AAPL - Apple Inc.

[txlaw]

I think Apple has a major competitive advantage with regards to privacy issues:

 

https://www.apple.com/privacy/

http://www.washingtonpost.com/business/technology/apple-will-no-longer-unlock-most-iphones-ipads-for-police-even-with-search-warrants/2014/09/17/2612af58-3ed2-11e4-b03f-de718edeb92f_story.html

 

 

[Liberty]

http://www.bloomberg.com/news/2014-09-18/apple-s-new-big-screen-iphones-draw-long-lines-at-stores.html

 

Apple Inc.’s stores attracted long lines of shoppers for the debut of the latest iPhones, indicating healthy demand for the bigger-screen smartphones. [...] At Apple’s store on Fifth Avenue in New York, police officers put up barricades as the line stretched more than 10 blocks and the crowd cheered continuously for the 15 minutes before the phones officially went on sale.

[prevalou]

http://www.valuewalk.com/2014/09/apple-inc-iphone-6-first-weekend-shipments/?utm_campaign=trueAnthem:+Trending+Content&utm_content=bXRPEC&utm_medium=trueAnthem&utm_source=twitter#!bXRPEC

[Palantir]

I found this interesting:

 

By last summer, with Apple’s stock down by as much as 40 percent from a record high because of concerns about the lack of new products, Cook was ready to accelerate the project.

 

Looks like Cookie Monster was bothered by Apple's falling stock price.

[Liberty]

I found this interesting:

 

By last summer, with Apple’s stock down by as much as 40 percent from a record high because of concerns about the lack of new products, Cook was ready to accelerate the project.

 

Looks like Cookie Monster was bothered by Apple's falling stock price.

 

Looks like you think that what a journalist wrote has much to do with what actually went on inside Apple or Cook's head.

 

I bet the two things are not be related at all. I bet it's "By last summer Cook was ready to accelerate the project" (because they though it was getting good enough to turn into a real product, after starting work on it 3 years ago) and the journalist added the part about Apple's stock price because when they looked up "last summer" that's what they found and the media judge Apple by its stock price anyway.

[Viking]

Studies that looked at purchase intent for iPhone 6 and 6+ concluded there would be very strong demand from current Apple users and also Android users. Preorders were 4 million in the first day, very strong compared to 2 million for the 5 two years ago. Watching first day sales today, it looks like demand is VERY strong. Looking at surveys, preorders and first day sales it looks to me like The iPhone 6 and 6+ will sell very, very well this holiday season.

 

The sales split may be 60-65% iPhone 6 and 35-40% iPhone 6+

The iPhone 6 sells for $100 more. As well with the new 16/64/128 storage sizes the expectation is this will motive more people to spend more on storage (increasing revenue per unit and margins).

 

In fiscal 2015 I think Apple can grow iPhone units by 20% and avg revenue/unit by 5-10%. This results in iPhone revenue growth of 25%; given the iPhone represents about 70% of Apples profits this should drive double digit growth in total earnings. With the share count about 10% lower year-over-year this should result in earnings per share increases of greater than 20% year over year. This does not include Apple watch sales or any new innovation we may see in the coming months like improvements to Apple TV.

 

Analysts expect 2014 fiscal year revenue of $180 billion (to end of Sept). Currently they expect 2015 fiscal year revenue of $199 billion (looking a Yahoo finance), an increase of 11%. Expectations for Apple for revenue growth are currently very low; as one would expect this is also the case for earnings and earnings per share.

 

The fly in the Apple ointment is supply of the 6+, which appears to be pitifully low. This will suppress sales in the coming month or two. Not selling yet in China is a second negative for near term sales, given comparables from last year at this time include China numbers.  So while the near term outlook is quite foggy, the outlook for the full year (fiscal 2015) looks very good.

 

When I weave it all together I think Apple may have hit a home run with the iPhone 6 and 6+. I expect analysts will soon be raising revenue, earnings and earnings per share targets.

