AAPL - Apple Inc.

[Guest valueInv]

I would argue that Apple is one of the most understood companies out there. People parse through its data like it's a Fed statement.

 

could not agree more. there is little we don't know about it.

 

Really? You a few months back, you were complaining about how the stock was performing badly since they won't return cash. Did you know they were going to return $100B in two years. When you complained about "the worst capital allocation" did you know they would be buying back stock at 7 times earnings?

 

And pray tell us what these new product categories that Cook is talking about are? What is IOS 7 going to look like? What are the new features in this years iPhone?

[Guest valueInv]

If you think that 1, competition is eroding Apple's margins

2, Apple is not innovating

3, Competition has caught up with Apple

 

then you do not understand Apple.

 

I think 1) & 3) is happening as we speak...yet those margins will still be higher than its peers, even though they will come down.  On 2), I also think Apple is still innovating, but so are its competitors. 

 

Nothing worse than someone falling in love with a stock.  I highly recommend you not do that...whether it is Apple, Fairfax, Berkshire, Google or any other stock.  Market prices are there to serve you...that is the only thing you can control, as management and companies (even the best) will falter at times.  Cheers! 

 

Here's the new ad:

http://www.apple.com/iphone/videos/#tv-ads-photos-every-day

 

Notice anything?

 

[Parsad]

Let's address the iPhone first.

On 1 - ASPs have been more or less stable..How do you know that competition is eroding margins? How do you know that it is not costs?

 

Lets say ASPs decrease going forward. Is it because competition is forcing prices down? Is it because Apple is entering lower priced segments as the higher priced segments saturate? How do you know?

 

Margins are eroding partly due to cost, but mostly due to competition.  Why do you think they are entering the lower priced segment?  Because they are losing market share.  And by entering the lower priced market, they will erode margins a bit.  Correct me if I'm wrong, but it's the same reason that Jobs never wanted a smaller, lower-priced iPad.  And I think you're jumping on the wrong guy here, because while I'm saying that margins will erode, they will still be higher than the competition.

 

On more thing - this is not about falling in love with a stock. This is about understanding a business whose stock you own. I have held Apple for 12 years and during most of that time, I have heard people like you sing the same song. Take a look at the links in my signature.

 

The links are very good, especially the last one.  You could be right...I could be one of the same old song, but you've been wrong about the company's valuation for the last 12 months, correct? 

 

I never said Apple will disappear...quite the opposite actually...I'm saying competition will make things tougher, but they will continue to prosper.  I'm long Apple, but only at a certain price and that happened in the recent past.  The one thing I will say, and I continue to believe it, is that it won't be the same company after Jobs passed away...but will continue to be a very good company nonetheless.  Cheers!

[Guest valueInv]

Margins are eroding partly due to cost, but mostly due to competition.  Why do you think they are entering the lower priced segment?  Because they are losing market share. 

 

Do you think its possible that they are entering lower priced segments because the higher priced segment is saturated? That 5 years after introducing the iPhone, that everyone who could afford it has bought one? That lower price segments are the slower adopters?

 

What does this tell you about current prices of memory:

http://www.bloomberg.com/news/2013-04-24/chip-shortage-looms-as-samsung-courts-rival-to-fill-orders-tech.html

 

What does this tell you about the iPhone 5 manufacturing costs:

http://www.examiner.com/article/iphone-5-may-be-too-difficult-to-manufacture-foxconn-can-t-keep-up-with-demand

 

What do the two links tell you about when margins will improve?

 

And by entering the lower priced market, they will erode margins a bit.  Correct me if I'm wrong, but it's the same reason that Jobs never wanted a smaller, lower-priced iPad.  And I think you're jumping on the wrong guy here, because while I'm saying that margins will erode, they will still be higher than the competition.

 

Jobs did not want a smaller iPad because he thought a smaller screen wouldn't make a good device (He was wrong on that). This is another thing that you guys don't get about Apple - Their first goal is to make the best products possible, their second goal is to make as money i.e. their primary motivation is building amazing things. Do you think they are building the expensive spaceship campus because it has a good ROI?

