Sunday, October 28, 2012

Mobile Devices, Corruption in China, U.S. Growth and the Baseball World Series; Let's Go Giants!

Last week, dynamics in the high profile mobile technology market included: 1) Apple (AAPL -0.9% for the week) – its earnings report disappointed some investors, and the pricing for its iPad Mini tablet was higher than expected, 2) Samsung Electronics (005930:KS -1.1% for the week) – its strong earnings results were driven by sales of smartphones (including the Galaxy S3) and flat panel displays, but smartphone market growth may slow in 2013, 3) Microsoft (MSFT -1.5% for the week) - released its Windows 8 operating system and a version of its Surface tablet offering, 4) Facebook (FB +21.9% for the week) – its earnings surprised investors with better than expected traction in mobile advertising and 5) as a sign of increasing competition, Apple, Google (via its recently acquired Motorola division), Microsoft and Samsung are major advertisers during this year’s Major League Baseball World Series.

In the U.S., the Commerce Department reported that third quarter GDP grew at a stronger than expected rate of 2% driven by consumer, defense and homebuilder spending. In China, the New York Times reported in “Billions in Hidden Riches for Family of Chinese Leaders” (October 25, 2012) that members of Prime Minister Wen Jiabao’s family had accumulated assets of over $2.7 billion since 2002, and the report “Illicit Financial Flows from China and the Role of Trade Mis-invoicing” (Oct 2012) by Global Financial Integrity said “the Chinese economy hemorrhaged $3.79 trillion in illicit financial outflows from 2000 through 2011. (Note: Last week, China blocked access to The New York Times website.)

  • Regarding U.S. GDP growth, September’s results are positive, but questions to consideration include: 1) when will business-spending trends improve, and 2) are investor expectations for higher GDP growth levels unrealistic? 
  • Regarding China, corruption in that country is not new news, but the scale cited in reports likely exceeds most expectations – investors should proceed with caution. 
  • Regarding mobile devices, competition may provide consumers with increased product choices and lower prices, but investors should be aware of the potential impact of lower profit margins and market share shifts. In addition, the expanding use of Google’s Android operating system is worth tracking – it drives many Samsung and Motorola mobile devices, as well as cameras by Nikon - another World Series advertiser.
  • Finally, with San Francisco leading in the World Series, let’s GO GIANTS!

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