Sorry, Apple-haters, but Cupertinian doom not on the horizon As these words are being typed, Apple's stock is taking a beating, down around 10 per cent from its $514.01 Wednesday close, in reaction to what Wall Street has clearly characterized as disappointing financial results for the first quarter of Apple's 2013 fiscal year. May your humble Reg reporter take this opportunity to point …
Ummm... I don't think anyone ever suggested that they should expand their market share at the expense of their high-end product.
What seems to have disappointed the analysts is that the demand for the products seems to be shifting (NOTE: not "has shifted") away from the brightest-and-best, towards less capable products (e.g. demand for iPhone 4 and iPad Mini seems to be better than for iPhone 5/New iPad).
There's no way that a company can introduce cheaper products and it NOT effect sales of their higher end kit. There are always going to be a proportion of people who buy the cheaper device instead of the premium model they would have purchase otherwise. The only thing they can do is hope the result will be net positive.
In the current financial climate coming out with about the same growth in profits as Google (the 14 week vs 13 week thing equates to about 7% growth) isn't bad, but cheaper devices command lower margins.
As far as I can see, the current surge in sales of tablets is very much like that of the 'netbooks'. Its a bubble that will inevitably burst. Working habits haven't changed. People still work in cubicles. Kids still do their homework sat at a table. Teachers invariably still stand at the front of a classroom projecting onto a board while the kids look on.
They don't do anything particularly "new", but they do less of the "old".
I just don't see the trend continuing for a huge amount of time. Couple more years, 4 at tops.
"Working habits haven't changed. People still work in cubicles."
Yes they have. Workers might still be in cubicle, but instead of working they are updating their facebook profile.
"Kids still do their homework sat at a table."
Ummm... wrong again. Kids are not sat at the table because their parents are too busy playing angry birds on their tablets on the couch. The only reason a kids would sit at a table is to play angry birds on their tablets because there's no more space on the couch.
"Teachers invariably still stand at the front of a classroom projecting onto a board while the kids look on."
Well, ok, you might have a point there. But this point is nullified by the above.
Which is it?
"He also noted that sales of the iPhone 5, iPhone 4S, and iPad mini also suffered from supply constraints"
Yet Apple are vastly cutting the forecasts for components.. Seems they know that demand for iPhone is dwindling, as users are finding better quality (or better value) phones in Android.
Yet Apple are vastly cutting the forecasts for components.. Seems they know that demand for iPhone is dwindling, as users are finding better quality (or better value) phones in Android.
That's an opinion, not fact. Obviously Apple have reached a saturation point where new sign-ups (first time iPhone users) are reducing and replacements are on a slow uptake because people don't want to replace (4 / 4S users) or the few that go off to another manufacturer. Stop fandroiding and get real here.
They are surely approaching a plateau as more people have bought iPhones than, one would think, have the disposable income to replace them every year.
iPhones are expensive for what they are. There are virtually no Android products that compete directly. They concentrate on bigger screens, more features or lower price, and are thus aiming at new markets. (Anyone with a 5 inch or above phone is likely to be someone who doesn't want to have to pay for both a phone and a tablet, for instance, so they are a lost sale to Apple both for phone and tablet). Outside the US, where the price tends to be less carefully hidden in the contract charges, even a "cheap" iPhone 4 looks a bit old compared to comparable Android products.
The nearest anyone seems to be going to a direct head to head is RIM, with the Blackberry 10 platform. They seem to be trying to capitalise on people for whom an iPhone 5 is now a bit too common and want something different. But they are hedging their bets by aiming to keep the old keyboard form factor as well.
So Apple's problem is a bit like Rolls-Royce cars, till they were taken over; the risk is of market saturation and the only product alternatives in your range being older and cheaper variants of the top of range product, with no benefits other than price.
Firstly the rumours of Apple cutting screen orders were wildly overstated. The estimate is they actually cut orders from about 17 million for this quarter to between 12 and 15 million. Secondly you're assuming that the screens were the cause of the supply constraint. It's pretty likely that there were other factors and they now have overstock of screens waiting to be used, hence the cut in orders.
Oh well if that's all - go get your jobs at Goldman's then.