 

 

 

[Liberty]

Looks like Apple has dumped Samsung and is fabbing its SOCs at TMSC on a 20nm process:

 

http://9to5mac.com/2014/09/19/chipworks-iphone-6-tsmc/

 

 

[Kiltacular]

Cook has been masterful in his tenure thus far.  It wasn't obvious he would be.  His handling of the first era in the post Jobs period is a huge credit to Jobs's choice as well as to Cook himself.

 

Seeing this kind of devotion to a tech product at this stage is amazing -- he kept people waiting just long enough to (re)build the hype...I thought for sure we were at the stage of the 5 blade Gillette razor (when the Onion did the parody and Gillette then did the razor). 

 

Even though I bought the stock during the huge correction, I didn't expect this reaction to another phone.

 

Whatever comes in the future, at this point, he (and the pre & post Jobs team) deserves credit.  There were lines all over the place, all day, all over NYC.  I can't recall any other product -- maybe the second Star Wars movie [for us over 40's] -- that attracted this much attention this long after the first iteration. And I think the second movie was just a few years after the first.

 

The above said, I don't know what to do with the stock.  Doesn't seem expensive enough to sell but I wish they had bought back even more -- probably nitpicking.

 

I have more IBM now at these (relative) prices.

[fareastwarriors]

Apple announces record sales of 10 million iPhone 6 & iPhone 6 Plus units in first 3 days

 

 

http://appleinsider.com/articles/14/09/22/apple-announces-sales-of-10-million-iphone-6-iphone-6-plus-units-in-first-3-days

[Viking]

Tim Cook said "We would like to thank all of our customers for making this our best launch ever, shattering all previous sell-through records by a large margin. While our team managed the manufacturing ramp better than ever before, we could have sold many more iPhones with greater supply and we are working hard to fill orders as quickly as possible."

 

Last year Apple sold 9 million; this year Apple sold 10 million.

Last year included China; perhaps as much as 2 million units. They are not selling in China yet.

Last year included a new 5C model; this year Apple will continue to sell the 5S. Channel fill last year for the 5C may have been as high as 3 million units.

Supply of 6+ is VERY constrained. Sales split of 6 to 6+ may be 66% to 33%. This suggests 2 to 3 million units of 6+ were pushed to Oct due to low supply.

Offsetting all this is supply of 5S was constrained at launch last year, which negatively impacted opening weekend sales.

 

When you add all the puts and takes together it looks like opening weekend sales (actual sell through) could be +40% higher than last year. As I stated a few posts ago, for fiscal 2015 (which starts today) analysts expect 11% revenue growth. With iPhone unit sales looking poised to grow 20 to 40% over PY, with average selling price increasing 5 to 8%, does this look like 11% revenue growth for Apple for fiscal 2015? And I think Apple has a new hardware category launching in the new year (some wrist thingy). Clearly, the analysts are way, way behind the curve on Apple revenue, earnings and earnings per share for fiscal 2015.

 

[krazeenyc]

http://www.bloomberg.com/news/2014-09-18/apple-s-new-big-screen-iphones-draw-long-lines-at-stores.html

 

Apple Inc.’s stores attracted long lines of shoppers for the debut of the latest iPhones, indicating healthy demand for the bigger-screen smartphones. [...] At Apple’s store on Fifth Avenue in New York, police officers put up barricades as the line stretched more than 10 blocks and the crowd cheered continuously for the 15 minutes before the phones officially went on sale.

 

FWIW, A huge part of the reason the lines were so long in NYC is the delayed launch in China. I was visiting Lincoln Center to see the Sesame Street exhibit with my kids on Saturday and there was a line for the iphone (maybe 100 people?)  at the Upper West Side Apple store -- 100% Asian.  I'm pretty sure they're all buying 2 unlocked no contract iPhones that are magically finding their way to Asia.

[fareastwarriors]

Many of my Asian friends got their iphones to resell in America.

[Viking]

Krazeenyc, yes, a large number of 6 and 6+ sales over the weekend did find their way back to China. However, I would expect this number to be much, much lower than what was sold directly into China last year when  it was included in the official launch.

