AAPL - Apple Inc.

[Guest valueInv]

Well said:

 

http://iterativepath.wordpress.com/2013/10/29/a-bloggers-advice-to-apple-for-its-cash-pile-cut-prices/

[Parsad]

Chris, it's Peter. Sequentially we were relatively flat, so I'll comment on a year-over-year basis. They were down 7% as you indicated and this was primarily due to a significant increase in the sales of our entry SKUs where we had made them more affordable to attract more first-time smart buyers. We've also encouraged some FX headwinds from the yen, the Australian dollar and a number of the emerging markets which impacted us as well. I don't want to forecast ASPs for the December quarter. We'll report to you in January what they were. But the FX headwinds will likely continue given where exchange rates are today.

 

Translation:  We're going to blame foreign currency translation, even though we've decided to compress margins to retain or acquire market share.

 

Cheers!

[Guest valueInv]

Chris, it's Peter. Sequentially we were relatively flat, so I'll comment on a year-over-year basis. They were down 7% as you indicated and this was primarily due to a significant increase in the sales of our entry SKUs where we had made them more affordable to attract more first-time smart buyers. We've also encouraged some FX headwinds from the yen, the Australian dollar and a number of the emerging markets which impacted us as well. I don't want to forecast ASPs for the December quarter. We'll report to you in January what they were. But the FX headwinds will likely continue given where exchange rates are today.

 

Translation:  We're going to blame foreign currency translation, even though we've decided to compress margins to retain or acquire market share.

 

Cheers!

 

He states very clearly that it was the increase in lower priced skus. In fact, he mentions that before the currency. Also, if you read the transcript, you'll see Tim Cook talk about price elasticity and the iPhone 4.

[fareastwarriors]

Signs Point to Coming Scarcity of iPad Minis

 

 

http://bits.blogs.nytimes.com/2013/10/30/signs-point-to-coming-scarcity-of-ipad-minis/?src=busln

[nwoodman]

Tim Cooks's comments regarding iPad's market share of 94% of the education tablet market certainly caught my attention during the conference call.  The article below explores this growing moat a little further:

 

http://appleinsider.com/articles/13/10/30/apple-dominant-in-elementary-schools-with-room-to-grow-as-just-25-use-ipads

 

"The fact that the iPad is so strong in education makes it difficult to justify developing for any other platform," said John Friend, managing director of PocketPhonics developer Apps in My Pocket.

 

"I would love to find new markets for the PocketPhonics app. But with such a small slice of the education pie, the Android market is currently too small to support the costs of developing an app," he continued.

 

[Guest valueInv]

Finally, someone figured out Apple's strategy:

 

http://iterativepath.wordpress.com/2013/10/30/the-iproduct-cycle/

[Parsad]

Chris, it's Peter. Sequentially we were relatively flat, so I'll comment on a year-over-year basis. They were down 7% as you indicated and this was primarily due to a significant increase in the sales of our entry SKUs where we had made them more affordable to attract more first-time smart buyers. We've also encouraged some FX headwinds from the yen, the Australian dollar and a number of the emerging markets which impacted us as well. I don't want to forecast ASPs for the December quarter. We'll report to you in January what they were. But the FX headwinds will likely continue given where exchange rates are today.

 

Translation:  We're going to blame foreign currency translation, even though we've decided to compress margins to retain or acquire market share.

 

Cheers!

 

He states very clearly that it was the increase in lower priced skus. In fact, he mentions that before the currency. Also, if you read the transcript, you'll see Tim Cook talk about price elasticity and the iPhone 4.

 

So far Cook's time in office has been akin to Ballmer 2!  He's doing almost everything right you would think from a CEO perspective when it comes to dividends, buying back shares, retaining market share, etc.  But the moat isn't expanding...he's just holding on and headed in all of the directions his predecessor said not to go.  Revenue is slowing, margins are compressing...whether you want to believe their comments that it is occurring because of their intent to attract first time buyers or not...the fact remains that margins are compressing.  Their products are now a commodity like any other, and their competition will decide how far those margins shrink.  Cheers! 

