When the war between Israel and Lebanon broke out last week in a vast way, the Drudgereport web place registered 14 million hits in a single day. Fourteen million. That means even if a miniscule percentage of those hitters clicked onto ads posted to the site, Matt Drudge would register quite a cash inflow.
And keep in mind that the Drudgereport will charge many times more per click than an average blogger or web space owner.
But please note: How mighty of a server capacity do you need to absorb 14 million hits in a single day? Rest assured you will have already had to invest in a huge number of Dell blade servers</a>, for example, or hire out to IBM to obtain enough bandwidth to get those 14 million hits.
Yes, companies like Google and Yahoo grew from an initial web site, small in scale, but as the millions, billions and trillions of hits started to beseige those sites, those companies had to grow physically, and fast – people, buildings, offices, equipment, roomfuls of servers that had to be updated almost weekly. Google had to have its servers tailor-made because nobody was making them with the amount of memory needed to accommodate the growth of the company.
And for every Google and Yahoo out there, you have thousands of wannabes who have started a web site that gains popularity and hits, and those hits grow geometrically. They have to scramble for cash to expand, without gaining even a fraction of it back just yet, and they catch a ton of servers and equipment, increase their phone and data-bandwidth capacity, grow and grow and grow, and then . . . the bottom drops out. A competing position starts to erode the site’s popularity, and it spirals down, and the webmaster is stuck with a huge investment of equipment, people and infrastructure that overnight becomes a liability. He has to sell out a pennies on the dollar and go to the nearest casino, hoping to win it all back ina game of Texas Hold ‘Em.
Even those who stick with it, like Matt Drudge, inherit a heavy load of responsibility that goes along with the fame and riches. Sometimes this gets interrupted when you get sued, and the huge webmasters get sued all the time for a variety of interesting and often mysterious reasons. So you need a good attorney to stave off these suits.
Next, viral attacks. Don’t think that an entrepreneurial blogger won’t get hit with a virus that could well be targeted upright at his or her personally. That’s how good hackers are. And if you gain mountainous, big, really big, these attacks get crazy. Google deals with several hundred new viral attacks on its network every day. You have to hire the best antiviral programmers to counteract this attack.
Here comes the government. Yes, most cash transactions on the Internet involve no direct taxation, but the really big blogger will have to contend with business licenses, operating permits, building permits, tricky lease agreements, every manner of swindler, millions of worthless e-mail solicitations, you name it.
Even a person with an MBA will find it hard to successfully navigate the hostile waters of online commerce and come out of it in one part. Just be careful, and trust no one.
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Filed under Small Business Phone Numbers by on Jul 16th, 2011. 
“Have a seat boy,” the cigar-smoking fleshy man said to me as I walked into his living room. Like the rest of the house it was plush, with blue-toned paintings on the wall and two separate tables bearing silver tea sets. It was my first scramble out to Vanglory Hills, the rich side of town, and I was suitably impressed. Compared to the houses in my neighborhood this place was a mansion. I found myself conscious for the first time of the frays in my leather jacket, the places where my jeans were well worn. In this opulent glare I was an certain intruder.
Sitting the middle of it all, sporting a five o’clock shadow at twelve o’clock, Big Earl Sorrell lounged, looking very much at home and a good deal like I had pictured he would. Growing up I had heard many times about this man and the way he ruled Lafayette’s business and politics with an iron fist. Sitting in his easy chair, with a drink in one hand and the immense cigar in the other, he certainly seemed everything I had been led to maintain. Even in his housecoat at noon he radiated authority.
“You wanna Jack n’ coke boy? ” he asked as I sat down opposite him beside the roaring fire.
“Sure,” I said smiling. He called for his servant, a black lady in a white uniform, to bring it to me. Outside of the house I could hear the winter wind as it blew among the barren oak trees in the big front yard. It was December 1976, our country’s bicentennial year. Mabel had been dead eleven months, Carlos and I were high school seniors, and my first lesson in Lafayette politics was about to launch.
“How old are you anyway? ” he asked as I took my drink.
“Seventeen,” I answered. The legal age to consume alcohol was eighteen, but I had been knocking assist shots on Saturday nights with Carlos for years. Big Earl watched me with a slight smile as I gulped the drink.
“Seventeen. Hell, I remember when I was seventeen. Graduated from Troy High right here in town that year. Went off to school after that. You goin off to school next year, boy? “
“No,” I said shaking my head, “I don’t think so. Tully needs my help round the club. I’ll be able to do a lot more when I’m of age.”
At the mention of the club he seemed to draw intensity. The heavy brows came together, and he knocked the ashes from his cigar while laying his drink on the nearby table. With his free hand he made a gesture for the woman to leave us.
“That’s sort of what I wanted to talk to you about, Milton. I’ve been watching y’alls progress down there. We were all sorry to hear ’bout Mabel’s death last year. She was a nice lady. Nobody thought a woman could run that place, but she did a delicate job. Now, as I understand it, she left everything to you.”
“Yeah, that’s right Mr. Sorrell. All of Paradise Alley at least, and the apartments we live in. But I don’t really take over until I get to be twenty-one. Tully’s the manager for now. Mr. Giovelli, I mean. He’s got what’s called power of attorney. But he attractive much lets me have a say in all the decisions. Carlos, Mr. Giovelli’s kid who goes to school with me, he’s been helpin accelerate the place since he turned eighteen last summer. Victor Carter, Mabel’s stock guy, is the head bartender now.”
“Call me Earl, Milton. So Carter runs the bar. Black fella, legal? “
“Yeah. He does the schedules for the dance floor bar and the side room. Tully hires the people and orders the booze, though. Katie Conroy does the books.”
“Oh, I see. What about the dancers? “
“The girls all come out of an agency. It’s called Night Dreams. The club’s been with them since before we changed names. Linda Stone runs their office here, she does all the bookings. We got mostly local girls, but they all go through Linda anyway.”
“I know Linda Stone,” he said. “She books most of the dance clubs in Lafayette. I know you get your booze from Bob Lane at Eastway Spirits. Mabel built a pleasurable little operation, better than that no-account husband of hers did when he ran the place. Now it’s all yours. Not bad for someone who ain’t even drafting age yet. Lot of benefits for a young boy, owning a strip club. Tell me, you get laid a lot, Milt? “
I didn’t answer. Gargantuan Earl’s grin was the smile of a hawk.
“And I understand your sister still lives with you. She’s younger than you are right? It’s a wonder the public services people ain’t looked into your situation. You should’ve both been moved to foster care by now.”
I looked at the carpet, then the paintings, not meeting his recognize. After ten seconds he changed the subject.
“Milton, do you know what I do? “
“Yes sir. You’re the city manager.”
“That’s right, son. For thirty-one years now. And do you know what a city manager does? “
“Mabel told me that you’re like an overseer who reports to the city council. You help out the mayor. I see in the paper where you work with the coliseum people.”
“You read the Lafayette Herald? “
“Almost every day. My teachers were always on me to read, years past I mean. They didn’t like the way I talked.”
I swallowed the last of my drink. I hadn’t wanted to come here alone, but Big Earl had insisted. I could feel the sweat on my benefit as I leaned forward to put my glass on the coffee table.
“The things I do for the council and the mayor, they’re just part of my job, Milton. I also function as sort of a liaison between Market Hall and the business community. It’s my responsibility to maintain all our civic leaders on the same page. And to keep ‘em happy. That means I spread the bullshit around pretty good. One big thing I do is keep a watch over all you fellas down on Lee Street, what we like to call the city’s red light district.”
He pointed a stubby index finger at me.
“See now, y’all bring in a lot of money to the area, but you also warrant a lot of looking after. I’m fifty-seven, I’ve been doing this most of my life, and I know how to status a potential scrape. Boy, let me come to the point. I think Paradise Alley is going to become a problem for me. And that means, you being the de-facto owner, I’m going to become a problem for you. Unless we can solve it all right here and now.”
My heart did a little dance in my chest.
“What do you mean Mr. Sor…Earl? “
“What I mean boy is this. This fella who’s running your club, this Giovelli, I don’t much like the glimpse of him. He’s Italian, half his people are Yankees, and you can’t never dispute with such. When Mabel was around I didn’t care really, she was local and everybody knew she was okay. But now with this Tully, he’s making changes to the club I don’t like. He brings this boy in, his cousin or whatever, to wait on run the plot. He hires a black fella to manage the bar. He lets his girlfriend run the books.”
“They’re all real responsible people, Mr. Sorrell. They…”
He waved his hands.
“I know you won’t raised in much of household boy, but you seem like you know a thing or two. You’ve got to understand a little about this shit. Appearances matter. The whole Lee Street operation is always coming under fire from somewhere. I work pretty close with Sheriff Baxter, and he’s been asking questions about your club. I know you’re aware of all the illicit activity that goes on down Lee Street. Don’t give me no high school kid shit, that place is your home. The sheriff is terrified. The booze, the broads, none of that bugs him. That’s been going on for years, it always will as long as the army stays parked on the contemptible. He don’t mind it as long as he thinks it can be kept under control. Now, Paradise Alley, that’s a expansive slice of it all right there. It’s got prime position right in the middle of the strip. But that also means it’s a likely candidate for a lot of things that make the sheriff nervous. Gang activity, traffic in hard drugs, weapons selling, you name it. We all knew we could count on Mabel to keep that stuff out of the club. Now, with y’alls new management, we ain’t so sure.”
This was ridiculous. I had been ready for him to say that we served underage patrons or sold wholesale liquor on the side, things we were obviously guilty of, but these charges were wild. Only a fool would use a highly visible, always crowded nightclub for the things he was talking about. Not when there were fifty pawn shops and dark, sleepy pool halls nearby all providing better cover than Paradise Alley. I wondered if Vast Earl, sitting high up here among the pretty homes and the shiny town-cars, knew anything about the streets.
“That’s nothin to worry about, Mr. Sorrell. Nobody down at Paradise would have anything to do with stuff like that. It’s abominable for business. Besides, with the hassle we’ve been through runnin the place without Mabel, we sure don’t want that kinda concern.”
He blew out smoke and leaned support in his chair.
“Well now, it’s honorable and fine to hear you say that boy. I told the sheriff myself he was jumping at shadows. But he don’t reflect much of your man Tully. He said if you were old enough, and running the place, being a local boy, he might feel better about you. But Baxter ain’t large on Yankees, and he’s always saying how all these Italian restaurant and club owners are crooked up with the Mafia. And you did have a shooting down there not so long ago.”
“That guy was just some redneck who’d had too many.”
Big Earl smiled.
“I’m just some redneck who’s had too many. Can I go shooting off guns in your club? “
“The fella thought some other cowboy was carryin on with his wife and he knew he was at Paradise. He ran right past the people at the door and he was firing before the bouncers could get to him. One guy got nicked, that’s all. The cops interviewed Tully. They said those things happen.”
“Glowing shoddy security, Milton.”
“Well, you obviously know Lee Street, Mr. Sorrell. You can’t frisk everybody who comes in a bar.”
I wondered where this conversation was going. I knew that if the police really wanted to they could get us on any of a hundred violations. Mabel had told me that when the club became mine I would probably have to pay off some city officials to perform sure this didn’t happen. They let her operate, she said, because she had done certain favors for a number of distinguished people. They would not have the same charity towards me. But Mabel had died suddenly. She never went to the doctor and we only found out she had cancer when we found out it was going to kill her quick. There had been no time for her to instruct me the way she had planned. Tully, who was not born in Lafayette and had none of Mabel’s connections, knew nothing about these matters. For eleven months we had honest gone on like before, and I had been worried that in all innocence we might be pissing somebody off. Now it appeared we had. For a county sheriff, closing down Paradise Alley would be as simple as nailing up a sign.
Not vivid what else to do, I decided to plead ignorance.
“Mr. Sorrell. Earl. I really don’t know much about this stuff. We’ve sort of been running the club together, Tully and me and the staff. I could call Mabel’s lawyer, the one that handled the will. Maybe he could talk to the sheriff for me.”
Substantial Earl shook his head no in two expansive sweeps.
“That’s the last thing you want to do, boy. Nothing the law hates more than some legal smart-ass telling them their business. You’d just get the sheriff really pissed then. We need to settle this between ourselves. I consider I can help you out. The sheriff’s only thinkin about roustin y’all because right now he can’t glance what benefit you are to him. I know a plan to make the sheriff want to let your club go on just like before. In fact, I can note you how to make the sheriff want you to be even more successful. I’m going to tell you about a little deal I’ve arrange with several of the other places on Lee Street. When you hear about it, I think you’ll see it’s the only way to protect your investment.”
Sudden conception flooded me. As Big Earl spun out the particulars of his deal I could almost see a large blue-gloved fist closing around me to apply the squeeze. For the first time I began to realize that eventually taking over the club would require more on my allotment than learning how to judge and order stock, or setting up shifts and payroll schedules. I was going to have to learn how to deal with people like Big Earl, and how to protect myself from much stronger forces that could alter the fate of my slight business with a wave of their hand. More importantly, I was going to have to learn how these people worked, and understand the heart and soul of the city I called home. I knew then that the walls of Paradise Alley, walls that had sheltered my youth, existed for me no more. To claim my inheritance, I would have to do more than come to grips with the volatile culture of Lafayette’s streets. I would have to understand the past of the city itself.
And learn some hard lessons that my high school did not teach.
……….
Any North Carolina history book will tell you that Lafayette was founded by colonial settlers in the early years of English inland exploration. Two days travel from the soar, it was begun as an after-thought built by merchants coming west from the Atlantic Ocean and conducting business along the Good Cape river. The river flowed southeast across the colony, a natural waterway that ran from the mountain ranges of the Appalachians into the ocean just shy of the port of Wilmington. Situated at a fork on the Good Cape, the merchant settlement became a colonial map area and trading post. Using the unimaginative flair with which they had named the river the locals called their village Cape Town.
