AAPL - Apple Inc.

[Palantir]

Anybody looked into buying CHL? I get an 8.35% FCF Yield...same as NTT

[frommi]

Anybody looked into buying CHL? I get an 8.35% FCF Yield...same as NTT

 

Yes :). They look very cheap and they are the only chinese telco that has LTE implemented. I don`t think that the growth coming from LTE/IPhones is priced into the stock currently.

[Liberty]

I was reading something interesting about that recently; many chinese will make the jump from EDGE to LTE rather than from 3G to LTE. That's a huge jump that will make smartphones like the iPhone much more desirable. I think there are already 45 million iPhones on China Mobile despite them not selling it, but these are stuck at pre-3G speeds. Imagine how much better the experience will be when LTE arrives!

[Liberty]

nobody buys desktops anymore. :)

 

Good thing Apple is also a leader in laptops, tablets, and phones, eh? :)

 

At least Apple has healthy margins on the desktops that it does sell... Not sure the same can be said of Dell, Acer, HP, etc.

[Phaceliacapital]

Just FYI: http://www.mobileunlocked.com/iphoneprices.asp?an=af&aid=125272

 

Not mingling in any discussion :D

[Liberty]

Just FYI: http://www.mobileunlocked.com/iphoneprices.asp?an=af&aid=125272

 

Not mingling in any discussion :D

 

Thanks! What it tells us is interesting, but it's not quite what some people will think at first.. Not everybody has the same income in these countries, so you end up with something like this:

 

http://stratechery.com/wp-content/uploads/2013/12/image-9-600x450.jpg

[Guest valueInv]

Tells you that Apple can have low marketshare and still sell a lot of phones.

[Liberty]

https://developer.apple.com/support/appstore/

 

iOS 7 now 74% of iOS devices, iOS 6 22%.

 

Impressive adoption rate for a new OS, especially one that was the biggest change in a long time (which could have scared users and made them stay on the old version).

 

3/4 of users on the last version within a few weeks! Very helpful to developers, both to make better apps (latest technologies and APIs) and to reduce the amount of work and headaches related to supporting old versions forever.

[Guest valueInv]

http://feedproxy.google.com/~r/Techcrunch/~3/FEu3XO7uxaw/

 

So this release has ushered in:

The fingerprint era

The mobile 64 bit era

The iBeacon era

 

Not bad for a company that is not innovating ;)

[Guest wellmont]

nobody buys desktops anymore. :)

 

Good thing Apple is also a leader in laptops, tablets, and phones, eh? :)

 

At least Apple has healthy margins on the desktops that it does sell... Not sure the same can be said of Dell, Acer, HP, etc.

 

do they break out the margin on desktops?

[Liberty]

nobody buys desktops anymore. :)

 

Good thing Apple is also a leader in laptops, tablets, and phones, eh? :)

 

At least Apple has healthy margins on the desktops that it does sell... Not sure the same can be said of Dell, Acer, HP, etc.

 

do they break out the margin on desktops?

 

I don't think so, but their desktops are basically the same hardware as their laptops but without quite as much fancy milled aluminum and without retina screens, so the margins should be at least the same if not higher.

[Liberty]

Looks like the WSJ might have jumped the gun:

 

China Mobile Ltd, the country’s largest mobile operator, said it is still negotiating with Apple Inc to offer iPhones on its network, commenting on a media report saying that a long-awaited agreement had been reached.

 

Earlier in the day, the Wall Street Journal reported that the two giants had signed a deal, citing an anonymous source familiar with the matter.

 

“We are still negotiating with Apple, but for now we have nothing new to announce,” China Mobile spokeswoman Rainie Lei said, declining to elaborate. Apple also declined comment.

 

http://business.financialpost.com/2013/12/05/apple-inc-china-mobile-iphone/?__lsa=8c0c-048c

 

Yes, no, yes...

 

http://blogs.wsj.com/digits/2013/12/09/china-mobile-to-accept-iphone-orders-this-week/

 

Guess we'll know for sure soon enough, but despite the recent denials, things seem to be happening. China Mobile and Apple probably just don't want to say anything official before at least pre-orders are available because the media attention is worth more if people can buy the thing.

[Liberty]

http://www.jana.com/blog/smartphone-preference-and-spending-in-emerging-asia/

 

Table at the end particularly interesting.

[Palantir]

What is so interesting about it? I think it's well established that many people like the iPhone.

 

Problem is, in place like India, the iPhone 5C costs about $620, the 5S, about 750. This is in an unsubsidized market, and where people make lower salaries.

 

This is totally different from how the iPhone actually became successful in the US - by aiming at the mass market, rather than being an elite, niche product. People from all walks of life in the US own iPhones. In an emerging market, yeah right.

