Interview with Bruno Ferrari of Exame magazine Brazil

My thanks to Bruno Ferrari of Exame magazine Brazil for asking the following questions. My answers were written two weeks ago on April 2nd.

Based on financial data of the first fiscal quarter, it is possible to confirm that 2012 will be the best year in Apple’s history?

Actually, it’s possible to confirm without looking at first quarter data. Every business line Apple has except the iPod is growing and is likely to keep growing during this year. That means that sales will increase over 2011, which was Apple’s biggest year. You can see historic sales growth data here:

 What are your predictions for the second fiscal quarter?

I published my predictions here.

The iPhone number seems to be higher than consensus. It’s aggressive but I’m basing my opinion on the launch of the iPhone 4S in China and the Chinese New Year and new carrier agreement there. Also the iPad will do quite well.

Do you think Apple will hold the iPhone 5 launch to September in order to open 2013 with an extraordinary result?

The next iPhone will launch between June and September. It might be earlier due to the 4S being the “wide end of the egg”. Think of the iPhone as an egg rolling down the hill. There is a sharp end and a wide end and the speed of rolling depends on which end is down.

Besides the iPhone 5, which products that Apple could announce in 2012 you think may help them to maintain this extraordinary growth?

I think the iPhone is becoming more predictable. What I’m more curious about is what they will do with the iPod. Apple takes its brands seriously. I am watching the iMac, MacBook and iPod for clues of a re-fresh or replacement as they have aged.

Do you think we will see the “iTv”? Do you think it could be “the next iPad” of technology market?

Apple TV is in waiting mode. It’s like an airplane circling, waiting to land. Something will happen but not sure when. Fundamentally, the opportunities are still there but the entertainment industry is very complex. The more complicated it is the more necessary for an entrant is to create a parallel version of it. That takes time.

The building blocks are all there however. See additional thoughts here.

If we analyze the growth of Apple in recent years, it is supported by the launch of new products, especially the iPhone and the iPad. Do you think Apple can lower your rate of growth in coming years since we don’t see in its roadmap new innovative products like a new smartphone or a new iPad?

New products created new growth but iterations of those products also created and will continue to create growth. Of all of Apple’s products only one product is not growing today, the iPod. And that is after 10 years in the market and with a “dominant” market share. In addition, Apple has a lot of room to expand internationally and into enterprise and professional sectors.

I do agree that 100% growth is hard to maintain without new products. I believe there might be a few products still waiting for launch. TV is one area (along with game-based entertainment). New user interfaces might be enabling new categories of products. Intelligent assistance and companionship are open problems that software can solve but which have not been productized.

When do you think we’ll stop to see Job’s legacy in Apple new products. And what then?

Jobs’ legacy is not in specific products but in how products are built. He also taught the importance of putting products first and markets second (this is, at its base, an artistic principle, not a commercial one). I think that legacy can last forever, if managed properly.

How do you analyze the dividends pay and the buyback made this month?

I wrote some thoughts about it here. I believe the impact will be mostly psychological for investors.

And finally, I was reading at Asymco some analysis of Apple’s share price. Do you think $600 is enough? Do you think in a 1 trillion dollars company in 2014 as some analysts are saying?

The share price depends on the psychology of people. I like to say that Apple is the same exact company today as the one that was priced at $78/share three years ago. When I look out the window of my office I see the same view year-to-year. When I look on my computer screen at Apple’s financials I also see the same view year-to-year. I don’t know how people can see Apple differently one year to the next. To me it’s like looking out the window and seeing mountains instead of the sea.

But this is how markets behave. I can’t say what the price will be. It may be $1000 or it may be zero. But the company will not change in either case. It won’t change because it does not need to change.

  • The egg-rolling-downhill analogy escapes me. Could you elaborate, please?

    • kankerot

      I suppose it means that the wide end of the egg is the IP4s and is moving fast towards a refresh rather than the a year ago where the IP4 was the thin edge and its pace towards refresh was not as much.

