Archive for the ‘Technology’ Category

The Talking Machine

Wednesday, July 21st, 2010

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July 20, 2010……The Talking Machine:  A Brief History….. STP-099

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The Amazing History of the Telephone and the Growth of the Telecommunications Industry.


1. A Eureka Moment

On a hot afternoon in June 1875, a tall young man was working busily in a small, noisy machine shop. Scattered around the shop was an assortment of wires, magnets, crude batteries, and various metallic parts. The man was working on a crude apparatus that included a magnet, some coils of wire, and  a small, clock-spring reed. Suddenly he heard a faint sound — like a twang — from the apparatus. The sound both surprised and

puzzled him; but then he realized what had happened. His surprise quickly changed to joy; he knew his “Eureka” moment had arrived.

He immediately asked his assistant in the next room to repeat what he had just done. The assistant snapped a spring on a similar apparatus that was connected to the first by a thin wire. He heard it again — the same faint sound — the twang of a spring. In that brief moment, his new invention became a reality. Never before had a complete sound been initiated at one end of a conducting wire, transported through the wire, and reproduced perfectly at the other end! The basic principle of the telephone was confirmed.

The inventor was a young Scottish American; he was a professor of acoustics and a student of electrical phenomenon. His name was Alexander Graham Bell. His assistant was Thomas A. Watson, a young mechanic.

Like most inventions, that first sound — the twang — merely proved a theory but had no immediate practical use. The infant telephone needed to be coddled and improved to produce Bell’s true goal, i.e. — the transmission of recognizable speech. It took forty, long frustrating weeks after that day in June to reach that goal.  Finally, on March 10, 1876. the “ talking apparatus ” actually talked. It said, “Mr. Watson, come here. I want you.” Mr. Watson, who was in the basement of the building, rushed up three flights of stairs shouting to Bell, “I can hear you — I can hear you”. On that date, the first, true, practical telephone was born.

Fortunately for Bell, on February 14, 1876, his lawyer had filed an application for Bell’s telephone which covered “ the method of and apparatus for, transmitting vocal or other sounds telegraphically by causing electrical undulations similar in form to the vibrations in the air accompanying said vocal or other sound ”. On March 7,1876, Bell received patent (No. 174,465) for his telephone apparatus. Although no one could possibly conceive of it’s future value, it was probably the most valuable, single patent ever issued.

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2. The  Skeptics

A basic fact of human nature is that people resist change and would much rather keep things as they are. And, so it is when new inventions are initially introduced. The first announcements of Bell’s speaking apparatus were no exceptions. Neither laborers nor learned men could understand it. Therefore, they ridiculed it. The very idea of speaking into a mechanical device composed of metal and wire was bizarre, weird, and rather repulsive. It was absurd and impractical. Who on earth would ever spend hard earned money for such a contraption?

The following are some of the comments reported in the press in 1876 after hearing about Bell’s apparatus:

a.  Bankers thought it might be good for grocers but would never be of value to bankers. Grocers said it might be good for bankers but not for grocers.

b. A Salem, MA newspaper ran an article with the headline, “Salem Witchcraft”.

c. The New York Herald said, ”The effect is weird and almost supernatural”.

d. The Boston Times ridiculed the device with the following comment:

“ A fellow can now court his girl in China as well as in East Boston; but the most serious aspect of this invention is the awful and irresponsible power it will give to the mother-in-law who will be able to send her voice around the world.”

e. Later in that year, Bell and his partners were struggling to keep the new company alive. Typically, they had little revenue and many debts and were desperate for money. They reluctantly offered all telephone rights to the President of the powerful Western Union Telegraph company for $100,000. He turned them down with the comment, “What use could this company make of an electrical toy?”

What a colossal mistake!

Cdlstk Model

Western Electric Candlestick

with Dial — 1920’s

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3. The  Proof

The first convincing proof of the reality of the telephone came when Bell and Watson devised a powerful test of the telephone’s capability. They borrowed a telegraph line between Boston and the Cambridge Observatory and attached a telephone to each end. They then maintained a conversation for about three hours and took careful notes of what the other man said and heard. When the notes were compared, it was obvious to all that the telephone worked exactly as Bell said it would and was not a hoax or publicity stunt.

On October 19, 1876, the Boston Advertiser published the notes in parallel columns which convinced the skeptics that the telephone was a practical success.

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4. The Incredible Growth of the Telephone Industry

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1 Model 102

Western Electric Telephone

Model 102    (1920’s and 1930’s)

The Bell Telephone Association was initially formed in August of 1877. The founders were: Alexander Bell, Gardiner Hubbard (who later vbecame Bell’s father-in-law) and Thomas Sanders. There was no capital in the company.

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In 1880, after an important agreement with Western Union, the American Bell Telephone Company was formed with $6 million of new capital. From that point onward, the company fortunes just grew … and grew … and grew. Here are some startling growth figures:

1. In August of 1877, there were 778 Bell telephones in use, mostly in the Boston area. By 1886, over 150,000 people in the US had telephones.

2. On October 9, 1886, Bell and Watson talked by telephone over a two-mile long wire stretched between Boston and Cambridge, Massachusetts. On January 25, 1915, the same two men talked by telephone across the entire United States. A  3,400 mile long telephone line had been erected between New York City and San Francisco.

