The Downside Of Being Fashionable ....
... is that eventually the products will go out of fashion.
Apple released its financial results for the first quarter of its 2013 fiscal year after the markets closed on Wednesday, and disappointing results immediately drove its stock price down by over 5 per cent. Although Apple posted record quarterly revenue of $54.5bn, a quarterly profit of $13.1bn, and earnings-per-share (EPS) of …
The 33% drop in share price is because the product has stopped being fashionable, the product being 'shares in Apple'.
The P/E ratio is still low, sales are up and revenues are growing. Apart from the lack of profit growth as highlighted by El Reg, I think there's also the psychological problem that Apple shares are no longer a sure fire thing for an investor.
Stock markets rarely make sense.
They often trade based upon hype, so if the new Apple TV set is rumoured it can make the share price jump, when it doesn't appear it can plummet.
There's been an expectation that Apple will launch a big product every year, except that really making an improvement takes time.
Apple's share price dropping after posting good profits is no less idiotic than it's share price jumping because some chinese factory made a new screen protector.
Ultimately the quarterly statement tells us what has happened, not what is going to happen - that's for the analysts and stock brokers to decide - and the stock market appears to have decided that the sheen is coming off Apple.
"The fact that profits are the same as last year means that future profits are expected to be lower than what they thought they would be last year."
Except that's untrue - they are higher than 12 months ago, EPS is higher and they beat their own expectations.
The downward movement simply reflects numbers below expectation and more competitive markets in which they trade. Samsung, Google and others are taking more of the wind out of Apple's sails. This may spur them on or it may indeed spur on the competitors...either way, their results are still pretty impressive and their cash pile is not exactly small.
Agreed. The signs have been there for some time. Not knocking Apple or their products, but you can improve on an existing product only so many times before everyone has one and competition catches up or passes.
I'm always surprised out how well Apple has done in the American market with the state of the economy. I remember thinking they would never pull it off, but I was wrong.
But the house that is Apple is going through some changes, power struggles, product problems, nothing really new to show off that's above and beyond.
But their patents will keep them in money for a while though......
"Yeah selling more phones and making more profit must really suck"
They didn't make more profit, more phones, but proportionally more costs - it was just the central point of the article toadwarrior *slaps forehead*
Remember that Apple was the market leader in terms of smartphone for a long time - now competitors like Samsung are outselling Apple in smartphones, and long term that means less people locked into the App Store/itunes etc which lowers Apple's earnings long term - its not just about selling handsets...
I agree with your post, but:
"Remember that Apple was the market leader in terms of smartphone for a long time"
Actually no, it was Nokia number one until 2011, then Samsung 2012. Apple might have held the title for one quarter.
Plus "smartphone" is ill-defined, and just a marketing term, which unfairly compares 100% of Apple phones to a minority of everyone else (with Apple using the term even for phones which couldn't run apps). The mobile market is Samsung number one, Nokia number two; until a year or two ago, it was those positions reversed.
I think another way of looking at it is that people had bought into the absurd media hype from 2007, fuelling some idea that Apple would take over and become number one, but with the amazing success of Samsung (and Android in general), it's become clear that's not true, and the existing companies will carry on leading the market just fine.
Markets don't exactly operate on current data, they operate on expectations which are informed by current data. The expectation was that Apple would make more money than it actually did. Therefore future expectations have to decrease, which means the stock price has to decrease. This is all independent of whether ANY of those expectations were grounded in reality.
This is one of the reasons there is a segment of economists who strongly favor not taxing dividends, which would allow stocks to start paying them as a means of benefiting shareholders instead of driving them to stock value appreciation. Not sure how badly this distorts the British and EU economies, but it is a major factor for the US.
"I can see what looks like exponential growth in the iPhone sales chart which is good for Apple, but iPad sales seem linear which is not good."
We looking at the same charts / figures? iPad sales were up 49% in this 13 week quarter compared with 12 months ago which was a longer 14 week quarter. They sold all the iPad Minis they could make - if they could have made more they would have sold more.
Sure, sure follow the illusionist's misdirect.
The relevant numbers aren't total sales, they are profit per sale, which is falling. And given that Apple is a high margin/non-commodity player that means they are either moving into a market segment where they've never competed well, or they have to switch horses to a new high margin product. When Jobs was still alive that was a 7:3 prospect. With him out of the picture it's maybe a 3:7 prospect.
