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Apple's 3Q FY13 Preview (Padcast)

Anders Brownworth and I got together on a Perspective airshow and recorded our conversation about Apple’s performance this quarter. We packaged it as a downloadable Padcast which you can listen to while looking at the motion graphics. After listening you can peruse the graphs and estimates at your leisure.

Requires an iPad of relatively recent vintage, the Perspective App and $19.99.

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  • andrewmiller

    OK I’ll bite: what makes you think this is worth $20?

    • Austin

      I’m curious about this as well.

      I have to admit I was a little taken aback by the price.

      • andrewmiller

        I mean, I assume it’s way cheap if you think of it as an analyst report and not as a consumer entertainment product.

      • Sacto_Joe

        Exactly. Horace is projecting revenue will exceed Apple’s highest revenue projection and earnings will be within a whisker of matching Apple’s highest earnings projection (see 2.0 http://tech.fortune.cnn.com/2013/07/22/apple-earnings-smackdown-q3-2013/ ). Presumably that Padcast helps one understand why.

      • Chaka10

        Horace largely seems to be reverse engineering the results that would give a repeat of last quarter, i.e., a revenue beat of $700 mm (vs $600 mm last time) and top-end of the gross margin guidance (this time, not having the warranty expense hit). Part of that reverse engineering would show low single digit iPhone and IPad growth on a revenue basis.

        If that’s indeed what we get, I sure hope it’s already baked into the stock price (this time without the benefit of a new dividend hike and share buyback plan being announced at the same time as the results…). Personally, I would like to see a more substantial beat than forecast by Horace, including some early indication of resumed iPhone growth (unit and revenue).

      • Tatil_S

        Horace highlighted Chaka’s comment on his Twitter feed for expecting far more iPhone sales compared to consensus, yet he is staying more or less within that same range.

      • Chaka10

        In fairness, I don’t think Horace intends this as much a forecast as helping readers understand and work through the implied components of Apple’s guidance. As he tweeted (though he’s being too modest about the value of his work): “Not sure there’s any value in my estimates. I am simply copy/pasting what Apple gives us.”

      • Tatil_S

        I think he was more willing to diverge from Apple’s forecasts in the past, but now that Apple’s guidance is supposedly more accurate, he might be trying to find a combination of sales numbers for product categories that would add up to such a total. If iPhone numbers are well above 30 million, something else has to come down to make up for the difference. Drop in iPad sales?

      • Tatil_S

        Actual results: substantially more iPhones (good job Chaka10), but even fewer iPads than Horace’s estimate, with a little less overall revenue and profit overall.

      • Farshad Nayeri

        @andrewmiller You seemed to have answered your original question.

        Different content has different price at different times.

        One can argue that ‘entertainment/edutainment product’ made out of an ‘analyst report’ should even be valued more. Try gaining an ‘understanding’ by reading a 10-K or listening to the earnings call.

        My guess is that we will continue to see much analysis on the blog. Padcasts for the Earnings mostly describe the story behind the story, Horace’s thinking as it applies to the numbers.

    • gbonzo

      He did not say it is worth $20.

      I feel that Horace is tempted to monetize his work now since all his projections and methods are quickly falling apart. I mean he was completely hyperbolic one year ago and actually projected 110 million iOS devices for Q4 2012 and God knows how many units for 2013 until reality crushed those estimates. And now (now!) he sets this kind of price for his padcasts.

      This is just my opinion, everyone is free to disagree. I understand that Horace is allowed to price his work as he wishes and that everyone is free to choose whether to pay or not.

      • hmm

        I don’t really understand your line of reasoning here. Why would someone feel more tempted to “monetize” their work on what you feel is a decline in quality?

        I think it’s sad if the most you get out of this blog is a few predicted numbers.

      • gbonzo

        “most you get out of this blog is a few predicted numbers.”

        I don’t know where you got that from. Earlier I felt this blog to be very useful and many of the writings to be brilliant.

      • hmm

        Earlier than what? If you feel that the general quality of articles have declines, and not just the predictions (small fraction) then why not say so?

      • gbonzo

        I thought I just did. I’m sorry, english is not my native language. Should I have used the word “Previously” instead of “Earlier” for this phrase to be understandable: “Earlier I felt this blog to be very useful and many of the writings to be brilliant.”

      • Chaka10

        I’ve seen several critical posts about Horace’s work on this quarter including his decision to seek compensation to access his work. This piece is generally addressed to all who might feel that way (and presume to share their complaints, rather than keeping it to themselves).

        Horace has provided a valuable service to all his readers, for many years — valuable not just in terms of his own analysis, but also in his ability to attract a very high caliber of readership who enjoy and seek to engage in debate and discussion on Asymco. I don’t know if you agree with my recently posted analysis, but I can tell you affirmatively that it wasn’t happenstance that I chose to post on Horace’s blog. Horace’s analysis is always thoughtful and data driven, and he doesn’t engage in hyperbole. He is scrupulous about attribution, and he is magnanimous (yes, a big word, but deserved) about contrary views. No, I don’t always agree with him, but that’s not the point. As far as I can tell, he has done this work (yes, that’s what it is — professional work) mostly free to his readers, who aren’t even much burdened by advertising.