3. On December 14, 1901 the New York Times published some statistics on the Bell telephone industry: The Bell Companies were handling a total of nearly 2,000,000 telephone calls per year. They operated a total of 1.8 million miles of wire and they employed 33,000 people. At that time there were 2.2 million telephones in use in the United States with a total investment of $470 million in lines, instruments and exchanges.

4. The percentage of households using telephones in the United States increased steadily every year. By 1945, the figure was 50% of all households. In 1955, it was 70%. In 1969, 90% of all US households had a telephone.

5. On January 1, 1984, after a long legal battle, the AT&T monopoly was broken up into seven independent Bell companies and a new AT&T company. Just prior to the breakup AT&T, had $150 billion in assets and employed 1 million people.

Today the telephone industry encompasses many technology-related businesses besides the traditional local and long-distance wireline companies. The telecommunications industry now includes wireless communications, Internet services, fiber optics networks, cable TV networks and satellite communications. The total value and the total revenue of all this equipment is impossible to measure.

>Model 302


Western Electric Model 302

with Dial — 1940’s and 1950’s

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5. Growth of the Cellular Telephone Industry

As part of the entire telecommunications industry, some comments should be made about the cellular phone industry. The growth of the cellular telephone industry has been even more rapid than that of the old-fashioned telephone. The cellular industry began slowly in about 1982. However, according to U.S. Census figures, by 1999 the United States had 86 million cellular telephone subscribers. Total service revenue at that time was about $40 billion.

According to the Cellular Telephone Industry Association (CTIA), there were 100 million subscribers in the United States in the year 2000. That figure increased to 180 million subscribers in 2004.

A recent industry estimate was made by Tina Tang, wireless systems analyst for Isupply. In the year 2009, total worldwide mobile phone industry sales were 1.15 billion units. In the year 2010, she estimates there will be 1.3 billion mobile phones sold worldwide.

What, indeed, hath God wrought 135 years ago?

References for this article include:

1. The History of the Telephone by  Herbert N. Casson 1910

2. They Made America

Two Centuries of Innovators by  Harold Evans 2004

3. History of the Telephone by Wikipedia

4.  Alexander Graham Bell by Wikipedia

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Written and Posted by: Stanley Goslovich

July  20,  2010


Apple is Hitting on all Cylinders

Wednesday, April 28th, 2010

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STP – 094 ………………………………………Posted:  April  29,  2010

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Apple’s Innovative Products Power Higher Revenues and Earnings

We commented on Apple in our April 6, 2010 post entitled, “Apple’s iPad is a Game-Changer!” That was several days after the new iPad product had been introduced. In the next two weeks or so, Apple announced that it had sold over 500,000 iPads in one of it’s fastest launches ever. Thus, we continue to believe that our initial assessment of the iPad is correct, i.e. — it is a game changer!

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Apple iPad 3x4

Apple iiPad

On April 20, 2010, Apple reported a very strong financial quarter, one that greatly surpassed analyst’s estimates. For the second quarter ended March 2010, Apple reported that:

1. Revenue rose 49% to $13.5 billion.

2. Earnings rose about 90% to $3.0 billion.

3. Powering these impressive results were iPhone sales.  Apple sold 8.75 million phones, up from 3.8 million a year earlier, a gain of 130%.  Analysts had expected 7 to 7.5 million phones would be sold.

4. Apple reported that iPhone demand was particularly strong in Asia and Europe. Also, iPhone sales in China increased by nine times.

5. Apple also sold 2.9 million Mac computers in the quarter, up 33% from the 2.2 million a year earlier.

Apple iPhone 2x2.25

iPhone 3G (s)

Looking ahead, iPad revenues will begin to add to revenues in the current quarter and for the rest of the year.  Steve Jobs, CEO, stated that “several more extraordinary products will be announced later this year.”  One of these is expected to be a new iPhone coming in July.

Apple iPod 3x2

iPod Nano Assortment

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Evaluating Apple’s Share Price

On April 27th, Apple’s stock closed at $262.

Currently, the average EPS estimate for 2010, among 44 analysts covering the company, is about $13.00 per share. The current year P/E ratio, therefore, is about  20.2 times earnings. This appears to be a very reasonable valuation for a company whose earnings growth this year is likely to be somewhere between 30% to 40%.

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Assuming the lower growth figure of 30%, the PEG Ratio is 20.2 divided by 30, or about 0.67. In other words, the P/E ratio is only 0.67 times the conservatively estimated growth rate. Again, this is a very reasonable valuation for a dynamic growth company such as Apple – even at today’s $262 price!

ST Logo 4KB We still like the company and the stock.

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DISCLAIMER:

Our sources of information are believed to be reliable, but they are not guaranteed to be complete or without error.

StansTake.com is not a registered investment advisor. Nothing contained in any of this material should be construed as a recommendation to buy or sell securities.

Opinions or suggestions are given with the understanding that readers acting on information herein assume all risks involved.

In addition, we highly recommend that readers do their own investment research or seek advice from registered investment advisors on subjects commented on above.

The editor of Stanstake.com owns shares in the Apple Company.