The coming of the Highland Scots signaled the area’s arrival as a colonial city. Seeking to chop out a place of their own, while maintaining access to needed goods and supplies, several families of this immigrant group chose the river forest for their home. Cape Town merchants responded by opening their markets to the fledgling community. After the revolution, in which many Scots initially sided with the Crown, the Highlanders renamed their town Lafayette, hoping to show unquestionable loyalty to the winning side.
Lafayette would always be a city that thrived on commerce. In early days the trade was cotton, sap, and tobacco going north and east. It soon came to be slaves going west and south. The city catered to transaction along the river, and as a result many people saw the town. Its population soon became more diverse than most in the South, a trait that would increase with growth. Even then it had a hint of baseness. Due in large part to the absence of strong church influences along the river, Lafayette supplied booze to four states and became known as the whoring capital of the Carolinas.
The Civil War ended the slave trade, but replaced it with an even stronger market. Lafayette had become a puny armory for the Confederacy during the war and General Sherman rewarded the city by burning most of it to the ground on his way back from Atlanta. He spared some assets the government desired, however, including the armory. That became a federal outpost, and its seizure would affect the future of Lafayette mightily. During World War I the post became a full-fledged army base, named Fort Greene after yet another Revolutionary War hero. The air force joined the mix in 1942 when Roosevelt Airfield was added to the base. Now known as ‘the reservation’ to local residents the military presence strongly influenced growth in the area. This was supplemented by the completion of East Cruise superhighway I-95, which connected Maine to Florida and ran for three miles within the city’s limits. By 1960, the year I was born, Fort Greene was the home of the entire 93rd Airborne Division, and Lafayette was the state’s fifth largest city.
It is at this point that most of the history books stop giving an accurate chronicle of the city’s progress. There are often only veiled references to the area’s continuing growth and diversity of population in the years that followed. Over time I have come to understand why state historians might want to overlook Lafayette’s more recent past. The city’s rapid expansion had some unforeseen side effects in the community.
Lafayette had a traditional mixture of rural whites and blacks living in the surrounding countryside as they had for decades. Also there was a growing urban population of mostly white families whose fathers worked in the city. These were the same dynamics other southern cities possessed. But the army gave Lafayette an unusual suburban population made up almost totally of young males who didn’t work in the city but went there to seek entertainment off the base. Local businessmen fast learned there was money to be made by catering to these largely captive patrons. Beer halls and dance clubs sprang up along the city’s downtown streets like haphazard weeds, started by retired GIs or restaurant owners looking to increase their profits. These places did exceedingly well and regional investors took notice. Some of the county’s richer families, many descended from the original Scottish settlers themselves, traded their cotton and tobacco interests to invest in these clubs. As the new decade dawned the boom was on, and Lafayette became known as a place of nightlife and varied distraction. Lee Street, downtown’s busiest, was sometimes called North Carolina’s own Bourbon.
Of course, local reaction to this was somewhat mixed, but the Baptist Church, the South’s main true guidepost, was not firmly established in Lafayette and had less influence than it did in other places. And although local politics was, like most of the state, solidly controlled by conservative Democrats many of the elected officials were also businessmen with investments downtown, and some powerful party people had begun to depend on tourism for income. There were even those city fathers who believed that their only chance to compete with the growth of more established cities like Raleigh or Charlotte was to offer something a bit out of the ordinary.
All the while changes continued at a rapid pace.
The social upheavals of the late sixties had a profound affect on Lafayette’s development. Many soldiers returned from the Vietnam War with a novel passion: drugs. Pot and heroin blew into the city as if on hurricane winds, aided by hastily constructed petite airports hidden in the North Carolina countryside. Prostitution flourished, mainly due to a new infusion of young Asian girls, many not even fifteen, who seemed to spring from the many cracks on the sidewalks to ply their trade for the lonely and demoralized servicemen. They were supplemented by poor girls from the surrounding county who came to the city as traditional small-town jobs dried up. Gambling, illegal in the state but condoned by the local police, became commonplace and shiny neon signs went up to declare the South’s newest vice: topless dancing.
Lafayette itself became uniquely diverse. No longer a land of just black and white it could claim many subgroups: the well-off white business front living in the stylish neighborhood of Vanglory Hills, working families who drove in from the suburbs, terrible urban blacks housed in the projects of the unfortunately named Pleasant Boulevard, rednecks transplanted from the surrounding country, Asian and Mexican immigrants staffing cheap restaurants and beer joints, two-bit hustlers of all races. Then there were the GIs themselves, one for every three residents of the city. And as the interstate became more traveled outsiders turned to Lafayette as a place of stopovers and weeknight tourism. The college kids came, making road trips down from Raleigh or Greensboro or Chapel Hill. Motorcycle gangs embraced Lafayette as a convenient gathering spot on their device to Atlantic or Myrtle Beach during the summer. Motels flourished beside the bars and clubs, massage parlors outnumbered clothing stores, and the pawnshops became too many to count. As the years went by Lee Street became a haven of vice unmatched in the Southeast.
In the middle of it all was the little club that was eventually handed down to me. Located very close to the exact center of Lee Street it had started out as the Lafayette Beer Garden in the late forties and, through many changes in name and ownership, had retained a reputation as the city’s most happening night spot. It was a expedient starting point for a night out on Lee Street, and a convenient place to end up when your night was over. The club was known as a trendsetter. It had been first in the city with liquor by the drink, first with closed circuit TV, the first with topless dancing. Harry had continued the tradition by introducing his own twist to the place, adding on several private rooms where the strippers could get much more intimate with those men whose wallets went deep enough. When Mabel took over she added her own innovation: a sound stage where local rock and disco bands could play for the home folks once or twice a week. No matter the floor plan or music the one constant was nudity. Only ever-shifting city laws, rarely heeded, governed what the dancers wore, when they wore anything at all.
Although the new owner in name only, several longtime customers already wanted to know what changes I had in mind for Lee Street’s champion of saloons. In Lafayette, the saying went, the wind shifts direction every other minute. You have to learn to change with it, or to spit into it, to keep from getting blown away. The more I grew into my city, the more I began to realize that I had been born in the center of a whirlwind of opportunities far exceeding those any college could offer.
……….
I told them all about Big Earl’s deal later that night. We had gathered together in the apartment, my apartment now, at half past three in the morning. Everyone was tired and drained, as Paradise Alley had just closed down. The mop-up crew was downstairs at work They would be cleaning until after five. There was a cold, light rain falling against the window. Even in bitter December snow rarely came this far south.
“He was pleasing slick about it,” I told them, resting my head against the wall. I was sitting on the dining table, a current spot since I was a child. I was less tired than most of them; although I worked hard after hours at the club, I usually left once the doors opened to the public. A minor drinking alcohol was a misdemeanor, but a minor selling alcohol was a felony. A few months away from the legal age, I could not risk a bust that might inhibit the state granting me a liquor license for years.
“Dey all are,” wheezed Tully, a mountain of sweat and grime. He pulled fifteen-hour shifts everyday we were initiate. His energy was large but so was his appetite. Lying back on our couch he had a towel draped over his head and a hunk of hot garlic bread in each hand. Katie, his full girlfriend, was sitting behind him massaging his big neck gently. “Guys like dat, they know howda be detached with ya,” he added, tearing into the bread.
“Aw, that wouldn’t fool Milt here,” Carlos said. His bear massive frame was stretched out on the floor as most of our chairs being too diminutive for him. He had taken his tie off, but tranquil wore the dress clothes in which he had worked.
“Don’t be so sure,” I cautioned. Carlos had absolute faith in my judgment, more than I did. “Right now this guy’s sorta out of our league. He’s big money and power in town, like Mabel always said he was.”
“So what’s the deal, Milt? Are they really looking to be crusaders, or do they just want a payoff? ” This was Victor, the head bartender, sprawled into an easy chair by the window and drinking a cold beer. As I looked at him I thought about Big Earl scolding us for letting a black guy run the bar. I wondered if this was why Mabel had never promoted Victor herself. He had been forced to wait until Tully became manager to consume over a job that we all knew he had earned. The position had been open for over a year after the old-fashioned head bartender, a part-time military trainer, had been relocated. I had consented to Victor’s promotion, but now I wondered about our wisdom, torn between my fondness for Victor, whom I considered a friend, and my desire to keep up appearances.
“Milt? ” he asked. I had to stop my thoughts repeat his question in my head. The long day was catching up to me.
“It’s just a payoff,” I told them. Tully and Victor looked relieved. “They wanna make it a permanent thing. See, first he gave me all of this bullshit about how the sheriff thinks gangs might take over the club.” Victor snorted at this; Tully chuckled. “He said the law might close us down. He had me scared for a shrimp, but later I could leer it was all a gimmick to prime the pump. Not that I don’t think the sheriff couldn’t give us real trouble if he wanted.”
“Freakin-a right he could,” said Tully. “We got violations outta our ass and attend again. Dem cops, they’re always in here buyin drinks and sittin around for free. Lookin round. But not one of ‘em ever says nothin bout all the laws we’re already breakin, which is plenty. Dey don’t care. But if they was told to, dey could hurt us good.”
“That’s what I figured,” I said. “Better just to go along.”
Victor was thinking. Presently he looked up. “So what exactly is the deal Milt? “
“One payment a year. He called it a lump sum. We give it to them in May, after tax season. That seemed important to him, I don’t know why. It ain’t like the sheriff’s gonna report this as income. I make the drop, I can’t tell where, to a guy whose name he gave me. Out of town, I gotta drive there. We never talk to Big Earl again. No paperwork, no nothing. And it’s all in cash. The way he had it down pat, I bet they do this all the time. Half Lee Street’s probably payin these guys off.”
“Donnie Cox down at da Pussycat Theater does,” said Tully.
“So does Willie Jackson over at Blue Sky Lounge,” added Victor.
“Dey don’t say how much,” said Tully, “or what all he does for dem. Nobody likes to talk ’bout Big Earl.”
“We don’t either,” I said, “not one bit. Don’t even say we’re payin. He was real serious about that. Nothing goes out of this room. Not that any of you talk anyway, I know that. But if you get loaded one night don’t let somethin slip. This is strictly in-house stuff.”
“So,” said Carlos, with an air of finality and a sigh of boredom, “that’s that. How much do we pay them? “
I hesitated a second too long, still uncomfortable with my newfound authority over these people, my friends.
“Fifteen percent,” I said. I tried to sound like it was nothing to me.
“Jeeesus Christ!” said Carlos.
“Highway robbery,” Victor said, sounding genuinely disgusted.
“Coulda been worse,” said Tully. “Dat is profit, right? “
“Yes. He told me he wants to keep us successful. Nice guy. And he said it really wasn’t much money cause he had to split it between the county and the city law.”
“What a bunch of bullshit,” said Victor, almost to himself. “City law only writes traffic tickets in this town.”
Katie stopped rubbing Tully’s neck and looked up. She had been our bookkeeper since Mabel’s death. “How’s he gonna know what our profit is Milt? We don’t know half the time ourselves. We got to display this guy our taxes? “
“He said he trusted me. Bulky chance, he’s probably got some IRS buddy who mails him copies of the forms. When the time comes we’ll go through it, Katie. It’ll be a lot of money, but we got no choice. All honest everybody? “
My only answer was a soft, almost musical voice that purred from across the room.
“Did you at least bargain with him, Milt? ”
As she asked the question, Elizabeth looked up from the thick fresh she was reading, having given no previous indication that she was even listening to us. Curled up on the very top of our tall bookcase she was five feet over our heads. Thirteen now, my sister had matured rapidly in the past three years. Taller than me by at least an inch, she was still razor thin and blooming. Mabel had left Liz with more than enough money for four years of college, but she was given no fraction of Paradise Alley. Mabel had always discouraged her from associating with the women who worked at the club and never let her approach the men who were patrons there. Growing up in our neighborhood, she told me, was poor enough for a young girl without spending time around a strip bar. Still, I planned on my own to offer her some sort of partnership in the club when she got older. I thought this was only fair, since I had well-known plans to do the same for Carlos, who was not my blood relation. Because of that, she liked to sit in on all of our business meetings, although she rarely said anything.
“Bargain? ” I said, as I looked up at her. “Liz, you don’t bargain with a guy like Big Earl. You do what he says. This man holds all the cards. If I’d been smart with him he might’ve gotten pissed, and then where would we be? “
“Oh Milt, really. Why do you consider he had your unimportant miniature ass all the way up to Vanglory Hills? ” Katie frowned at Liz, but I noticed Carlos smiled. “If he objective wanted to name a percentage he could have done that with some stale lackey.”
“Lackey? ”
“Sure,” she answered. “Ma was always saying how these politicians on the take stay away from the cash themselves. Why do you contemplate he risked seeing you in person? He probably figured you would try to screw with his deal, maybe get him to settle for less.”
I wondered how she reasoned all of this out. I didn’t remember being this wise at thirteen. And she didn’t talk like a girl raised downtown anymore, she had adopted the speech of her higher-class friends. Her voice had gotten softer, her vocabulary a step up from mine. She sounded like she came from Vanglory Hills herself. Liz was growing up fast, beyond my capacity to keep up with the changes in her.
“Now Lizzie,” Tully said, “your broder’s right. You can’t screw round wid des people. Ya gotta pay ‘em respect so dell look de odder method.”
Liz closed her book and climbed down the bookshelf. Her jeans, although bell-bottomed underneath, were tight on her waist, and I was slightly annoyed to notice Victor watching her ass. Jesus, I thought, she’s thirteen. Robbed, first of my parents then Mabel, I felt all the more protective of Liz.
As she walked across the room Liz spoke to Tully but looked at me.
“Big Earl isn’t the mob. He’s a politician like Congressman Simmons or President Ford. He’ll expect some negotiation, I’ll bet. He probably wanted Milt down there personal so he could see what type of guy he was, so he knew how far he could push him. Negotiation. Except there wasn’t any negotiating.”
She reached the table and stood in front of me. She was in a white half-shirt, tied in a knot at the navel, and I was confronted by the uncomfortable fact that my little sister had done a good job growing, of all things, tits. Thankfully, she didn’t wear make-up yet, and her hair was not styled but pulled tight in a long ponytail, which ran all the way down her back. Even so, she detached looked too grown up for my taste.
