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back to article You're spending WHAT on iPhone 6? Wells Fargo downgrades Apple stock

Analysts at Wells Fargo have downgraded their outlook on Apple shares for this year, taking it down from "outperform" to "market perform". A report on the fruity firm stuck to a valuation of between $536 and $581 a share, but it pointed out some concerns about the gross margin of profit on the upcoming iPhone 6 as well as …

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Downgrade to "market perform"?

That's a downgrade? Apple stockholders wish that the stock had performed like the market in 2013, it would have been up more than 20%

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Anonymous Coward

That's a downgrade?

No, 2013 was a "correction".

Remember the market is never ever wrong, except in a bubble, when somehow nobody who mattered noticed because they were too busy inflating the bubble.

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Anonymous Coward

When has the market got it right?

I remember hearing that Apple failed to get a China contract only a few months ago which as it turned out it did.

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Anonymous Coward

I can't imagine phones can get anything new on them. Even adding something like proper Dolby surround would be an iteration.

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@AC 17:11 - "I can't imagine phones can get anything new on them"

I'm still looking for a phone with a built-in DVD player, a full-sized keyboard, an ethernet port, and a 15-inch monitor.

And where are the Control, Alt and Delete buttons on this thing?

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Anonymous Coward

They haven't since about 2007

Peak of smartphones at the time had Google maps, including turn-by-turn navigation, rapidly increasing resolution screens, the ability to play back a variety of movie formats (including streaming them over the Internet), Flash support, integrated contacts lists, HSDPA/HSUPA (3.5ish G mobile broadband), a swipey touchscreen interface including widgets and icons, bluetooth, removable storage & battery, WiFi, 3D acceleration, online storage, multiple cameras (that's plural- one front VGA for videocalling and one multimegapixel at the back), IRDA, etc etc. It also had a massive number of useful apps that could be installed quickly- and frequently shipped with an Office-compatible office suite.

Then the iPhone was released and everyone went for shiny slim phones- the iPhone range itself was, in terms of features, well behind the 2007 peak until the 4 or 4s, and other manufacturers actually shed features to get the size down and speed/profit-per-unit up, again only really hitting where they were in terms of features in the last year or two.

So there haven't been any properly 'new' feature additions in half a decade. The closest thing to new is Apples' recent acquisition of Primesense (makers of the Kinect) which gives them a phenomenal amount of image and audio processing IP and could lead to some seriously cool AR tech (or was just used to screw over Microsoft). If it's the former, expect to see 'import yourself into Angry Birds' apps and 'Identify which direction that Fart came from' apps :D

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Re: They haven't since about 2007

"So there haven't been any properly 'new' feature additions in half a decade."

If you mean no espresso machine, fair enough. If you mean the iPhone 5 has feature parity with iPhone 1 then I'll have some of what you're smoking please.

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Re: They haven't since about 2007

"If you mean no espresso machine, fair enough. If you mean the iPhone 5 has feature parity with iPhone 1 then I'll have some of what you're smoking please."

True. The iPhone 5 has cut and paste, for a start!

More seriously, AC's point was that the iPhone 1 had significantly fewer features than pre-existing smartphones, has set the trend for other smartphone makers to cut features, and that smartphones are just getting back to where they were in 2007.

I don't know if AC is right but I do know AC meant that because I tried that newfangled thing they call "reading his post". Not that I expect it to gain significant traction in El Reg's comments section...

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DN4
Coat

Feature parity

So you say iPhone 5 doesn't even have feature parity with iPhone 1? Did they remove the obsolete phone-call function or what happened?

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Re: They haven't since about 2007 (@AC)

If we're discounting (i) the interface (Apple: first to market with multitouch; first mobile OS built from day one to assume a GPU); and (ii) the cost of ownership (Apple strong-armed AT&T into unlimited data when everyone else was charging 50p/megabyte), then I guess you can write off the iPhone. And more or less everything else to happen in computing since at least 1980. Who needs the direct manipulation metaphor if a Computer Science graduate can learn to navigate a highly modal, nested interface on a phone with exactly one font and two levels of zoom using a combination of key presses, dials and a stylus?