        So, I have no problem if Horace seeks to charge whatever he wants for any particular piece (or even all) of his work. You and every other reader, of course, are free to choose not to pay. Beyond that, if you disagree with any of Horace’s forecasts or analysis, I suggest you share your contrary views and analysis. I, for one, would find that more constructive, and better aligned with the spirit of this excellent blog.

        I’m sorry for the somewhat stiff words, but I do believe it’s warranted (after just so many complaints).

      • gbonzo

        No, I am sorry. I can not share my contrary viewpoint if it costs me $20 to see Horace’s viewpoint, since I am not paying that.

        What comes to the one Horace’s viewpoint that I mentioned in my post, I have expressed my contrary viewpoint to that in the summer of 2012.

      • Chaka10

        So you’re basically unhappy he’s not giving it to you for free, and your reaction is to slam the quality of his work, the most recent of which you obviously haven’t seen (since you won’t pay for it). I hate to get personal, but that’s not right.

      • gbonzo

        No, no, no. Can you please stop it right there and read what I have said.

        Me: “I understand that Horace is allowed to price his work as he wishes”

        You: “I suggest you share your contrary views and analysis. I, for one, would find that more constructive”

        Me: “I can not”

      • Chaka10

        No, I quite get it. My point is, don’t pay for Horace’s work if you don’t want to, but I suggest you leave it at that. Horace doesn’t deserve a slap at the quality of his work on your way out, if you will…. If you have a separate complaint about the qualify of his work, then respond and contribute (I don’t specifically mean this quarterly report — I’m not dumb).

      • gbonzo

        I have contributed. I have expressed contrary opinions and suggested alternative methods to Horace.

        Calm down, don’t attack me for something I have not said or for something I have explicitly denied already. Read my posts, including the minor “disclaimers” at the end.

      • http://www.asymco.com Horace Dediu

        It’s sort of like Apple. The price is not for the product. The price for the poetry.

  • Neil

    I enjoy the articles on this site as well as the comments and would pay for access if Horace decided to become a commercial publisher and regularly published a designated number of articles every week. That’s not his current business model, which is fine. So I enjoy the sporadic articles for free instead.

    But this padcast’s price is odd since it has a very short shelf life. In less than a day, will it have any value? If so, the above advertising copy doesn’t explain why. I’d pay $20 for a padcast with valuable data or a few hours of entertainment. Wouldn’t it have made more sense to create a padcast analyzing the actual earnings?

    • claimchowder

      I guess it depends on what you do with the information. To a trader it might be worth much more than $20 because it is published before the actual earnings call and one *might think* one could use the padcast to predict the impact of the earnings call on share price.
      To an investor, analysis of the actual results would probably be preferable, but may not be valued as much due to the lack of an instant profit generation opportunity.

  • Joachim

    I can link to a dozen pay reports of similar less quality that for about $150.
    Do you work for free? Then why expect someone else to.

  • Chaka10

    As Horace says in reference to his slide on revenue growth by product line, “… [the product revenue growth trend lines] are very, very volatile. … It’s hard to really see from this data that there’s a pattern, its very volatile; you can’t just put in the numbers and say, well it was the same thing last quarter. There is very little correlation sequentially here.”

    I ran some additional charts, which I’ve attached.

    As we can see in the attached Chart 1, the sequential trend line is really not much more informative when presented on a unit (rather than revenue) basis, which is not surprising given stable ASPs. Chart 2 shows that the YOY trend line is also not really informative.

    • Chaka10

      (Continued from prior post]

      On the other hand, Charts 3 and 4 show that the trend line appears interesting and potentially informative when the comparison is done on against the 2 year prior quarter. This may seem obvious, given the relevance (increasing relevance) of replacement demand, but most quarterly comps that I’ve seen are limited to the sequential and YOY quarters.

      As I’ve previously said, my interest is not just for June quarter, but also for what it might say for implications of this model for future quarters. We will have that data soon.

    • gbonzo

      I have said it before to Horace, now I am saying it to you: you should try to model the effects of new iPhone introductions.

      Example modeling: Customers waiting for a new model decreases demand. That demand is shifted forward as sales in the quarter when a new model is available. Make corrections to the actual sales numbers based on this.

      There will be so much more information and so much less noise in your YoY growth figures chart after you make this fix. The data that you just dismissed as “not really informative” comes alive.

      • Chaka10

        Run the charts and share them. Demonstrate your point.

      • gbonzo

        I have done it, but I won’t share them here and now. However, it is not difficult. I basically revealed my method above.

        And I would probably get 1000 thumbs downs from the fanboys, because of the downward trend. Imagine that I already got one for my post above.

      • Chaka10

        I’m sorry, but if you won’t share it, it’s irrelevant to me. Thanks.

      • gbonzo

        That’s the difference between you and me. I am interested to know what is the growth rate of the iPhone business whereas you just said that you are not.

  • BGC

    The Joker: If you’re good at something, never do it for free.

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