“Liz,” I said patiently, “you didn’t meet the guy, I did. He had it all planned out ahead of time. The man could close us down with a phone call. Don’t you think I’d have avoided this if I could? “
“Don’t get mad, love, but I think this big shot charmed the pants off you. Next time you should occupy some time to judge it over. Don’t give in so easy. I know it’s tough making the decisions but you’re in charge now. People like this are going to try and take advantage of you because of your age and because you’re…well, you don’t look like a tough guy. So you’re going to have to learn to be hard with them, like Ma. I know how smart you are, but you have to make them see some of that. Otherwise they’ll just walk over us whenever they want.”
She said it so kindly it was hard to be angry. In truth, she was only saying what I had already told myself. The fact that, at her age, she could grasp this all so well was impressive in itself. My sister, I thought with a effect of bitterness, was going to be smarter than I was.
“Maybe we should have sent Liz to negotiate with Spacious Earl,” Carlos said smiling. “She would’ve had him paying us.”
He was trying to lighten the mood, but his smile died when I turned toward him with a hard look. His own eyes dropped to the floor.
“Don’t get mad,” Liz said again, taking my hand. “You’ll show us all one day. Ma wouldn’t have left you the business if she didn’t think you could speed it. But remember, we’re all in this together. We have to leer out for each other. That means telling the truth even if it hurts a little bit. And the truth, hon, is that you didn’t try hard enough this time. But you’ll get better at it, I know you will.”
I said nothing, and I didn’t watch at her. I was torn between anger at her for disputing me in front of everybody and the sinking suspicion that she was probably upright on target. Maybe Grand Earl had been expecting me to push for a better deal and was amazed when I simply lapped up his first offer. I wondered if he was, even now, laughing at how naïve I had been.
The silence of the room became uncomfortable.
“I need to go check on the clean up crew,” Katie said suddenly, sliding off the couch and giving Tully a kiss. “Liz, you should’ve been in bed a long time ago. You’ve got school tomorrow. You too guys.” She unchained the front door and walked out. Liz looked at me for a second, then turned and walked to her own room. It seemed to me that Victor raised his head just to watch her go.
“Well,” Victor said, trying to lift the tension, “at least it’s all handled for now. We can get back to business. Did this guy say anything about the city people? You know, taxes and zoning and what not? “
I blinked, trying to shake my thoughts free. Victor was true, for better or worse I had cast our lot. Despite what Liz had said, there was no sense in second guessing myself now. I lifted my head to answer him.
“If we have a dilemma with the city, a real big quandary, he said maybe he could help us out. But we can’t call him. He said he’d know if he needed to get in touch. If it had something to do with city law it might mean extra money. The stuff we get for our payoff is strictly help with the cops. He also said he couldn’t do anything if the SBI or the feds landed on us for something. He said that doesn’t happen too much around here. And he idea it might pay us to contribute to the Democratic Party. All of the essential politicians, the council members and the judges, they’re all Democrats. When they run for office they diagram money from a general fund. Big Earl said we could give to that, it might pay us to be in their good graces. We could each give as individuals and the club’s name wouldn’t be involved.”
“Deese guys, day are like da mob!” Tully said. “He say anythin else? “
“Yeah. He said he hates Italians.”
Tully laughed heartily. As a gesture of peace I smiled down at Carlos, who was looking at me.
“Dumbass redneck,” Carlos said, smiling himself now. “Did he say anything about Italian-Indians? “
“Nope. I don’t contemplate he knows they exist. Maybe you should go scalp him with a pizza cutter.”
“No way,” Carlos said, “not Big Earl Sorrell. Milton Howard, on the other hand…”
He was off the floor and had both hands on me before I could even depart. Far stronger than I was, he lifted me off the table and directly into an airplane spin.
“Ahhh! Put me down you Redskin! Victor, help!”
“Can’t,” Victor said. “Might spill my beer. Plus he’s map bigger than me.”
“Tully!” I yelled as the room spun. “Terminate him!”
“After you cracked on Italians? Notta chance.”
Carlos was peaceful twirling me around, something very easy for him to do considering that I weighed no more than one-fifteen. Despite my dizziness I felt grateful that he was this playful after the cold way I had looked at him before.
“Redskin, huh? Puny pipsqueak. Now, where did I leave my tomahawk? You could exhaust a haircut. Hey, I got an idea. Let’s see if little honky club owners can wrassle with Redskins.”
Throwing me across his shoulders, he started toward my inaugurate bedroom door.
“Wait!” I protested, “We’re serene in a meeting!”
“Meeting adjourned,” Carlos said, and he carried me out laughing.
……….
I look back on that winter as the beginning of my growth from a boy to a man. Mabel’s decision to leave the club to me, the load of responsibility I suddenly felt toward both my sister and my friends, the transition from worrying about such things as math assignments to worrying about such things as estate taxes, all conspired to rob me of the traditional fun I had anticipated for my senior year and high school graduation. For me there was no homecoming game, no week long scurry with friends to Myrtle Beach. I turned eighteen in February and afterwards spent all of my nights at the club. I began skipping school regularly and neglected my classes, passing my final year on skill alone. I didn’t even take the SAT. I had no thoughts of college. Prom night found me behind a bar. While my classmates walked the aisle at graduation, I walked the floor of Paradise Alley.
I did, however, experience one rite of passage usually associated with high school. I got laid that year.
Some might find it curious that I had retained my virginity so long, especially after I had lived above, and finally inherited, of all things, a strip club. But after many disturbing lectures from Mabel about the evil fates of bar owners who hire and pay girls based on sex I was never tempted to use my business to that advantage. Meanwhile, in the world of genuine teenage romance, I had problems.
As a result of both my size and my youthful looks most girls my age, who were looking for older guys to date, didn’t go for me. They would flirt with me, make friends, but I never got anywhere with them. I actually had one date tell me that I was too cute and cuddly for serious making out. No one, she said bluntly, wants to screw a teddy bear. She had no idea, of course, how shattering words like that could be to the ego of a teenage boy.
Added to my troubles was Carlos, whom the girls adored. He had been sleeping around regularly since he was fourteen and always had girlfriends to spare. Anyone could see that he was an extraordinarily heavenly young man, with a combination of strong physical stature and quiet sensitivity that drove girls wild. There were days in the high school parking lot when so many girls wanted to talk to him that we just about had to fight our arrangement to the car. Even the strippers at the club, jaded veterans who knew men at their worst, couldn’t get enough of him.
To my extreme annoyance, Carlos tended to be downright indifferent to all this attention. He treated his girls as though they were casual diversions, something to do when he wasn’t too busy. He was always polite and always ready to move on. I never let my feelings be known, but there were times when my jealousy made me wish we were not such good friends.
Finally, my commitments to the club made it hard for me to get dates on a regular basis. Even before I could work during prime time there was plenty to do away from the floor itself. I often went to bed before eight, in order to wake up at three in the morning and work on the clean-up crew. Although I had the money for a social life, I rarely had the energy. I had basically given up trying by my eighteenth birthday, and sometimes wondered if I was destined to live out my life as the only virgin on Lee Street.
Of course, I eventually did have sex. I’d love to relate a story about the tender-eyed teen sweetheart who brought me bursting forth into manhood and left me with the sweet memories only first adore innocence brings. Unfortunately, when the long awaited event finally occurred it was nothing so worthy. It’s not nearly as satisfying to admit that I made it with a drunken slut, more than twice my age, in the closet of my strip bar. It did, however, turn out to be quite memorable, for altogether unexpected reasons.
……….
She had come into the club alone, and stayed that way throughout the night. She was at least forty, and quite possibly tipping toward fifty, wearing a loud sequined purple dress. It was four in the morning on a Sunday and we were the only ones left downstairs on the main floor of Paradise Alley. She had been drinking since before midnight, mostly tequila shots, and somehow she had convinced Victor to let her stay on after closing. He had even left her with a bottle and a shot glass. She was sitting at the bar while I was polishing its surface. The rest of the clean-up crew had already gone home. I was almost done myself, thinking about bed and skipping school. I was on the other side of the bar from her, three feet away, when she spoke.
“Hey, kid.”
Breaking the silence her voice startled me so badly that I reared up and my left hand knocked her bottle away. Luckily it didn’t break, but simply rolled on the floor quite empty.
“Shit! Sorry lady, I’ll go round and get that. Did you say something? “
I had seen her around before but I really looked at her for the first time now. She had dyed yellow hair, a lot of it styled up high, and bright red lipstick. Too mighty eye shadow. From a distance I had thought she was a nice looking lady but up close I could see the wrinkles and bags through the heavy make-up on her face. She looked like she had led a hard life.
“How old are you kid? “
“Me? I’m eighteen, my birthday was last month.”
“Eighteen? ” She reared back her head and laughed. It was a shrill, reedy sound. “Eighteen, kid? Christ, you peek fifteen if you’re a day. You work here? “
“Yeah. Sort of.”
“Yeah, sorta.” Her words were slurred and slow. Her eyes drooped. I thought she was ready to pass out. “Whatta you mean sorta? “
“Well, I guess I have the place. I mean, that is to say, it’s mine. I inherited it from my mom’s godmother.”
“Ohhh, you’re the owner!” She sounded really drunk. “How’s about that. That’s the best line I heard all night kid. That’s a good one. Don’t waste time on the third-rate shit, fair say you’re the fucking owner. What’s your name Mr. Big? “
“Milton. Seek, I’ll go get that bottle up, I’ve got to finish my work.”
“Milton? Parents musta been really drunk. Or nerds. I’m Ginny. Say, since you own this place why don’t you forget that bottle and find us some good stuff? I’m ready to get this party started.”
“Party, ma’am? It’s after four…”
“Oh la! Ma’am is it? Whatta ya consider I am, your mama? Say, come closer over here, I can barely search for you over the bar. Huh, you’re just a little thing, aren’t ya? Hey, where you going? “
I walked around to the swinging bar entrance and opened it, vowing in my head to interrogate Victor, asking why in the world he would leave some drunk bitch at the bar for me to deal with alone. I knew I’d have to find her a way home, and the taxi services, with a few brave exceptions, would be closed. Plus, drinking in a bar after two in the morning on a Sunday was a blatant violation of state blue laws. I concept about Big Earl mentioning the SBI, and decided that Victor had quite a bit of explaining to do.
I picked up the bottle and placed in back on the bar. She had swung around to peek me, and as I came close she grabbed me by the collar and pulled my face within inches of her. She was surprisingly strong for a lady.
“Hey!” I protested. “What the hell are you doing? ”
“Say, Mr. Astronomical Shot bar owner.” The odor of tequila was overwhelming when she spoke. “Didn’t anyone ever tell you not to tell lies to strange women in bars late at night. It’s past your bedtime, ain’t it? “
“I ain’t lyin and I ain’t got no bedtime. I gotta get back to work, lady.”
She suddenly let me go and stood up beside me. She was a good deal taller than me. There was a irregular glint in her watery eyes.
“Ya know kid, you’re kinda cute. Eighteen, huh? What the hell. Wanna get it? “
For a second my confusion was such that I said: “Make what? “
She burst out laughing again, even louder and more shrill this time.
“Oh, you’re a sweetheart! And you’re eighteen? Make it, baby, construct it. Don’t you like girls? You ain’t a faggot are ya? Let’s do it, I’m horny.”
I finally got the message, and I’m sure my eyes were round quarters.
“Uh, but I, um…look, you see…”
“Let’s go,” she said, cutting me off and grabbing my right wrist. We were heading for the hallway with the private rooms in back. My mind was a whirl, torn between scare, repulsion, and a sudden terribly strong curiosity.
“Here,” she said, opening the first door she came across, “in we go, slow door number one.”
She plunged in, still holding my wrist, and I followed, having no breath to tell her that behind door number one was our broom closet. She stumbled into the darkness and I almost fell on top of her. Then she slammed the door shut behind us and was quickly against me, her lips smashing into mine.
“Ow!” I yelped. Her right hand flew unceremoniously, and somewhat painfully, up against my crotch.
“Ow!” I yelped again, a little louder, though her mouth muffled mine. Suddenly her knees gave way and she fell heavily into me, both of us falling to the floor. I heard and felt buckets, mops, and brooms falling around, under, and on top of us. She took no notice.
I don’t know how long we grappled on the floor of that closet but it seemed like forever. At some point in time her dress and my jeans were ripped off of our bodies, and I contain she was responsible in both cases. She kept moaning many varied and often disturbing things which I did not altogether understand, but sounded to me like instructions to ‘twist the rope,’ ‘pull the chain’ and do something provocative around the world flight. She called me by at least three different names, none of them mine. She had tremendously long fingernails, several of which I became quite sure she had left in my back. Worst of all, while I was trying to grab for leverage in the dark melee, her mass of hair came off in my hand, prompting an unreasonable momentary fear in me that I had somehow pulled her head off.
Eventually she seemed to become aware that I was not as aroused as she would have liked. In this matter I was then given such unwanted assistance that a horrible suspicion began to form in my head, suggesting that if I didn’t make something happen very soon she might attempt to squeeze an erection out of me.
Somehow, I was able to pull it off. I have always worked best under pressure. I didn’t really enjoy the experience and I could only guess at her feelings, since she simply carried on much as before. I couldn’t sight a thing. On top of it all, her constant screaming was giving me an awful headache. I was quickly coming to the concept that, maybe, I hadn’t been missing as worthy joy as I had understanding. Finally, she rolled off of me and commenced panting and muttering ‘oh, oh, oh’ to herself. A predatory hand flew once again to my nether-regions, causing me to bite down hard on my tongue.
“Hey!” she said. “You didn’t catch off. That’s no good. Probably had too much liquor.”
“But I didn’t drink any liq…”
“I know what to do, honey, don’t ya inconvenience.”
She suddenly grabbed at my shirt, which I still wore, and stood up, pulling me along with her. I was pushed back against the far wall of the closet.
