October 20th, 2009

Will Apple find El Dorado in Beijing?

Posted by David Morgenstern @ 9:24 am

Categories: AAPL, Apple, Apple Retail Store, China

Tags: China, Apple Macintosh, Apple Inc., El Dorado, Apple Mac OS, Desktops, Sales Strategy, Operating Systems, Software, Hardware

El Dorado is the fabled place of gold, once thought to exist in the American hemisphere. However, for technology companies, China has long been an El Dorado, the untapped market that will bring black ink flowing into the quarterly financial reports. At the end of the month, Apple will make it real in China with the launch of the iPhone 3GS with partner China Unicom.

At the company’s conference call on Monday, Tim Cook, chief operating officer, said Apple was “thrilled.”

We’re thrilled to be launching there on October 30th with China Unicom and we’re going to start with about 1,000 points of sale and then expand further over the next several months thereafter. They’ve announced the plans and prices that they’ll have for the device and for the service. There’s a very wide range here on the post-paid side from $18 a month all the way up to $85, $100 a month. At the higher price point an individual is able to actually get the device for free and it goes up as you go down the ARPU, as it would in most countries.

As you know, as we’ve shipped the 3G and the 2G phone prior to that, we discovered that there were quite a few phones going in to China so it would seem to us to indicate that there’s a good opportunity and we’re really excited to get started. We’re not making any projections on the volume, but it is a huge market — the largest market in the world in terms of total phones. And I think it’s very important that we get started to make it as large as possible on smartphones.

Apple in July opened its first China retail store in Beijing and is reported to open another in Shanghai this fall.

I am interested in whether the iPhone’s halo effect will be felt in this new market. What will be Macintosh sales? And before anyone remarks on how totally price-conscious the China market is and how it’s foolish to expect any sales there, may I point out that these are the same arguments that have been made for every other market segment worldwide and keep getting knocked down.

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August 3rd, 2009

Apple Board vacancy: Good riddance to Eric Schmidt

Posted by David Morgenstern @ 10:48 am

Categories: AAPL, Corporate, Google, Windows

Tags: Eric Schmidt, Apple Macintosh, Quicken, Board, Apple Inc., Board Member, Corporate Governance, Desktops, Business Operations, Corporate Law

Apple on Monday said that Google CEO Eric Schmidt won’t have a seat at the next meeting of its board of directors. The only question was why did it take so long for push to come to shove for this joker.

Apple said Schmidt’s effectiveness had been diminished.

“Eric has been an excellent Board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful,” said Steve Jobs, Apple’s CEO. “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple’s Board.”

Come on! Maybe he’s going to spend some more time with his family too. How many announcements of competing products does it take for the Apple board to figure out that a board member isn’t pulling his or her weight? The writing for this ejection has been on the wall for years.

Was it the Chrome OS? Was it a competing browser? Was it Google’s cloud applications that compete against Apple’s host-based and online sync services? Where is the “passion” to make Apple successful here?

(Note that I’m not talking here about the responsibilities of the board for governance here and their possible dropping the dime on Steve Jobs’ absence and the lack of transparent planning for succession. Board members are also supposed to bring something of an industry perspective.)

What about the other members of the board?

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July 30th, 2009

Crazy talk: Apple should ditch the Mac?

Posted by David Morgenstern @ 5:24 pm

Categories: AAPL, Consumer electronics, Mac OS, Smartphone, iPhone 3GS

Tags: Apple iPhone, Apple Macintosh, Margin, Apple Inc., Desktops, Smart Phones, Hardware, Consumer Electronics, Personal Technology, David Morgenstern

Industry observers point to the amazing margins of the iPhone and the declining margins for computers. So, of course, the logical course of action is for Apple to abandon the Macintosh? It’s crazy talk.

In a Thursday BNET Technology post, Erik Sherman pointed to some recent analyst figures on the iPhone margins. They are amazing.

You’ll have to read his piece for the details, but the short take is that the margin of the iPhone appears to be nearly 60 percent. That’s right, in the world of consumer electronics, Apple is making such a large margin than competitors would likely break out in tears in realization of what they are missing. But instead of simply pocketing the money, it uses the financial advantage to lower Mac prices so it can be more competitive in a cost-sensitive environment.

That raises the question of whether Apple plans a complete shift away from Macs. It needs them for now, but if it can bulk up enough on iPhones and the upcoming tablet, it may be that the Mac becomes an unnecessary endeavor.

The Mac is an “unnecessary endeavor?” Come on! This is crazy talk.

Is the success of the iPhone some kind of a sign that Apple should toss aside its computer hardware and software businesses and become a one-platform company again? A move that would make it totally dependent on the cycles of a single technology, again?

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July 21st, 2009

Apple’s Q3 2009: best non-holiday quarter in company history

Posted by Jason D. O'Grady @ 2:00 pm

Categories: AAPL, Earnings, Finance

Tags: Revenue, Quarter, Apple Inc., Operational Accounting, Finance, Jason D. O'Grady

Apple’s Q3 2009 earnings conference call is under way, you can listen to the live stream beginning at 5:00 p.m. ET, 2:00 p.m. PT.