[plato1976]

The difference from ballmer is that apple now has a pe around 8 net cash

It's a much better starting point for the stock

 

Chris, it's Peter. Sequentially we were relatively flat, so I'll comment on a year-over-year basis. They were down 7% as you indicated and this was primarily due to a significant increase in the sales of our entry SKUs where we had made them more affordable to attract more first-time smart buyers. We've also encouraged some FX headwinds from the yen, the Australian dollar and a number of the emerging markets which impacted us as well. I don't want to forecast ASPs for the December quarter. We'll report to you in January what they were. But the FX headwinds will likely continue given where exchange rates are today.

 

Translation:  We're going to blame foreign currency translation, even though we've decided to compress margins to retain or acquire market share.

 

Cheers!

 

He states very clearly that it was the increase in lower priced skus. In fact, he mentions that before the currency. Also, if you read the transcript, you'll see Tim Cook talk about price elasticity and the iPhone 4.

 

So far Cook's time in office has been akin to Ballmer 2!  He's doing almost everything right you would think from a CEO perspective when it comes to dividends, buying back shares, retaining market share, etc.  But the moat isn't expanding...he's just holding on and headed in all of the directions his predecessor said not to go.  Revenue is slowing, margins are compressing...whether you want to believe their comments that it is occurring because of their intent to attract first time buyers or not...the fact remains that margins are compressing.  Their products are now a commodity like any other, and their competition will decide how far those margins shrink.  Cheers!

[Guest valueInv]

Chris, it's Peter. Sequentially we were relatively flat, so I'll comment on a year-over-year basis. They were down 7% as you indicated and this was primarily due to a significant increase in the sales of our entry SKUs where we had made them more affordable to attract more first-time smart buyers. We've also encouraged some FX headwinds from the yen, the Australian dollar and a number of the emerging markets which impacted us as well. I don't want to forecast ASPs for the December quarter. We'll report to you in January what they were. But the FX headwinds will likely continue given where exchange rates are today.

 

Translation:  We're going to blame foreign currency translation, even though we've decided to compress margins to retain or acquire market share.

 

Cheers!

 

He states very clearly that it was the increase in lower priced skus. In fact, he mentions that before the currency. Also, if you read the transcript, you'll see Tim Cook talk about price elasticity and the iPhone 4.

 

So far Cook's time in office has been akin to Ballmer 2!  He's doing almost everything right you would think from a CEO perspective when it comes to dividends, buying back shares, retaining market share, etc.  But the moat isn't expanding...he's just holding on and headed in all of the directions his predecessor said not to go.  Revenue is slowing, margins are compressing...whether you want to believe their comments that it is occurring because of their intent to attract first time buyers or not...the fact remains that margins are compressing.  Their products are now a commodity like any other, and their competition will decide how far those margins shrink.  Cheers!

 

The margins are compressing because they are expanding into lower segments using the 5s. For form being commoditized, they have increased their pricing. Further, in developed markets they have increased their marketshare. Btw, they increased iPhone sales by 26% in a slow quarter.

 

Cook is the anti-Ballmer. Ballmer couldn't release a product to save his life. Take a look at what Ballmer did with Windows 8 and what Cook did with iOS 7. Both were big re-architectures of the 0Ses. There is a day and night difference in the results.

 

Cook is displaying the same discipline that Jobs did. He had actually been even bolder in his investments.  I told you when Apple came out with their new ad campaign that was Cook's message that the're going to do things they own way and at their own pace. That Cook was doubling down. Apple is doing exactly that.

 

One more thing. They state very clearly that the ASP decline was primarily due to lower priced skus. Yet you translated  that as they're blaming it on currency. Ask yourself why you translated it that way.

[Parsad]

One more thing. They state very clearly that the ASP decline was primarily  due to lower priced skus. Yet you translated  that as they're blaming it on currency. Ask yourself why you translated it that way.

 

For some time, they stated that there would not be significant compression of margins.  Now there is significant compression of margins.  Not because we've had to move to lower priced SKU's to retain market share, but because we've CHOOSEN to move to lower priced products to attract the first-time buyer.  Why have they choosen to move to lower-priced SKU's if they aren't losing market share to other lower-priced competitors. 