How about this - market cap less cash puts they at a PE of about 6 - that is dirt cheap. If they were factoring in massive future growth they would trade on a PE much, much higher - try comparing Apple's PE with Amazon (ha ha) or Microsoft or even Google etc.
If I were Apple think I would spend some of that cash on significant share repurchases - they could buy back 1/3 of themselves from their own reserves.
we thought it useful to point out that Apple's sales would have been higher had Cook & Co. better managed that task
Rik, that is exactly why Apple is considered to have underperformed in that quarter. It was what the board is paid for to get right. Personally, I don't buy the constrained supply argument too much; the flat profits look like a shift to the slightly lower margin products. This is fine except it does beg the question: when is the next high-margin device coming?
The rise in reserves is also not that impressive: companies with large cash piles are generally considered to be inefficient as returns on that cash are much lower than on products. This explains the current trend for cash-rich companies to buy shares back. There are likely to be calls for Apple to do something with that cash - either a share buy-back or a big acquisition.
Apple's business is still extremely healthy and anyone who doesn't envy it obviously isn't interested in money. However, it will be interesting to compare sales and profits growth with Samsung when they become available. Part of Samsung is now competing more or less directly with Apple but better able both to meet demand and sell higher-margin devices.
Finally, share price movements alone should be taken with a pinch of salt. You need to know the volumes and, if possible, the buyers and sellers. On and around numbers days the market is distorted by those making a quick buck.
Your favorite designer fruity status symbol company has lost it's mojo and are running around releasing any old shit, in the hope that some of it sticks.
They have no answer for Android. Android beats them in features, performance price and style at the top end, and value at the bottom and mid end. There is an Android for you, regardless of your requirements (big screen or small, waterproof, drop proof, keyboard or touchscreen, you name it, there is one).
The same is now happening on tablets too, the latest 7in Android tablets piss all over the iPad Mini, as does the 10in Android tablets over the iPad, and not only are they better, they are also cheaper too.
The revenues in this context are only important to investors and therefore have a direct impact on it's share price and thus it's market capitalisation, but those things are transitory and largely emotionally reactive. What Apple should really be worried about (and the rest of the IT world rejoicing about) is that they are already throwing themselves headlong into everything they did last time Jobs exited the company that drove it to near extinction, the things he reversed or stopped outright when he took over again. This time he won't be coming back to save them from the mistakes they are already gleefully holding press conferences to promote.
I wouldn't be rejoicing about the prospect of the demise of Apple if I was you - not that I believe what we're seeing here is the beginning of the end by any stretch of he imagination. More like it's a stock market reality check. But anyway, about rejoicing the demise of Apple - exactly how good would Android be if Apple didn't exist? It is the pressure of the competition which has driven the evolution of Android into the product it is today, the constant need to catch and pass the market leader (a moving target). As I understand it, Android entered development before iOS yet it has spent most of its time playing catch up (until ICS really). Apple set the bar and they set it high and the Droid OEM's, along with Google, were forced to up their game to compete. This is a good thing.
Now the media working itself into a lather and the iOSomething evangelists do my head in, not to mention the ignorance of some Apple users about Android [1] - I am no Apple fan, believe me and my Nexus 10 arrives today, but a market as utterly dominated by Android in the future as it was by iOS in the past is not something we should welcome. I'd like to see Apple cut down to size a bit more but nothing more than that. Whether MS will ever be a serious player in this market is an interesting one - I am not sure if there is even room for 3 major players (and certainly not more so I think it'll be bye bye RIM).
[1] - Got a new HTC One X hours before going away for the weekend. When meeting up with some friends I went to check something on my phone and realised that much of the new phone still was not set up. She happily informed me that if I'd only got an iPhone then all of my contacts, calendar events etc would just synchronise back through iCloud.[2]
Not sure what you went from phone wise to your new phone. If you jumped across platforms, then, no most of your phone setup is not going to just happen. I have been across several builds of android on my 2+ year HTC HD2 and every time I log into gmail on the phone, most everything is just there. Got a new Note 2 and 3 minutes after logging in, most stuff was there. Had to tell play store to re-download my apps, but that was about it. It works very well to resync on android.
