Explaining Southern California's economy

September housing starts, more on Pandit, Microsoft prices Surface

Microsoft Surface


The new Microsoft Surface tablet. Microsoft will price it a levels competitive with the Apple iPad.

Builders haven't been building this fast since July 2008: "Construction activity rose in three of the nation's four regions. The biggest increases came in the West and South. Housing starts increased by nearly 20 percent in both regions." (Commerce Dept.)

Maybe buying Merrill Lynch wasn't such a great idea. Bank of America suffers an expensive quarter: "Overall, Bank of America reported a profit $340 million versus a profit of $6.23 billion a year earlier." (WSJ)

North American energy boom continues: "Exxon Mobil agreed on Wednesday to buy Celtic Exploration for about $3.1 billion in cash and stock, as it sought to expand its presence in the energy-rich shale formations of western Canada." (DealBook)

The beginning of the end for the PC? Intel takes a hit in the quarter: "The big chip maker, whose microprocessors power most desktop PCs and laptops, said it is significantly scaling back production in the fourth quarter in response to weaker than expected demand." (WSJ)


5 million iPhone 5s in 3 days? Not good enough, Apple!

iPhone 5 launch at AT&T Glendale

Jason Georges/KPCC

Customers line up in the early hours on Friday, September 21 at the AT&T store in Glendale, California, hoping to get a new iPhone 5. Apple wound up selling million, but Wall Street didn't care.

Apple absolutely killed it this weekend, selling over five million iPhones in three days. But for Wall Street, it wasn't enough. The company's stock, which had risen above $700 a share, fell to about $690 today.

Expectations for iPhone 5 sales may have gotten out of hand. They fell a million shy of what some analysts seemed to think was possible. 

Worse, as the Wall Street Journal suggests, Apple may have hit a sort of "speed limit" on production:

Another theory is that Apple may have reached a theoretical limit to how many products can be produced in a specific window of time. Tom Dinges, an analyst at IHS iSuppli, said Apple historically began production of new iPhones in mid-August, a little more than a month from the release date. But, he said, the company may have shortened that production schedule to control information leaks that could come from suppliers.

"For the major opening weekend, we're close to the limit," Mr. Dinges said. "Unless they're willing to widen the manufacturing window, maybe we have seen" the limit for how many units Apple can deliver without more production lines.

Mr. Dinges noted that Apple would need to have roughly half a million iPhones produced per day at a minimum to meet some analyst expectations of 50 million iPhones to be sold during the holiday quarter.


Building iPads is 'tedious and boring'


Rob Schmitz, the Man in Shanghai for Marketplace, became the second reporter ever to be allowed inside the massive Foxconn factory where workers from across China come to build Apple iPads for $2 and hour. (Marketplace is part of the same American Public Media family as KPCC, by the way.)

Building the world's most popular tablet is "tedious and boring," says Schmitz. And from the video footage, it looks it. Foxconn is running an old-fashioned assembly line, barely automated at all, where human hands do the repetitive work that's creating a new middle class (of sorts — $14 a day only gets you so far) in China.

Worth noting that this is ground zero for Apple's substantial 30-percent profit margins. First, Apple has outsourced the assembly work to the cheapest possible place where it can still be right in the middle in the Asian consumer electronics supply chain. Second, Apple has compelled Foxconn's parent company to accept much lower relative margins, in return for the work.


Be sure to thank Foxconn and wireless providers for your Apple dividend

Apple Unveils Updated iPad In San Francisco

Kevork Djansezian/Getty Images

Apple CEO Tim Cook speaks during an Apple product launch event at Yerba Buena Center for the Arts on March 7, 2012 in San Francisco, California. Today, the company announced its first dividend since...1995!

Apple announced this morning that, in response to various levels of pressure, it will be dispersing some of its $100-billion cash hoard by paying a $2.65 quarterly dividend to shareholders, starting in 2013, and buying back $10 billion worth of stock. These were both fairly conservative, but far from unexpected, moves. As soon as Apple announced that it would be...making an announcement, some kind of dividend scenario was in the picture. The questions were along the lines of "How big?" and "Will it be a one-time dividend?"

Apple's stock, not surprisingly, is waaaayyy up in trading this morning, currently humming along just a hair below $600. Actually, it's been headed almost straight up since last December. And it could have been set up by Apple CEO Tim Cook and CFO Peter Oppenheimer to move higher, but they went for a relatively small dividend: 1.8 percent versus what Apple's biggest Wall Street bulls wanted, something like 2.5 percent.


In Silicon Valley, nice guys aren't for real

Paul Sakuma/AP

Facebook co-founder and CEO Mark Zuckerberg poses at Facebook headquarters in Palo Alto, Calif., Feb. 5, 2007. This was long before he became a modern-day robber baron.

At Breakingviews, Rob Cox lays into our presumptions about the virtues of Silicon Valley startup founders like Mark Zuckerberg, Mark Pincus, and (by implication) Steve Jobs. Here's a salient paragraph:

Though Silicon Valley’s newest billionaires may anoint themselves the saints of American capitalism, they’re beginning to resemble something else entirely: robber barons. Behind the hoodies and flip-flops lurk businesspeople as rapacious as the black-suited and top-hatted industrialists of the late 19th century. Like their predecessors in railroads, steel, banking, and oil a century ago, Silicon Valley’s new entrepreneurs are harnessing technology to make the world more efficient. But along the way, that process is bringing great economic and labor dislocation, as well as an unequal share of the spoils. Just last week, the Justice Department warned Apple that it planned to sue the company along with several U.S. publishers for colluding to raise the price of electronic books - monopolistic behavior that would have made John Rockefeller proud.