 

Not that doing so won't necessarily work...BMW proved it with their MINI division, as did The Gap with their Old Navy division.  I'm just wary of executives who buy into their own company's hype and then realize they may be slipping.  Again, Ballmer comes to mind when he espoused how great Microsoft was and then saw their ass get beaten by up and coming competitors.  Cook has been sipping from the same Bacchanalian wine glass as Ballmer...others are on their tail, and we'll have to wait and see how Cook handles it.  Cheers! 

[Viking]

Tim Cook is not Steve Jobs; Tim Cook is also not Steve Ballmer.

 

When looking at their capital deployment decisions the past 18 months, yes, Apple has started and increased a dividend and also started, added to and accelerated a stock buyback. I think Buffett's advice to both Jobs and Cook at different times was that Apple should use their cash to buy back stock. Perhaps Buffett doesn't know what he is talking about and Cook should ignore him.

 

When looking at innovation at Apple, this year alone we have seen:

1.) iOS 7: biggest overhaul of OS since iphone was launched

2.) A7 chip: a 64 bit beast that sets Apple up for the next couple of years

3.) M7 motion processor: allows for added functionality

4.) fingerprint scanner: opens up new, large markets (payments)

5.) ipad air: biggest hardware redesign of the ipad since it was launched three years ago; engineering marvel that will sell like hot cakes

6.) productivity software are all cross platform and free: iWorks and iLife

 

Looks to me like Apple in 2013 has been building a foundation that it will use in the coming years; that is leadership. Apple clearly sees where the puck is going.... it is called mobile. iphone and ipad are the future (not Mac) and that is why they have updated their software to work across all Apple devices (great with iphone and ipad while pissing off some Mac power users).

 

We did noy see any new product categories in 2013 and, yes, this was a little disappointing. I trust Apple knows what they are doing and will launch the new products when the time is right. In 2014 I see lots of line extensions that will drive sales in mobile such as a larger screen iphone and ipad pro.

 

Regarding margins, Apple for fiscal Q1 is forecasting GM = 36.5 to 37.5. If we include the $900 million software deferral the midpoint is actually 38.5% to compare to prior periods (based on the comments on the conference call). The real news is the margins Apple posted in 2012 were crazy high for a bunch of reasons unique to that time period. It looks like Apple will post improving gross margins in fiscal 2014 compared to 2013.

 

At this point in time, to suggest that Tim Cook is comparable to Steve Ballmer is being very unfair. Now having said this, I thought Tim Cook's answers to analysts on the last conference call were VERY poor; I am hoping he was just having a bad day.

[Parsad]

Looks to me like Apple in 2013 has been building a foundation that it will use in the coming years; that is leadership. Apple clearly sees where the puck is going.... it is called mobile. iphone and ipad are the future (not Mac) and that is why they have updated their software to work across all Apple devices (great with iphone and ipad while pissing off some Mac power users).

 

We did noy see any new product categories in 2013 and, yes, this was a little disappointing. I trust Apple knows what they are doing and will launch the new products when the time is right. In 2014 I see lots of line extensions that will drive sales in mobile such as a larger screen iphone and ipad pro.

 

Everyone has realized that everything is going mobile.  So how does this differentiate Apple? 

 

Regarding margins, Apple for fiscal Q1 is forecasting GM = 36.5 to 37.5. If we include the $900 million software deferral the midpoint is actually 38.5% to compare to prior periods (based on the comments on the conference call). The real news is the margins Apple posted in 2012 were crazy high for a bunch of reasons unique to that time period. It looks like Apple will post improving gross margins in fiscal 2014 compared to 2013.

 

We'll have to wait and see.  When margins were well above 40%, many said that they wouldn't go below...while some of us said that not only will they go below, but they will compress further.  Apple insisted initially that margins would not compress too much.  So, only hindsight will tell us exactly what is happening.  Not that compressing margins are necessarily bad.  As long as your margins are higher than your competitors and your revenues are increasing while demand for you product is strong, lower historical margins simply allow you to take more market share.  Now is this what is happening to Apple, or are margins compressing because product demand is slowing?

