The Foxconn affect: slave labor versus protected employment
There are many components used in various Apple (AAPL) products that will come and go. Few are as indispensable for the foreseeable future as glass. It is an irreplaceable material that is used in all of Apples’ products and unless some new alternative material is created it will remain this way. Just consider the Apple store construct that every customer walks thru and endless pictures of fans lining the streets hours before anticipating the launch of some new i-hotness, hmm is that glass? Company seems to be big on it. Continuing to subcontract production to overseas manufacturers compromises the future revenue growth and intellectual properties of their numerous innovative market leading products. If glass production and other manufacturing are left to foreign partners under the thumb of governments with less than ethical values that oppress their native populations through force then their life blood patents will continue to reach the hands of competitors who will have access to proprietary knowledge and technology through secondary sources, thus enabling new competition to enter the market place and level the playing field or tilt the odds in their favor. Essentially allowing competitors to squeeze price points and reduce profits. Do not under estimate the possibility of becoming obsolete. Just think Blackberry, AOL and MySpace. By merging with Corning (GLW), APPLE protects an essential research, development and manufacturing partnership. This acquisition will give APPLE exposure to new markets and partnerships through the long and extensive list of organizations GLW already have business relationships with. Glass is far from the only meaningful product this Mega-Corporation creates. Corning has 5 interior units of expertise and innovations with various finite concentrated sub-subsidiaries; Life Sciences, Environmental Technologies, Display Technologies, Telecommunications and Specialty Materials.
BEST OF BREED
?………..PROVE IT!There is a competitive advantage to be had and leeway to be gained. The combination of these two conglomerates entities research and development departments and engineers will be unmatched in the technology sector. Future inventions and product upgrades can be made without the fear of competition gaining access to new technologies through second and third parties. APPLE and CORNING is a monopoly waiting to happen. Competition would be forced to expense more resources and capital in order to remain relevant in the consumer market place. Buying Corning frees’ up supply chain costs that are reserved for glass manufacturers and used to further secure the companies’ finances.
$ Money Ain’t a Thing $
Gross profit has increased each year since 2009; rising from $2.093 billion in 09’ to $3.049 billion in 10’ and $3.566 billion[1] in 11’. The net income in 2011 of $2.8 billion was a near $800 million increase over 2009’s net income. On Monday April 23rd 2012 the closing bell last trade of GLW was $13.21; a market cap of $20.06 billion[2]. Corning’s total current assets as of December 31st, 2011 were $8.677 billion; more than enough to cover the $6.77 billion of total liabilities. Property, Plant and Equipment stand at $10.671 billion and total assets of $28.848 billion. Net tangible assets are $20.152 billion, exceeding market capitalization by more than $100 million.[3] This acquisition monetarily is nothing more than a blip on the screen for Apple. They have the cash on hand and forecasted profits coming in to afford this deal 6 days a week and twice on Sunday. GLW’s profitability margin is 35.55% with an operating margin of 23.07%. Total revenues for Corning in 11’ were $7.89 billion with $4.8 billion in cash and cash equivalents.[4] The puppy in this windo
The Divisions:
b1) Life Sciences:
Corning announced Tuesday April 10th, 2012 that an agreement with Becton, Dickinson and Company (NYSE: BDX) to acquire a majority stake in Discovery Labware for approximately $730 million in cash[5].
The plan is to improve the Corning Life Sciences’ division and spark
long-term growth. GLW believes revenue increases of the unit will be
40%. Thoughts are this segment and the portfolio of products will boast
revenues of $1 billion in 2014 and propel Corning towards its goal of
being a $10 billion revenue organization by 2015.The Life Sciences division manufactures products used in scientific laboratories. Plastic for safe storage of various materials used in labs, hospitals and other life science facilities globally. Corning Cellgro offers a product portfolio of custom solutions for cell culture, cell therapy and bioprocess[6]. Antibiotics and supplements are only two among a range of molecular biological products. Corning built one of the first scientific research and development facilities in the United States, 1906 Sullivan Park[7], three miles from Corning, NY. 100 years of being an industry leader means, even if Apple’s experience in this area of expertise is limited, the infrastructure is in place and no tinkering is necessary. The Life Science unit can be left as is to grow and expand with a strategic plan currently in motion. The division does have intrinsic value and a spin off after merger is completed can also be considered, not wise though.
b2) Environmental Technologies:
Corning’s division of environmental technology manufactures clear air emissions control products. Engines around the globe utilize Corning Celcor substrates and Corning Dura trap filters ranging from light-duty gasoline passenger vehicles to heavy-duty diesel on and off-road trucks. Green tech would give Apple’s product portfolio and overall organization a much-needed socio-environmental responsible image boost. Going green cannot entirely repair the Fair Labor Association investigative report on Foxconn; the Chinese manufacturer of I-Phones, I-Pads and other Apple products. In all 43 violations that were widespread included some work is exceeding 60 hours a week and in some cases not getting a day off for 11 days. Apples labor conditions perception needs an image overhaul and the participation in environmentally responsible business practices of being green and saving the planet is a good start.
