands half or more of the U.S. market. Sure, the juice is cheaper than what American farmers can produce. But one reason is that Chinese orchards rely heavily on illegal arsenic-based pesticides that are absorbed by the tree and concentrated in the fruit.

To make matters worse, apple juice is used as “natural” sweetener if huge variety of other juices, desserts and other food products. Who knows where this is going.

To the broader point, we observed in Death by China:

For our refrigerator, China is the largest exporter of seafood to the United States, a key supplier of white meat chicken, and of course, the world’s third largest tea exporter. The Dragon also provides 60% of our apple juice concentrate, 50% of our garlic, and significant amounts of everything from canned pears and preserved mushrooms to honey and royal bee jelly.

For our medicine cabinet, China likewise produces 70% of the world’s penicillin, 50% of its aspirin, and 33% of its acetaminophen, or Tylenol. Chinese drug companies have also captured much of the world market in antibiotics, enzymes, primary amino acids, and vitamins. The Dragon has even cornered the world market for vitamin C[md]with 90% of market share[md]even as it plays a dominant role in the production of vitamins A, B12, and E, besides many of the raw ingredients that go into multivitamins.
These statistics should disturb all of us for one simple reason: Far too much of what the Dragon is flooding our grocery stores and drug emporia with is pure poison. That’s why Chinese foods and drugs always rank number 1 of those flagged down at the border or recalled by both the U.S. Food and Drug Administration and the European Food Safety Authority.

It is long past time for us to reconsider the sanity of outsourcing our food and product safety to a despotic nation that has shown little respect for the lives its own people or its own environment. Placing the burden on American taxpayer funded agencies like the FDA or Consumer Products Safety Commission to do the QA work for China is just as crazy.

The government likes to bury the story because it likes Chinese money financing our massive debt. So we have had a succession of eunuchs in the White House and at Treasury on the China question.

So we believe the media, particularly the financial media needs to step up here, We are doing a terrible job of covering this story because of a fear of upsetting the economic Apple Cart. Wall Street likes the China trade – even if it is killing our kids on Main Street.
Please understand that the China problem on both the product safety and unfair trade practices front is a systemic one that is greatly harming this country. As Navarro is fond of commenting on the Kudlow show, “It’s not China bashing if it’s true.”

Greg Autry and Peter Navarro are the co-authors of Death by China.  They teach macroeconomics at the Merage School of Business, UC Irvine.  For more information, please visit http://www.gregautry.us and follow the authors on Facebook and Twitter.