 

Also understand this - when the first goal conflicts with the second, Apple will be a lousy investment.

 

The links are very good, especially the last one.  You could be right...I could be one of the same old song, but you've been wrong about the company's valuation for the last 12 months, correct? 

Apple made mistakes that they need to fix. And I have been vocal and specific about them. When and if they fix those mistakes, the price will recover-

but that will take time. If you understand Apple, you know they take their time making their move but when they do, they do so boldly. This is what you guys didn't understand about the buyback. 

 

I have posted my analysis from years ago here:

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/my-apple-analysis-track-record-circa-2007/

 

 

[VAL9000]

Margins are eroding partly due to cost, but mostly due to competition.  Why do you think they are entering the lower priced segment?  Because they are losing market share. 

 

Do you think its possible that they are entering lower priced segments because the higher priced segment is saturated? That 5 years after introducing the iPhone, that everyone who could afford it has bought one? That lower price segments are the slower adopters?

 

What does this tell you about current prices of memory:

http://www.bloomberg.com/news/2013-04-24/chip-shortage-looms-as-samsung-courts-rival-to-fill-orders-tech.html

 

What does this tell you about the iPhone 5 manufacturing costs:

http://www.examiner.com/article/iphone-5-may-be-too-difficult-to-manufacture-foxconn-can-t-keep-up-with-demand

 

What do the two links tell you about when margins will improve?

 

These input costs are a result of competition.  It's one and the same:

1) Other customers are crowding out Apple's access to chips, which drives up cost.  That's competition for a fixed resource.

2) Competition forces Apple to stay one step ahead.  This results in a new iPhone design.  The new design is hard to build.  This is a cost from competition.

 

If the higher priced segment is saturated, how is it that the Galaxy S3 is selling tens of millions of units?  Apple is just losing more sales at the high end.

 

[jeffmori7]

we haven't heard anything from Einhorn so far concerning buybacks and dividends at Apple. I'm wondering how he feels about his preferred idea ditched so fast? :)

[ShahKhezri]

we haven't heard anything from Einhorn so far concerning buybacks and dividends at Apple. I'm wondering how he feels about his preferred idea ditched so fast? :)

 

here is DE's comments: http://dealbook.nytimes.com/2013/04/23/einhorn-supports-apples-big-payouts/

 

 

[Palantir]

I'm long Apple, but only at a certain price and that happened in the recent past. 

 

What is your "maximum I'll pay for this stock" price and what is your estimate of IV?

 

I'd pay a little over 400/s, IV probably 500ish.

[txlaw]

Let's address the iPhone first.

On 1 - ASPs have been more or less stable..How do you know that competition is eroding margins? How do you know that it is not costs?

 

Lets say ASPs decrease going forward. Is it because competition is forcing prices down? Is it because Apple is entering lower priced segments as the higher priced segments saturate? How do you know?

 

Apple is "entering lower priced segments" (iPhone product line consists of both high-end iPhone 5s and lower-end iPhones) because of competition, which is taking away iPhone unit sales.  Just take a look at Galaxy sales (as pointed out by VAL) and the "overwhelming demand" for the S4 in order to understand that the high-end of the market is not "saturated."  That's wishful thinking on your part.

 

Note that AAPL is smart to mitigate this loss of market share (and concomitant loss of unit sales) at the high end by continuing to sell the lower-end iPhone models at great margins.  However, what affect does that have on total GM dollars from the iPhone product line when unit sales growth is slowing?

 

Here's what Peter Oppenheimer and Tim Cook said on the CC about iPhone ASPs:

 

The iPhone ASPs were down sequentially about $28 as you noted. And this was driven primarily by mix. The largest factors were an increase in the iPhone 4 mix, which resulted from or making the iPhone 4 more affordable in many markets. And also mix within the iPhone 5 as it was in its second full quarter.

