Prasad, please don't tell me you're impressed by the new iPhone

[Guest valueInv]

 

Apple is in thus for the long haul, and has a history of not throwing in features for the hell of it. We are still some time away from retailers adapting NFC payments on a large scale, and on a global scale (remember, this phone is sold everywhere..this isn't Samsung or HTC who release 25 phones a year spread out all over the world). In a year or two, when NFC has more real uses (rather than being a extra line manufacturers throw in their list of specs), I'm sure it'll be added to the iPhone.

 

They build a great product, and are constantly refining it. Would you rather them follow the oth of all the android manufacturers and release 22 different iPhones a year?

 

DCG, you nailed it:

 

http://www.businessinsider.com/why-apple-didnt-change-the-iphone-design-2012-9

 

On NFC, I think they came to the conclusion that it is inferior and they're probably working on something that substitutes it - maybe something over Wifi and Passbook. But to enable things like payments, etc, they need to fix security first. I'm guessing that they will integrate Authentec's technology first before that start doing the other stuff.

[VAL9000]

This article sums up my feelings:

http://www.wired.com/gadgetlab/2012/09/the-iphone-5-is-boring-and-amazing/

 

I like that the new dock connector is reversible.  That is something I wish the USB standard had incorporated.  So that's cool.  The BS reason for why they're changing the connector was kind of weird, though.  We use more wireless so we had to change the connector?  Even though it's fully backwards compatible?  Odd pitch.

 

The excitement I felt upgrading from a BlackBerry Curve to an iPhone 4S will probably not be matched by upgrading from an iPhone 4S to an iPhone 5.  Some in my office want to move from the 4 to the 5, but many are holding out for a different flavour of handset.  All I want is my physical keyboard without sacrificing the excellent iPhone browsing experience.

 

Also, the new nanos are ugly, ugly, ugly.  It's _way_ too early to get concerned about the rest of the product line, but does anyone here think that those would have been approved for launch by Steve?

[txlaw]

txlaw - if you don't mind me asking, what is your background/profession in?

 

Why?  Do you think it will destroy the credibility of my posts that are tech-related?

 

I'm an attorney.

[Guest valueInv]

txlaw - if you don't mind me asking, what is your background/profession in?

 

Why?  Do you think it will destroy the credibility of my posts that are tech-related?

 

I'm an attorney.

 

My bad - I should have looked at your profile name. I like figuring out how and why perceptions are formed.

[Guest valueInv]

 

Also, the new nanos are ugly, ugly, ugly.  It's _way_ too early to get concerned about the rest of the product line, but does anyone here think that those would have been approved for launch by Steve?

 

Yup, they are off. But they have screwed up the nanos once before even under Steve. People tend to forget the mistakes made under Steve. The only consolation I see is the making of a smaller, cheaper phone - something in between a smartphone and a featurephone.

 

Maybe they're experimenting. Its not a critical product for them anymore. It doesn't feel like its from Jony Ive's team. Did they outsource the design? I would probably put Jony's team of 15 on the iPhone, the Apple TV and the iPad and not on the iPods.

 

On the other hand, I think they hit it out of the park with the iPhone and iTunes. Even the new iPod ad is Apple at its best:

 

http://www.cultofmac.com/190437/check-out-apples-awesome-new-ipod-ad-video/

[txlaw]

Is any other board member who has loved using their iPhone just bored with the whole product line? 

 

I don't know if that's the techie in me, but I'm really bored with my iPhone, and I kind of want to try something new.  Maybe it's because I have had the iPhone 4 for a while now.

 

That Techcrunch article about the "turn" and the "prestige" is dumb.  There's nothing extraordinary about the iPhone.  There's nothing magical about the iPhone 5. 

 

I don't think it's just me:

 

http://www.slate.com/articles/technology/technology/2012/09/iphone_5_dock_connector_the_one_incredibly_irksome_feature_that_will_leave_you_cursing_apple_.html

http://www.readwriteweb.com/archives/live-blog-apples-iphone-announcement-plus-itunes-11-ios-6-new-ipods.php

 

Well, next time well tell Cook to make it more "entertaining" for you.  ;)

 

Time to buy more RIMM, txlaw?