Ignoring the good things Apple did for the market just weakens discussion of the many bad. It also implicitly attacks Android. Android has conquered the market by being a million times better than the near-unusable pre-iPhone rubbish. That's why throwing some gestures on top of Symbian and trying to do with development tools what they couldn't do with the OS didn't work for Nokia.

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New features != "must have" features

Things like GPS for maps/directions, full desktop browser, multitouch screen, wifi, MEMS/gyroscope sensors, a camera of sufficient quality to produce acceptable pictures when picture-taking isn't the goal of one's day, the ability to install third party apps that have access to an API comparable to PC apps are a must have in any smartphone.

Stuff like fingerprint readers, eye scrolling, 64 bit CPUs vs 32 bit CPUs, quad/octo core CPUs, NFC, being slightly thinner than the previous model, 1080p screens versus 720p screens, and so on are niche features at best, gimmicks at worst.

Apple was the first to put all the stuff in the first paragraph together into one phone - though they didn't invent any of it. Since then, there has been nothing added to smartphones, either from Apple or Android, that contained something that nearly everyone finds useful and has become a must have for every phone made.

There is some room for new killer features to be added. Like say a screen that is a bright in reflected light as it is under its own light (i.e. doesn't wash out in direct sunlight) But that won't be an innovation of Apple, or Samsung (at least not the part that develops phones) it'll come from the CE industry and be brought to phones when it is affordable and there are no other compromises (i.e. they're available now, but are slow and have terrible color)

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Re: They haven't since about 2007 (@AC)

Well I had a single touch mobile.....what do you think would come next? But I did have.....

Icons....check!

Email....check!

Web.....check!

1gb of data ....check! (£30 including calls and text)

Tethering......check!

WiFi hot spot check!

All before the iPhone.........err.....sorry to say but it was flaming windows mobile. Rough around the edges ( sorry rounded corners) but it did it all.

Oh yes cut and paste too!

The iPhone did a spit and polish to bring it to the masses …….. True. But it was all there already.

Down vote heaven if you do not know your tech!

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Re: They haven't since about 2007

It's partly true, but only really for Apple, not other manufacturers. Nokia didn't shed features for Symbian AFAICT, and kept all of the things he listed, whilst continuing to add new features.

Android may have lacked features in the very early days, but nowhere near the extent that iphones did. I guess another example might have been MS ditching Windows Mobile for Windows Phone, which was very dumbed down in an IOS-like manner, and has gone through the same phase of having to add basic features. He is right that most of the changes from iphone 2007 to iphone 4 was playing catchup to what other phones had years ago - indeed, until then, at least, it wasn't even a smartphone.

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Re: They haven't since about 2007 (@AC)

So Apple did 2 things 6 years ago - I don't see why we constantly have to hear about that, and not the lots of firsts achieved by other companies. No, I won't write off the iphone, but it was the media that decided to ignore every other phone!

The GPU claim is just a property of being newer - is Windows RT better than Linux, because it was written in a time when GPUs can be assumed? No. Newer OSs that come out will in turn be able to assume things that IOS could not, but that doesn't automatically make them better, let alone an argument for being revolutionary.

"And more or less everything else to happen in computing since at least 1980."

I don't know what you're on about with styluses and key combinations - my 2005 feature phone launched apps via icons, it's just now I touch the icon rather than using arrows to move a cursor. Once you've switched to a touchscreen, saying to touch the icon (the same way we click on non-mobile OSs) is bleeding obvious. If there's some magical new UI that IOS introduced in 2007, it can't be anything that I've seen on Android, yet I get by just fine.

"It also implicitly attacks Android. Android has conquered the market by being a million times better than the near-unusable pre-iPhone rubbish."