 

And then on iPhone margins:

 

Toni, we don’t provide margins by product or within product line. But I talked about two factors that were impacting gross margin on a sequential basis. The first is leveraging, that’s largest of the two on the lower sequential revenue. But we also expect to see a different product mix and that’s primarily related to iPhone.

 

If fixed costs (not just component costs, but other costs incorporated within COGS) are going up faster than unit sales (and therefore revenue growth), that is loss of leverage.  Note that Tim Cook said that last year costs were historically low.  On top of that, you have a "different product mix" where gross margin dollars per unit is likely smaller.

 

Your man Horace Dediu believes that iPhone margins are crazy large and contribute a huge amount to Apple's overall gross margin dollars total.  If gross margins per iPhone unit are shrinking and iPhone unit sales growth is slowing, then that translates to reduced earnings for the iPhone product line and reduced Apple earnings, as we saw this quarter.

 

If you think iPhone GM dollars will go up substantially more from here, you are likely betting that a new iPhone launch will save the day on ASPs -- and maybe it will, but that's not necessarily a great bet. 

 

Keep the faith, though!

[Guest valueInv]

Let's address the iPhone first.

On 1 - ASPs have been more or less stable..How do you know that competition is eroding margins? How do you know that it is not costs?

 

Lets say ASPs decrease going forward. Is it because competition is forcing prices down? Is it because Apple is entering lower priced segments as the higher priced segments saturate? How do you know?

 

Apple is "entering lower priced segments" (iPhone product line consists of both high-end iPhone 5s and lower-end iPhones) because of competition, which is taking away iPhone unit sales.  Just take a look at Galaxy sales (as pointed out by VAL) and the "overwhelming demand" for the S4 in order to understand that the high-end of the market is not "saturated."  That's wishful thinking on your part.

 

Note that AAPL is smart to mitigate this loss of market share (and concomitant loss of unit sales) at the high end by continuing to sell the lower-end iPhone models at great margins.  However, what affect does that have on total GM dollars from the iPhone product line when unit sales growth is slowing?

 

Here's what Peter Oppenheimer and Tim Cook said on the CC about iPhone ASPs:

 

The iPhone ASPs were down sequentially about $28 as you noted. And this was driven primarily by mix. The largest factors were an increase in the iPhone 4 mix, which resulted from or making the iPhone 4 more affordable in many markets. And also mix within the iPhone 5 as it was in its second full quarter.

 

And then on iPhone margins:

 

Toni, we don’t provide margins by product or within product line. But I talked about two factors that were impacting gross margin on a sequential basis. The first is leveraging, that’s largest of the two on the lower sequential revenue. But we also expect to see a different product mix and that’s primarily related to iPhone.

 

If fixed costs (not just component costs, but other costs incorporated within COGS) are going up faster than unit sales (and therefore revenue growth), that is loss of leverage.  Note that Tim Cook said that last year costs were historically low.  On top of that, you have a "different product mix" where gross margin dollars per unit is likely smaller.

 

Your man Horace Dediu believes that iPhone margins are crazy large and contribute a huge amount to Apple's overall gross margin dollars total.  If gross margins per iPhone unit are shrinking and iPhone unit sales growth is slowing, then that translates to reduced earnings for the iPhone product line and reduced Apple earnings, as we saw this quarter.

 

If you think iPhone GM dollars will go up substantially more from here, you are likely betting that a new iPhone launch will save the day on ASPs -- and maybe it will, but that's not necessarily a great bet. 

 

Keep the faith, though!

 

Only one problem with that theory:

http://venturebeat.com/2013/04/26/samsung-q1-2013/

 

http://www.theverge.com/2013/1/14/3874576/samsung-sells-over-100-million-galaxy-s-devices

 

How many iPhones did Apple sell in the Dec quarter?

[texual]

Galaxy 4 will outsell Galaxy 3. iPhone 5 will have to wait until August for the S upgrade, which may or may not be substantial. Who knows?