 

I've got plenty of RIM right now, thanks.  ;)

 

It's okay if Tim Cook is boring -- which he is.  That's not what made this release so disappointing.  I wish that Apple had been more forward thinking so that the iPhone update would have had more new useful features in it.  The bigger screen was a necessary update -- they had no choice given how people are loving it in their non-Apple phones.  Thinner?  Big deal.  LTE?  Also necessary.

 

The new dock connector bit is crappy, but it doesn't affect me personally as much as it will other people.  Not having NFC is much worse to me, and could potentially make me go with Android.  Also would have loved to see new cloud services rolled out to make the iPhone more useful, but they're probably still working on all that.

 

I find there's no compelling reason to upgrade, and this is the first time I'm contemplating switching from an iPhone to another device. 

 

It looks like we may not see any real magic from Apple again until they release their iTV.

 

Apple is in this for the long haul, and has a history of not throwing in features just for the hell of it. We are still some time away from retailers adapting NFC payments on a large scale, and on a global scale (remember, this phone is sold everywhere..this isn't Samsung or HTC who release 25 phones a year spread out all over the world). In a year or two, when NFC has more real uses (rather than being a extra line manufacturers throw in their list of specs), I'm sure it'll be added to the iPhone. I understand that nf has other uses than payments, but they're mostly gimmicks at is point.

 

They build a great product, and are constantly refining it. Would you rather them follow all of the android manufacturers and release 22 different iPhones a year?

 

And people seem to sometimes forget that the iPhone is the combination of software and hardware. The refinements of iOS are arguably more important than tech-spec improvements that people often fixate over.

 

Regarding the phone design, why make huge changes to something that works very well already? Android phones with large screens usually pixallate the OS and look awful. Who wants to carry a 6" phone in their pocket? Would a trackball that changes colors (RIMM shot) be a useful and magical feature?  :P

 

That's the Apple fanboy line you're touting.  Apple never puts in features for the hell of it, or they don't put stuff in that's not ready for prime time.  Not sure if it's true.  Siri was not ready for prime time.  Yet they put it in, probably because of their ongoing war against GOOG. 

 

NFC in the iPhone would be awesome, and there already are uses for it that are being tested right now.  In Austin, they're testing Isis, for example.  But the industry needs Apple to get on board to drive adoption of NFC.  They failed the industry.  Probably because there are negotiations going on behind the scenes regarding how Apple is gonna get paid off of NFC in relation to the carriers, payment processors, and other interested parties.  Not because NFC shouldn't be put into devices now.

 

iOS 6 is fine.  They're doing a good job incorporating catch up features that Android has.  But I'm not hugely impressed with the updates.  It's incremental improvement I see -- kaizen, if you will.  Nothing wrong with that.

 

You won't hear any arguments from me that the iPhone 5 is not a great phone.  It could very well be the best on the market.  The only phones I am aware of that are even in the ballpark with the iPhone are the Samsung Galaxy S3 and the new Razr HDs. 

 

I guess I just agree with Bezos and am getting tired of the upgrade hamster wheel.  Apple may make a lot of money on the iPhone 5, but do they really deserve to?

[txlaw]

txlaw - if you don't mind me asking, what is your background/profession in?

 

Why?  Do you think it will destroy the credibility of my posts that are tech-related?

 

I'm an attorney.

 

My bad - I should have looked at your profile name. I like figuring out how and why perceptions are formed.

 

I'm sure, I'm sure.  What's your diagnosis, professor?

[gokou3]

I guess I just agree with Bezos and am getting tired of the upgrade hamster wheel.

 

I think a lot of people in the US are upgrading because they get a free/cheap phone from their carrier every 2 years (contract).  But then, the more entrepreneurial / cheap types can actually sell their new phone on craigslist and thus effectively extend their upgrade cycles, say, from 2 to 4 years.  The proceeds from the sold phone can be used to considerably subsidize the hefty carrier bills that people so commonly complain about.

