3 ms·

> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Microsoft is already heavily di

by mbesto 5y ago

> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Microsoft is already heavily diversified. Big difference.

runako 5y ago
Not material since they have saturated there initial markets, per the narrative. But sub in Apple of you prefer.
- skinnymuch 5y ago
  I mean the money Apple makes on wearables (AirPods + watch), iPads, and possibly growing Mac sales because of the M chip are all huge. Their services segment keeps growing at a massive pace too. Sure none of these are as big as the iPhone. But if Apple only did the iPhone as hardware, they would be no where close to their current valuation. None of the big 5 tech companies are close to tapping out. Any or all of them could be worth another $1T in a couple years and it wouldn’t be that crazy.
  - runako 5y ago
    I agree that none of the biggest tech companies are in danger of tapping out anytime soon. But in terms of narrative, Microsoft was the PC company and Apple is the iPhone company (it took years for them to shake off the funk of being the iPod company in the face of saturating that market) and so forth. Narrative-wise the comparison looks like this: Apple gets >50% of its direct sales from the iPhone, and likely a meaningful percentage of its wearables and services revenue is levered to iPhone sales (AirPods and Fitness+ being examples). Probably 60%+ of Apple sales is tied to iPhone at this point. The mobile market is essentially saturated, so growth will taper there going forward. All the other products are nice, but they are a minority of revenue. To sustainably grow at 20%, Apple has to find a brand new category that is worth $40B, and they have to do that every year. (By way of comparison, that's about as big as Tesla. Apple needs to find a new Tesla worth of revenue every year.) So that's the narrative on Apple. By comparison, the shift to EVs is at the very beginning of its ramp, with ~7% of global sales being EVs. So Tesla has many years to grow at very large rates (40%, 50%, etc.) before it arrives at saturation. They don't have to find any new categories (adding a truck doesn't count as a new category for narrative purposes), they can basically keep doing what they are doing and add SKUs in their existing line of business and grow along with the market, which is growing really fast. They don't have to find giant new categories every year, so in some ways the business problem in front of them is more straightforward. That's the Tesla narrative. Tesla has a great narrative for the future, and that helps drive the stock price.
    - mbesto 5y ago
      > So Tesla has many years to grow at very large rates (40%, 50%, etc.) before it arrives at saturation. You missed the GP's point - even if they take 100% of the car market, it's not like the car market is growing exponentially. So this car market growth is "already priced in" and it's TAM is the combination of all of their car companies (even assuming they were to get 100% market share which is unrealistic), which Tesla is already valued at higher than all of those companies combined. The narrative is that Tesla becomes a "battery company" (which is basically just their JV with Panasonic anyway). But they haven't proven anything in that market yet. So the point is this -> Microsoft may not just be a PC computing company anymore (selling Windows OS) but it already has proven cloud revenue for example, so you can speculate that those revenues will grow by X% with its own TAM.
      - runako 5y ago
        I didn't miss the point, I promise! One narrative is indeed that their core market is EVs (or call it Auto 2.0 if you include software, advanced driver assist, etc.), and that this market is indeed growing rapidly. This part of the narrative assumes the legacy makers will not pivot fast enough, so the EV market will be divided among the newcomers. Under this view, Tesla is not competing against BMW any more than the iPhone was competing against the Nokia feature phones. Thus, the EV market is essentially a new market (goes the narrative). Investors clearly buy into this narrative at some level. You do make a good point that Tesla has multiple narratives working in its favor. At one point, it was the self-driving company. When necessary, it can push the solar roofs angle. It has a couple of narratives it can use to goose the stock.
        mbesto 5y ago
        > Thus, the EV market is essentially a new market (goes the narrative). Investors clearly buy into this narrative at some level. Huh? Again, you're missing the point - there is total addressable market of vehicles that all of the major automakers currently capture and have forward looking valuations based on future expectations. It doesn't matter whether that vehicle uses diesel, gasoline, electric, nuclear, hydrogen, whatever... > Under this view, Tesla is not competing against BMW any more than the iPhone was competing against the Nokia feature phones. Literally no. People aren't going to magically buy more vehicles because they run using a battery. A car gets you from point A to point B. A smartphone and dumbphone both make a call from point a to point B, but one also has an internet connect computer which opens thousands of new opportunities of communication (video, images, spreadsheets, word processing, etc.). Also iPhones cost substantially more than Nokias for a reason. This is a bad analogy. There is a total amount of money every year the population is willing to pay for for transportation. Let's say that number is $1T (idk what is for sure, just using that as an example). Tesla is fighting to gain that market share of $1T - its zero sum (sans overall increases in demand for vehicles every year). The only way this changes is if Tesla reaches level 5 autonomous navigation which is (1) not even built in the cars today and (2) Tesla still has Level 3~4 that is not fully productive. So this is like saying "yup but their dumbphone can access the internet...but only when they are in this one building in NYC...think of the future!"