Android today is much better than pre-2007 stuff, it's also better than pre-2008 stuff. It's called progress. But I found touchscreen Symbian perfectly fine compared to anything else of the time, despite being the single-touch 5800. And yes, it had more than two levels of zoom (you don't need multitouch for this). Multitouch gestures are useful, but this is a tiny improvement compared to having a touchscreen at all, which is what makes the difference. I don't care for fancy gestures and swipes (I'm not a fan of all the gestures on Samsung's Touchwiz either, give me vanilla Android any day). If multitouch is the revolution you claim, then how come the complaint today Apple fans make of Android is that the phones are too big to use one handed - how do you use multitouch one handed? Apple were first to market with multitouch, but that's it - it wasn't a revolutionary new GUI, anymore than any new gestures that Samsung add to Touchwiz (or Nokia did to Meego, which was heavily swipe based) makes a revolution either.

And it is you who is attacking Android. Android was popular precisely because it didn't drop all the features like IOS, but built and carried on the success of Symbian.

Your comments about what Nokia couldn't do with development tools also make no sense - they switched to Qt, one of the best toolkits I've used, and development was as good as Android's for the time (some things were not as good, but some things were better). Symbian remained the number one platform until 2011, and continued to outsell IOS until the WP switch.

As for AT&T, if they offered unlimited data to the minority of Apple users and not others, that's not something to praise.

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Re: New features != "must have" features

"Apple was the first to put all the stuff in the first paragraph together into one phone"

It was the first one to have multitouch, and all of the other things were fairly standard things, so it trivially follows that the iphone was first to have the complete set. But that doesn't mean it was actually first with those other things! This is just cherry picking your featureset, and I could do the same for any first by another company. If you're doing an AND of features rather than an OR, then simply being first with one of those features, means the product will also be first with that one feature AND many others.

E.g., for the first phone that could do Wifi (a Nokia?), I could say also "It was the first phone to do Wifi, and [long list of bog standard but useful features]" - well no, that's not anything new, I've just rephrased the being first with Wifi. Similarly I could say Nokia are the first company to do GPS for maps/directions, full desktop browser, multitouch screen, wifi, MEMS/gyroscope sensors, a camera of sufficient quality to produce acceptable pictures when picture-taking _is_ the goal of one's day, the ability to install third party apps that have access to an API comparable to PC apps are a must have in any smartphone. By subtely upping the camera requirement, I've moved it back to Nokia. Same if I included sat nav.

The 2007 iphone couldn't even run apps at all. Does IOS really run exactly the same browser as desktops? Not that I see why that matters - Nokia don't have their own desktop browser, so that's an unfair comparison. Decent browsers were available, like Opera Mobile. Since browser choice is a personal preference, I'd much prefer a platform that let's me use any browser I choose.

"Since then, there has been nothing added to smartphones, either from Apple or Android, that contained something that nearly everyone finds useful and has become a must have for every phone made."

I'd agree that many things being added are gimmicks, but I'd still include sat-nav, a decent size screen (4" minimum) and resolution (800x480 at least - even Symbian's 640x480 was better than the iphone) as important too, so for me phones didn't mature until around 2010-2011, and it was Android leading the way (with Symbian the contender). The 2007 iphone wasn't even close, with its lack of apps, 3G, and even copy/paste.

I'd also add that multitouch is as much a gimmick as any gimmick today - it's useful, but not revolutionary. I want to use a phone one-handed sometimes, and a multitouch UI is a much bigger prevention than large screen sizes. If anything, credit should be given to the little-publicised one-touch zoom that Google have started to introduce into Android (double-tap, then move finger up or down - annoyingly it's not OS-wide, and confusingly the zoom direction in maps is reversed to that of Chrome!)

I agree with your last paragraph, but doesn't that apply for multitouch too? Apple didn't invent capacitive screens, they just happened to be first to market for phones with that one feature.