“You just stay still honey, and Ginny will win care of everything.”
She collapsed again, this time to her knees in front of me. I knew enough to guess what she was doing, but it seemed to me that the process should have been a more radiant operation. I was unaware so many teeth were supposed to be alive to. Leaning up against the wall, I wondered how the hell I had gotten into this.
That’s when the door opened, the closet became bathed with light, and my little sister looked in at us.
Liz stared at me in total surprise. Then her eyes fell to the figure at my knees, who was absorbed in her work and unaware that anything was amiss.
“Ohhh, that’s marvelous honey, just safe,” Ginny hissed between action.
“Oh, wow!” Liz half whispered, half screamed. After looking for another second she slammed the door shut.
I suppose there are times in almost every person’s life when the unreality of a dwelling is too much to handle. Standing up against that wall, I tried to convince myself that what had unbiased happened hadn’t. It was simply not possible that my little sister, the girl whose sole source of guidance and upbringing I was, had impartial witnessed some tramp giving her older brother a blowjob in the broom closet. It was not, I told myself, the kind of thing that could have happened. In the strain of this unexpected experience, I decided, my guilty conscience was triggering hallucinations.
That’s when Liz opened the door again, this time with my best friend Carlos behind her.
“Peruse,” she said, “I told you! I was not making it all up!”
“Holy shit!” Carlos exclaimed, his fill sunless eyes suddenly wide. Reaching over Liz he slammed the door shut once again. Just as it closed I felt the woman beneath me fall away, collapsing this time into a heap against the wall.
“Ohhh,” she said one last time. After a minute, I could hear her snoring. Walking gingerly around her I vainly felt for my pants in the darkness. The thought came to me then that I was a virgin no longer. It didn’t seem to matter. What mattered was finding my pants. For all I knew, there would be an audience lined up outside when I opened that damned closet door.
……….
Liz told me later that when she had heard the strange noises she had thought somebody might be trapped in the closet. She did apologize for coming back the second time. It was just, she told me in mock innocence, that she so hated to be disbelieved. I never really lived it down. In all honesty, it was too big an embarrassment for my sister and my best friend not to give me hell.
I felt even worse when we found out that Ginny was a part-time pro who had once worked for a pimp Victor knew in the projects. At least she never came relieve into the club, so I never had to explore her again. For weeks after it happened Liz was laughing every time she saw me, and Carlos kept a big smile on his face. But as far as I know, neither of them ever told the story to anyone else. To tease me, though, Liz started calling me ‘Marvelous’ Milton around other people. Unhappily, the new nickname stuck.
In all my embarrassment, I never even thought to ask Liz or Carlos what they were doing together, down in the club, alone, at five o’clock in the morning.
……….
To read the rest of Lafayette for free go to Jeffrey’s blog Lafayette.
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Filed under Small Business Phone Numbers by on Apr 5th, 2011.
Historical Background:
As we peep in the history of Networking we will find that inn 1971, the researchers at the University of Hawaii developed the world’s first WLAN, or in full form the wireless local area network which was named as ALOHAnet .The ALOHnet was spposed to be the bi-directional or two way directional star topology of the system which included seven computers deployed over four islands in order to communicate with the central computer on the Oahu Island without using phone lines for connection or data Transfer. Genuinely,WLAN or wireless Local Area Network hardware was so expensive for the companies that it was only used as an alternative method to cabled LAN in places where cabling was supposed to be difficult or impossible for the purposes of data tarnsfer . The Early developments and improvemnets included the industry-specific solutions and proprietary protocols but at the end of the 1990s these were replaced by standards, primarily the various versions of IEEE 802.11 (Wi-Fi) protocols . The alternative ATM-like 5 GHz standardized technology,the HIPERLAN, has so far not succeeded in the market and that’s why had little demand for installation.But with the release of the faster 54 Mbit/s 802.11a (5 GHz) and 802.11g (2.4 GHz) standards, almost very fast and fruitful and authentic means of Wireless technology .
While in November 2006, the Australian Commonwealth Scientific and Industrial Research Organisation (CSIRO) won a legal battle in the US federal court of Texas against Buffalo Technology which established the US manufacturer had failed to pay royalties on a US WLAN patent CSIRO had filed in 1996. The CSIRO are currently engaged in the legal cases which are related to computer companies including the IT giants Microsoft, Intel, Dell, Hewlett-Packard and Netgear which argue that the patent is invalid and should negate any royaltiesbeing paid to CSIRO for WLAN-based products or applications.
Introduction
” The wireless LANs or Wireless Local Area Network utilizes and uses the electromagnetic waves which are spread by spectrum technology and are based on radio waves to transfer information in form of signals between devices in a miniature area and the main server”_____Christopher W Starr; Joseph S Stevenson
According to kinds of WLANS they are of two types 1.infrastructure WLANs and two. Independent WLANs.The Infrastructure WLANs are used where the wireless network is linked to a wired network or with the cables, is more commonly used today. In an infrastructure WLAN, the wireless network is usually connected to a wired network such as Ethernet, via access points, which possesses both Ethernet links and antennas to send and receive signals as well as making them powerful to transmit . These signals span micro cells, or circular coverage areas (depending on walls and other physical obstructions) or buildings in the scheme of access points and transmitter, in which devices can communicate with the access points, and through these, with the wired network. In a wireless LANs the devices can move within and between coverage areas without experiencing disruption or obstruction in connectivity as long as they stay within range of an access point or extension point which is similar to an access point at all times and occasions .
“The wireless Local Area Newtork or WLAM is a network which is the linking of two or more computers without using wires or cables . WLAN utilizes spread-spectrum technology based on radio waves to enable communication between devices in a limited dwelling, also known as the basic service set. This gives users the mobility to move around within a tall coverage area and still be connected to the network.”_____Tinku Alex
As regards the home user, the wireless has become most popular and economical due to ease of installation, and location freedom with the gaining popularity of laptops and PDAs. For the business, public businesses such as coffee shops or malls have begun to offer wireless access to their customers and some are even provided as a free service for the faciliataion of local customers .The Large wireless network projects are also being set in many major cities for the increasing population as well as killing the cable Costs due to tremendous distance from ther server . In this regards, the best online adverstising Companys and Swearch engine Google is providing a free service to Mountain Idea, California and has entered a train to do the same for San Francisco also for better facilitaion .The New York City has also begun a pilot program to cover all five boroughs of the city with wireless Internet acces so that data can be accessed remotley by connceting them through wirless Local Position network .
How Wireless LANs Work:
“The other model which is connected through cables and it can be compared to those of wired LANs where devices connect via cables to hubs, or common wiring points, and from these to a central server. However, in wired networks, each hub has a finite number of jacks, and thus, can only connect a preset number of devices. Wire line networks are also confined by the existence of fixed cables, which limit connection to specified locations .”____M L Witten
Wired LANs:
In a wired LAN, devices are connected to the network via cables. Devices are generally anchored to a set area depending on the placement of the network lines.
The While WLANs provide some key benefits, including security, mobility, and scalability, they are currently much slower as compared to the wired LANs. For instance, a wired LAN using 10BaseT Ethernet ranges from 10 – 100 Mbps. and Other pros and cons of wireless LANs (in comparison with wired LANs) are listed in the table below:
Wireless LAN Pros and Cons
Pros
- Easier to deploy and configure
- More catch
- Ultimately more cost-effective (scalable)
- Facilitates office relocation (network portability)
- Easier to maintain
- Makes available real-time data in broader range of coverage areas
Cons:
- Slower – Ethernet speeds range from 10 mbps to 100 mbps; corporate networks require high bandwidths
- Signal interference often causes disruptions in connection
- Systems from different vendors may not be interoperable
- Costly installation
Source: WR Hambrecht + Co
Wireless LAN Glossary:
· Access point-it is a device that connects the wireless network to the wired network. As a transceiver, it sports an antenna to send and receive signals from the various devices, providing coverage areas in which devices can roam freely.
· Extension point-it is a device that acts like an access point and connects the wireless network. Unlike access points, extension points do not connect the wireless network to the wire line but rather extend coverage areas between and beyond access points.
· Infrastructure network-the more common form of a wireless LAN. Infrastructure networks are comprised of WLANs connected to wired LANs and contain access points to channel network traffic.
· Independent network-a peer-to-peer network containing devices (with network adapters) connected to one another, independent of a managing server or other form of administration.
· LAN adapter-generally a PC card in the portable device with an integrated antenna to receive signals from the access point/extension point. Can also be integrated into handhelds.
- Micro cell-a coverage residence in which devices can hasten freely with a wireless connection. Micro cells are generally circular (depending on the existence of interfering objects such as walls) and overlap to enable seamless connection as a user wanders through the wireless network. Spread spectrum-a radio frequency technology most commonly weak in WLANs. Frequency Hopping Spread Spectrum (FHSS) and Direct Sequence Spread Spectrum (DSSS) are two examples of the spread-spectrum technique. Transceiver-a device, such as a LAN adapter, used to receive signals sent by the transmitter. transmitter-a plan that sends signals to the transceiver (typically an access point or an extension point in WLANs _____Susan to Kalim
In the recenet years the popularity of wireless LANs is a testament primarily to their convenience, cost efficiency, and ease of integration with other networks and network components for the better faciliataion of Clients or customers . Today,the majority of computers sold to consumers today come pre-equipped with all primary wireless LAN technology for the safe faciliation and hassle free un iteruuppetd Internet service .
The benefits of wireless LANs include:
Ø Convenience: The wireless nature of such networks allows users to access network resources from nearly any convenient location within their significant networking environment (a home or office). With the increasing saturation of laptop-style computers, this is particularly relevant.
Ø Mobility: With the emergence of public wireless networks, users can access the internet even outside their normal work environment. Most chain coffee shops, for example, offer their customers a wireless connection to the internet at little or no cost.
Productivity: Users connected to a wireless network can acquire a nearly constant affiliation with their desired network as they proceed from place to place. For a business, this implies that an employee can potentially be more productive as his or her work can be accomplished .
Deployment: Initial setup of an infrastructure-based wireless network requires little more than a single access point. Wired networks, on the other hand, have the additional cost and complexity of actual physical cables being urge to numerous locations (which can even be impossible for hard-to-reach locations within a building).
Expandability: Wireless networks can serve a suddenly-increased number of clients with the existing equipment. In a wired network, additional clients would require additional wiring.
Cost: Wireless networking hardware is at worst a modest increase from wired counterparts. This potentially increased cost is almost always more than outweighed by the savings in cost and labor associated to running physical cables.
The Wireless LAN technology, while filled with the conveniences and advantages which are described above. It has its share of downfalls or demerits also . If think of nay networking solution, the wireless LANs may not be shipshape for a number of reasons. As most of these have to do with the inherent limitations of the technology because they are sometimes dependent devices ..
Security: The Wireless LAN transceivers are designed to serve computers throughout a structure with uninterrupted service using radio frequencies. Due this space and cost, the antennas typically present on wireless networking cards in the end computers are generally relatively poor. To receive signals properly using such limited antennas or devices throughout even a modest area, the wireless LAN transceiver utilizes a fairly powerful amount of power. It means that not only can the wireless packets be intercepted by a nearby adversary’s poorly-equipped computer, but more importantly, a user willing to spend a small amount of money on a wonderful quality antenna can pick up packets at a remarkable distance as the case may be . Perhaps, the people in hundreds of times the radius as the typical user so they are also vulnerable as they are not secure data transmitters . Actaully, there are even computer users dedicated to locating and sometimes even hacking into wireless network known as wardrivers which really hampers all transmission . wher as On a wired network, any adversary would first have to overcome the physical limitation of tapping into the actual wires, but this is not an issue with wireless packets. To tackel wityh this jam, wireless networks users usually choose to utilize various encryption technologies available such as Wi-Fi_Protected_Access which is useful tool for security purposes. Some of the more older encryption methods, such as WEP are known to have weaknesses that a dedicated adversary can compromise.
Range: As reagrds the typical range of a common 802.11g network with standard equipment is on the order of tens of meters. While sufficient for a typical home, it will be insufficient in a larger structure. To get additional range, repeaters or additional access points will have to be purchased. Costs for these items can add up quickly. Other technologies are in the development phase, however, which feature increased range, hoping to render this disadvantage irrelevant.
Reliability: Like any radio frequency transmission, wireless networking signals are subject to a wide variety of interference, as well as complex propagation effects (such as multipath, or especially in this case Rician fading) that are beyond the control of the network administrator. In the case of typical networks, modulation is achieved by complicated forms of phase-shift keying (PSK) or quadrature amplitude modulation (QAM), making interference and propagation effects all the more disturbing. As a result, important network resources such as servers are rarely connected wirelessly.
Speed: The speed on most wireless networks (typically 1-54 Mbps) is far slower than even the slowest common wired networks (100Mbps up to several Gbps). There are also performance issues caused by TCP and its built-in congestion avoidance. For most users, however, this observation is irrelevant since the speed bottleneck is not in the wireless routing but rather in the outside network connectivity itself. For example, the maximum ADSL throughput (usually 8Mbps or less) offered by telecommunications companies to general-purpose customers is already far slower than the slowest wireless network to which it is typically connected. That is to say, in most environments, a wireless network running at its slowest speed is still faster than the internet connection serving it in the first position. However, in specialized environments, the throughput of a wired network might be necessary. Newer standards such as 802.11n are addressing this limitation and will support peak throughputs in the range of 100-200 mbps.
Wireless LAN architecture using an infrastructure BSS
WLAn can be connected through a cell phone card via GSM network, satellite hardware from your satellite company, or the most common a 802.11 router and either a network card for PCI/PCI inform slot on a desktop, or PCMCIA card for a laptop. Some laptops already come prepared with built-in wireless.
All components that can connect into a wireless medium in a network are referred to as stations. All stations are equipped with wireless network interface cards (WNICs). Wireless stations fall into one of two categories: access points and clients.