"other factors held down revenues, and therefore net income. A shortage of iMacs, for example"
Yeah and bad management pisses off the market, go figure. I'm probably the world's biggest Apple hater (they and their customers literally aggravate me to rage despite knowing several past and current employees) - but I know their share price is irrelevant in the same way it was irrelevant when it was at it's high.
Share price fanboys need to get a grip.
Apple's Mac sales dwindling? Could be of course, probably depends where you are. I know several colleagues who, in the last year, having the need for buying a new computer, have switched to Macs, mostly Macbooks, one even a Macbook Pro, a lot of people around me have iPads and iPhones, and I still have to meet the first unhappy one about their purchase.
I switched over 5 years ago, when I bought a second hand Mac Mini, which is now seven years old, but is still doing fine and in use daily. We bought a 21" iMac 5 years ago, running today Mountain Lion and is the main machine in our house, being used by the whole family. Still running as well as it did when bought.
Windows 8 on the other hand, I've just seen on TV for now. Would love to see a machine on which it runs to have a look at it - does look interesting, but haven't met anyone who has actually bought one yet.
I'm not a fan of Apple kit myself, but I don't want to see them hounded out of the business either.
The real problem for the writer of this article is that he wants the stock market to work as it did before, well, Apple led the wave of computerized transactions.
People used to buy a product that impressed them, or see one in action, or use one, or ride in one, and they would buy the stock, get real stock certificates which they would hang onto for life because their money would be safe in a company that made such obviously better goods.
That isn't what happens today by a long chalk.
People buy stock electronically. there is no point to having a certificate because the stock was bought as a quick return money-earner, and the value of the stock under those conditions is decided by how panicky people are in any given moment.
You'd think in a world where transactions of this sort move faster than they can be traced, short-selling would be more tightly controlled than it is, but the mentality is that short-selling "worked" in the trad shout-and-paper trade world, so it just works, 'kay? (Ollie White's MRP classes had a great take on what happens when you computerize a 'working" paper system. If you can find them, they are worth a look.)
It isn't about how shiny or better the product is, it is about how much money the board was told would be piling up set against what is actually being shoveled out of the way when the sums are done.
Shocking. But, you know, life. I honestly wonder sometimes why some companies go public, given that the abrupt (and necessary) shift in company goals must pose a serious risk of whiplash injury and the predators who can break a company just for the hell of it without serious investment or oversight.
Problem is, if you were correct, then there would be big fluctuations in each direction as shorters and market makers effectively manipulate the market. This would be a daily or even hourly thing.
The reality is that the share price has been in a steady decline for 4 months now, there's been no spikes or dips, so no real shorting. Apple had been a favourate with long term inverstors and investment houses (think pensions) as they have been safe, reliable, and always rising. For the stock to drop over 30% in just four months shows signs of the big players selling and getting out, or at least offloading larger chunks of their investments. A furtehr 10% today shows that Cook's performance has not imperssed the city.
I do not think they will collapse, but I have said for a long time that the stock was seriously over-priced and I think what we're seeing at present is a reballancing towards a more reasonable price, at which point it will level out once more (unless there's a major screw up - successes rarely cause big price rises). Apple with carry on as before and the only peopel hurt will be those who got carried away on god like stock.
I've been happily using and buying Apple product since the early 90s. However...
This year I DIDN'T spend at least $8000 AUD on a Mac Pro because Apple decided to not bother significantly updating what is already an old product line; I DIDN'T replace my waterloggged v4 iPhone with a v5 because the dis-benefits (new iOS "features" I dont want and a new connector that won't match my audio devices, etc) outweighed the benefits; I've STOPPED renting movies thru iTunes because Apple's servers often take literally hours to transfer the content to me over my metropolitan Melbourne ADSL2 line; and when my massive matte Apple Cinema Display finally dies (it's becoming unwell, sadly) I WON'T be replacing it with a glossy "mirror" screen.
Sheesh, I hope Apple knows what it's doing!
29% was a good bit more than 0%, and 48% was a tremendous bit more than 0%. And you'll note these are within the same time frame so a week or two twitch between reporting periods is irrelevant. Which means Apple are shifting more units for less in order to keep even on profits. Which means they are on a downslope that has to end. Whether it ends with an upswing or a crash is the question. Given that St. Jobs is no longer around to create miraculous upswings, best to put on your crash protection gear.
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