 

At this point in time, to suggest that Tim Cook is comparable to Steve Ballmer is being very unfair. Now having said this, I thought Tim Cook's answers to analysts on the last conference call were VERY poor; I am hoping he was just having a bad day.

 

Of course it's premature, but we've seen this rodeo before right?  Look at Blackberry's collapse.  And I'm not saying that Ballmer was a bad CEO...he wasn't.  But he wasn't a great CEO either...he was adequate relative to what else was out there.  Cheers!

[Viking]

Everyone has realized that everything is going mobile.  So how does this differentiate Apple?

 

I think Apple is making the transition to mobile as a company very well; their ability to pivot and focus as a company does differentiate them. Earlier this year one of my concerns with Apple was the competition appeared to be catching them in mobile and had the opportunity to pass them in 2013. However the opposite has happened; Samsung and Microsoft have stumbled and Apple has widened the gap and re-established themselves as the leader in mobile.

 

In 2013 Samsung has clearly lost some momentum; when given the chance to lead mobile they blew it. It started with their in very poor taste Galaxy S4 launch event and ended with a thud with the Gear debacle. Don't get me wrong, Samsung is a great company; however, the honeymoon period is over. Microsoft has failed to get any traction in mobile; this is likely the number one reason Ballmer got the boot. Now Microsoft gets to pick a new CEO, complete a company reorganization (including culture) and integrate Nokia (a European co). Yes, Microsofts enterprise business is amazing; its mobile business rests on hopes and dreams.

[Guest valueInv]

One more thing. They state very clearly that the ASP decline was primarily  due to lower priced skus. Yet you translated  that as they're blaming it on currency. Ask yourself why you translated it that way.

 

For some time, they stated that there would not be significant compression of margins.

 

When did they say that ?

 

  Now there is significant compression of margins.  Not because we've had to move to lower priced SKU's to retain market share, but because we've CHOOSEN to move to lower priced products to attract the first-time buyer.  Why have they choosen to move to lower-priced SKU's if they aren't losing market share to other lower-priced competitors. 

Because there is a large swaths of lower price segments that are growing quickly and that they need to address. The pricing on their most of their devices is stable or even higher.

 

Not that doing so won't necessarily work...BMW proved it with their MINI division, as did The Gap with their Old Navy division.  I'm just wary of executives who buy into their own company's hype and then realize they may be slipping.  Again, Ballmer comes to mind when he espoused how great Microsoft was and then saw their ass get beaten by up and coming competitors.  Cook has been sipping from the same Bacchanalian wine glass as Ballmer...others are on their tail, and we'll have to wait and see how Cook handles it.  Cheers!

How do you know Cook is buying his hype? Remember is comment "We don't have our head stuck in sand". Why did he say that at the D conference? Do you think Cook doesn't read the press?

[Guest valueInv]

Looks to me like Apple in 2013 has been building a foundation that it will use in the coming years; that is leadership. Apple clearly sees where the puck is going.... it is called mobile. iphone and ipad are the future (not Mac) and that is why they have updated their software to work across all Apple devices (great with iphone and ipad while pissing off some Mac power users).

 

We did noy see any new product categories in 2013 and, yes, this was a little disappointing. I trust Apple knows what they are doing and will launch the new products when the time is right. In 2014 I see lots of line extensions that will drive sales in mobile such as a larger screen iphone and ipad pro.

 

Everyone has realized that everything is going mobile.  So how does this differentiate Apple? 

 

Regarding margins, Apple for fiscal Q1 is forecasting GM = 36.5 to 37.5. If we include the $900 million software deferral the midpoint is actually 38.5% to compare to prior periods (based on the comments on the conference call). The real news is the margins Apple posted in 2012 were crazy high for a bunch of reasons unique to that time period. It looks like Apple will post improving gross margins in fiscal 2014 compared to 2013.