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Re: They haven't since about 2007 (@AC)

"The GPU claim is just a property of being newer - is Windows RT better than Linux, because it was written in a time when GPUs can be assumed? No. Newer OSs that come out will in turn be able to assume things that IOS could not, but that doesn't automatically make them better, let alone an argument for being revolutionary."

Revolutionary is a straw man. Nobody here has said revolutionary.

Launching when GPUs had become cheap enough is part of what allowed Apple to be first to commercialise the direct manipulation metaphor. The direct manipulation metaphor is a huge advance because it removes one more abstraction. If I want to scroll the web content, I just push it around with my finger, in any direction I like.

Compare and contrast with having mentally to link the position of the content to two individual sliders, and being able to scroll on one axis at a time only. You think nothing of it because you're a long-time computer user. Most of the world isn't.

So, yes, being able to design around having a GPU on hand is part of what allowed Apple to advance the state of the art (though, again, by _commercialising_ an idea, not by inventing it).

I maintain that direct manipulation is a huge advance and is one of the reasons Android now rules the roost.

"I found touchscreen Symbian perfectly fine compared to anything else of the time,"

That's very difficult to believe. I was given an N8 for free by Nokia as part of a developer relations effort. So that's nearly the final touch-screen Symbian phone. To pick one fault at random, from the limited set I recall at this distance: because Symbian was designed around the screen area being known and constant, most applications couldn't deal with a virtual keyboard that would, effectively, dynamically change the screen area — so Nokia hacked around that by implementing a system whereby tapping on a text field would take you to a completely separate screen, without any context, where text could be entered and then submitted back to the original text box, returning you to where you previously were.

I saw that in several places, without installing a jot of third-party software.

"If multitouch is the revolution you claim, then how come the complaint today Apple fans make of Android is that the phones are too big to use one handed - how do you use multitouch one handed?"

I can't actually answer for every Apple fan you've ever heard say something on the internet, but I would assume it's about options. Use it with a single thumb or multitouch it. While my personal preference smaller phones, the market has spoken fairly clearly: the 5–6" Android phones are where the action is. I guess it's all about hand size too, even in the opposite direction: a lot of people already can't reach the entire iPhone screen with a single hand so what advantage is a 4" screen to them?

"Your comments about what Nokia couldn't do with development tools also make no sense - they switched to Qt, one of the best toolkits I've used, and development was as good as Android's for the time (some things were not as good, but some things were better)."

You're rose tinting. Nokia was in the process of developing and trying to push QT Quick because full-fat QT was considered too much hassle on a handset. Even then, we had a thirty-minute presentation on how 'easy' it was to create a push button. Apparently all you need to do is create a graphic of the button, create a depressed graphic, add a touch sensitive area, position it exactly over the graphic, then catch the appropriate finger up/down callbacks and push appropriate messages to show and hide your two graphics.

Android and iOS, of course, just have built-in classes for buttons.

"As for AT&T, if they offered unlimited data to the minority of Apple users and not others, that's not something to praise."

AT&T went from — in line with the rest of the industry — not offering unlimited data to anyone, to offering it to some people. That's not something to praise?

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@Mark - using a phone one handed

Just because you want to be able to use a phone one handed doesn't mean you don't use multitouch gestures. Sometimes people are just typing in text messages or whatever and don't need to pinch to zoom or do the various four finger swipes that hardly anyone knows about, let alone uses.

Personally I think the way to fix the issue with "phone too big to operate one handed" would be to have a way to compress the keyboard over to one side or the other (depending on which hand) since the problem for most people would be typing and having a hard time reaching across to the far end (i.e. Q key if you're right handed) If you have large hands that's not a problem and you can reach across with your thumb just fine. If you have small hands and can't reach across, having a smaller keyboard isn't going to be a problem.

Hmmm, maybe I should patent this, and sue both Apple and Samsung if they implement it :)

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@ThomH Re: Qt quick

That's utter tosh.