[Guest valueInv]

What is so interesting about it? I think it's well established that many people like the iPhone.

 

Problem is, in place like India, the iPhone 5C costs about $620, the 5S, about 750. This is in an unsubsidized market, and where people make lower salaries.

 

This is totally different from how the iPhone actually became successful in the US - by aiming at the mass market, rather than being an elite, niche product. People from all walks of life in the US own iPhones. In an emerging market, yeah right.

 

Reliance offers subsidized phones in India.

[Liberty]

What is so interesting about it? I think it's well established that many people like the iPhone.

 

Problem is, in place like India, the iPhone 5C costs about $620, the 5S, about 750. This is in an unsubsidized market, and where people make lower salaries.

 

This is totally different from how the iPhone actually became successful in the US - by aiming at the mass market, rather than being an elite, niche product. People from all walks of life in the US own iPhones. In an emerging market, yeah right.

 

Things can be interesting without being surprising. It's nice confirmation from the market where Android does best.

 

As for pricing, of course that's an issue. It also is for BMW; they certainly do better in markets where you can lease than in markets where you don't have access to credit and have to pay for the whole thing up-front. Is the solution for BMW to make a lower quality $15,000 model? I'm not so sure (maybe they'd sell a lot, but do they really want to compete on price with a zillion other competitors making similar low-quality models, eventually killing their margins? do they want to hurt their brand in the high-end by cheapening it? do they want to spend their engineering and management resources that way?).

 

The population of Asia is very large, and so is income inequality. There are still hundreds of millions of people who can afford the iPhone, and that number will just go up as GDP grows, the credit infrastructure becomes better and contract/subsidy models catch on, etc. I also think Apple will slowly reduce iPhone prices over time (years), as they've done with their computers, but there's no hurry.

[Guest valueInv]

The issue is not whether the S4 is better than iPhone 5S, it's really about when the rival product is "good enough" so that the iPhone is not such a big upgrade anymore. That is, if you like Android, I don't see why you'd get an iPhone over the Nexus, which is very comparable and $200 cheaper.

 

The way I see it, in the eyes of most users, GS4 is only superior to the iPhone 5S due to its screen size. If/When Apple fixes that, then they're going to be playing on an even footing which will hurt Samsung IMO.

 

True.  It's about whether Android products are "good enough" and how the price point differential affects Apple's unit sales and profits. 

 

But if we are going to be comparing iOS and Android in terms of "how ahead" they are, we really should be looking at Kit Kat on new hardware versus iOS on the latest hardware (iPhone 5S).  Also, there's really no way to say that Apple will be on even footing if/when Apple fixes the small screen problem because we don't know what Samsung's new phones will look like at that time.  Samsung will always have a COGS advantage because they are vertically integrated -- which means that Apple will never be on equal footing with Samsung at least in one important aspect: price.

 

As usual, you are not even close to reality. Apple has already shifted to 64 but not so much Kit Kat.

btw, the nexus 5 still doesn't have a fingerprint sensor and the camera still sucks. I could go on and on.

 

You probably could have done without putting that first sentence in.  I'm willing to "engage with you intellectually" if you learn some manners.

 

I don't consider support for 64-bit to be of much use at this time.  However, I do think it becomes more important on upcoming next gen devices because I still believe in convergence, where the phone will be the only computer you need (the Ubuntu Edge vision, if you will).  The fingerprint reader is pretty nice, but it's only one feature and doesn't make it a given that Apple is way ahead. 

 

In some respects, Apple is behind.  Small screen is absolutely a problem.  Tighter integration of Google Now into Kit Kat blows Apple out of the water for the very common use case of finding stuff on the fly on your phone.  iCloud integration still isn't very good compared to Android and Google services.

 

So, no, I wouldn't say Apple is far ahead.

 

Blows Apple out of the water, eh?

http://blogs.barrons.com/techtraderdaily/2013/12/10/apples-siri-googles-now-assistants-both-c-in-piper-bakeoff/

 

Right.

[Guest valueInv]

What is so interesting about it? I think it's well established that many people like the iPhone.

 

Problem is, in place like India, the iPhone 5C costs about $620, the 5S, about 750. This is in an unsubsidized market, and where people make lower salaries.

 

This is totally different from how the iPhone actually became successful in the US - by aiming at the mass market, rather than being an elite, niche product. People from all walks of life in the US own iPhones. In an emerging market, yeah right.

 

Things can be interesting without being surprising. It's nice confirmation from the market where Android does best.

 

As for pricing, of course that's an issue. It also is for BMW; they certainly do better in markets where you can lease than in markets where you don't have access to credit and have to pay for the whole thing up-front. Is the solution for BMW to make a lower quality $15,000 model? I'm not so sure (maybe they'd sell a lot, but do they really want to compete on price with a zillion other competitors making similar low-quality models, eventually killing their margins? do they want to hurt their brand in the high-end by cheapening it? do they want to spend their engineering and management resources that way?).