 

I also look forward to the new Lumia line which may be aluminum and significantly smaller and lighter than the 920. I think that Nokia can take some American consumers by surprise when they have a phone on every carrier in the high end range. Blackberry is done, Android is still very strong but more likely to be Samsung driven for the near future. I don't know what Motorola is going to do that is better than Galaxy 4.

[txlaw]

Let's address the iPhone first.

On 1 - ASPs have been more or less stable..How do you know that competition is eroding margins? How do you know that it is not costs?

 

Lets say ASPs decrease going forward. Is it because competition is forcing prices down? Is it because Apple is entering lower priced segments as the higher priced segments saturate? How do you know?

 

Apple is "entering lower priced segments" (iPhone product line consists of both high-end iPhone 5s and lower-end iPhones) because of competition, which is taking away iPhone unit sales.  Just take a look at Galaxy sales (as pointed out by VAL) and the "overwhelming demand" for the S4 in order to understand that the high-end of the market is not "saturated."  That's wishful thinking on your part.

 

Note that AAPL is smart to mitigate this loss of market share (and concomitant loss of unit sales) at the high end by continuing to sell the lower-end iPhone models at great margins.  However, what affect does that have on total GM dollars from the iPhone product line when unit sales growth is slowing?

 

Here's what Peter Oppenheimer and Tim Cook said on the CC about iPhone ASPs:

 

The iPhone ASPs were down sequentially about $28 as you noted. And this was driven primarily by mix. The largest factors were an increase in the iPhone 4 mix, which resulted from or making the iPhone 4 more affordable in many markets. And also mix within the iPhone 5 as it was in its second full quarter.

 

And then on iPhone margins:

 

Toni, we don’t provide margins by product or within product line. But I talked about two factors that were impacting gross margin on a sequential basis. The first is leveraging, that’s largest of the two on the lower sequential revenue. But we also expect to see a different product mix and that’s primarily related to iPhone.

 

If fixed costs (not just component costs, but other costs incorporated within COGS) are going up faster than unit sales (and therefore revenue growth), that is loss of leverage.  Note that Tim Cook said that last year costs were historically low.  On top of that, you have a "different product mix" where gross margin dollars per unit is likely smaller.

 

Your man Horace Dediu believes that iPhone margins are crazy large and contribute a huge amount to Apple's overall gross margin dollars total.  If gross margins per iPhone unit are shrinking and iPhone unit sales growth is slowing, then that translates to reduced earnings for the iPhone product line and reduced Apple earnings, as we saw this quarter.

 

If you think iPhone GM dollars will go up substantially more from here, you are likely betting that a new iPhone launch will save the day on ASPs -- and maybe it will, but that's not necessarily a great bet. 

 

Keep the faith, though!

 

Only one problem with that theory:

http://venturebeat.com/2013/04/26/samsung-q1-2013/

 

http://www.theverge.com/2013/1/14/3874576/samsung-sells-over-100-million-galaxy-s-devices

 

How many iPhones did Apple sell in the Dec quarter?

 

What about the HTC One?  The Nexus 5?  An Amazon phone?  Lumias?  Even Blackberries!

 

We shall see in the next few quarters what will happen to the iPhone product line and ASPs.

[Guest wellmont]

 

Only one problem with that theory:

http://venturebeat.com/2013/04/26/samsung-q1-2013/

 

http://www.theverge.com/2013/1/14/3874576/samsung-sells-over-100-million-galaxy-s-devices

 

How many iPhones did Apple sell in the Dec quarter?

 

more fun with statistics ehh? As you know Samsung also sells the Galaxy Note, which is an amazingly popular phone. You know the Note, the groundbreaking, large screen phone that Apple is soon going to copy, that is, if Samsung doesn't sue them for infringement. So I would love to see comparisons that include the Galaxy Note. But for some reason the Apple Fan boy media totally forgets that Samsung has 2 of the top 5 selling smart phones on the planet.

 

And did you hear that Apple is going to try to get Swype on IOS? Imitation is the sincerest form of flattery they say. And I believe Google is quite flattered that apple is going to copy a feature that has been a mainstay on Android for Years. After 4 years apple has figured out that consumers love to Swype!