 

We'll have to wait and see.  When margins were well above 40%, many said that they wouldn't go below...while some of us said that not only will they go below, but they will compress further.  Apple insisted initially that margins would not compress too much.  So, only hindsight will tell us exactly what is happening.  Not that compressing margins are necessarily bad.  As long as your margins are higher than your competitors and your revenues are increasing while demand for you product is strong, lower historical margins simply allow you to take more market share.  Now is this what is happening to Apple, or are margins compressing because product demand is slowing?

 

At this point in time, to suggest that Tim Cook is comparable to Steve Ballmer is being very unfair. Now having said this, I thought Tim Cook's answers to analysts on the last conference call were VERY poor; I am hoping he was just having a bad day.

 

Of course it's premature, but we've seen this rodeo before right?  Look at Blackberry's collapse.  And I'm not saying that Ballmer was a bad CEO...he wasn't.  But he wasn't a great CEO either...he was adequate relative to what else was out there.  Cheers!

 

Yeah, I predicted RIM's collapse and you called it "hubris". I have seen this rodeo before.

[Guest valueInv]

 

Everyone has realized that everything is going mobile.  So how does this differentiate Apple? 

 

 

Apple is the company that made everyone do mobile. They are the people who revolutionized mobile and continue to define the market.

[Guest valueInv]

Everyone has realized that everything is going mobile.  So how does this differentiate Apple?

 

I think Apple is making the transition to mobile as a company very well; their ability to pivot and focus as a company does differentiate them. Earlier this year one of my concerns with Apple was the competition appeared to be catching them in mobile and had the opportunity to pass them in 2013. However the opposite has happened; Samsung and Microsoft have stumbled and Apple has widened the gap and re-established themselves as the leader in mobile.

 

In 2013 Samsung has clearly lost some momentum; when given the chance to lead mobile they blew it. It started with their in very poor taste Galaxy S4 launch event and ended with a thud with the Gear debacle. Don't get me wrong, Samsung is a great company; however, the honeymoon period is over. Microsoft has failed to get any traction in mobile; this is likely the number one reason Ballmer got the boot. Now Microsoft gets to pick a new CEO, complete a company reorganization (including culture) and integrate Nokia (a European co). Yes, Microsofts enterprise business is amazing; its mobile business rests on hopes and dreams.

Nokia is beginning to get some traction. They will gain a foothold if they continue to execute under MSFT.

[rkbabang]

Looks to me like Apple in 2013 has been building a foundation that it will use in the coming years; that is leadership. Apple clearly sees where the puck is going.... it is called mobile. iphone and ipad are the future (not Mac) and that is why they have updated their software to work across all Apple devices (great with iphone and ipad while pissing off some Mac power users).

 

We did noy see any new product categories in 2013 and, yes, this was a little disappointing. I trust Apple knows what they are doing and will launch the new products when the time is right. In 2014 I see lots of line extensions that will drive sales in mobile such as a larger screen iphone and ipad pro.

 

Everyone has realized that everything is going mobile.  So how does this differentiate Apple? 

 

Regarding margins, Apple for fiscal Q1 is forecasting GM = 36.5 to 37.5. If we include the $900 million software deferral the midpoint is actually 38.5% to compare to prior periods (based on the comments on the conference call). The real news is the margins Apple posted in 2012 were crazy high for a bunch of reasons unique to that time period. It looks like Apple will post improving gross margins in fiscal 2014 compared to 2013.

 

We'll have to wait and see.  When margins were well above 40%, many said that they wouldn't go below...while some of us said that not only will they go below, but they will compress further.  Apple insisted initially that margins would not compress too much.  So, only hindsight will tell us exactly what is happening.  Not that compressing margins are necessarily bad.  As long as your margins are higher than your competitors and your revenues are increasing while demand for you product is strong, lower historical margins simply allow you to take more market share.  Now is this what is happening to Apple, or are margins compressing because product demand is slowing?

 

At this point in time, to suggest that Tim Cook is comparable to Steve Ballmer is being very unfair. Now having said this, I thought Tim Cook's answers to analysts on the last conference call were VERY poor; I am hoping he was just having a bad day.