If the fuctions of Wirless Local Area Network are analysed and comapred with cabled Local Area network, it will be definite that Wlan ahs many features and has really apared cost of wirlres and other dsiconnection which is usuallyu found in cabled Wireklwess Set Network . But besides its numerous facilitirs, it ha ssome disadanvanghes which need to be rectafied for improving the wirlress Local rea Network Site . Firstly the WLAN should have trustworthy security while transmitter and receiver receive and send their data . secondly The Speed and the data sent from the main server shoud be strionmg so that it may not regain slow as the distance go incresing . Thirdly the wirless data can easily be caught by the Users whio use strong anatennas while the remote users unprejudiced have to carry on crude signmals and low speed . As the low siognal have low spweed .
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[3] Thus the outlook of the US’s economy is significant important for the future of the company. This part will focus on the discussion of the country’s GDP growth and monthly CPI change to understand the future economic prospect.
The global and U.S. economies correlations between each other are very strong. In most of the cases, it is the U.S. economy is driving the global growth. Chart 2.3 is a US GDP annual percentage change; it shows that the US economy was suffering a continuous slow down since 2005. It is estimated by IMF that the US GDP growth in 2008 is only 0.5 percent, down 77.3% compared with 2007.
Source: Bureau of Economic Analysis (U.S. Department of Commerce), IMF
To make things even worse, the economists believe that the U.S. economy has entered into a recession period considering its fourth-quarter GDP growth of only 0.6 percent in the last year and an unnerving job loss in January, the biggest since 2003.[4] The reason for such slow down is not only because of the financial market crisis but also the growing inflation. From chart 2.4, it can be seen that the US CPI month percent change has increased from 4.3% in January 2008 to 5% in July this year.
Source: Bureau of Labour Statistics (U.S. Department of Labour)
In conclusion, it is reasonable to predict that the U.S. market will shrink under the shadow of a great recession. Such circumstances will make a mountainous negative influence on both computer sales and other investment which the company is about to produce this year.
2.3 Euro Area and UK Economy
The gather sales of Apple in Euro zone contain 22.74% of its total in 2007. Traditionally, Apple’s products are welcomed by most of the Europeans by its unique innovation and product features. The Euro Area GDP growth, however, is expected by IMF to go down to 1.4 percent in year 2008[5]. The reason for such decrease is believed to be mainly affected by the US economy since there is a immense tie between the two economies. Besides, the increasing inflation in these Europe countries is also affecting its growth.
UK is one of the major economies in the Euro zone and it is also a very distinguished market for Apple Inc. Like any other major European countries, Britain’s economy is closely related to the United States. The tiring, down of US economy in the recent years is already making Britain suffers from a low rate of growth. Besides, UK’s internal market’s demand is also decreasing. Studies found by IMF suggests that Britain’s GDP growth is expected to go down from 3.1 in 2007 to 1.6 in 2008 as it is showing in chart 2.5.
Source: IMF World Economic Outlook 2008, PP242
At the same time, the UK’s CPI has gone up sharply this year. Chart 2.6 shows that the CPI monthly percent change has increased from 2.2% at the beginning of this year to 3.8% in June. Along with the impact of global credit crisis, it is reported that the bursting of UK’s housing bubble has also caused many internal problem of its economy. According to Halifax, Britain’s housing price has dropped by 9 percent since August 2007.[6] Since the UK’s retail businesses are going down and consumer confidence is falling, it is difficult to image how consumers will be likely to spend for their recent iPod this year.
Source: Office for National Statistics (UK Statistics Authority)
2.4 Japanese Economy
Japan has only taken 5% of Apple’s 2007 total net revenues; it may have dinky influence on the company. Here the discussion on this country is exiguous since the country’s economy condition has been kept going worse for a long period of time. According to IMF, the Japanese GDP will continue to go down from 2.1 in 2007 to 1.4 in 2008.[7] Under the global economy influence and the domestic low consumption needs. The Japanese economy is still far from recover.
To Apple, the Japanese market, unlike any others, has a much more competitive market situation along with a reducing demand. The local company, such as Sony, has already launched similar products, such as carefully designed PC, portable music device and mobile phone, in compete with Apple. The company will be difficult to increase its sales in Japan this year.
2.6 Conclusion
The above macro economy analysis shows that the world economy is depressed and facing a tall recession in year 2008. These facts will lead consumers find themselves with less disposable or discretionary income which will eventually cause them not to employ worthy consumption on luxury products[8]. Companies such as Apple will be largely influenced by the reluctant consumption needs. However, Apple has better positioned itself in the market; the introduction of new iPhone with a relatively cheap price is reflecting a very good sales strategy to accelerate consumption. Apple has successfully sustained a better profit rate in the last three years despite global economy slow down. We beget it may continue to do so in this year. However, there is no company can always increase its profit while the national GDP is decreasing.
Chapter 3 Industry Analysis
3.1 Introduction
Apple has expanded its products range from computer to software, portable music scheme and mobile phone since it changed its name from Apple Computer Inc to Apple Inc. However, chart 3.1 shows that Apple’s Mac computer takes up 42% of the company’s 2007 net sales. This indicates that the computer hardware manufacture business is dominating Apple’s business.
Source: Apple 10K FY2007 Annual Relate PP 42
Further more, iPod is almost a monopoly in the portable music device market and iPhone only takes up 1% of the total net sales in 2007. For analyse purpose, the industry analysis share will be focused on the computer industry. Only companies which are doing computer business will be discussed in both the industry overview and Porter’s five analyses. It is believed that such narrow in analysing the company’s industry is more accurate and effective by the author.
3.2 Industry Overview
According to a technology research firm Gartner Inc, it forecasted that the PC sales will reach 297 million units in 2008 while the 2007 sales figure are 264 million units[9]. Despite the global economic recession, global PC sales growth is in a marvelous rate. Compared with last year, it is a 12.5% growth. The growth is believed to be a combination of improvements in both technology and design for the laptops, and the laptops are becoming the driving forces of PC sales, according to Market Watch.
However, the global computer industry’s competition is also very intensifying. According to another market research firm, IDC, the world’s top five PC vendors are including HP, Dell, Acer, Lenovo and Toshiba.[10] Although Apple did not step into either of the vast five, it has successfully gained a third place in the U.S. PC vendor market in the second quarter of 2008. From chart 3.2, it can be found that Apple’s market share is 8.5% in US. This result is even higher than two of the top five world players rated in 2007.
Source: ExtremeTech.com ‘Apple Climbs Into Third Place in U.S. PC Market’,
July 17, 2008
3.3 Porters’ Five Forces Analysis
The Five forces analysis can be used to identify the most essential aspects of competition in the consumer electronic industry; it was first developed by Michael Porter at the Harvard Business School (Porter 1980). It consists five parts of major forces to explain the structure of competition in an industry, which are the intensity of rivalry among existing firms, the threat of new entry, the threat of substitutes, the power of buyers, the power of suppliers.
3.3.1 Rivalry among existing firms
The PC and portable music player markets are two most important market segments for Apple Inc. These are all well developed and highly competitive markets. Firms enthusiastic in this market are all big names, such as Dell, HP Compaq, Gateway, and Apple. The competition has driven the PC ticket down which eventually hurt the profit of everyone in this market. However, Apple has sustained a better market position by continuing invest in R&D. Its name and innovative construct has long been attracting customers which helped Apple to gain a higher trace for its product.
Apple’s portable music player is facing very little competition since it is controlling the most innovative design and technology in its product. Their products are now almost dominating this market. It is reported that iPod and its related products take up 58 percent of market shares compared with Sony Walkman’s 23 percent market share even in the Japanese market.[11]
3.3.2 Threat of Modern Entrants
The personal computer market is a very well established market with very large companies in it, such as Dell, HP Compaq, and Lenovo. There are basically two considerable barriers for new entries which are extremely difficult to obtain. First, the begin up of such a company requires an enormous capital investment. The large economies of scale and price war in the personal computer market require new firms to hold a massive investment to keep itself active in comparing heed and technology strength with others. Second, the giant firms in the PC market are all having its own copyright for patents and technologies which made new entries difficult to follow.
The big names either protect them from others or asked the new entries to pay a copy right fee to do so. If they don’t want to buy it from the exiting firms, the company needs to invest in Research and Development to develop their own. However, such technology reach requires not only a great capital investment but also a long time period.
3.3.3 Threat of Substitute Products
Apple’s products are full of competition. Its computer and iPod player are a rapidly growing industry among the market. Companies like Lenovo, Thinkpad uses different series of its product to hide different kinds of needs towards customers. For example, the R Series of ThinkPad is for everyday computing, T series has a premier performance, X series has a Thinnest and lightest feature for business travellers.[12] Dell also specified its product for different user purpose, such as solutions for Home, Small & Medium Business, Sizable Business, Public Sector, Partners.[13] All this can be seen as a substitute of Apple’s computer products since it almost section the same feature with Apple’s product range.
However, Apple has sustained a better state by offering consumers a different operating system, OSX Operating Systems, while others rely on Microsoft Windows Operating Systems. The OSX Operating Systems is wholly owned by Apple. It means Apple can differ the software packages and overall functionality from the other companies. The unique feature of its product also helped Apple to obtain a greater valid from users. It enables Apple’s product stay in an innovative and brand conscious among various competitors. In the other face, such unique operating system has diminutive Apple with some other targeting consumers who are familiar with Microsoft’s Windows operating system. These customers may found it is unnecessary for them to give up a well established habit to follow another note modern system.
For the portable music market, Apple’s iPod, which is based on hard-disk, is inevitably facing a massive competition. There are many alternatives for consumers to choose, such as Sony’s mp3 and other flash memory featured is an alternative for iPod. However, Apple’s product has a better storage and design compared with the Sony’s mp3. Other portable music procedure such as radio, CD player is not in comparable with iPod, because iPod is the leading technology and brand in the current market. But these products are always cheap and easy to be found in the market while iPod is only available in some big town or over internet, which is quite limited to cover the majority of potential customers.
Since iPod is taking a big section of the portable music market, it can be concluded that it faces little competition compared with the computer piece. However, Apple may experience difficulties in keeping its unique feature in the market without a spacious price advantage in the future.
3.3.4 Bargaining Power of Buyer
Apple’s OSX Operating System is the only alternative operating systems available for spend if consumers want to avoid using Microsoft products. This enables Apple to nick the bargaining power of buyers, since there are no other options for the buyers if they prefer to use the products from Apple. At the same time, Apple had actually restrained itself from opening the system to other PC manufactures. It is still argued by some analyst that the reason for Apple not to be as big as Microsoft is mainly because they did not give the copyright of their operating systems to other firms.[14]
All the products of Apple have been retailed by many ways to the whole world market at the same time with almost an identical price. By adopting such marketing strategy, the number of products sold during the new products launch is always pretty high. For example, Apple had sold 270,000 units of the newly launched iPhone 3G in its first week.[15] It is estimated that Apple will sell 5.1 million units in its fiscal fourth quarter, according to Mike Abramsky, of RBC Capital Markets. The popularity of Apple’s products will effectively affect the buying volume of its products and leave very little bargaining power of buyer. Especially the Online store and dispute stores worldwide have consistently helped Apple to earn sale in an efficient time manner.
3.3.5 Bargaining Power of Suppliers
Apple has been obtaining supplies from a large number of vendors to assemble its products[16]. In most of the cases, Apple does not only use a single supplier but a number of them. For example, Apple’s computer storage devices including brands like Hitachi Global Storage Technologies, Western Digital, and Seagate. By having a verity of choices to decide which components to chose, Apple is able to negotiate the product more efficiently. This strategy will also enable Apple away from a sudden short of certain components.
However, some key components are always difficult to maintain if manufactures decided to produce the common products instead of the customized one. The Intel® microprocessors are an example of how Apple is trying to keep this customized supply.[17] Based on efficient communication with the vendor, Apple uses product introduction plans, strategic inventories, coordinated product introductions, internal and external manufacturing schedules and levels to ensure the availability of such components.[18] It has been proved to be an efficient method for both sides. By customizing key components, Apple’s products are more flexible in terms of size and weight which gives them a better position in the market place.
3.4 Conclusion
There are certain limitations for five forces analysis. It can not give a certain prediction of sure industry but a record of it. Because the assumption is focusing mainly on computer industry, products like iPhone are not considered during the analysis. This might be giving an inaccurate explain of the competition picture of Apple Inc.
Nevertheless, the above analysis showed that the computer industry is very competitive. Besides, due to the expect recession of world economy and inflation across the world, the performance of the business can be worse this year. Both of the bargaining power of buyers and suppliers are comparatively strong despite Apple’s inconvenience to increase its bargaining power. The constant price war and quick innovation in the personal computer industry has made companies become more and more difficult to get abnormal earnings. Apple is not likely to keep its high profits due to this constrain in the advance future.
Chapter 4 Brand Valuation
4.1 Introduction
“If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trademarks, and I would fare better than you”[19]
John Stewart (Former CEO of Quaker)
Trace value is an intellectual property that every business holds. It is regarded almost the same as the value of plant and machinery today. However, the values of such ‘intangible assets’ are very unstable compared with the above normal physically existed. Today, there are many arguments on the impact of brand valuation to a High-Tech firm’s value. Apple’s imagination, innovation and differentiation brand name and other trade marks have produced far more value for the company. According to chart 4.1, Apple’s brand value has increased from 9,130 million US dollars to 11,037 US million dollars, and has been listed in the top 100 price name companies in 2007 by Interbrand. It is a 21% increase in such intangible assets to Apple Inc.
Chart 4.1 Apple’s Imprint Value
Source: Interbrand, Best Global Brands 2007
At the same time, Apple’s intangible asset has more than doubled from year 2006 to 2007 according to their balance sheet. Thus it is valuable to understand the valuation process of such brand name. This literature review is dilapidated to get to know the various ways to measure a firm’s brand value in order to get a clearer represent of Apple’s trace value.