That must be because you have no friends. Windows Phone is selling:
Nokia has returned to profit, ending an 18-month spell during which it piled up losses of more than €4bn (£3.36bn).
The Finnish mobile phone maker reported an operating profit of €439m, compared with a loss of nearly €1bn a year ago, as consumer demand for its smartphones revived and the decision to slash its workforce by 20,000 helped to cut costs. The company has returned to growth, with net sales up 11% on the previous quarter to €8bn.
In a sign that the Windows operating system used in Nokia's heavily marketed flagship Lumia handsets is beginning to gain traction, the key devices and services division also returned to profit.
Or when you look at the figures a bit more closely:
iPhone sales up from 37m to 47.8m (up over 29%) despite problems manufacturing the new design and negative issues / publicity related to Apple Maps launch.
iPad sales up from 15.4m to 22.9m (up 49%) and they could not make the iPad Minis fast enough to keep up with demand.
Mac sales were down but the whole market is down and they could not build the new iMacs quickly enough for demand so only ended up selling them in 1 month in the quarter.
Total revenues up 17.7% - gross margins were lower at 38.6% - both higher than their OWN estimates - lower margins probably due to the lower average cost of iPads with the iPad Mini and many people buying older iPhones (at lower cost / free on contract).
All of this was despite it being a 13 week reporting period whereas the same quarter 12 months ago was a 14 week quarter (7.7% longer) - so if you looked at average sales per week they would have been higher still).
Sitting on an even larger cash mountain up almost $16bn to over $137bn.
Isn't the point that the iPhone sales are more heavily biased towards older models, because the 5 is too expensive for what it is?
This, and the success of the iPad mini, implies that future growth is going to be driven by cheaper, lower margin products, while the competition is technically ahead at the same prices. So the future earnings projections need to be adjusted down.
If they had sold 47.8 million iPhone 5, Apple should be back at $700. But they did not.
Long term it does not really matter which iPhone they bought - sure they make more profit today on a '5' but those 3GS, 4, 4S users are very likely (think I read it about 80%) to buy an iPhone 'next' time and they become an iTunes customer today. Also selling all those iPods is underestimated since if you have an iPod (especially a Touch) the logical / easy step is to an iPhone / iPad.
My problem now is are they cheap enough. On one hand it is pretty clear that the ttm P/E says it's cheap but I have no way of knowing if that will be true going forward. As it is, the aftermarket is now down to $463.50 which seems a bit excessive to me so I'll have to set some overnight orders in the event it doesn't rebound in the morning. While I don't see a rapid bounce back, it shouldn't take long to come back 5-7% and I'd be happy with that for a month or so of sitting.
I expect that a lot of work will go into making the [5S,6] a lot cheaper to build to boost the margin back up and they may even quietly spin a 5 rev2 if they have the time, they certainly have the cash. One option that I've heard a lot about in the news, that I can't but question, is whether they will do an iPhone 'frugal' to compete on the low end but I wouldn't be surprised if they built the equivalent of an iPhone Air at eye popping margins with near shaving quality edges and a 3-3.25" screen.
Apple have a long term benefit - they may sell an iPad Mini or older iPhone and make less margin but they are then an Apple / iTunes customer. Samsung sell a phone today and that's it - next time it could be a Samsung but equally a HTC, Asus, Motorola, Sony - whoever. Once someone has used Apple they tend to be much more loyal and (unlike Samsung) Apple make ongoing revenue selling the media from iTunes.
Yes the shares appear cheap - market cap ($482bn now) less cash ($137bn now) puts them on a ridiculously low PE of around 6. Compare it to Microsoft for example or Google or Amazon - or pretty much anyone for that matter. Realistically the share price could double and they would still be reasonably priced. And - they even pay a dividend now.
Obvious FAIL from Apple. Failed to meet expectations. The iPad is obviously stagnating and the iPhone5 is a failure. They have lost momentum. The cool factor is gone. I just quickly read 7 different articles all negative on AAPL. Man, I mean look at those graphs and numbers?!? How is Apple even staying in business?
Somewhere there is a reality distortion field, and it is located on Wall Street, and in the offices of Tech journalists.
Reality distortion field? I think it's yours...all my graphs are up.
- Revenue up
- units shipped up
- operating income up
- earnings per share up
Only thing Cook needs to explain is the 18% drop in profit on that revenue- it reeks of poor supplier management and cost creep; something he was formally head honcho of.