 

With the iphone 5 now selling at an even higher price (before subsidy), the carriers will be even more motivated to sell the competing products.

[Liberty]

I think a lot of people in the US are upgrading because they get a free/cheap phone from their carrier every 2 years (contract).

 

Not quite, though. There's no such thing as a free lunch. People are still paying for the expensive phones, they're just amortized over a 2-year contract or whatever instead of being paid all upfront. It's a cosmetic difference that, sadly, seems to fool most people into buying stuff they can't afford (same when people fixate on the monthly cost of buying a car or a house rather than the total cost).

 

I know you know this, I just felt like venting a bit about the general state of financial illiteracy in the world :)

[Grenville]

The phone looks very nice. Lots of cool upgrades. The photo quality and panorama is very nice.

 

here is a link to the presentation:

http://www.apple.com/apple-events/september-2012/

 

[Guest valueInv]

Is any other board member who has loved using their iPhone just bored with the whole product line? 

 

I don't know if that's the techie in me, but I'm really bored with my iPhone, and I kind of want to try something new.  Maybe it's because I have had the iPhone 4 for a while now.

 

That Techcrunch article about the "turn" and the "prestige" is dumb.  There's nothing extraordinary about the iPhone.  There's nothing magical about the iPhone 5. 

 

I don't think it's just me:

 

http://www.slate.com/articles/technology/technology/2012/09/iphone_5_dock_connector_the_one_incredibly_irksome_feature_that_will_leave_you_cursing_apple_.html

http://www.readwriteweb.com/archives/live-blog-apples-iphone-announcement-plus-itunes-11-ios-6-new-ipods.php

 

This article was written two years ago:

 

http://www.macworld.com/article/1151235/apple_rolls.html

 

Apple is still doing the same thing, people are saying the same thing. Wanna guess what the sales are going to be/

[txlaw]

Is any other board member who has loved using their iPhone just bored with the whole product line? 

 

I don't know if that's the techie in me, but I'm really bored with my iPhone, and I kind of want to try something new.  Maybe it's because I have had the iPhone 4 for a while now.

 

That Techcrunch article about the "turn" and the "prestige" is dumb.  There's nothing extraordinary about the iPhone.  There's nothing magical about the iPhone 5. 

 

I don't think it's just me:

 

http://www.slate.com/articles/technology/technology/2012/09/iphone_5_dock_connector_the_one_incredibly_irksome_feature_that_will_leave_you_cursing_apple_.html

http://www.readwriteweb.com/archives/live-blog-apples-iphone-announcement-plus-itunes-11-ios-6-new-ipods.php

 

This article was written two years ago:

 

http://www.macworld.com/article/1151235/apple_rolls.html

 

Apple is still doing the same thing, people are saying the same thing. Wanna guess what the sales are going to be/

 

I agree.  Apple is doing the same thing it always does with its product lines.  It's iterating.  I mentioned the word Kaizen a couple of posts ago. 

 

What Apple hasn't done is release something magical, like with the first iterations of the iPhone or iPad. 

 

That's why I said that Techcrunch article was dumb.  There's no need to buy into the Apple spin regarding the new device.  Let's just be real about it.  They released a nice update that probably keeps the iPhone 5 the king of the pack, but that doesn't refute the notion that the gap is closing between Apple and the Others. 

 

Sales will be good -- I don't dispute that.  We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

[Guest valueInv]

Is any other board member who has loved using their iPhone just bored with the whole product line? 

 

I don't know if that's the techie in me, but I'm really bored with my iPhone, and I kind of want to try something new.  Maybe it's because I have had the iPhone 4 for a while now.

 

That Techcrunch article about the "turn" and the "prestige" is dumb.  There's nothing extraordinary about the iPhone.  There's nothing magical about the iPhone 5. 