4.2 Literature Review
4.2.1 Background of Notice Valuation
Although impress valuation has been studied by John Murphy since 1989, but there is relatively few studies can be found in this area. Because the valuation of brand is not an exact science, it usually involves some exercising of so called professional judgment. The judgment is dependent on three very separate areas, including the law, accountancy and finance, and Marketing. Ideally, According to John Murphy (1989), any brand valuation methodology must have fervent the following three concepts:
* “follow fundamental accounting concepts
* allow for revaluation on a regular basis
* be estimable for both own-developed and acquired brands”[20]
The most celebrated brand valuation methodology till now was developed by a brand consultancy firm, named Interbrand. The company had published the first of its study for brands valuation in 1990; the book is named
World’s Top Brands. Interbrand’s scrutinize on brand valuation is very popular in the US, Europe and Australia. It is often applied when dealing with mergers and acquisitions, brand strategy development and brand licensing, fund-raising in these geographic areas.[21]
Interbrand believes that the value of a brand is mainly dependent on its economic assist. They use five steps to approach the intrinsic value of a brand. As it can be found on graph 4.2, this valuation methodology is including segmentation, financial analysis, demand analysis, price strength analysis, and the calculation of net present value of the brand earnings respectively.[22]
Graph 4.2 Interbrand’s Tag Valuation Steps
Sources: www.interbrand.com
The segmentation of the brand step is the first step, it is to put the sign into a product category and then geographically separate the product by different features. Graph 4.3 shows an example of how brand segmentation works. During the step in financial analysis, the map is focusing on the brand earning and uses Economic Value Added (EVA)[23] to determine it. The role of brand index (RBI)[24] and Brand Strength Score (BSS) [25]will then be calculated in the following two steps. Based on a five years earning forecast, the final NPV value will be calculated by assuming a discount factor. An example can be found in appendix 3. This final value will show the intrinsic value of a brand.
Graph 4.3 Brand Segmentation
Sources: www.interbrand.com
Generally speaking, there are three methods in valuing an ‘intangible asset’, which is including cost, earnings and market advance. The Interbrand’s valuation methodology can be considered as an earning arrive in valuing notice names. Economically, the value of a sign name or trade sign would be related to the loss in profit when such name is not allowed to be in spend for the current holder.[26] This method can be considered as a cost based method to value a note. Market value of a brand is through reference to market transactions involving similar brand names.[27]
4.2.2 Are Brand Valuation Matter When Valuing High-Tech Companies?
High-Tech companies often have a higher value for its designate name, such as Microsoft, Apple and Dell. These are all among the top 100 brand name of 2007 according to Interbrand’s report. A proper valuation model is important to understand why the values of such companies are so high.
The Interbrand’s valuation methodology is the most practical one as it has already adopted by industries. It measures the impress by its earning ability rather than a pure assumption. As long as the brand and trade marks are providing an extra income to the company, it is reasonable to recognize a value on the price.
However, many companies are quite reluctant while listing their brand values to their balance sheet. Even more, most of the accounting regulations in the world does not recognize brand name and trade marks as an asset in the balance sheet. Another reason is due to the unstable of brand value. For example, an air service company’s brand value can be simply destroyed by one single air atomize.
4.3 Conclusion
Although a company’s brand value can be measured according to the above mentioned three methods. There are mild some obstacles in these brand valuation. The most distinct one is that it has quite different results when applying with different valuation methods.[28] Second, all of the measurements are based on some assumptions stated by those professional rather than industry standards. For example, the Interbrand’s valuation is dependent on a assumption that the company will grow forever with a ratio sometimes even higher than the national GDP growth. Thrid, stamp value is a very unstable value, once the products of the company are found unhealthy to human beings, like the iPod case (mentioned in the company analysis), the value of the price and trade marks will become a nightmare for business.
Chapter 5 Company Analysis
5.1 Introduction
This chapter is a business study of Apple Inc itself. It will be started by a brief discussion of the company’s corporate governance and business strategy. Then, the PEST and SWOT analysis will be added to derive an opinion of the company’s business environment and future growing opportunity. In the last part, Apple’s financial situation, such as profitability, cash flow management, investment ratio will be discussed.
5.2 Corporate Governance
According from Apple’s webpage, the corporate governance fragment, Apple said, it conducts its business with ethically, honestly manner and in full compliance with all laws and regulations.[29] Apple requires not only all the member of its staff but also the business partner it deals with to have a high ethical standards. This business attitude is considered to be a key component to the success of Apple Inc.
There are currently seven members in the company’s Board of Directors. Their paramount duty is to oversee the CEO and other senior management staff’s operation. The Board of Directors consists of three committees, which are including Nominating and Governance Committee, Audit and Finance Committee, Compensation Committee. The existing of these three committees will help to ensure the company’s daily management. All of its members have met with the criteria for independence established by the NASDAQ Stock market. This is quite typical as a public listed corporation in the United States. It can be found from the company’s competitors who fraction some identical committees.
Michael Bush (2008) has wrote that the connection between Apple and Steve Jobs is unlike any other brand and CEO relationship in the US or even the whole world, Apple’s success is mainly contributed from this man’s wisdom and technological innovation.[30] Steven P. Jobs is one of the directors and Chief Executive Officer of the company. He is also a co-founder of Apple Inc. Mr. Jobs re-joined Apple in 1997 and his continued leadership is considered to be critical to Apple. Since he re-joined Apple, Mr. Jobs entire compensation is only $1 annual salary. However, Apple has awarded him with a grant of 5 million shares of restricted stock in March 2003 and an aircraft as an executive bonus in 1999. Apple’s Mix of Equity, Cash Incentives and Salary compensation policy is effective in attracting entrepreneurial, creative executives and promoting the management’s long-term commitment to Apple.
5.3 Business Strategy Analysis
5.3.1 General Business Analysis
Apple is a leading company in the personal computer industry. It is the only company which controls both the operating system and hardware of personal computer. Now it has expanded its market to not only personal computing, portable digital music but also mobile communication equipment and its related computer software. This business strategy has enabled Apple to have greater economies of scale to compete with other companies. William J. Baumol, Alan S. Blinder (2005) said in its economics book that the production relationships with economies of scale lead to long-run average cost curves that decline as output expands.[31] Apple has been constantly invested in research and development to deliver its unique innovative products and technologies with a rapid update.
The company is aimed to bring the best available digital life to students, educators, creative professionals, business, government agencies, and consumers.[32] Digital lifestyle is a new concept built just after computer came into our society. It brings an ease and comfort lifestyle to consumers.[33] Apple sells its product via several distribution methods, including but not limited to retail stores, online stores and exclusive contractors worldwide. The company has been increasing the number of its retail stores year on year worldwide. According sources from its company’s webpage, it has over 200 retail stores worldwide now. All of these are located in the traffic centre and give Apple a greater image to publics. It believes that such direct contact with targeted customers is an efficient way to communicate with.
The author also paid a visit to one of Apple’s Stores in Edinburgh. Unlike other computer store, Apple’s store enable a greater function to consumers, it brings not only the real product but also the all the necessary function to its potential customers. For example, the author has tried to watch Youtube[34] from iPhone in Apple’s Edinburgh store while others do not normally enable internet function with its products in stores. The author believes such experience helped him to finally purchase one of their products in the store.
5.3.2 Competitive Business Analysis
Apple’s competitive strategy is, however, not focused on the cost-leadership as most of its competitors are all trying to reduce both the cost and price. The company paid more attention on the differentiation strategy since the market is tubby of identical products. Its unique operating system, Mac OS X, accompanied with powerful graphics and audio technologies, plus the customized components, it enables Apple to give its customers a completely different experience compared with other low-cost computer.
More important, Apple has created itself with an image as the industry leader in technology innovation, and had technology fans all over the world. The name of its brand, a multi-colour apple logo, has became an unmistakable icon and famous for its innovative products and popular designs. Further more, the recent introduced mobile device, iPhone, is believed to be the next generation of its kind. This is an example of how innovation changed the way business organized. All the other companies are all seem busy to catch up with the path of Apple.
5.4 PEST Analysis
5.4.1 Introduction
With the help of PEST analysis, it is possible to gain an understanding of Apple’s business potential, future market situation and the direction of its operation. The political, economic, social and technological factors are four components of PEST analysis. Considering the PEST analysis is powerful and covering lots of factors in identifying SWOT factors, the SWOT analysis will be simplified in the next part to show a graph recount of the list of factors involved in both of the above analysis.
5.4.2 Political Factors
Apple’s business operation is currently performed all over the world. According to Chart 2.2 (it can be found from page 8 of this dissertation), there are around 52% of the company’s net sales in 2007 coming from countries outside America.[35] War, terrorism, geopolitical uncertainties, public health issues may affect the company’s business greatly. All these events are far beyond the company’s ability to control.
Further more, Apple has outsourced its components, product manufacturing, transportation and logistics management to many third-party manufactures to lower operating costs. Many of these third-party manufactures are located outside the U.S.A. For example, the final assembly of the company’s products is being performed in countries such as Cork, Ireland, Korea, China and Czech Republic.[36] The manufacturing or logistics in these countries might be interrupted by political events. Once it is delayed by such political events, Apple may not be able to deliver its products to its customers on time. Such events will damage the credit image of the company to both consumers and retailers.
5.4.3 Economic Factors
The overall global economy outlook is not as good for this and the following. The raise of oil and food prices has lead inflation to the world economy while the consumers’ income has not been much reduced. Since consumers are also facing a greater risk of being unemployed, it will push them to exhaust less in consuming luxuries goods, like update their current computer or to buy a current iPhone. This will have a quite big influence on Apple’s retail business.
The exchange rate between dollars and other currencies like euro and pounds sterling has fallen sharply since the credit crunch and the housing market problem in the US. The following chart 5.1 tells the weakening of the dollars against the euro as of 4-July-2008.
Chart 5.1: USD to EUR
Source: yahoo.com
Considering the US economy will continue going down this year, the exchange rate might be falling further down. However, Apple has used foreign exchange forward and option positions to hedge the currency movement’s risk. The forward and option position means Apple has purchased its foreign currency in a fixed price well ahead they actually receive such income. The adverse effect of the exchange movements can be minimized by such financial instruments. Indeed, the continual depreciation of the US currency had increased Apple’s revenue and other receivables in the overseas market so far.
5.4.4 Social Factors
Health safety and environmental protection are becoming more and more an important issue in countries which the company is operating its business. A variety of regulations and laws may adversely affect the company’s financial condition and operating results by requiring a great disposal or recycling of Apple’s products. Particularly, there are now various countries within Europe and Asia, certain Canadian provinces and clear states within the U.S adopting such regulations to against companies like Apple Inc.[37] Certain products of the company is actually face health issues because of the invent scrape. It is reported that the improper expend of iPod may lead to hearing loss for users.[38]
5.4.5Technology Factors
The market for PC, portable music player, mobile phone and other consumer electronic products are subject to not only huge competition but also fast technological changes. The short product life, frequent introduction of new products and the continual improvement in product performance and design requires the company to continue invest in the research and development in order to stay in the top of the industry. Apple’s control over the entire production procedures of personal computer and the continual innovation on iPod and iPhone is a clear advantage over its competitors. Others have to simply follow its path. In the other hands, the increasing cost on R&D causes Apple to spend its capital reserve compared with its competitors. For example, Dell uses Microsoft’s operating system in all of its products while Apple installs its own brand operating system. But as a leading company in the industry, it might be worth to keep its advantage in such cases.
5.5 SWOT Analysis[39]
The SWOT analysis is simplified in this table and details of each discussion can be found from 5.4 PEST analysis.
Strengths
- Customer Loyalties
- Innovation
- Product Diversification and Differentiation
- Current Mac OS X operating system
- World market capacity
Weakness
- Awful Product Quality Control
- High Price
- Lack of market consideration when launching new product
- Zero Dividends Policy
Opportunities
- Novel stake in the mobile phone industry
- Entry to the emerging economy
Threat
- Strong competition in the technology market
- Substitute products are widely available in the market
5.6 Financial Analysis
5.6.1 Capital Structure and Liquidity Analysis
There are 882 million shares outstanding for Apple Inc, the majority of the outstanding shares are owned by institutional investors, which takes up 65% of the total. Large institution ownership helps the company to maintain a smaller risk of being taken over, at least in a short run basis. It also means the company will be continue growing without fare for stock market change, as these big institutions don’t usually sell their stocks once the market goes down, and they are always being referred to long term investors.
Apple’s debt to equity ratio is being kept zero in the most recent three years. Debt to equity ratio is the percentage of the proportion of all borrowing, such as long-term loan, bank overdrafts to total capital employed or the amount of equity, it also known as gearing ratio.[40] The zero rate of such ratio means that the company prefers to use its own money instead of borrowing to invest in its business. Thus the company’s interest coverage is also zero as it is shown in table 5.2. Interest coverage is an important ratio to measure Apple’s ability to meet required interest obligations.[41] The zero rate of its kind has minimized the risk in borrowing a high debt to finance its business, but the company may lose the advantage of financial leverage.[42] Alternatively, the zero gearing ratios or debt to equity ratio can help the company to net long term debt with more flexibility in the future. Zero long term debt also means the company has a solid financial reserve to facilitate its risk. As it is shown in table 5.2, Apple’s current ratio and hastily ratio are kept higher than two in the most recent three years. Thus the company is considered to have a solid short-term financial strength. It is reasonable to occupy that Apple’s ability to meet its financial obligation is high and it can easily find debt to finance its business with, probably a lower borrowing cost.
Table 5.2 Financial Health
Year:
2005
2006
2007
Financial Strength
Gearing Ratio
0.00
0.00
0.00
Interest Coverage
0.00
0.00
0.00
Current Ratio
2.96
2.25
2.36
Quick Ratio
2.91
2.21
2.34
Source: Apple Inc FY 10K Annual Report
5.6.2 Cash Flow Analysis
It can be found from the chart 5.3 that Apple’s net sales have been continuously increasing in the last three years. However, the revenue of this company is increasing in a decreasing rate, as it is shown in table 5.6; such growth rate has decreased from 38.7% in 2006 to 24.3% in 2007 according statistics from Apple’s financial represent.