And much of this come from over analyst expectations, which apple can't control. eg: Apple management forecast $52.00 billion in total revenues, the analysts expected $54.69 billion, and the result was $54.51 billion.
My question is where the big products are coming from in 2013 - another year of incremental upgrades like 2012 will not get them back in front.
Afterall, 56.24% of sales came from the iphone alone, and given the 5 was not the big upgrade people were expecting, degredation of iphone sales volumes will have a big effect on bottom line.
I'm guessing (obviously - but not like a highly paid anal-yst) but maybe they took in huge stocks they could not build in that quarter which will increase cost but not converted to revenue (yet) so hit margins.
What SHOULD count to shareholders is do Apple meet THEIR expectations - these analysts are listening to rumours and the fact is they DON'T KNOW.
so where is the 'cachet' in owning one?
Ignoring the fact that the reported profit is an obscene 55%, which should be enough to put anyone off buying any product, these things are as common as dirt and little better than a Ford Model T.
Seeing your charts simply highlighted the fact,
I better understand the mentality behind one company who treats the loss of an iThingy more like the loss of a pencil than a valued piece of equipment. Even a 22-year old house guest never got too excited when she lost iThingy but it turned up a couple of days later.
As much as you losers try to make it about the "cool factor", It ain't about cache', it just works, and I can do shit on my ipad 1 I still can't do on any other device. That's a problem, because I will have to shell out for another ipad if I want to keep doing things BESIDES checking my email.
"I can do shit on my ipad 1 I still can't do on any other device."
Name one function (apart from syncing with cursed itunes...) that you can't do with another tablet.
If you can't do it with one of the current Android tabs its because you have never bothered to try - the difference between the two in terms of functionality is practically non-existent these days.
Sure, if you're comparing a $500-800 ipad to a $200 locked down kindle, then yeah the kindle does less by design, but its a fraction of the price too...
I know lots of people with iThingies. Anyone who bought it for himself is always touting the coolness factor while simultaneously denying he bought it for the coolness factor. (Probably because admitting you're just following the rest of the lemmings is not cool.) Only person I know who doesn't tout the coolness factor has a work issued iPhone.
Funny thing about that. I was reading an article in wired magazine about how only 2% of android users are actually USING android. It's all O.S.'s built on android, but full of bloat ware and HEAVILY rebuilt to be specific to each manufacturers hardware. Only about 2% of users are getting the android experiences.
Please don't assume Wired know what they are talking about. Most of your post makes no sense, so if you got that information from Wired, then their article must make no sense either.
There are no OS's built ON android (Android is built on Linux, the OS). All Android implementation require some customisation to specific hw, but are nowhere near 'HEAVILY' rebuilt. The only obvious example is TouchWiz on Samsung phones, that is built ON TOP of Android, but doesn't rebuild Android to any great extent at all.
AAPL beat their estimates and in a 13 week quarter compared to 14 weeks in the previous year. This just shows analysts can get it wrong. As for iPhone 5 being a failure - how when they sold 47m compared to 37m a year ago and had problems with supply so would have sold more if they could have made more.
I think this shows just how greedy the Wall street types are. If I were earning 13.1 billion a quarter, I'd be quite satisfied with that...Just under 50 Million iPhones in a quarter....
What were they expecting? Tim Cook's "Just one more thing" to be revealing Rumplestiltskin as VP of spinning straw into gold
This is so reminiscent of Sun just after it peaked. No matter how good the results were, and how close to the predictions, the share price went down after the announcements because the analysts had got used to being impressed by Sun beating expectations every time
Maybe Larry wants a phone company too?
Yet when the same thing happens to Google, people moan about how awful they are for not being able to meet demand.
"Expect many of these to shift into the following quarter."
Typically iphone sales have always been up in the quarter of a new release, then slide the rest of the year (compared to Samsung or Android which outsell them all year round, for example).
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I don't think the return you imagine is necessarily going to happen.
It's uncontroversial to say that for some people a tablet is a better device than a desktop/laptop. Those people will migrate one way and then not migrate back the other. So I guess the disagreement is: how many people is that
I'd argue that it's a big number, being a large proportion of those that use a computer primarily for accessing the Internet. I further think that the people that just want to access the Internet are the reason that laptops have made their way into shops like Tesco, and that the £300 Tesco-level laptop is responsible for large volumes because it's so easily available and cheap enough compared to its perceived value to be an impulse buy.