b3) Telecommunications:
Corning’s telecommunications division in of itself offers a tangible value to Apple and its plans of future market expansion. Corning Mobile Access constructs in-building Distribution Antenna’s System (DAS) for wireless broadband connectivity indoors. Five bar reception on smart phones is dependent on the quality of bandwidth and the integrity of the DAS. Current market customers consist of stadiums, hospitals, hotels and enterprises. Corning provided wireless coverage for Super Bowl XLVI held in Lucas Oil Stadium, Indianapolis and all major venues in the city including: Indianapolis international Airport, the JW Marriott and the Colts training facility. Two weeks of hot stove topics seeking reporters representing every major media outlet on the planet. The extent of wireless communications taking place simultaneously is massive; football legends past and present taking photos and uploading them to Facebook, Twitter and other social media platforms; phone interviews by players and analysts. Fans partaking in the same activities while the NFL implemented new marketing strategies that encourage everyone to participate through websites online wirelessly; bringing them closer together and creating a more personal experience. This was the fifth Super Bowl Corning mobile assets has provided DAS for; 2004, 2005, 2006 and 2008 respectively. The Superbowl is the greatest platform for advertising, building brand and product awareness. The NFL is a good partner to be in business with. A cable provider would be well served with the opportunity to offer their customers purchasing options for the NFL Season Pass. Partnered with Apple, Corning mobile access can target Walt Disney World and all the multiple theme parks and resorts, Universal Studios, Six Flags, Las Vegas hotels and event venues giving them advertising access to consumer’s currently spending discretionary cash.
b4) Display Technologies:Corning display technologies unit provides Apple with immediate benefits and a competitive advantage over growing competitors. The liquid crystal displays glass products Corning manufactures is the best of breed and partner Apple would industry leaders in television, computers and handheld mobile devices. This merger will also strengthen apples global supply chain since GLW already does business in Taiwan, Japan, China and Korea; allowing for better product releases globally. Among these international partners are Acer, Dell, Motorola, LG, Lenovo, Sony, Nokia, NDC, HP, Hyundai and Samsung.
The latter being the most intriguing partnership of them will. Corning has a 50% equity stake in Samsung Corning precision materials company LTD (SCP). On April 17, 2012 federal judge Lucy Koh ordered both Samsung and Apple to mediate a settlement with in the next 90 days. This order from Koh forces the groundwork of what might be the first of many negotiations between these two corporate giants. Only Corning could serve as the “bazooka” in an arsenal of leverage. With these jobs unfortunate passing perhaps his “thermonuclear war” theology can make way for a philosophical change in approach towards
Samsung and the true vein of Jobs fading years, Google. Android
is here to stay getting used to it and begin taking more long-term
technical measures to secure long-term market leadership. Buying
Corning, and hand it over to Sir Jonathan Ive in march forward triumphantly because if Larry Page
and Google gain control of the best-of-breed American glass
manufacturer all but locking up their position in the mobile device
marketplace; Steve is going to roll over and face down in his grave in
shame.b5) Specialty Material:
Corning Specialty Materials division has a portfolio of over 30 innovative products including semiconductor optics/glass wafers, radiation shielding glasses, laser optics and components, fluorite crystals and Gorilla Glass. Corning Gorilla Glass has been confirmed hesitantly by Apple to be used on the I-Phone five. Curious that Corning is not included on their much-hyped suppliers list (PDF). More than likely Gorilla Glass will be used on the new I-Pad also. This highly anticipated new Apple mobile device will be covered and protected by Corning innovations.
Raising the Flag Foxconn has recently acquired a stake in Sharp. This move by Apples biggest manufacturer fanned the flames of the rumor mill surrounding the introduction of an I-Television. Is this how a slave labor and sweatshop operator should be rewarded, by lining their pockets through additional subcontracts and higher percentage of the profits? All in the name of selling Americans Apple I-Televisions, I-Phones, I-Pads and Apple Macs. Would child labor violations grant them contracts for an i-Car? Managers who send mothers back to the assembly line after childbirth ( during lunch time, of course ) get access to the companies private jet. The continually placated and exploitative business practices of outsourced labor hurts the American worker. Not all labor can or should be kept in house; this is not a discussion of global separatism or nationalism; there are numerous morally enriched organizations that provide unparalleled products and services. Instead, this speaks to the core of labor abuses that occur internationally and undermine the American way of life. The American worker is protected by legislation that should be an admired asset not a handicap. In the great U.S. of A. employers of all ilks are bound by the same set of principles ensuring that an honest days’ work is compensated by a livable wage. Sick days, personal days, paid vacations, health insurance, 401k’s, 8 hour work days’ with a half hour lunch, 40 hour work weeks and a list of other perks that attract and reward the best employees’ on the planet. On a level playing field the American worker cannot be outperformed. It is time for corporate citizens to stop turning their heads to the abuse of labor forces around the globe for the sake of equity investor returns. Haven’t they made enough money off the backs of the under employed Americans who have taken a pay cut over the last 30 years? Apple has more money than God and that is a lot.
What’s next … A free trade agreement with China?
What is a corporation and how it should comply or behave should not be some puzzling enigma up for debate. It does not require the aid of an on-line dictionary to disseminate the characteristics an American corporation should display. The foremost U.S. high tech corp. should be at the forefront of U.S. employment. No excuses! If corporate citizens do not willingly implement strategies’ to hire and develop American labor than their privilege of being a legal entity and all the rights that accompany it should be revoked. During this great recession it is the responsibility of corporations and political representatives to take progressive measures to ensure full recovery and stability. Cowboy up kiddies, it’s time to GO AMERICAN!
[1] http://finance.yahoo.com/q/is?s=GLW+Income+Statement&annual
[2] http://finance.yahoo.com/q/ks?s=GLW+Key+Statistics
[3] http://finance.yahoo.com/q/bs?s=GLW+Balance+Sheet&annual
[4] http://finance.yahoo.com/q/ks?s=GLW+Key+Statistics
[5] http://www.corning.com/lifesciences/us_canada/en/news_and_events/news_releases/2012/2012041001.aspx
[6] http://www.corning.com/lifesciences/us_canada/en/index.aspx
[7] http://en.wikipedia.org/wiki/Corning_Inc.