      So Time travels along the edge of the egg from the thin edge to the wide and we then we have the  Inception egg inside an egg which came before the chicken.

    • Kizedek

      I think a rolling egg doesn’t roll as evenly as a sphere. The flat end will be slower. When the egg is on its point, it’s going to roll faster.

      If Apple wants to boost sales, it should get a new pointy end. The 4S has been the pointy end long enough. Why hold off on a 5?

      The older models are the wide base, but the new pointy end always adds impetus and gets it rolling again.

    • fring

      Well with the egg poised on the sharp end, there is more potential for accelerated growth because the potential energy is increased by the larger proportion of the mass, inducing the momentum. The other way round, there is less momentum for accelerated growth.
      It’s why Apple does product refreshes spaced throughout the year and not all at once.

  • As always, excellent, well thought out commentary.

    I don’t see Apple getting into making TV sets while they can make devices that send content to other people’s flat panel displays. Why get into the TV market which as you say is a mess when you can become the “computer” for Sony/Samsung’s screen? So, I think AppleTV will grow in market and capability and then more in market and Apple’s Remote app running on iPad, iPhone, iPod Touch will grow as well, maybe into home control.

    What I don’t get is why the iPod touch, which is really a small iPad or a cell-less iPhone isn’t bolstering the iPod category and pushing it higher and higher. Could it be that Apple’s positioning of this product is killing at least some of its sales? They push game playing, they push listening to music but they don’t push “small iPad” or iPhone sans-phone company.

    I think the iPod touch could revive the entire iPod category and become one of the hottest products Apple sells, it’s a matter of how it’s positioned and priced relative to the iPad and iPhone.

    • Kizedek

      It is bolstering it, because iPod touch sales account for about half of all iPod sales. Therefore, the ASP is higher than ever.

  • dicklacara

    Here’s a question that I wonder about:

    When Apple develops the next product that defines a new category, or redefines an existing one,,,

    Who at Apple will instill the desire/need for this “new thing” in the customer?

    This is marketing in its purest form — and Steve was best at this.

    Steve could say: “We want you to have this, and here’s why” — and you “believed”,

    • Kizedek

      Right, I always liked hearing Steve’s passion about Apple products… I took it at face value that Apple genuinely and truely delighted in “making insanely great products”. But I thought that was just me — had a Mac since 1984 and wouldn’t use Windows if you paid me to!

      I don’t think it is necessary for Apple to worry too much about the marketing. Because I thought it was precisely that passion (Steve’s so-called RDF*) that people were cynical about. That many people thought Apple was “all about” the marketing. Apparently Apple competitors like MS have made people so cynical now about marketing in general, that they automatically assume it must be true of Apple, too, no matter who says it.

      In fact, people can now no longer use Steve’s passion as an excuse NOT to buy Apple products. Now that Apple is so big, it must be seen that it can’t just be all about the marketing… there must be some substance there somewhere! It has to be more than Apple fans that are buying the products. Actually, I think word of mouth and customer satisfaction ratings serve and will serve Apple perfectly well and adequately… because they are in fact, one of the few companies that actually does produce products with substance!

      *I think I remember that “RDF” was not originally a term of derision to be used by critics that cynically thought Steve was trying to convince us what “we should be buying or using” (with nothing to back it up, apparently). Rather, the RDF was about how he could convince those in his development teams that “yes, the seemingly ‘impossible’ IS POSSIBLE!” “We CAN make this idea a reality!” “Yes, we can do better!” “Yes, we can dig deeper and actually make something insanely great for our customers!”

    • Walter Milliken

      I doubt the majority of Apple customers ever saw the Steve Jobs product introductions, just those of us who follow the company very closely. So the relevant question may now be, “Who’s guiding the marketing effort now?” than depending on Steve Jobs’ personal appearances.

  • emilysong

    as a dominant in the mobile phone area , iphone actually is playing a great role in it.
    there is no doubt that the new product faces enormous pressure from us.