 

I don't think it's just me:

 

http://www.slate.com/articles/technology/technology/2012/09/iphone_5_dock_connector_the_one_incredibly_irksome_feature_that_will_leave_you_cursing_apple_.html

http://www.readwriteweb.com/archives/live-blog-apples-iphone-announcement-plus-itunes-11-ios-6-new-ipods.php

 

This article was written two years ago:

 

http://www.macworld.com/article/1151235/apple_rolls.html

 

Apple is still doing the same thing, people are saying the same thing. Wanna guess what the sales are going to be/

 

I agree.  Apple is doing the same thing it always does with its product lines.  It's iterating.  I mentioned the word Kaizen a couple of posts ago. 

 

What Apple hasn't done is release something magical, like with the first iterations of the iPhone or iPad. 

 

That's why I said that Techcrunch article was dumb.  There's no need to buy into the Apple spin regarding the new device.  Let's just be real about it.  They released a nice update that probably keeps the iPhone 5 the king of the pack, but that doesn't refute the notion that the gap is closing between Apple and the Others. 

 

Sales will be good -- I don't dispute that.  We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

 

The metric that is important is FCF/share, wouldn't you agree?

[bathtime]

I think the new design/larger screen is a beautiful refinement of the iPhone, so while some don't see much change, I see this version as being a major advancement.

 

All that said, I am no longer sure I will get one once my contract rolls over. I'm on Verizon and it's not possible to be on the phone and access the web  (unless on wifi) at the same time - something that's possible on AT&T. This is a disappointment to me as I am able to perform this function on my HTC Thunderbolt on Verizon, as do many other Android phones:

 

http://bits.blogs.nytimes.com/2012/09/13/iphone-5-calls-data/

[Yours Truly]

My wife and I are definitely upgrading to the 5.. she's upgrading from the 4 and i'm switching from the Galaxy Note.  I had initially thought that the Galaxy Note could serve as both a tablet and phone but after  playing with and subsequently purchasing the new iPad, I was severely wrong.

 

I like Android's diversity of offerings but at the end of the day, the phone just lacks refinement and polishness.  I'm also not particularly fond of having the newest and greatest Android device only for it to be diminished a few days/weeks/months later by another Android device from the same maker or the various other handset manufacturers.  The upgrade from Gingerbread to ICS was a huge improvement but it's still rather laggy and buggy in certain areas plus battery life is horrid!

[DCG]

Pre-orders are already sold out, for anyone questioning the demand.

[Guest valueInv]

We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

 

Here are historic ASPs of Apple products many of which have had "me too" competitive products that sometimes offered even more features than Apple's. These are average selling prices, not margins. ASPs also vary by product mix. If ASPs are constant, margins may even increase if costs decline due to economies of scale, newness of technologies used, etc. Other Apple products have been through similar cycles as what the iPhone and iPad are going through.

 

http://www.asymco.com/2012/09/14/are-iphone-average-sales-prices-increasing/

 

Here is their historic overall GM:

http://www.gurufocus.com/financials/AAPL

 

[txlaw]

Is any other board member who has loved using their iPhone just bored with the whole product line? 

 

I don't know if that's the techie in me, but I'm really bored with my iPhone, and I kind of want to try something new.  Maybe it's because I have had the iPhone 4 for a while now.

 

That Techcrunch article about the "turn" and the "prestige" is dumb.  There's nothing extraordinary about the iPhone.  There's nothing magical about the iPhone 5. 

 

I don't think it's just me:

 

http://www.slate.com/articles/technology/technology/2012/09/iphone_5_dock_connector_the_one_incredibly_irksome_feature_that_will_leave_you_cursing_apple_.html

http://www.readwriteweb.com/archives/live-blog-apples-iphone-announcement-plus-itunes-11-ios-6-new-ipods.php

 

This article was written two years ago:

 

http://www.macworld.com/article/1151235/apple_rolls.html

 

Apple is still doing the same thing, people are saying the same thing. Wanna guess what the sales are going to be/

 

I agree.  Apple is doing the same thing it always does with its product lines.  It's iterating.  I mentioned the word Kaizen a couple of posts ago. 