The press release has been posted and Apple reported the best non-holiday quarter revenue and earnings in Apple history. Some highlights:

Apple today announced financial results for its fiscal 2009 third quarter ended June 27, 2009. The Company posted revenue of $8.34 billion and a net quarterly profit of $1.23 billion, or $1.35 per diluted share. These results compare to revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share, in the year-ago quarter. Gross margin was 36.3 percent, up from 34.8 percent in the year-ago quarter. International sales accounted for 44 percent of the quarter’s revenue.

Apple sold 2.6 million Macintosh computers during the quarter, representing a four percent unit increase over the year-ago quarter. The Company sold 10.2 million iPods during the quarter, representing a seven percent unit decline from the year-ago quarter. Quarterly iPhones sold were 5.2 million, representing 626 percent unit growth over the year-ago quarter.

AAPL shares are up in after hours trading. Currently: 158.33 +6.82 (4.50%)

July 20th, 2009

Ahead of the tape: Apple Q309 earnings preview

Posted by Jason D. O'Grady @ 7:46 am

Categories: AAPL, Earnings, Finance

Tags: Apple Macintosh, Apple Inc., Earnings, iPhone 3GS Sale, Sales Strategy, Sales Force Management, Financial Accounting, Sales, Finance, Jason D. O'Grady

Apple plans to conduct a conference call to discuss financial results of its third fiscal quarter tomorrow,  Tuesday, 21 July 21 2009 at 2:00 p.m. PT, 5:00 p.m. ET. The conference call will be streamed via Quicktime (natch) from the company’s Investor Relations Web site.

CNet new has posted an excellent piece on what to expect from Apple’s quarterly progress report.

Analysts are expecting revenues for the quarter between $7.88 billion and $8.44 billion, and earnings per share between $1.02 and $1.31. Apple itself–which always gives guidance on the low side–is anticipating revenue between $7.7 billion and $7.9 billion and earnings per share between 95 cents and a dollar.

iPhone 3GS sales are expected to be excellent with over 1 million sold in the first weekend and AT&T reporting that launch day was the carrier’s single best sales day in history. Piper Jaffray expects that 5 million iPhones were sold in the quarter.

The real question is Mac sales. Piper Jaffray’s Gene Munster estimates that Apple sold 2.2 million Macs during the quarter benefiting from price cuts and the launch of the aluminum MacBook Pros. But IDC recently noted that U.S. Mac shipments dropped by over 12 percent this quarter while the entire PC industry was down only 3.1 percent worldwide.

There will be lots of questions about the economy and Steve Jobs’ health and the call should be enlightening. I wouldn’t be surprised if Steve Jobs appeared on the call himself, if for no other reason than to calm the nerves of jittery investors.

At press time AAPL is trading at 153.68 +1.93‎ (1.27%‎).

May 26th, 2009

Morgan Stanley turns bullish on AAPL; sets $180 target

Posted by Jason D. O'Grady @ 9:16 am

Categories: AAPL, Finance

Tags: Apple Inc., Morgan Stanley, Apple Stock, Investment, Finance, Jason D. O'Grady

If you’re still dreaming of grilled bratwurst and ribs (or gardening or the beach) after the long Memorial Day holiday weekend here in the United States, you may want to wake up and check your portfolio –- especially if you own shares of Apple Inc. (NASDAQ: AAPL).

Apple stock is on a tear this morning up almost $7 (~5.5%) to around $130 at the stroke of noon eastern time. While many would attribute the rise in AAPL shares to the fact that the market in general is up this morning, others will say that it’s the imminent announcement of the third-generation iPhone that’s pumping the stock.

Another reason for the rise in AAPL shares is a new report from Morgan Stanley analyst Kathryn Huberty increasing her rating on the stock to Overweight from Equal Weight, lifting her price target to $180, from $105.

Citing better long-term growth potential than the Street generally realizes, Huberty writes “iPhone is feeding earnings growth that the market is missing,” and “We believe Apple is emerging as the clear leader in the battle over the mobile Internet. We size this as an incremental 4 billion installed base opportunity for Apple, 4x the installed base of PCs and 10x the installed base of MP3 players.”

Huberty goes on to call Apple’s September 2009 quarter a “key inflection point” noting that an expected iPhone price cut…

…could drive 50%-100% incremental unit demand: a $50 price cut should drive 50% growth, she says, and a $100 cut, a 100% increase. She also says 15%-plus of the current installed base typically upgrades to a new generation phone.

More on the report is available from Barrons.