So while businesses — not just technological but anything that involves document preparation or significant digital editing or anything like that, being pretty much all of them — and enthusiasts aren't going to migrate permanently to a tablet, a huge chunk of people are.
If someone primarily only uses a computer for Internet, but not always, what do they use for the other thing? I mean, despite the media claims, my observation is that tablets are being bought more by the computer-savvy people who also have laptops, than by computer inexperienced people never using a non-tablet PC. It's the "enthusiasts" more likely to pick up an extra tablet.
The fact that tablets are mostly still things that you attach to a PC, rather than things you attach devices to, adds to this idea (and USB to go seems a pain to set up, or know if it will work). E.g., whilst I'm sure there might be some way to print from my Android device, if I had the right kind of printer, it's certainly not something that Just Works OOTB yet, or is as easy as clicking print.
Of course I'm sure that eventually this will change, so you can do everything from a tablet, and do so easily, but then as I say in my other comment, at that point they are basically PCs anyway, and the distinction becomes meaningless.
The whole "Post-PC" thing is meaningless anyway, since it's so ill-defined. If I'm using a touchscreen personal device for computing, then why isn't it a personal computer. It's a different form, but we still call laptops PCs, even though they're significantly a different form to desktop PCs.
Sometimes it's useful to distinguish between a computer that people use for general purposes, and things that are technically computers but used for a far more restrictive set of things - e.g., consoles, smart TVs, and phones. But if people start using things like phones/tablets for general purposes, then that distinction no longer holds.
Many shops refer to them already as "Tablet PCs". To some degree, most tablets today are still basically oversized smartphones, but this line will become increasingly blurred, and Windows 8 tablets are surely PCs too. Hybrid devices further blur the line in terms of the form factor.
(Yes, I know that "PC" traditionally also meant a particular hardware platform derived from the IBM PC, but x86 tablets blur that line again anyway, and few people these days care or know about that definition.)
Plus I hate the whole "Post-PC" thing as it's almost always spread by Apple fans, most likely posted from their Apple-badged PCs, who also believe "Macs aren't PCs" and hence magically immune to any claims of the end of the PC (Mac is a trademark; the computers are still personal computers - Apple themselves even marketed them as PCs back in the PowerPC era, but now have switched to claiming they're not PCs purely for marketing reasons).
The $13bn profit is a 2.1% return on their market capitalisation. Before the share price went down, it was a lower return than that. A 10 year US government bond will give you 1.83%.
You can have the best company in the world and still have a share price that is too high for what the company is worth.
It's a case of Apple say 10 the analysts say 13 and everyone is disappointed when they hit 12. iPhone 5 sales up by 10m (27%) despite manufacturing issues and the iMaps problem. iPad sales up almost 50% and again production / supply issues on iPad mini. IMac sales down but again severe shortages.
"Those moneymen look for growth in profits, not growth in revenues. Obviously."
At the risk of sounding childish - well duh!
Dividends (if Apple choose to pay them) are paid out of profits not revenues. Otherwise a company that doubled revenue, but quadrupled costs would be a good investment when they actually went backwards...
The point that most of the people confused about the share price performance are missing, is that a lot of this is being driven by the large drop in per device profit
If you are selling 30% more devices but making the same profit, unless your overheads have risen significantly then you have a problem
It points towards the idea that whilst people are still buying iDevices, they are going for the cheaper versions rather than the flagship variants where Apple make the most margin.
So in order to grow their profit, they need to either sell far more devices at lower per profit device (unlikely, as eventually you hit a saturation limit unless you can successfully convince people that they NEED 2 phones) convince people to buy the more expensive iPads and iPhones (Needs a compelling product however and the incremental upgrade strategy seems to be failing) or launch another paradigm-shifter and race to initial dominance (Because thats easy to do, and every idea is guaranteed to be a hit.......)
Whilst short-termists will look at the headline numbers and say everything is fine. In reality it points towards a troubling trend long-term which NEEDS to be reflected in the share price
"If you are selling 30% more devices but making the same profit, unless your overheads have risen significantly then you have a problem"
Revenue was up about 17% but profit was flat - they were seriously constrained in supply. For all you know they could have a huge stock of parts (already paid for) but could not physically build the units (until next quarter).