 

Of course it's premature, but we've seen this rodeo before right?  Look at Blackberry's collapse.  And I'm not saying that Ballmer was a bad CEO...he wasn't.  But he wasn't a great CEO either...he was adequate relative to what else was out there.  Cheers!

 

Yeah, I predicted RIM's collapse and you called it "hubris". I have seen this rodeo before.

 

 

I agree. You can't compare Apple to RIM.  RIM has been a dying company for years. A dying company (even though it was blatantly obvious to many) who's management (and major investors) didn't even know it was dying.  RIM didn't have to die, of course. It could have seen the threat and responded (in 2008, not 2013) and things might have been different.  We could be talking about Apple vs. Blackberry today rather than Apple vs. Samsung.  If some other company comes out with a device that is so different and unique that it makes the iPhone and iPad obsolete and useless by comparison.  And if Apple's management sticks their heads in the sand, refusing to admit it has fallen behind, and does nothing about it.  Then you can compare Apple to RIM.

[Guest valueInv]

I've seen a tendency among people,especially investors- if they don't understand X, they try to find a Y to compare it to. Then they look at what happened to Y and predict they same for X. Never mind that even though X and Y may have some things in common, they may be more different than similar. People simply don't bother to look under the covers to see what is different. I call this "reasoning by analogues".

 

It is like me saying Watsa is Paulson2. Yeah, they both benefitted form CDSs in 2008. Yeah, they both  are having a bad year. But their investment approaches and values are completely different. And What the future holds for each of them is likely to be very different.

[Parsad]

I've seen a tendency among people,especially investors- if they don't understand X, they try to find a Y to compare it to. Then they look at what happened to Y and predict they same for X. Never mind that even though X and Y may have some things in common, they may be more different than similar. People simply don't bother to look under the covers to see what is different. I call this "reasoning by analogues".

 

A similar tendency is just as noticeable in investors that espouse "this time it's different".  The cases when it is actually different relative to history, are far fewer than the repetitive failures because it is actually comparable to history.

 

It is like me saying Watsa is Paulson2. Yeah, they both benefitted form CDSs in 2008. Yeah, they both  are having a bad year. But their investment approaches and values are completely different. And What the future holds for each of them is likely to be very different.

 

I'm Prem's number one fan, but don't fool yourself for a second that this argument is not being made this very second.  Even Fairfax knows it will be, because they did make a substantial macroeconomic bet.  Apple will be held to the same torch.  Cheers!

[Parsad]

I agree. You can't compare Apple to RIM.  RIM has been a dying company for years. A dying company (even though it was blatantly obvious to many) who's management (and major investors) didn't even know it was dying.  RIM didn't have to die, of course. It could have seen the threat and responded (in 2008, not 2013) and things might have been different.  We could be talking about Apple vs. Blackberry today rather than Apple vs. Samsung.  If some other company comes out with a device that is so different and unique that it makes the iPhone and iPad obsolete and useless by comparison.  And if Apple's management sticks their heads in the sand, refusing to admit it has fallen behind, and does nothing about it.  Then you can compare Apple to RIM.

 

No one is comparing Apple to RIM.  Only that once the eye does get off the ball, the drop is far more precipitous than many people think.  Cheers!

[Parsad]

Yeah, I predicted RIM's collapse and you called it "hubris". I have seen this rodeo before.

 

I didn't call your prediction of RIM's collapse hubris, but any supposition from a quarter's worth of numbers smacked of hubris.  Re-read the quote.  Cheers!

[Guest valueInv]

Initial reports look good:

 

http://venturebeat.com/2013/11/01/ipad-air-sells-out-in-new-york-hong-kong-other-parts-of-china/

 

I would think that they are not supply that supply constrained on the iPad Airs. No new screens, fingerprint sensors or other components that would result in low initial yields.

 

The retina iPad mini is another story.

 

 

[Liberty]

I did my part. I ordered a iPad Air (64 gig wifi) this morning.

[Guest valueInv]

Amazing:

 

http://www.bgr.in/news/iphone-5s-launch-gets-overwhelming-response-in-delhi/