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April 22nd, 2009

Apple disses netbooks, again

Posted by Jason D. O'Grady @ 2:43 pm

Categories: AAPL, Earnings, Finance, Netbook

Tags: Apple Inc., Netbook, Netbooks, Nettops & MIDs, Hardware, Jason D. O'Grady

When asked about netbooks on today’s Q2 2009 earning conference call Apple’s chief operating officer Timothy D. Cook took a couple of pointed shots at the ultra-small notebooks, saying (paraphrased):

• I see cramped keyboards, terrible software, junky hardware, small screens, things I would not put the Mac brand on
• Not interested in them in the short term
• We do look at ths space and interested to see how our customers react to them
• The iPhone and iPod touch already do a lot of what a netbook does
• If we find a way to deliver an innovative product we’ll do that
• We have interesting ideas in the space
• It’s a stretch to call netbooks personal computers, they’re propping up PC manufacturer’s numbers

Does Apple just have its head in the sand or is it intentionally hiding the fact that it’s secretly developing a netbook?

Photo: Cult of Mac

April 22nd, 2009

Apple's Q209 earnings. Recession? What recession? (Updated)

Posted by Jason D. O'Grady @ 12:00 pm

Categories: AAPL, Earnings, Finance

Tags: Apple Inc., Financial Web Site Seeking Alpha, Financial Accounting, Finance, Jason D. O'Grady

Apple, Inc. (NASDAQ: AAPL) is holding its Q209 earnings conference call with analysts today, 22 April 2009 at 5pm ET, 2PM PT. The call is being streamed via QuickTime from Apple’s investor Web site.

Highlights of the results include:

• Revenue of $8.16 billion, compared to $7.51 billion in the year-ago quarter
• Net quarterly profit of $1.21 billion, or $1.33 per diluted share, compared to $1.05 billion, or $1.16
• Gross margin was 36.4 percent, up from 32.9 percent
• International sales accounted for 46 percent of the quarter’s revenue
• 2.22 million Macs sold during the quarter, a three percent unit decline
• 11.01 million iPods sold during the quarter, representing three percent unit growth
• 3.79 million iPhones sold, a 123 percent unit growth

A press release has all the details.

Update: WSJ has a live blog of the call that reads like a transcript.

April 16th, 2009

Should Apple takeover Sun?

Posted by David Morgenstern @ 11:21 pm

Categories: AAPL, Mac OS

Tags: Sun Microsystems Inc., Apple Inc., Tim Cook, Apple Mac OS, Apple Mac OS X, Sun Solaris, Operating Systems, Storage, Servers, Software

IBM’s fizzled purchase of Sun Microsystems is showing signs of being on-again, off-again, as reports say Sun is still waving a flag in Big Blue’s direction.  However, some Apple fans want Cupertino to buyout the enterprise technology maker.

As I mentioned in Takeover Fever: The Apple-Sun saga, written when IBM’s Sun bid was hot, Apple and Sun have a long history of merger discussions.  At various times, the pair were considered perfect fits. But no longer.

Reader Juan Madrigal laid out the talking points of a takeover in an email. He said that what Apple lacks, Sun has and vice-versa.

Sun is strong in the enterprise — their storage and server offerings power a lot of Fortune 500 companies. Sun’s has great technology and some of the best engineers. Apple can use them to solidify Mac OS X by merging the best from Solaris.

For example, Mac OS X has no built-in virtualization. Solaris has Zones and Containers; Linux has its VServer/Xen strategy, which they are building into the kernel; and Microsoft is working on its Hypervizor, while Apple seems to fiddling their thumbs.

Sun already has a solid support infrastructure that could really boost Apple’s lack of enterprise support and offerings.

Sun’s storage goes hand-in-hand with Apple’s creative products. Apple could really start penetrating more big time FX/production houses by integrating ZFS and Sun Storage with Final Cut Server, versus what they currently offer with Promise RAIDs (Promise doesn’t have the credibility or support that Sun offers for storage).

Sun’s open source involvement would be a big plus for Apple and would boost their image on the OSS side of things. MySQL is great to have — imagine if Apple brings in Filemaker and merges it with the MySQL team. They’ll be able to make more head way into the database market for sure.

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April 13th, 2009

Apple is recession proof

Posted by Jason D. O'Grady @ 7:08 am

Categories: AAPL, Finance

Tags: Jason D. O'Grady

Back in December 2008 I blogged about Apple being recession-proof based on comments to that effect by financial analyst Shaw Wu and Apple COO, Tim Cook. TUAW notes that a panel on CNBC’s Fast Money concurs, noting that AAPL shares have jumped 40% so far this year, outperforming the NASDAQ.

The chart below (courtesy of Google Finance) shows how AAPL (blue) compared to the NASDAQ (red) over the last three months.

As for the stock’s immediate future, the panel and Mr. Mark point to this summer’s concurrent release of iPhone OS 3.0 and a likely new iPhone model as a powerful stimulus. Finally, Mr. Mark notes that it isn’t often that an electronic gadget becomes more useful and valuable over time.

The numbers don’t lie folks. While no one’s completely immune to a slowing economy Apple has remained virtually recession-proof (so far).

Can they continue to buck the trend?

Tip: CNBC via TUAW

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