Considering all the bad press over iMaps, they could only ship iMacs in 1 month out of 3 and supply problems with the iPhone 5 and iPad Mini their figures are still great. I would actually expect a relative bounce this next quarter.
$450B market cap in after hours trading. And ~$150B in cash with no debt. That's easy math: Wall Street thinks a company that spins ~$50B a year in profit is worth $300B or 6x earnings. And that they won't find something extra interesting to do with that $150B in ready cash. But Amazon is worth 3500 times earnings, 600 TIMES as much, to Wall Street. I don't get it.
That growth in profit stalled in the Christmas quarter would be a big deal. Except that Apple is laying out huge amounts of capital (capex) for something new and interesting, and is facing higher costs for putting a spike in Samsung's wheels. And they're not engaging in stupid acquisitions that have to be writ down 90% within the year.
According to the 8K filed today Apple owns $98B in long-term marketable securities. If they keep plowing their profits into securities they're likely to become the world's largest investment bank. Oh, how I would love to see the list of securities they own. How would you spread out that much money? As the economy recovers that's going to be a huge driver of Apple's economy. For goshsakes, they could take Intel private without going into debt. They could wire every home in America with gigabit fiber broadband - thrice. For $30B I could get my cat elected President of the US and fill the halls of Congress with her fleas. What somebody with the entrepreneurial spirit could do with that kind of cash boggles the mind.
This is just an insane amount of money. I give up. It makes no sense. Even valued at Microsoft levels of P/E (14) this is a trillion dollar+ market cap company. Stalled growth is no excuse - Microsoft has been stalled for a decade, not a quarter. It makes no sense. Compared to other IT companies Apple's P/E less cash looks like a dog that won't hunt. But it DOES hunt.
Does Tim Cook have cancer too or something? Cocaine addiction? Is there some secret government plot to ban the products? I don't get it. Either there's something going on here we don't know, or the game is rigged. And who can rig the game so well as to manipulate the price of a company worth nearly half a trillion dollars?
I don't care for their products myself. Their cathedral just isn't my thing. But I'm not stupid. Other people do and continue to be willing to pay premium prices for the premium experience they offer. It makes no sense.
I don't get it.
I can see your point but has it has to do wth the way apple does business and what products they produce. Arguably they only sell 3 (maybe 4) products. And arguably there success is a fashion bubble waiting to explode. It wouldnt take much for apples main revenue streams to dry up. I realise they have gazzilions in the bank, but a couple of poor choices, a failed release, god forbid; a recall. and all that cash is used up.
Yes Apple has huge competition from Android and Microsoft and ther model needs adjusting.
You forget Microsoft have come back because they are a $260 billion dollar company. Apple is just a temporary wounded animal worth $450 billion! They are not going to take all this lying down from Samsung, Microsoft and all other competitors.
They will re-invent, re-innovate, headhunt the best in the game and come back greater than ever.
Money talks and makes waves.
Thing about Apple though is the majority of their profit is in two product lines, and the vast majority being in just one. If people do start turning away from the iPhone line in large numbers and they have nothing to replace it then those profits are likely to plummet. Who would have predicted Nokia's position today 6 or 7 years ago. It doesn't take long to go from hero to zero in the technology world. Not that I am wanting Apple to fail, it makes no difference to my life what happens to them.
One thing is for sure if you ask me, Apple at the moment is a ship without a captain. Tim Cook may be a great first mate but in my opinion he is not a captain, he is a number cruncher and Apple needs a products man with some vision at the helm. As for the steady profits on increased revenue. I'd hazard a guess at the reports about the difficulties they are having in building the latest products may be causing more wastage and increased costs as a result. But then I suppose if I was that great at knowing what was going on, I'd be heading up the company, instead of sitting at a keyboard. Still wouldn't mind a share of those profits the Wall Street goons are complaining about though.... I could buy my very own country.
"Who would have predicted Nokia's position today 6 or 7 years ago."
Just about everyone, so it seems - the Apple-hyping media have been predicting the doom of Nokia for years. (Yet still they sell more phones than Apple - Nokia are far from "zero", and Apple have never been "hero", that title now going to Samsung in phones.)
You're right, the news doesn't mean much - but remember it was the media praising how wonderful Apple were because they were number one of this arbitrary statistic that most people shouldn't care about. So fair's fair - if things are no longer good on that measure, it's worth pointing out.