 

The population of Asia is very large, and so is income inequality. There are still hundreds of millions of people who can afford the iPhone, and that number will just go up as GDP grows, the credit infrastructure becomes better and contract/subsidy models catch on, etc. I also think Apple will slowly reduce iPhone prices over time (years), as they've done with their computers, but there's no hurry.

 

Compare the graphs for

 

How much did you pay for your current phone?

Vs

How much will you pay for your next phone?

 

Particularly, look at the last category.

[Liberty]

Compare the graphs for

 

How much did you pay for your current phone?

Vs

How much will you pay for your next phone?

 

Particularly, look at the last category.

 

Not so surprising. Smartphones are expensive compared to dumb phones, but they're not bad compared to cars or computers or big screen TVs or air conditioners, yet they are arguably just as life-enhancing - if not more - than these other expensive items. A lot of people who are poor by Western standards probably feel like they are getting a good value for their money.

[Guest valueInv]

Exactly. And the vast majority of people buy Android, but the top of the market, where the money is, most buy Apple. I never said that most people bought Apple or knives made out of S30V steel. What I said is you can't overshoot in ease of use and quality, and the top end of the market will follow you as far as you go, not that average people will all use luxury brand because nothing else is "good enough".

 

I understood you to be saying that the mental model of "good enough" does not apply for consumer products like the ones that Apple makes.  That's what it sounded like in your post citing the stratechery blog. 

 

My point was that the mental model certainly does apply to those products, and the notion that the "top end" of the market will ostensibly continue to use Apple products is not at all inconsistent with Christensen's theories on commoditization.  If the majority of people make the decision to go with Android (or other) phones over Apple based on price point, that is consistent with the notion of overshooting, which does not mean that the incumbent goes away.  Overshooting simply means that when the technology more than meets most customers' needs, there is opportunity for cheaper (and perhaps more rudimentary) products to gain market share.  Which can eventually lead to disruption.

 

And while that article you posted on market share is a good one for explaining what market share means and doesn't mean, by no means should you conclude from the article that market share is not material to valuation.  Especially for a company that makes its profits primarily from sales of new product into the market. 

 

For example, if Apple's market share shrinks rapidly, even in the face of market growth, that can potentially lead to slower unit sales growth, which may not be factored into AAPL's current market valuation.  Market share loss can also affect COGS.  When you have a high market share, you can often extract the best possible terms from your suppliers.  IMO, Android market share growth has materially affected Apple's gross margins and has also been one of the reasons behind the supply shortages for Apple products.  And this, of course, affects profits per share.

 

That JD power thing made no sense at all. Apple beat it in all categories, except in price, but even that highly depends how you count price and for which models

 

http://techcrunch.com/2013/11/01/jd-power-explains-why-samsung-beat-apple-in-its-latest-tablet-study-price/

 

But saying that Samsung beats Apple in a quality survey because of price is like saying that a Corolla is a better car than a BMW 3 series because it's cheaper.

 

When did J.D. Power say that Samsung beat Apple in a "quality survey"? 

 

J.D. Power's tablet study is about "customer satisfaction," and under their scoring methodology, Samsung edged Apple out when it comes to overall customer satisfaction.  And price was the key factor there.  Now you can certainly criticize this methodology, but there shouldn't be a knee jerk reaction to such a survey, which is entirely consistent with the notion of the "good enough" phenomenon occurring in this market. 

 

If the top end were to fragment heavily and Apple only had a slice of it, maybe that'd be a problem. But Smartphones and tablets (which are basically general computing devices) aren't watches. They have strong network effects and ecosystems matter. There's a winner-takes-all aspect which means that we probably won't see much more than 2-3 platforms. I doubt the high end will fragment, and Apple can retain a big chunk of where the money is.

 

And Apple is affordable luxury, it's not Rolex, so let's not get carried away with the implications of the word "luxury".

 

I also used to think that strong network effects and ecosystems mattered for these OS providers (I still view Apple primarily as an OS provider that bundles its product in optimized boxes), but I've changed my view in this regard.  My view now is that the OS market is being commoditized, as we are getting to a point where cheaper and simpler versions are "good enough."  It doesn't matter if there are only 2 or 3 platforms in the end because value/profit is shifting to different parts of the value chain -- namely in the hardware layer and in the software and services layers running on top of (or through) the OS.  If the 3 competing products are pretty similar, people will go with the free one (i.e., Android) and focus more on apps and services.

 

In other words, the traditional business model for Apple is probably not going to remain a wildly profitable (on an absolute level) endeavor for the medium to long term. 