 

What Apple hasn't done is release something magical, like with the first iterations of the iPhone or iPad. 

 

That's why I said that Techcrunch article was dumb.  There's no need to buy into the Apple spin regarding the new device.  Let's just be real about it.  They released a nice update that probably keeps the iPhone 5 the king of the pack, but that doesn't refute the notion that the gap is closing between Apple and the Others. 

 

Sales will be good -- I don't dispute that.  We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

 

The metric that is important is FCF/share, wouldn't you agree?

 

I would say FCF per share would be an important metric, though it would not necessarily be the same as estimated owner earnings per share.  (Of course, one would also have to take into account sustainability of owner earnings in valuing a company based on earnings.) 

 

For example, let's say that Apple gross margins decline but sales increase such that owner earnings go up.  Well, then, you might have yourself a decent investment despite gross margin decline, especially if you think that the company will be able to keep a moat such that earnings will not decline.

[txlaw]

We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

 

Here are historic ASPs of Apple products many of which have had "me too" competitive products that sometimes offered even more features than Apple's. These are average selling prices, not margins. ASPs also vary by product mix. If ASPs are constant, margins may even increase if costs decline due to economies of scale, newness of technologies used, etc. Other Apple products have been through similar cycles as what the iPhone and iPad are going through.

 

http://www.asymco.com/2012/09/14/are-iphone-average-sales-prices-increasing/

 

Here is their historic overall GM:

http://www.gurufocus.com/financials/AAPL

 

Past performance is not necessarily indicative of future results. 

 

I find it highly unlikely that ASP will stay stable for the iPhone, and I don't think it would be wise to assume that in any projections you are making.  It's all about being conservative in projections in order to figure out the MOS.

 

Ultimately, the risk we're talking about is that because the innovation gap (as Val has put it) is closing, and because the business models for many successful competitors are not reliant on making huge profits on the OS/device (think GOOG and AMZN), there could be pressure on Apple's gross margins going forward.  Carriers also could put pressure on gross margins because, ultimately, it sucks for them to have to subsidize high priced devices in order to keep/gain customers because they can only make so much on the financing aspect of the two-year contracts.

 

Now gross margin declines could very well be offset by revenue per share increases, both from increasing unit sales and the sales of services tied to the ecosystem.  However, you have to ask yourself what do earnings potentially look like based on variability in revenue increases and gross margin declines.  And is the market fairly pricing Apple in light of the range of outcomes? 

[Guest valueInv]

We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

 

Here are historic ASPs of Apple products many of which have had "me too" competitive products that sometimes offered even more features than Apple's. These are average selling prices, not margins. ASPs also vary by product mix. If ASPs are constant, margins may even increase if costs decline due to economies of scale, newness of technologies used, etc. Other Apple products have been through similar cycles as what the iPhone and iPad are going through.

 

http://www.asymco.com/2012/09/14/are-iphone-average-sales-prices-increasing/

 

Here is their historic overall GM:

http://www.gurufocus.com/financials/AAPL

 

Past performance is not necessarily indicative of future results. 

 

I find it highly unlikely that ASP will stay stable for the iPhone, and I don't think it would be wise to assume that in any projections you are making.  It's all about being conservative in projections in order to figure out the MOS.

 

Ultimately, the risk we're talking about is that because the innovation gap (as Val has put it) is closing, and because the business models for many successful competitors are not reliant on making huge profits on the OS/device (think GOOG and AMZN), there could be pressure on Apple's gross margins going forward.  Carriers also could put pressure on gross margins because, ultimately, it sucks for them to have to subsidize high priced devices in order to keep/gain customers because they can only make so much on the financing aspect of the two-year contracts.

 

Now gross margin declines could very well be offset by revenue per share increases, both from increasing unit sales and the sales of services tied to the ecosystem.  However, you have to ask yourself what do earnings potentially look like based on variability in revenue increases and gross margin declines.  And is the market fairly pricing Apple in light of the range of outcomes?