[Parsad]

I'm long Apple, but only at a certain price and that happened in the recent past. 

 

What is your "maximum I'll pay for this stock" price and what is your estimate of IV?

 

I'd pay a little over 400/s, IV probably 500ish.

 

$450 max.  IV is somewhere between $625-700.  Cheers! 

[rkbabang]

This quote from the this article pretty much is how I think of Apple right now and why it remains a 4% position for me:

 

"There isn't very much downside risk left in Apple. The share buy-back should put a temporary floor under the stock price decline, and the increased dividend will provide some support going forward. However, it will take a major new and innovative product to drive the shares back to the $700 mark."

 

The entire thesis for this stock relies on the hope/belief that it has something we don't know about up its sleeve.  I think this very well could be the case, but I don't know this for sure.  My price point for buying more is around $375, I think I'd take a large position at under $350.

[Guest valueInv]

Let's address the iPhone first.

On 1 - ASPs have been more or less stable..How do you know that competition is eroding margins? How do you know that it is not costs?

 

Lets say ASPs decrease going forward. Is it because competition is forcing prices down? Is it because Apple is entering lower priced segments as the higher priced segments saturate? How do you know?

 

Apple is "entering lower priced segments" (iPhone product line consists of both high-end iPhone 5s and lower-end iPhones) because of competition, which is taking away iPhone unit sales.  Just take a look at Galaxy sales (as pointed out by VAL) and the "overwhelming demand" for the S4 in order to understand that the high-end of the market is not "saturated."  That's wishful thinking on your part.

 

Note that AAPL is smart to mitigate this loss of market share (and concomitant loss of unit sales) at the high end by continuing to sell the lower-end iPhone models at great margins.  However, what affect does that have on total GM dollars from the iPhone product line when unit sales growth is slowing?

 

Here's what Peter Oppenheimer and Tim Cook said on the CC about iPhone ASPs:

 

The iPhone ASPs were down sequentially about $28 as you noted. And this was driven primarily by mix. The largest factors were an increase in the iPhone 4 mix, which resulted from or making the iPhone 4 more affordable in many markets. And also mix within the iPhone 5 as it was in its second full quarter.

 

And then on iPhone margins:

 

Toni, we don’t provide margins by product or within product line. But I talked about two factors that were impacting gross margin on a sequential basis. The first is leveraging, that’s largest of the two on the lower sequential revenue. But we also expect to see a different product mix and that’s primarily related to iPhone.

 

If fixed costs (not just component costs, but other costs incorporated within COGS) are going up faster than unit sales (and therefore revenue growth), that is loss of leverage.  Note that Tim Cook said that last year costs were historically low.  On top of that, you have a "different product mix" where gross margin dollars per unit is likely smaller.

 

Your man Horace Dediu believes that iPhone margins are crazy large and contribute a huge amount to Apple's overall gross margin dollars total.  If gross margins per iPhone unit are shrinking and iPhone unit sales growth is slowing, then that translates to reduced earnings for the iPhone product line and reduced Apple earnings, as we saw this quarter.

 

If you think iPhone GM dollars will go up substantially more from here, you are likely betting that a new iPhone launch will save the day on ASPs -- and maybe it will, but that's not necessarily a great bet. 

 

Keep the faith, though!

 

Only one problem with that theory:

http://venturebeat.com/2013/04/26/samsung-q1-2013/

 

http://www.theverge.com/2013/1/14/3874576/samsung-sells-over-100-million-galaxy-s-devices

 

How many iPhones did Apple sell in the Dec quarter?

 

What about the HTC One?  The Nexus 5?  An Amazon phone?  Lumias?  Even Blackberries!

 

We shall see in the next few quarters what will happen to the iPhone product line and ASPs.

 

Much smaller than the Galaxies.

[Guest valueInv]

 

Only one problem with that theory:

http://venturebeat.com/2013/04/26/samsung-q1-2013/

 

http://www.theverge.com/2013/1/14/3874576/samsung-sells-over-100-million-galaxy-s-devices

 

How many iPhones did Apple sell in the Dec quarter?