 

Exactly, except imagine a world where there's just 2-3 car makers.

 

Imagine a world where there are 2 or 3 car makers, where all the cars are generally pretty similar, and where one car maker starts to give its product away for free.

 

There are many reasons why people pick Android, but I'm pretty sure one of the biggest ones is price. Sell the iPhone for the same price as the competition and you'll see what happens to Android's perceived advantages over the iPhone (especially after they have a model with a bigger screen -- Apple has always taken its time to get things right, but they do give people what they want eventually (ie. iPad Mini)).

 

I agree that price is a big reason why many people pick Android devices.  That's kind of my point.  I'm saying that as the "innovation gap" closes between Android and iOS, with Android being a "good enough" alternative to iOS, price becomes more and more of a factor.  And this could have a material affect on Apple's ability to extract the level of profits it does from the sale of each unit it produces.

 

On commoditization and disruption:

 

http://iterativepath.wordpress.com/2013/12/10/your-business-cant-escape-commoditization-and-disruption/

[Guest valueInv]

Apple reveals very little about its product design process but this gives you a look into how Apple thinks:

 

http://www.wired.com/design/2013/12/the-new-square-reader-a-look-at-how-gadget-guts-are-designed/#slideid-362751

 

This is a simple device, a smartphone is multiple orders of magnitude more complex. Square is the only other example I have seen of  company that puts that kind of care and innovation into its products.

[Guest valueInv]

NTT DocoMo comes just in time:

 

http://blog.appannie.com/japan-spotlight-revenue-inflection-point/

 

[beerbaron]

Apple reveals very little about its product design process but this gives you a look into how Apple thinks:

 

http://www.wired.com/design/2013/12/the-new-square-reader-a-look-at-how-gadget-guts-are-designed/#slideid-362751

 

This is a simple device, a smartphone is multiple orders of magnitude more complex. Square is the only other example I have seen of  company that puts that kind of care and innovation into its products.

 

I do product development for living and I can say that it really depends. The article talks about an ASIC and the feel of the swipe. There is nothing exceptional about that, I have done ASICs to reduce size and played with push buttons strengths to make the product feel better many times in the past.

 

The strength of a company does not rely on the amount of attention d details it puts but how it can, identify, quantify and prioritize those details. If the definition is not well done at the beginning the development team will languish for months without a clear understanding of what to accomplish. This is where the problem lies and where a good product manager comes into.

 

Also, the attention to details comes at the price of the amount of products that can be developped. A deep attention to detail will surely reduce the amount of products being developped since the engineering team will be overwhelmed by small details. This is the second part of the problem,  a rigourous selection of which products to develop needs to be done before any project starts.

 

To conclude, you can look at two models of product creation. There is the organic model (example google) where there is a lot of ideas thrown and tested but a lot of them will fail. Just like nature works, the strongest ideas survive and the weakest die. The second model is a planned model (example apple) where there is an enourmous amount of thinking being done at which products to make  and how to make them.

 

Both models work, if you have managers that have a lot of vision and market insight than the planned model will be more suited. If you have managers that are more technically focused but have little vision on how everything will fit together than the organic model is preferred.

 

BeerBaron

[Guest wellmont]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

[Liberty]

subsidy model going bye bye....

 

http://www.afterdawn.com/news/article.cfm/2013/12/11/at_t_smartphone_hardware_subsidies_are_likely_dead_into_the_future?utm_source=adeng_news&utm_medium=tickerbar&utm_campaign=englishNews

 

It's not really a subsidy, though, is it? There's no such thing as a free lunch. People pay the whole price, just over time, through higher monthly payments. It's not as if carriers have been generously paying for people's phones so far and now want to stop. They're just offering a form of financing that's rolled up into a single price.

 

I don't see why these would go away because competitors who don't stop would have a big advantage, and even if everybody does it at the same time cartel-like, everybody will just sell fewer devices because most people would rather pay nothing up-front and a bit more per month than a big chunk up-front and a bit less per month (facts show this -- a lot more people go for that than for expensive unlocked phones). Not to mention that without this form of financing, they won't be able to lock people into long-term contracts as effectively, which is a big downside when you look at how much each customer is worth to them and at the customer acquisition costs.

 

Maybe they'll do it differently, like by splitting the service payments from the device payments (offering low-cost financing that ends up being similar to the current model in practice), though.

 

In fact, I think the pressure is for that form of phone financing to get adopted in countries where it's not present. As soon as one carrier does it, it has a big advantage over competitors, and then they all have to do it. It's similar to how all auto makers offer financing for their products so you don't have to pay for it all up-front -- if they didn't, they'd sell fewer vehicles.

 

That's my reasoning, anyway.