 

So why didn't GMs decrease in the past when the innovation gap closed? Apple certainly hasn't done anything mindblowing with iPods or Macs.

[DCG]

 

 

Past performance is not necessarily indicative of future results. 

 

True; and on that note, past performancesof other large technology companies and companies with large market caps aren't necessarily indicative of Apple's future results either.

[txlaw]

We'll see what gross margins look like over the next few years, though.  I think Apple needs to focus more on its services tied to the iOS ecosystem.

 

Here are historic ASPs of Apple products many of which have had "me too" competitive products that sometimes offered even more features than Apple's. These are average selling prices, not margins. ASPs also vary by product mix. If ASPs are constant, margins may even increase if costs decline due to economies of scale, newness of technologies used, etc. Other Apple products have been through similar cycles as what the iPhone and iPad are going through.

 

http://www.asymco.com/2012/09/14/are-iphone-average-sales-prices-increasing/

 

Here is their historic overall GM:

http://www.gurufocus.com/financials/AAPL

 

Past performance is not necessarily indicative of future results. 

 

I find it highly unlikely that ASP will stay stable for the iPhone, and I don't think it would be wise to assume that in any projections you are making.  It's all about being conservative in projections in order to figure out the MOS.

 

Ultimately, the risk we're talking about is that because the innovation gap (as Val has put it) is closing, and because the business models for many successful competitors are not reliant on making huge profits on the OS/device (think GOOG and AMZN), there could be pressure on Apple's gross margins going forward.  Carriers also could put pressure on gross margins because, ultimately, it sucks for them to have to subsidize high priced devices in order to keep/gain customers because they can only make so much on the financing aspect of the two-year contracts.

 

Now gross margin declines could very well be offset by revenue per share increases, both from increasing unit sales and the sales of services tied to the ecosystem.  However, you have to ask yourself what do earnings potentially look like based on variability in revenue increases and gross margin declines.  And is the market fairly pricing Apple in light of the range of outcomes?

 

So why didn't GMs decrease in the past when the innovation gap closed? Apple certainly hasn't done anything mindblowing with iPods or Macs.

 

How do you know that GMs did not decrease for the iPod or Mac lines?  And are you factoring in GM maintenance as an accepted trade-off for unit sale decline? 

 

The iPhone and iPad distort any sense of whether there would have been gross margin decline absent their introduction.  Because those products' gross margins are very high and may have even increased as Apple has dominated the market in those products and extracted great terms from manufacturers and carriers.

[Guest valueInv]

Has anyone here used NFC readers to make payments or otherwise?

 

http://venturebeat.com/2012/09/17/nfcs-ongoing-user-interface-problem-some-readers-dont-work/

[Guest valueInv]

Mossberg's review:

 

http://allthingsd.com/20120918/the-iphone-takes-to-the-big-screen/

 

"Some rival phones boast some features Apple chose to omit. These include a wireless function called NFC, for paying for goods wirelessly, and face recognition for logging into your phone. But I regard such features as either little-used or unperfected. For instance, NFC isn’t available in most stores and, in my tests, facial recognition on phones has failed to work time and again. For some, these features matter a lot, but I’d bet most users won’t care about them, at least in their current state."

 

[gokou3]

Mossberg's review:

 

http://allthingsd.com/20120918/the-iphone-takes-to-the-big-screen/

 

"Some rival phones boast some features Apple chose to omit. These include a wireless function called NFC, for paying for goods wirelessly, and face recognition for logging into your phone. But I regard such features as either little-used or unperfected. For instance, NFC isn’t available in most stores and, in my tests, facial recognition on phones has failed to work time and again. For some, these features matter a lot, but I’d bet most users won’t care about them, at least in their current state."

 

LOL.  I am sure that's the reason MSFT didn't create the Metro UI until recently, and also why Apple didn't add an extra row of icons to the screen until now.