 

Here is a Barron's article on Android switchers: http://blogs.barrons.com/techtraderdaily/2014/09/22/apple-canaccord-sees-android-switchers-for-iphone-after-samsung-et-al-miss-the-cycle/?mod=yahoobarrons&ru=yahoo

[Liberty]

http://www.bloomberg.com/news/2014-09-18/apple-s-new-big-screen-iphones-draw-long-lines-at-stores.html

 

Apple Inc.’s stores attracted long lines of shoppers for the debut of the latest iPhones, indicating healthy demand for the bigger-screen smartphones. [...] At Apple’s store on Fifth Avenue in New York, police officers put up barricades as the line stretched more than 10 blocks and the crowd cheered continuously for the 15 minutes before the phones officially went on sale.

 

FWIW, A huge part of the reason the lines were so long in NYC is the delayed launch in China. I was visiting Lincoln Center to see the Sesame Street exhibit with my kids on Saturday and there was a line for the iphone (maybe 100 people?)  at the Upper West Side Apple store -- 100% Asian.  I'm pretty sure they're all buying 2 unlocked no contract iPhones that are magically finding their way to Asia.

 

That has no doubt an influence, especially in big cities like NYC. But the total number of phones sold would no doubt still have been signiticantly higher if the 6 had been launched in China at the same time like last year for the 5s & 5c.

 

Comparing this year, without china, to last year, with China, shows just how strong this year seems to be so far.

 

Update: Was writing this while viking posted...

 

Update2: http://www.asymco.com/2014/09/22/iphone-launch-patterns/

 

http://www.asymco.com/wp-content/uploads/2014/09/Screen-Shot-2014-09-22-at-12.35.01-PM-620x498.png

[Viking]

Liberty, I am trying to understand how to think about 5C sales in last years 9 million total. 5C replaced the 5. The equivalent this year is the 5S and it was not 'new' so was not included in the 10 million numbers. This makes year over year comparisons quite misleading.

 

Last year, I think the 5C simply shifted sales into the Sept quarter (inventory build) from the Dec quarter (inventory was run down).

 

The other big impact will be average selling price per unit. Last year 9 million units were sold; perhaps 1/3 of these were 5C at $100 less than the new model. This year we have the opposite; the 6+ is selling for $100 more than the 6. That is a $200 swing in average price per unit (lets assume the 5C and 6+ sell in equal numbers over the first weekend).

 

I think it is also very interesting that Apple did not increase their guidance for Sept quarter, which they did last year. This tells me that demand earlier in the quarter was likely weaker than normal as people held off buying waiting for the 6 and 6+. Sept quarter will likely come in at high end of Apple's guidance, with GM beating. More importantly, I think Apple is poised to beat with Dec quarter guidance with higher units, and much higher avg selling price = GM above 38% and much higher earnings. We will see. 

[Liberty]

The other big impact will be average selling price per unit. Last year 9 million units were sold; perhaps 1/3 of these were 5C at $100 less than the new model. This year we have the opposite; the 6+ is selling for $100 more than the 6. That is a $200 swing in average price per unit (lets assume the 5C and 6+ sell in equal numbers over the first weekend).

 

Agreed about the impact of the 5C. I also think the 5s will sell better with price-sensitive people than the 5c did, relatively speaking.

 

I think we'll also see the new storage tiers pull more people to pay $100 more to go to 64 gigs. 16 vs 64 is a no brainer, which 16 vs 32 wasn't to everyone. This should have a positive impact on ASPs.

[gfp]

I totally agree that this 16 -> 64 gb jump is going to result in the big surprise in the ASP and margin numbers.  Everyone I know who is planning to get the new phone is going for the 64gb because over the last few operating system updates people realized that - even with icloud - they had filled up their 16 gb phones and had to delete stuff to upgrade their iOS.  Lots more video, slo-mo video, big apps, etc...  Now for $100 extra they can jump all the way to 64gb.  When I first heard the storage tier changes I wondered why they didn't bump the 16gb tier up - but now I think it was probably well thought out and a bit of genius.