by mbesto 5y ago

> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Microsoft is already heavily diversified. Big difference.

runako 5y ago

Not material since they have saturated there initial markets, per the narrative. But sub in Apple of you prefer.

skinnymuch 5y ago
I mean the money Apple makes on wearables (AirPods + watch), iPads, and possibly growing Mac sales because of the M chip are all huge. Their services segment keeps growing at a massive pace too. Sure none of these are as big as the iPhone. But if Apple only did the iPhone as hardware, they would be no where close to their current valuation. None of the big 5 tech companies are close to tapping out. Any or all of them could be worth another $1T in a couple years and it wouldn’t be that crazy.
- runako 5y ago
  I agree that none of the biggest tech companies are in danger of tapping out anytime soon. But in terms of narrative, Microsoft was the PC company and Apple is the iPhone company (it took years for them to shake off the funk of being the iPod company in the face of saturating that market) and so forth. Narrative-wise the comparison looks like this: Apple gets >50% of its direct sales from the iPhone, and likely a meaningful percentage of its wearables and services revenue is levered to iPhone sales (AirPods and Fitness+ being examples). Probably 60%+ of Apple sales is tied to iPhone at this point. The mobile market is essentially saturated, so growth will taper there going forward. All the other products are nice, but they are a minority of revenue. To sustainably grow at 20%, Apple has to find a brand new category that is worth $40B, and they have to do that every year. (By way of comparison, that's about as big as Tesla. Apple needs to find a new Tesla worth of revenue every year.) So that's the narrative on Apple. By comparison, the shift to EVs is at the very beginning of its ramp, with ~7% of global sales being EVs. So Tesla has many years to grow at very large rates (40%, 50%, etc.) before it arrives at saturation. They don't have to find any new categories (adding a truck doesn't count as a new category for narrative purposes), they can basically keep doing what they are doing and add SKUs in their existing line of business and grow along with the market, which is growing really fast. They don't have to find giant new categories every year, so in some ways the business problem in front of them is more straightforward. That's the Tesla narrative. Tesla has a great narrative for the future, and that helps drive the stock price.
  - mbesto 5y ago
    > So Tesla has many years to grow at very large rates (40%, 50%, etc.) before it arrives at saturation. You missed the GP's point - even if they take 100% of the car market, it's not like the car market is growing exponentially. So this car market growth is "already priced in" and it's TAM is the combination of all of their car companies (even assuming they were to get 100% market share which is unrealistic), which Tesla is already valued at higher than all of those companies combined. The narrative is that Tesla becomes a "battery company" (which is basically just their JV with Panasonic anyway). But they haven't proven anything in that market yet. So the point is this -> Microsoft may not just be a PC computing company anymore (selling Windows OS) but it already has proven cloud revenue for example, so you can speculate that those revenues will grow by X% with its own TAM.
    - runako 5y ago
      I didn't miss the point, I promise! One narrative is indeed that their core market is EVs (or call it Auto 2.0 if you include software, advanced driver assist, etc.), and that this market is indeed growing rapidly. This part of the narrative assumes the legacy makers will not pivot fast enough, so the EV market will be divided among the newcomers. Under this view, Tesla is not competing against BMW any more than the iPhone was competing against the Nokia feature phones. Thus, the EV market is essentially a new market (goes the narrative). Investors clearly buy into this narrative at some level. You do make a good point that Tesla has multiple narratives working in its favor. At one point, it was the self-driving company. When necessary, it can push the solar roofs angle. It has a couple of narratives it can use to goose the stock.
      - mbesto 5y ago
        > Thus, the EV market is essentially a new market (goes the narrative). Investors clearly buy into this narrative at some level. Huh? Again, you're missing the point - there is total addressable market of vehicles that all of the major automakers currently capture and have forward looking valuations based on future expectations. It doesn't matter whether that vehicle uses diesel, gasoline, electric, nuclear, hydrogen, whatever... > Under this view, Tesla is not competing against BMW any more than the iPhone was competing against the Nokia feature phones. Literally no. People aren't going to magically buy more vehicles because they run using a battery. A car gets you from point A to point B. A smartphone and dumbphone both make a call from point a to point B, but one also has an internet connect computer which opens thousands of new opportunities of communication (video, images, spreadsheets, word processing, etc.). Also iPhones cost substantially more than Nokias for a reason. This is a bad analogy. There is a total amount of money every year the population is willing to pay for for transportation. Let's say that number is $1T (idk what is for sure, just using that as an example). Tesla is fighting to gain that market share of $1T - its zero sum (sans overall increases in demand for vehicles every year). The only way this changes is if Tesla reaches level 5 autonomous navigation which is (1) not even built in the cars today and (2) Tesla still has Level 3~4 that is not fully productive. So this is like saying "yup but their dumbphone can access the internet...but only when they are in this one building in NYC...think of the future!"