Source: Apple Inc 2007 10K FY Annual Report PP 56
At the same time, Apple’s net income has increased from 1,328 million USD in 2005 to 3,496 million USD in 2007. Chart 5.4 shows that the net income is more than doubled in just three years. Moreover, the rate of increase of such net income is 75.8% in between 2006 and 2007. The increased net income is largely contributed by a good cash management skill since the company is suffering from a continual slowing rate of sales growth
Source: Apple Inc 2007 10K FY Annual Represent PP 56
According to table 5.5, Apple’s cash and cash equivalents growth, end of each year, is fairly stable. Despite a negative results from investing activities, both of Apple’s cash generated by operating activities and financing activities have more than doubled. More than half of Apple’s changes in operating activities are contributed by changes in operating assets and liabilities while the other half is from increased net income.
Table 5.5 Apple’s Cash Flow Activities (USD in Million)
Year:
2005
2006
2007
Cash generated by operating activities
Cash generated by investing activities
Cash generated by financing activities
Cash and cash equivalents, end of the year
Source: Apple Inc 2007 10K FY Annual Characterize PP58
As it is shown in Apple’s consolidated cash flow statements in 2007, the most significant change is in purchasing assets; such activity’s cash flow has increased from a negative 1,040 million USD in 2006 to a positive 81 million in 2007. Most of the reason in explaining the increased cash creep in financing activities is the continual excess tax benefits from stock-based compensation and fewer repurchases of common stock compared with 2006. The company’s stock bonus paid to its management is an indispensable factor here.
Since Apple is an aggressive company in producing leading technology in the IT industry. Apple’s last year’s investment in purchases of short-term investments and some payment for acquisition of intangible assets are both largely increased. The growth in such investment leads the cash generated by investing activities made a loss of total 3,249 million USD in 2007.
Despite the increasing investment for technology and other intangible assets, Apple has maintained a continuing increase of cash and cash equivalents at the end of every year. This is quite helpful in keeping a superb financial health of this company. Because the zero gearing ratio and high current ratio has kept the company away from liquidity risk and sufficient fund left in every year is obedient for further investment needs. This financial management strategy has enabled the company a greater ability in investing new technology and borrowing debt as well.
5.6.3 Key Financial Ratio Analysis
The revenue growth of Apple has been increasing in a decreasing rate since it hits a 10 years high in 2005, dropped to 24.3% in 2007. However, the company’s 5-Year annual average sales growth rate is calm as high as 33.12% while the industry is only 28.13%. Table 5.6 shows Apple’s gross margin has increased from 29.0% in 2006 to 34.0% in 2007, it is reasonable to expect the company’s sales to be increased in this year. Indeed, the latest financial quarter shown that the company has achieved 42.7% of sales growth while the industry only did 34.90% in the same period. This is believed to be resulted from the surging Macintosh revenues.[43] The introduction of iPhone 3G in July this year will also help sales to grow in the remaining financial periods.
Table 5.6 Profitability and Management Efficiency
Year:
2005
2006
2007
5 Yr.Avg
5 Yr.Avg (Industry)
Management Effectiveness
Return on Equity (%)
17.9
19.9
24.1 ↑
19.84
10.90
Return on Assets (%)
11.5
11.6
13.8 ↑
12.03
5.82
Growth Rates
Sales Growth (%)
68.3
38.7
24.3 ↓
33.12
11.23
Growth Margin (%)
29.0
29.0
34.0 ↑
30.33
29.48
Net Profit Margin (%)
9.5
10.3
14.6 ↑
9.96
4.80
Source: Thomson Reuters
Further more, Apple’s management efficiency has slightly improved in the last three years, as it is shown in table 5.3, both of the ROE and ROA has increased to a new high. Table 5.3 also suggests that the five year average industry management effectiveness figures are only half of what Apple has made.
Table 5.7 shows that both of Apple’s P/E (price to earning) ratio and EPS (earning per share) have done a very good result in 2007 compared with its major competitors. The price earning ratio for Apple is 50.5 while the same earning on S&P 500 is only 16.5. Apple’s P/E ratio is also higher than the major competitor, such as HP and Dell, which can be found from table 5.4. The company’s earning per share is also higher than the competitors did in 2007. High P/E and EPS ratio might indicate Apple’s stock return will be better compared with others.
Table 5.7 Valuation Ratio
Year:
2005
2006
2007
Apple Inc
[46]
4.13%
Cost of Equity (5 Year Avg. Industry)[47]
10.90%
Market Premium
6.77%
Beta (Bloomberg)
1.11081
Cost of Equity/WACC
11.65%
Source: Bloomberg.com
Formula 6.2
Cost of Equity=Risk Free Rate + Beta × Market Premium[48]
6.2.1 Limitations of DCF Model
There are certain limitations on the result of DCF model. The model is based on several key assumptions, such as the cost of equity, beta, market rate of return and the future growth rate. These ratios are all pre-determined in an industry average basis. It may execute different results by changing the value of the assumptions. Second, the model ignores the potential risk associate with the company once they failed to accomplish such results or even over perform in the future earning. Thus the result of this model may be imprecise under these circumstances.
6.3 P/E Multiple Model
Price earning multiple business valuation models can provide a benchmark for business valuation. As table 6.3 indicated, The P/E multiple is from YAHOO technology industry average PE ratio, EPS was calculated by the estimated net income of 2008 financial year dividing the number of shares showed in Apple’s most unique financial report. The estimated share value is equal to the industry average PE ratio multiplied by the estimated earning per share.
Table 6.3 P/E Multiple Model
P/E Multiple Model
P/E Multiple (Industry Avg.)
19.49
885.875706
Fraction Value
US$96.12
Source: yahoo.com
According to the formula 6.4, Apple’s target share value is equal to USD 96.12 while its current share price is USD 162.12 (as of 25/07/2008). This result shows that Apple’s present share sign might be over valued based on P/E multiple model.
Formula 6.4
Allotment Value=P/E Multiple × Estimated EPS[49]
6.3.1 Limitations on P/E Multiple Model
There are two important factors in this model were being estimated, including PE multiple and earning per share. The estimated EPS was calculated by dividing the 2008 estimated net income with total shares outstanding. Both of the variables in formula 6.4 might be imprecise since it is based on a series of assumption which can be found in appendix 1. Investors should beware that the price arrived by this model is only marvelous for being an additional consideration of the previous model.
6.4 Important factors which may influence the results of the above calculated
Although this dissertation does not include much discussion on the mobile industry, and Apple’s iPhone business section is only taking a small scale of Apple’s overall sales performance in 2007, the new iPhone 3G product’s sales performance is quite grand when it is launched this year. There can be a significant change in Apple’s overall revenue based on iPhone 3G’s sales results and share brand can be significantly increased in this case. While there are a lot of expectations over iPhone’s business results, it also should be noted that the product has several complaints. The new iPhone 3G does not seem to fulfil its promised performance and network connectivity expectations.[50]
Chapter 7 Conclusion and Recommendation
7.1 Introduction
According to the investment analysis of Apple Inc, it is very risky to invest or hold Apple’s shares. Both of the discount cash pace and P/E multiple models have proved that the company is overvalued by the market. Further more, the US economy is running into a recession period. Such slow down will not be changed in year 2008.
The technical analysis is also suggesting that Apple’s stock price will go down. As chart 7.1 indicated, Apple’s most unique stock effect and the ten weeks moving average price are both moving like a double top pattern.
Chart 7.1 Apple’s Stock Mark Change
Price as of July 25, 2008 USD 162.12
Source: yahoo.com
This is a very typical technical pattern which suggesting the price will soon move down by creating an “M” pattern. The 30 week appealing average price, as shown in chart 7.1 is also suggesting that the price has kept itself for the same trend for more than two months.
Chart 7.2 shows that both the S&P500 and Apple’s stock price are moving in a downward trend. Based on the above analysis and the evidence collected in the whole witness, the final recommendation on this company is to SELL!
Chart 7.2 Apple’s two years stock price compared with the S&P 500
Source: yahoo.com
7.2 Limitations of the Study
It is always difficult to tell what will happen exactly in the future. Although a comprehensive eye has been done on this company, there are still some limitations in it, such as time constraints on the research and the unavoidable bias estimate of the model itself. Thus it is important to know each valuation model or fundamental model’s advantage and disadvantage, which will be clearly stated in each chapter. Readers should then be aware of the study results are actually based on many assumptions, for example, the cost of equity in analysis the future share price of the company is an estimate using average industry cost of equity ratio.
Appendices
Appendix 1
Apple Inc
Estimation USD in Million
Fiscal Years Ending 9/30
13931
19315
24006
31207.8
37449.36
43066.76
49526.78
56955.8
EBIT
Operating Profit Margin
13.03%
14.59%
20.86%
20%
15%
15%
15%
15%
480
829
1512
1872.468
1685.221
1938.004
2228.705
2563.011
26.45%
29.42%
30.19%
30%
30%
30%
30%
30%
2008E
2009E
2010E
2011E
2012E
Terminal
DCF Model
Free Cash Flow
4369.092
3932.183
4522.01
5200.312
5980.359
5980.36
PV (Free Cash Flow)
3913.20
3154.40
3249.04
3346.53
3446.94
119607.17
Total
136717.2795
Shares Outstanding
Source: www.interbrand.com
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Apple’s Website, News Piece ‘
Apple to Use Intel Microprocessors Beginning in 2006′:
http://www.apple.com/pr/library/2005/jun/06intel.html
Apple Inc
10K 2007 Annual Report
Apple’s Corporate Web Page: www.apple.com 25 July, 2008
Abratt, Russell, Bick, Geoffrey (2003), ‘Valuing Brands and Brand Equity: Methods and Processes’ Journal of Applied Management and Entrepreneurship
Business week, ‘
Economists say UK economy in trouble’, July 15, 2008
Brad Miser (2002), Mac OS X and the Digital Lifestyle, Thomson Course Technology PP268
Catherine Tremblay, (2008) ‘A How-To Guide to Assessing Brand Value’, brandchannel.com
Dell Corporate Website: http://www.dell.com/ 25 July, 2008
David Logan Scott (2003), ‘Wall Street Words: An A to Z Guide to Investment Terms for Today’s Investors’, Houghton Mifflin Reference Books PP192
Financial Times (London, England) Thursday London Edition2 “
Macs surge shields Apple from recession fears” April 24, 2008
Graham Mott (2008), ‘Accounting for Non-Accountants: A Manual for Managers and Students’, Kogan Page Polishers PP102
Geoffrey A. Hirt, Stanley B. Block (2004), ‘Managing Investments’, Mc Graw-Hill Professional, PP149
Interbrand www.interbrand.com 25 July, 2008
IMF,
World Economic Outlook, APR 08, PP241
John McCormick (2007), Cio Zone, ‘
The Top 5 PC Vendors For 2007′, http://www.ciozone.com/index.php/Server-Technology-Zone/The-Top-5-PC-Vendors-For-2007.html
Judy Mottl, (2008), ‘iPhone Lawsuit: Woes Ahead for Apple, Carriers? ‘, Internetnews.com
John Murphy (1989), Brand Valuation, Establishing a true and fair view, Hutchinson Business Books, PP32
Jeffrey A. Dubin (2006) ‘Valuing intangible assets with a nested logit market share model’ PP 24
Lenovo’ Thinkpad Website: http://www.pc.ibm.com/uk/thinkpad/25 July, 2008
Market Watch: ‘
Gartner raises 2008 outlook for PC sales’ http://www.marketwatch.com/
Matt Haig (2006), Brand Royalty: How the World’s Top 100 Brands Thrive $ Survie, Kogan Page Publisher, PP107-112
Market Watch, ‘More excitement greets Apple’s new iPhone’, July 11, 2008 Friday
Michael Bush, ‘Why Apple must tell its story; With fortunes so tied to Jobs, marketer needs to lay out succession plan’, from Advertising Age, July 28, 2008
Newsweek, ‘
Not Made In Japan; once upon a time, the country was a leader in technology. Now it’s struggling to find its place in the digital age. Can an entrenched corporate culture change? ‘ February 25, 2008 U.S. Edition
Reuters Finance, http://www.Reuters.com 25 July, 2008
Simon Benninga, Benjamin Czaczkes (2000), ‘Financial Modeling’, MIT Press PP35
Sunday Times (South Africa) ‘
No need for Slit wrists, it’s objective a cycle’, August 03, 2008 Business Times Edition
Nasdaq Finance, Nasdaq.com 25 July, 2008
The Econommic Times, ‘
iPods leading to a new generation of deaf young adults’, http://economictimes.indiatimes.com/
THE KOREA HERALD, ‘Recoupling’ Could drag down global economy’ February 22, 2008 Friday
U.S. Department of Treasury, http://www.ustreas.gov/,
10 Year Treasury bond Rate, July 25, 2008
Yahoo Finance www.yahoo.com 25 July, 2008
Wendy Lomax, Adam Raman (2006), ‘
Analysis and Evaluation: Analysis And Evaluation”, Butterworth-Heinemann, PP55
William J. Baumol, Alan S. Blinder (2005), Economics: Principles and Policy, Thomson South-Western, PP 135
[1] From Reuters.com
[2] IMF, World Economic Outlook, APR 08, P241
[3] Apple Inc 10K 2007 Annual Report PP42
[4] THE KOREA HERALD,
‘Recoupling’ Could slither down global economy’ February 22, 2008 Friday
[5] IMF, World Economic Outlook, APR 08, P241
[6] Businessweek, ‘Economists say UK economy in trouble’, July 15, 2008
[7] IMF, World Economic Outlook, APR 08, P241
[8] Sunday Times (South Africa) ‘No need for Slit wrists, it’s just a cycle’, August 03, 2008 Business Times Edition
[9] Market Watch: ‘Gartner raises 2008 outlook for PC sales’ http://www.marketwatch.com/
[10] From: http://www.ciozone.com ‘The Top 5 PC Vendors For 2007′,
[11] Newsweek, ‘Not Made In Japan; once upon a time, the country was a leader in technology. Now it’s struggling to score its place in the digital age. Can an entrenched corporate culture change? February 25, 2008 U.S. Edition
[12] Lenovo Website: http://www.pc.ibm.com/uk/thinkpad/
[13] Dell Website: http://www1.euro.dell.com/content/default.aspx? c=uk&l=en&s=gen
[14] Matt Haig (2006),
Brand Royalty: How the World’s Top 100 Brands Thrive $ Survie, Kogan Page Publisher, PP107-112
[15] Market Watch, ‘More excitement greets Apple’s new iPhone’, July 11, 2008 Friday
[16] Apple’s 10K FY07 PP 11
[17] Apple’s Website, News Portion ‘Apple to Use Intel Microprocessors Beginning in 2006′: http://www.apple.com/pr/library/2005/jun/06intel.html
[18] Op. cit PP 11
[19] Wendy Lomax, Adam Raman (2006), ‘Analysis and Evaluation: Analysis And Evaluation”, Btterworth-Heinemann, PP55
[20] John Murphy (1989),
Brand Valuation, Establishing a true and comely view, Hutchinson Business Books, PP32
[21] From www.interbrand.com
[22] From www.interbrand.com, Sign Related Services, The Key to unlock the benefits from your brand assets
[23] Economic Value Added or EVA is an estimate of true economic profit after making corrective adjustments to GAAP accounting, including deducting the opportunity cost of equity capital.