 

The other big impact will be average selling price per unit. Last year 9 million units were sold; perhaps 1/3 of these were 5C at $100 less than the new model. This year we have the opposite; the 6+ is selling for $100 more than the 6. That is a $200 swing in average price per unit (lets assume the 5C and 6+ sell in equal numbers over the first weekend).

 

Agreed about the impact of the 5C. I also think the 5s will sell better with price-sensitive people than the 5c did, relatively speaking.

 

I think we'll also see the new storage tiers pull more people to pay $100 more to go to 64 gigs. 16 vs 64 is a no brainer, which 16 vs 32 wasn't to everyone. This should have a positive impact on ASPs.

[rpadebet]

I totally agree that this 16 -> 64 gb jump is going to result in the big surprise in the ASP and margin numbers.  Everyone I know who is planning to get the new phone is going for the 64gb because over the last few operating system updates people realized that - even with icloud - they had filled up their 16 gb phones and had to delete stuff to upgrade their iOS.  Lots more video, slo-mo video, big apps, etc...  Now for $100 extra they can jump all the way to 64gb.  When I first heard the storage tier changes I wondered why they didn't bump the 16gb tier up - but now I think it was probably well thought out and a bit of genius.

 

 

The other day we had a thread discussing difference between Advertising and Marketing. This is a perfect example of upselling using marketing rather than advertising. Its kind of dickish move from a customer standpoint though, they could easily have had a 32GB option at the low end instead of 16GB version, but clearly the marketing department here was working towards a higher ASP.

 

Also, I would be surprised to see iphone 6 sales exceeding iphone 6+ (unless supply constraints force it). From a consumer psychology stand point, Apple has customers coming in the door with their mind made up of going for a larger phone than they are used to. From there to go for a slightly more larger phone is also a similar "no-brainer". I expect the 64GB iPhone 6+ to be the high volume product this cycle if supply issues are resolved in time. That is a $200 ASP increase for AAPL.

 

All this being said, the next 2-3 quarters are going to be great for AAPL, but this also implies the comparison towards later part of 2015-2016 to be really difficult. Its going to be incredibly difficult to top this.

[Liberty]

They haven't even unveiled the new iPads and (likely) Apple TV yet! ;)

[rpadebet]

They haven't even unveiled the new iPads and (likely) Apple TV yet! ;)

 

Frankly, iphone is where the steak is at here. iPads don't move the needle as much and it will be even less if iphone 6/6+ is a blockbuster.

 

I don't know about Apple TV. It depends on what kind of product they come up with. Also unlike an iphone this will also most likely be a one unit per household product on average, so difficult to see huge until volumes or repeat refresh cycles here. TV will be more like the ipad rather than the iphone.

 

The product with most potential appears to be the watch, if it takes off in the fashion sense. Good probability of high volumes and super high margins.

[Liberty]

They haven't even unveiled the new iPads and (likely) Apple TV yet! ;)

 

Frankly, iphone is where the steak is at here. iPads don't move the needle as much and it will be even less if iphone 6/6+ is a blockbuster.

 

I don't know about Apple TV. It depends on what kind of product they come up with. Also unlike an iphone this will also most likely be a one unit per household product on average, so difficult to see huge until volumes or repeat refresh cycles here. TV will be more like the ipad rather than the iphone.

 

The product with most potential appears to be the watch, if it takes off in the fashion sense. Good probability of high volumes and super high margins.

 

It's not one or the other. It all works together. I'll take the extra billions of FCF from these solid businesses (Macs too), knowing that people who buy iPhones are more likely to get iPads, Macs, Apple TVs, etc...

[innerscorecard]

I totally agree that this 16 -> 64 gb jump is going to result in the big surprise in the ASP and margin numbers.  Everyone I know who is planning to get the new phone is going for the 64gb because over the last few operating system updates people realized that - even with icloud - they had filled up their 16 gb phones and had to delete stuff to upgrade their iOS.  Lots more video, slo-mo video, big apps, etc...  Now for $100 extra they can jump all the way to 64gb.  When I first heard the storage tier changes I wondered why they didn't bump the 16gb tier up - but now I think it was probably well thought out and a bit of genius.