 

more fun with statistics ehh? As you know Samsung also sells the Galaxy Note, which is an amazingly popular phone. You know the Note, the groundbreaking, large screen phone that Apple is soon going to copy, that is, if Samsung doesn't sue them for infringement. So I would love to see comparisons that include the Galaxy Note. But for some reason the Apple Fan boy media totally forgets that Samsung has 2 of the top 5 selling smart phones on the planet.

 

And did you hear that Apple is going to try to get Swype on IOS? Imitation is the sincerest form of flattery they say. And I believe Google is quite flattered that apple is going to copy a feature that has been a mainstay on Android for Years. After 4 years apple has figured out that consumers love to Swype!

 

If you want to add the Note, add the Tab and the iPad also. Then, you will get an even bigger difference between Apple and its competitors.

[txlaw]

Let's address the iPhone first.

On 1 - ASPs have been more or less stable..How do you know that competition is eroding margins? How do you know that it is not costs?

 

Lets say ASPs decrease going forward. Is it because competition is forcing prices down? Is it because Apple is entering lower priced segments as the higher priced segments saturate? How do you know?

 

Apple is "entering lower priced segments" (iPhone product line consists of both high-end iPhone 5s and lower-end iPhones) because of competition, which is taking away iPhone unit sales.  Just take a look at Galaxy sales (as pointed out by VAL) and the "overwhelming demand" for the S4 in order to understand that the high-end of the market is not "saturated."  That's wishful thinking on your part.

 

Note that AAPL is smart to mitigate this loss of market share (and concomitant loss of unit sales) at the high end by continuing to sell the lower-end iPhone models at great margins.  However, what affect does that have on total GM dollars from the iPhone product line when unit sales growth is slowing?

 

Here's what Peter Oppenheimer and Tim Cook said on the CC about iPhone ASPs:

 

The iPhone ASPs were down sequentially about $28 as you noted. And this was driven primarily by mix. The largest factors were an increase in the iPhone 4 mix, which resulted from or making the iPhone 4 more affordable in many markets. And also mix within the iPhone 5 as it was in its second full quarter.

 

And then on iPhone margins:

 

Toni, we don’t provide margins by product or within product line. But I talked about two factors that were impacting gross margin on a sequential basis. The first is leveraging, that’s largest of the two on the lower sequential revenue. But we also expect to see a different product mix and that’s primarily related to iPhone.

 

If fixed costs (not just component costs, but other costs incorporated within COGS) are going up faster than unit sales (and therefore revenue growth), that is loss of leverage.  Note that Tim Cook said that last year costs were historically low.  On top of that, you have a "different product mix" where gross margin dollars per unit is likely smaller.

 

Your man Horace Dediu believes that iPhone margins are crazy large and contribute a huge amount to Apple's overall gross margin dollars total.  If gross margins per iPhone unit are shrinking and iPhone unit sales growth is slowing, then that translates to reduced earnings for the iPhone product line and reduced Apple earnings, as we saw this quarter.

 

If you think iPhone GM dollars will go up substantially more from here, you are likely betting that a new iPhone launch will save the day on ASPs -- and maybe it will, but that's not necessarily a great bet. 

 

Keep the faith, though!

 

Only one problem with that theory:

http://venturebeat.com/2013/04/26/samsung-q1-2013/

 

http://www.theverge.com/2013/1/14/3874576/samsung-sells-over-100-million-galaxy-s-devices

 

How many iPhones did Apple sell in the Dec quarter?

 

What about the HTC One?  The Nexus 5?  An Amazon phone?  Lumias?  Even Blackberries!

 

We shall see in the next few quarters what will happen to the iPhone product line and ASPs.

 

Much smaller than the Galaxies.

 

Yes, but we are talking about the smart phone market in aggregate ex-Apple.  If Samsung Galaxy/Note sales are replaced by HTC, Nokia, and LG sales, that still doesn't bode well for Apple, especially since those guys are dying to make profits and will definitely lower price points accordingly.