Qt Quick was nothing to do with whether or not the phones had the CPU power.

It's actually slightly slower than doing it in C++, so technically needs a faster CPU anyway.

QtQuick was (and is) about creating easily skinnable and replaceable GPU-accelerated GUI interfaces in JavaScript to tie to your C++ program.

And it does have button classes. Also swiping ones and flicking ones. You're moaning about an API you've clearly never tried based on a brief description of an early Alpha that explained how to create a custom "button class", and ignoring the features of the beta and released.

Personally I'm not keen on Qt Quick, but that's no reason to slag it off.

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Boffin

Re: @Mark - using a phone one handed

Best one-handed phone was Blackberry - without a doubt.

If you want excellent one-handed operation, you've got to put a well-designed keyboard on the bottom. No other way around it.

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Trollface

Re: Feature parity

"So you say iPhone 5 doesn't even have feature parity with iPhone 1? Did they remove the obsolete phone-call function or what happened?"

No, that was the iPhone 4, wasn't it? The phone-call function was re-introduced after people objected, saying they wanted to use it as a phone as well.

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Pint

Re: They haven't since about 2007 (@AC)

Down vote heaven if you do not know your tech!"

No, an upvote*, because I was also using a phone with Microsoft's mobile version of Windows at the time.

As you said, rough around the edges, but yes, it did all of that - and more, such as GPS, with which I was using with the likes of FUGAWI.

* And a pint.

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Re: They haven't since about 2007 (@AC)

True enough, but isn't that what apple have *always* done well? They're very competent integrators, and this is from somebody who is in no sense a fanboy(i?)

Just don't expect them to bring out any ground-breaking technologies. Or "Get" the more boring sorts of businesses that I work in. That's all.

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Re: They haven't since about 2007

Most Reg commentards do read the post and respond to specific items in the post. It's only the Fanbois who cause problems.

In particular, you'll note the strawman shift; changing what was written to something which is obviously false. I expect now that he's done showing here in the forums, he'll pop on over to a gambling site "IQ" test.

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Anonymous Coward

Re: They haven't since about 2007

@Bob Gender Try reading the comment again. I said that the iPhone 1 was many many years behind the rest of the pack, and the iPhone 4 or 4s (released 2010) was about the time they caught up with the state-of-the-art from 2007 in terms of features they had.

Saying the iPhone 5 had feature parity with the iPhone 1 would be daft- the iPhone 1 was a piece of shit, the iPhone 5 is a more or less top-end smartphone. But between the two no particularly awe-inspiring, previously-unseen features were added.

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Anonymous Coward

Re: Feature parity

@DN4 No, I'm saying that the iPhone only reached feature parity with 2007's the /top end/ smartphones with version 4 or so. The original iPhone was the industry laughing stock when it launched thanks to its deficiencies with features and made up for this with incessant borderline-fraudulent marketing.

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Re: @ThomH Qt quick (@Richard 12)

"That's utter tosh."

No, it was poorly phrased. By "full-fat QT was considered too much hassle on a handset" I meant "the full QT API was considered to add too many unnecessary complexities when developing for a handset". No performance issue — just a question of how precisely you tailor an API for use in a specific domain to the exclusion of other uses.

"You're moaning about an API you've clearly never tried based on a brief description of an early Alpha that explained how to create a custom "button class", and ignoring the features of the beta and released."

I'm moaning about an API based on the description of it given to me by people Nokia paid to do so as pitchmen, presented a week before they abandoned Symbian, Maemo and QT.

If you're saying I should instead judge a later version then my judgment is this: it's completely useless because Nokia phones use Windows Phone.

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Trollface

Sorry, I can't take a company called Wells Fargo seriously.

Seen far too many westerns. :D

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Humph

And "Analysts at Wells Fargo" aren't do-nothing parasites on the business world at all, are they?

Chair weights. What have they created?

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Re: Humph

Like any analyst, they simply regurgitate what a marketing troll told them to ...