 

 

The other day we had a thread discussing difference between Advertising and Marketing. This is a perfect example of upselling using marketing rather than advertising. Its kind of dickish move from a customer standpoint though, they could easily have had a 32GB option at the low end instead of 16GB version, but clearly the marketing department here was working towards a higher ASP.

 

Also, I would be surprised to see iphone 6 sales exceeding iphone 6+ (unless supply constraints force it). From a consumer psychology stand point, Apple has customers coming in the door with their mind made up of going for a larger phone than they are used to. From there to go for a slightly more larger phone is also a similar "no-brainer". I expect the 64GB iPhone 6+ to be the high volume product this cycle if supply issues are resolved in time. That is a $200 ASP increase for AAPL.

 

All this being said, the next 2-3 quarters are going to be great for AAPL, but this also implies the comparison towards later part of 2015-2016 to be really difficult. Its going to be incredibly difficult to top this.

 

The iPhone 5s and the iPhone 5c outsold all the larger screen phones on the market. Now, maybe people were buying them in spite of their smaller screen size, so they could have iOS. But I think a lot of people do prefer smaller phones and won't necessarily buy the 6 Plus over the 6. I've heard and read anecdotally that many think even the 6 is too big, and may simply buy a cheaper 5s for that reason, despite initially being willing to pay the extra for the new generation.

 

That is to say, the marginal potential consumer of high-end smartphones who wasn't already in the iOS ecosystem definitely leaned towards large-screen phones (since half of high-end Android is large-screen phones, and large screen phones are even more prevalent in the growth markets for smartphones, including high-end smartphones), but that dynamic may not be true across the entire existing consumer base who is now upgrading.

[abitofvalue]

10 million Iphone's sold in 3 days.  Would have sold more if supplies were available..  10mm and they could have sold even more.  Keep in mind that the iphone5 sold 9mm in all of last year (5mm on their first weekend).

 

http://finance.yahoo.com/news/apple-sells-record-10-million-125125707.html

 

Apple Inc said it sold more than 10 million iPhones in the first weekend after its new models went on sale on Friday, underscoring strong demand for phones with larger displays.

 

Chief Executive Tim Cook said the company could have sold even more iPhone 6 and iPhone 6 Plus models if supplies had been available.

 

Analysts had estimated first-weekend sales of up to 10 million iPhones, after Apple booked record pre-orders of 4 million on Sept. 12, the day pre-orders opened.

[rkbabang]

 

I don't know about Apple TV. It depends on what kind of product they come up with. Also unlike an iphone this will also most likely be a one unit per household product on average, so difficult to see huge until volumes or repeat refresh cycles here. TV will be more like the ipad rather than the iphone.

 

I'm not so sure about that.  I have a Roku box on every TV in my house (3 bedrooms, 2 living rooms), so if I had chosen Apple TV over Roku I'd probably have 5 of them.  I've been wondering for years why Apple has simply let Roku have this entire market.

 

One of the things holding me back from replacing my last tube TV in one of my living rooms has been that it has a first gen Roku box in there with no HDMI output, so I'd need to buy a TV and a new Roku.  This is why I'm considering those new TCL TV's with the Roku interface built in.  Apple should be able to do this well, a nice interface + ecosystem with apps/games (supporting everything: Netflix, Amazon, Hulu+, youtube, Plex, etc,).  Maybe even sell TV sets with Apple TV integrated.  I couldn't see Apple working with TV OEMs the way Roku is, they would have to make the TV.  Ship the TV or the Apple TV box with an iPod touch instead of a remote.

[KCLarkin]

They haven't even unveiled the new iPads and (likely) Apple TV yet! ;)

I don't know about Apple TV. It depends on what kind of product they come up with. Also unlike an iphone this will also most likely be a one unit per household product on average, so difficult to see huge until volumes or repeat refresh cycles here. TV will be more like the ipad rather than the iphone.

 

Apple TV makes most sense as a service/ecosystem. If they can come up with a compelling ecosystem that turns your iPad and iPhone into a TV, there could be meaningful revenue opportunity.