 

Look at the HTC One.  The unlocked version is almost $200 cheaper than the iPhone.  The next Nexus device will be sold at no profit to GOOG, with profit only going to the manufacturer.  And if AMZN gets in the mix, yikes . . .

 

It all goes to the point about increased competition -- going forward. 

[texual]

I've owned every iPhone and have a lot of Android friends devices to use on occasion. Up until now and even going ahead I don't think Android is better per se, but there is a gap and it closes faster each month. The pace of Android is just too fast, and while it has flaws it is most likely rectified by the monolithic Google stock devices that showcase what Android can be. While I didn't like the Nexus 4 I believe another year or so we will begin seeing Motorola X phones or whatever they call it. Those should showcase android properly. Until then I don't think the Galaxy 3 or 4 are for me, but I understand they cater to a lot of customers.

 

Who cares about phones though? Its all about value investing and Apple just had a great hit with the iPhone and iPad. Other than that their cash hoard is not going to double in 10 years, their Mac sales are flat year over year and I just don't see the world treating Apple with high regard after Steve Jobs died. Its a good company, with a great retail network but it isn't worth the lofty valuation people are saying. Remember 10 years ago the company wasn't earning this kind of money. I call it a 'new rich' - a game changing device or product makes them insanely rich and we act like its a triple play home run type of story. Where the next inventive, or creative cash cow comes from I don't know. I also wouldn't bet on it coming from Apple, for the record.

 

And for further record taking, I own original Macintosh computers, nearly every Mac computer and device since Jobs returned and owned the stock. I sold the last of my shares to much detriment of my 'converted' friends (who I converted in the first place) in 2010. They rejoiced at another 200 dollars per share above where I cashed out. But I guess I held my ground and today those same friends are even more defensive about Apple than I was in 2004. As the price goes down you'll see a lot more defensive talk. Go check out daring fireball.

[texual]

I tell my friends that Apple today is like a classic Mustang stuck in the mud. Great car, built well and an engine that can scream. But that is the problem, its stuck in the mud. Only a special push (Steve Jobs, a magical third product launch, or a total surprise turn of events like Apple suddenly becomes the de facto new government of the world) will get it out on the streets and running ahead.

 

Till then its just revving its engine, looks great, sounds like a lot of gas is in the tank. But believe me they are stuck and know it. Their peak profitability hit last year, its only going to get worse. Their Mac sales are not enough to keep things interesting, iPod is all but dead, and iPhone is under assault by every OEM. iPad is a exception but I don't think I would rule out the Surface 2, or the tablets coming from Amazon, etc. With that said, its still a great solid car.

[Viking]

txlaw, yes, we will all be watching with great interest what happens to iphone sales, avg selling prices and margins given the iphone represents the majority of Apple profits.

 

As the smartphone market continues to increase in size it is also maturing and many different segments are forming. I hope Apple starts to launch line extensions with the iphone. I would like to see Apple offer an iphone for the mid priced market ($350 to $400) especially if this will help get distribution through China mobile. I also would like to see a 5 to 5.5" iphone as Samsung has demonstrated this segment is very large and growing.

 

If Apple offers a lower priced phone we will see avg selling price and GM fall for iphone. The key will be volume growth. It is possible total GM for the iphone could be weak as they transition to a full line of iphone products. I am OK with this. As an example, looking at the ipad line, I love the launch of the ipad mini. Yes, as a result of the ipad mini launch, GM % for the ipad categorory have declined. However, Apple is making very good margins on the ipad mini and also getting many new people into their ecosystem and further locking in many people who already own another Apple device.

 

In the Q1 conference call Tim Cook used the ipod (multiple products) as an example of what we may see Apple do in other product categories. Let's hopw this is true.