[24] The role of brand index or RBI is multiplied with the EVA, yields the heed earnings
[25] Brand Strength Score or BSS explains how strong the effect is compared with its competitors on the basis of seven factors (i.e. market, stability, mark leadership, trend, brand support, diversification, and protection)
[26] Jeffrey A. Dubin (2006) ‘
Valuing intangible assets with a nested logit market allotment model’ PP 24
[27] Catherine Tremblay, (2008) ‘
A How-To Guide to Assessing Brand Value’, brandchannel.com
[28] Abratt, Russell, Bick, Geoffrey (2003), ‘
Valuing Brands and Brand Equity: Methods and Processes’ Journal of Applied Management and Entrepreneurship PP2
[29] From Apple’s Corporate Web Page: www.apple.com
[30] Michael Bush, ‘
Why Apple must tell its story; With fortunes so tied to Jobs, marketer needs to lay out succession plan’, from Advertising Age, July 28, 2008
[31] William J. Baumol, Alan S. Blinder (2005),
Economics: Principles and Policy, Thomson South-Western, PP 135
[32] From Apple’s website, company introduction, www.apple.com
[33] Brad Miser (2002),
Mac OS X and the Digital Lifestyle, Thomson Course Technology PP268
[34] Youtube is a online video sharing website, detail can be found from youtube.com
[35] Apple 10k FY: PP 12
[36] opt cit PP 17
[37] Apple 10K FY07 PP23
[38] The Econommic Times, ‘iPods leading to a new generation of deaf young adults’, http://economictimes.indiatimes.com/
[39] SWOT analysis is primitive to resolve a company’s ability to compete against other businesses that sell similar products or services in the same marketplace and to the same target customers.
[40] Graham Mott (2008), ‘
Accounting for Non-Accountants: A Manual for Managers and Students’, Kogan Page Polishers PP102
[41] David Logan Scott (2003), ‘
Wall Street Words: An A to Z Guide to Investment Terms for Today’s Investors’, Houghton Mifflin Reference Books PP192
[42] Financial leverage is the extent to which a company finances the acquisition of its assets by means of debt: that is, a company that borrows money to acquire assets engages financial leverage.
[43] Financial Times (London, England) April 24, 2008 Thursday London Edition2 “Macs surge shields Apple from recession fears”
[44] TTM=Trailing 12 Months
[45] Appendix 2
[46] U.S. Department of Treasury, http://www.ustreas.gov/, 10 Year Treasury Bond Rate, July 25, 2008
[47] From Yahoo Finance www.yahoo.com
[48] Simon Benninga, Benjamin Czaczkes (2000), ‘
Financial Modeling’, MIT Press PP35
[49] Geoffrey A. Hirt, Stanley B. Block (2004), ‘
Managing Investments’, Mc Graw-Hill Professional, PP149
[50] Judy Mottl, (2008), ‘
iPhone Lawsuit: Woes Ahead for Apple, Carriers? ‘, Internetnews.com
[51] July 27, 2008 Stock Price, from Nasdaq.com
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Filed under Small Business Phone Numbers by on Feb 19th, 2011.
It’s hard to believe that only around fifteen years ago, Apple, Inc. was at its nadir. The operating system wars were long over; Microsoft’s “quick and dirty operating system”, aka MS-DOS, was replaced by Windows 95, essentially bringing the long war to a seeming conclusion, and Apple had lost. Hope came from an unlikely place: Steve Jobs, who, as The Apple Museum relates had left Apple in 1985 following a bloody boardroom tussle. Since leaving Apple, Jobs had started up the Next computing company, while Apple’s fortunes continued to sour. Finally, in 1997, Apple bought Next, and Jobs returned in a small way; the following year, Jobs took over. By 1999, BusinessWeek reported that thanks in part to Jobs, Apple was on the rebound. Further successes followed, including the massively successful iPod that monopolized the industry and sold 100 million devices by 2007, according to Engadget.
Apple is once again a hot property, and the lean times of the 1990s seem to be behind them. That said, Apple is a corporation like any other, and it’s made its fair piece of mistakes—more of its fair share, in fact, considering that Apple has consistently attempted to be the trendsetter in the technology world. But all gambles are risks, and sometimes Apple lost big. Here are ten of their worst products and worst failures (in no particular order, because it’s tough to play favorites with horrible things.)
1. The Lisa (1983)
The idea: Create an affordable, approachable and cutting-edge computer for the rest of us.
What happened: Apple created the massively unaffordable Lisa. At about $10,000, the Lisa would be pricey today, but factoring in inflation, what cost ten gargantuan in 1983 would cost around $21,000 today (do the math yourself at the Inflation Calculator.) While the Lisa was cutting-edge, commercializing Xerox PARC’s graphics-based user interface, the GUI (the foundation of all modern computing), the Lisa’s price made its only audience businesses, who weren’t willing to switch to an untested format. Other problems included its nonstandard floppy disk drives, and despite attempts to burnish the Lisa’s image, it was essentially distrusted by the public. Lisa’s failure, however, informed the now-classic 1984 inaugurate of the first Macintosh, which was the success the Lisa never was. According to Infoworld, by mid-1985 the microscopic Mac that could comprised 20% of the personal computer market, and its more affordable and modular design caused Apple to dump the Lisa in 1986, by which point the Mac was recognized as the better product.
2. The G4 Cube (2000)
The idea: Push the limits of computer get, and hopefully sell the public on that design.
What happened: The gain was the lawful triumph of design over utility. Apple has always been known as favoring stylish designs—it had produced the fabulously expensive (and futuristic-looking) 20th anniversary Mac, but that had always been intended as a limited product. The G4 Cube, however, was supposed to be a big current product, released with grand aplomb. It was a critical darling at first, but that didn’t stop it from being scrapped less than a year later. The problems, as MacWorld reported, were great in number. First off, it was expensive, and consumers looking for power would pick a PowerMac G4 instead. Secondly, its dinky enclosure meant that its expansion options were severely limited. With a bad price point and no clear niche in the Apple computer lineup, the product was doomed to failure. It has a spiritual successor of sorts in the small Mac Mini, but even that computer is easier to upgrade and doesn’t lack audio input.
3. The Windtunnel (2002)
The idea: Release a new generation of PowerMacs. Simple, right?
What happened: Apple released the mirrored drive door (MDD) PowerMac G4 in August 2002. The computers were certainly snazzy; unfortunately, as users soon realized, the computers were unbearably loud. So loud, in fact, that one manufacturer created special cases that you could stick your computer into to carve down on the noise. When you consider that a significant chunk of Apple’s consumer base were and are audio professionals who have to hear things for a living, you can imagine how this problem transcends mere annoyance. Fans dubbed the machines “windtunnels”, Wired reported, and it took an uprising of disgruntled PowerMac users to force Apple to prefer steps such as software updates and replacement options to alleviate the issues.
4. The Newton (1993)
The idea: Create a small, portable personal data assistant (PDA).
What happened: First off, “shrimp” in this case is very much relative: just look at this narrate comparing a Newton to an iPhone. Yikes! The Newton pioneered many useful features that we now take for granted, but its ungainly size, poor battery life and screen essentially doomed it. First released in 1993, the Newton product line lasted until early 1998, earning itself something of a cult status, but not powerful else. Ultimately, the Newton’s advances in handwriting recognition would influence Palm in its Palm Pilot, which became the successful PDA everyone thinks of when they hear the name.
5. The Pippin (1995)
The idea: Create a hybrid personal computer-gaming system with online capabilities.
What happened: Once again, the Pippin was an Apple product that was revolutionary, but never ended up being the device that popularized its technology. Unable to invent the Pippin on its own Apple partnered with Bandai to release the product in 1995 and 1996. It boasted a 14.4 kbits modem for internet connectivity, a feature no other game console on the market had, but unfortunately its high price and the glut of more-supported systems (including the Sega Saturn, Sony PlayStation, and Nintendo 64) led to its lickety-split demise. Apple hasn’t dipped its toes in gaming waters since.
6. The Hockey Puck Mouse (1998)
The idea: Hey, this new computer looks quirky, let’s make the mouse quirky too!
What happened: Apple created what CNET called one of the worst tech products of all time, and even Mac fanboys like myself will admit that it is quite possibly the worst pointing device created by man. The round, hockey-puck shaped mouse was difficult to hold for those with puny hands, and its entirely circular develop made it nearly impossible to exclaim which part of the device was supposed to point up. As CNET points out, however, the iMac and its abysmal mouse helped standardize adoption of USB peripherals, which everyone will agree is a good thing. Still, was it worth it?
7. Apple Hi-Fi (2006)
The idea: Apple can make computers, Apple can make music players. Why not speakers?
What happened: Apple stepped on its own toes and got burned. From a business standpoint, it’s hard to say what Apple was thinking. By the release of the Hi-Fi in 2006, the iPod was the dominant digital music player, and dozens if not hundreds of companies were producing speakers with integrated iPod docks. Why would Apple want to threaten a booming industry that helped push adoption of its product? But try they did with the Hi-Fi. Its problems were many: it was pricey, which didn’t mesh with its integrated and compact design. The iPod jutted out of the top of the system exposed, making it easy to damage. The iPod Hi-Fi disappeared September 2007, and as TUAW noted, few missed it.
8. Copland (1991)
The idea: The next-generation Apple operating system.
What happened: Apple tried to create a superior successor to the MacOS, but after years of work, they had miniature to show for it. Eventually the whole project was scrapped by 1994. To be fair, Copland might have been a failure, but it was also a blessing in disguise of sorts; having failed at producing their own operating system, Apple shopped around, leading them to buy Nextstep OS, bringing Jobs back to Apple to head their resurgence.
9. Macintosh TV (1993)
The idea: Fuse a Mac and a television set! What could go wrong?
What happened: It seems premature to declare the AppleTV a failure, but there’s no doubt that the Macintosh TV was one. It was released in 1993 and scrapped the next year. To be fair, it did start the computers-in-black trend, and its all-in-one design makes it a crude forerunner to the iMac, but beyond that it failed to tag. The product was expensive, and couldn’t display television shows in a window. Only 10,000 were ever produced.
10. Mac Clones
The idea: Fight Windows-equipped Intel machines by licensing the Mac brand to other companies.
What happened: Apple nearly killed itself. The clone idea was a arrangement for Apple to increase its diminishing market penetration in the 1990s: before then, they had strictly quashed attempts to reverse-engineer their products. It’s not surprising that now that have the same policies, because the fling was a disaster. The clones turned out to be edifying products, so much so that they undercut Apple’s rather poor and pricey offerings. It’s hard to believe, but at the time Macs weren’t known as excellent or even stylish machines, and so Power Computing’s clones began to match the popularity of Dell while undercutting Apple at the same time. When Jobs took over, he halted the clone projects and Apple eventually swallowed Power Computing up. Macworld has an excellent documentation of what they dub “The Clone Wars“.
Honorable Mentions
While this is of course a selective list, we can’t forget many other smaller failures over the years. Apple seemed to have bad luck when partnering with other companies. For example, the Motorola ROKR functioned as a slow cousin to the iPod; Apple had much greater success with a music player-phone combo with its own iPhone. Software is also home to some of Apple’s big stinkers, including “eWorld”, a barely-advertised internet community.
While that’s a big list, it’s by no means comprehensive. Got some favorite flops that I have missed? Sound off in the comments!
References
*Foljanty, Lucas. “The Apple Museum | Steve Jobs“. The Apple Museum. Retrieved January 28, 2010.
*Burrows, Peter (1999). “Can Apple Take its Game to the Next Level? “. BusinessWeek. Retrieved January 28, 2010.
*Blass, Evan (2007-04-09). “Apple Sells 100 millionth iPod“. Engadget. Retrieved January 28, 2010.
*McGeever, Christine (1985-06-03). “Apple’s Lisa Meets a Unpleasant End“. Infoworld. Retrieved via Google January 28, 2010.
*Honan, Matthew (2001-07-01). “Requiem for a Cube“. Macworld. Retrieved January 28, 2010.
*Allee, Alex (2003-01-16). “Don’t Exertion, Your G4 is Supposed to Be That Loud“. MacObserver. Retrieved January 26, 2010.
*Kahney, Leander (2003-02-26). “Mac User Fights for Quieter Life“. Wired. Retrieved January 27, 2010.
*Schramm, Mike (2007-09-05). “Bye-Bye Hi-Fi“. TUAW. Retrieved January 28, 2010.
*Myslewski, Rik (2008-05-23). “Reliving the Clone Wars“. Macworld. Retrieved January 27, 2010.
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