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sounds like a loose loose situation "Herp deep, you're spending too much on new features" "Herp derp, this lack of new features cant compete"

Economics is just another word for bullshit

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Headmaster

"loose loose...bullshit"

Hmmmm...too many "o" spoils the metaphor.

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Anonymous Coward

The last time I read about Wellls Fargo was in The Dandy. Colour me unimpressed.

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@ AC I/02/14 19:16 GMT

"The last time I read about Wellls Fargo was in The Dandy. Colour me unimpressed."

Be unimpressed, as you will... But as one of the four largest banks in the U.S. -- and THE largest, depending on which metric you use -- Wells Fargo has some cachet among those whose reading includes the financial pages instead of children's magazines.

...Just sayin'.

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Re: @Mike Moyle

Exactly, very good analogy ... because just like child books, they rely on some naive person to believe the bullshit. At least child books target our innocent kids, these banks target decision makers ... scary if you ask me.

No, nothing interesting has ever come out of the filthy sewers of these analysts ...

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Joke

Analysts...

can't live with 'em ... pass the beer nuts.

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Anonymous Coward

Anal-ysts - gotta love them. Would anyone really be that surprised to find out sometime in the future that these kinds of guys were talking down Apple publicly while recommending other clients buy? Oh no - they would never do anything like that.

Apple are going to have do much cash soon they could buy themselves.

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Terminator

It wouldn't matter who it was

R&D cuts into short-term profits which is all stock-market analysts care about. They have no interest in long-term corporate viability.

I'm not a fan of what apple are doing, but these people are so much worse.

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Paris Hilton

Apple knows what it should do (just in case it forgets): innovate and aim for a broad market share <as opposed to innovate and aim for a miniscule market share> no?

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Apple doesn't innovate, that's just their marketing department at work. What Apple best does is refine, reduce and repackage existing innovations in a highly effective manner, while claiming to be innovating. What it needs to do is what it already did with mp3 players, smartphones and tablets; find another (existing) class of product which is 'out there' in the hands of a niche market and ready to be brought to mass market.

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Re: aim for a broad market share

Apple have NEVER aimed for a broad market share. They've always aimed at a profitable niche. They got lucky (unlucky?) with the iPod and iPhone. Holding their market share will be a real challenge.

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Pint

Predicting the future ..

"Our bullish thesis on Apple had been predicated on"

Some analysist predicts a dip in Apple stock, people believe him, the stock dips and the analysist is proved correct. Yea, I had a turkey slaughtered for Christmas and analysed by the soothsayer and he did predicteded a sellith order ..

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Possibly too successful?

Apple's problems with analysts appears to be a product of it's success.

Until Apple brought out the iPhone and the iPad and the massive revenues and awareness they achieved, it was largely overlooked by analysts, investors etc. This meant the company was largely left alone to plough it's own path - hence in part why it was able to pull off the investments in the iPod, iPhone and iPad and deliver products to the market when it was ready, without too many questions from third-parties about the state of it's financials.

Now, with it's stock riding high etc. etc. the financial markets are taking a much closer interest and are putting pressure on Apple to 'look after their interests' and behave like a bluechip, namely keep the revenues and stock value up and ideally take it higher still - hence why they are concerned about the projected gross margin on the iPhone 6.

Apple's concern has to be to maintain it's levels of investment in new product R&D, because at some stage, just like a pharmaceutical company, it will need it to deliver new high margin products to market. However, like pharmaceuticals in the 80's~90's, I suspect we may not see the success of the smartphone and tablet markets repeated anytime soon. However, unlike pharma, the existing product portfolio also needs to be maintained and enhanced if it is to stay relevant in the market. So given the old adage about fighting wars on two fronts ...

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Apple's big problem (or rather the big problem for Apple investors) is that the fabled pipeline of Jobs-inspired innovative products that was hinted at in the great man's last days has steadfastly refused to manifest.

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