 

The big news for me the past quarter is how the dominant players (Apple and Samsung) have further consolidated their leading positions. We have bunch of very good competitors (Nokia, BBY, HTC, MSFT etc) who have all come out with very good phones. It looks to me the new devices have largely stopped the bleeding; it does not look like they are taking share from the two dominant players. I wonder if we are at the point where ecosystem and network effects are a stronger moat than we realize; to significantly grow sales someone needs to come out with a revolutionanry device (like the iphone in 2008).

 

This may mean in the coming years development of the ecosystem may become more important. I am looking forward to seeing what Jony Ives has up his sleeve regarding iOS at the June meeting.

 

Bottom line, Apple is in a great position to continue to grow their business. Can't wait to see what they have planned.

[Viking]

texual, I am not sure how you can so completely write off Apple when they are the undisputed leader in each of their product categories. Look at their share of profits in smartphones, tablets, PC's or MP3 players. They contine to dominate and out earn all competitors.

 

I think people are confusing 'lumpy' with 'in permanent decline'. My read is we are seeing Apple in transition. Yes, things will change; we likely will not see another Q with 47% GM like Q2 last year. Does this mean Apple is doomed? Of course not. Apple's business performed exceptionally well the past 6 months due to category refreshes and new product launches. We are now in the lull (just like every year) and competitors will make hay as they launch their new products during the Apple lull. I am confident Apple will give us some great products, software and services over the next 6 months and continue to grow their business. Time will tell.   

[texual]

Cook indicated there will be no size increase on iPhone so that can be put to rest. He could have evaded the question entirely which would lead me to speculate a 5 inch phone or more. Well, he said he wasn't interested in being at a larger size. And competitors already know that larger sizes are really popular so they'll push out larger phones. Until then, I would also not expect a lower priced iPhone except for the previous model. Again this isn't about price its about filling gaps, the diversity of consumers say that sizes of phones appeal to different segments, so does internal storage, operating system, battery size and removability. As long as Apple keeps their product on total lockdown (one model) they ignore the potential for other OEMs to fill the gaps.

 

I doubt any single OEM will shake down Apple. But put this another way: for every year that goes by Apple has one major product release or unveiling. Usually an update, or a new design for something. But what I noticed in the last two years, and especially now is that I expect from all other OEM's (Samsung, LG, Nokia, HTC, Moto, Blackberry, Amazon, Google, etc) to have a new product every 3 months. Thats right, I expect new phones or devices to come at me every quarter! (And for clarity - I mean them COMBINED. Not that each company is doing a 3 month cycle!)

 

It sounds silly but combined I think of having a half dozen or so top tier OEM's launching devices in harmony, not stepping on each others toes, and all aimed at stealing Apple's iPhone market. If you go to Verizon or ATT today they've put iPhone in the back on a single shelf display. I think they are still pushing for iPhone but the truth is, each few months they can advertise a totally new phone or product from another OEM and capture sales that way, without getting reamed by Apple's subsidy.

 

Amen to the developing world, it seems they really cannot afford the iPhone and prefer local manufacturers or even Nokia at multiple price points and serving them a decent experience from a smartphone. Thats why I 'wrote off' Apple in 2010, because I saw that they had no interest in the second phase of mass consumer electronics - just like SONY. They have a superior product at an absurdly high price, that only matters in the first phase, but masses cannot get in later when the time for competition arises. And SONY still sticks to their incredibly complicated releases, odd numbering system, vague and proprietary cables, cards and nicknacks when everyone wants a standard.

 

Apple got away with this for a longer time than I imagined it would but I think we are in the post iPhone age. Worldwide Android is doing very well and I think Windows Phone will grow into the third major ecosystem. Apple wins the USA for sure, I pretty much only use iPhone and I'm a Windows phone fanboy!

 

Of course I will be watching the Apple keynote as I have since the beginning. However, I assume I am not the only one who also watches Samsungs, or Nokias or HTC's, or Amazon's these days.

 

 

[Palantir]

If Apple really does follow Android's lead and release a "phablet" that will be a good bearish signal. I admire Apple's laser focus, and following lesser companies would be a mistake.

[PlanMaestro]

http://stratechery.com/2013/two-bears/