May 16, 2012

Apple 1, Samsung 0

Apple is a heavyweight; that cannot be denied. What surprised me was exactly how big of a financial punch they can land on their competitors with just a rumor.

Lets think about that for a second... 6% of a competitor/supplier's value is wiped out with a completely unsubstantiated report that was reported by Digitimes, a site that has a well documented history of 'reporting' completely bogus information. To quote the author of the piece:

By my count, 16 of these 25 stories turned out to be mostly or completely off-base. Five are largely or entirely correct. And four involve predictions that might yet come true. I wouldn’t obsess over the percentages — my sampling may or may not be representative of Digitimes’ Apple articles as a whole. But you get the idea.
Were I to be a shareholder of Samsung, I would be unhappy at the least when hearing about this. While my finance degree helps me to understand this kind of thing happens in a free market, knowing that I just lost that kind of money because of someone's rumor-mongering would probably irk me more than just a small amount. What must be even more frustrating is that nothing in the piece implies that Apple is moving any parts acquisition away from Samsung.

As I think about how sales of Apple's mobile devices have grown over the last few years and the possibility for growth in the future, a more logical explanation for this purchase, if it really happened, was that Samsung simply couldn't produce the quantity of DRAM that Apple will need in the next year. Even assuming that Samsung could meet such demand, does it make sense even for Apple to continue to purchase so much from a single supplier, despite what an amazing volume discount they must receive?

Samsung is the only Android vendor to making any kind of real profit from their mobile phone ventures. While Samsung is a large conglomerate who is by no means dependent upon their phone business for the continued existence of their organization, were they to fail as a company, where would Apple be when that happened? To put it mildly, they would be in a very bad place.

All that said, there are many reasons why Apple would want to purchase from multiple suppliers and to simply focus on Samsung also being a competitor as the reason for the change provides a short-sighted and incomplete analysis at the least. At worst, its journalism so sloppy that it borders on complete irresponsibility.

via Daring Fireball