Year: 2010

AT&T does not pay a higher price for iPhone exclusivity

In last year’s third calendar quarter earnings call (October 20, 2009) Tim Cook was asked:

“So when you go from exclusive to multiple, you don’t change the charge to the carrier?”

Cook answered: “Correct.”

In this year’s third calendar quarter earnings call (October 18, 2010) Tim Cook was asked again whether the future iPhone non-exclusive subsidy will affect the iPhone revenues and again Tim Cook repeated that it won’t.

Chris Whitmore – Deutsche Bank

And what is your experience then when you’ve gone non-exclusive from a subsidy and margin standpoint on the phone, have you had to give anything up in the past? Continue reading “AT&T does not pay a higher price for iPhone exclusivity”

Back to the PC

Apple’s “Back to the Mac” was a clever play on words. Everyone expected it to mean that the event was going to focus back on new Mac products.  As we had been so steeped in iDevice news the Mac was feeling neglected. It was time to take the discussion “back to the Mac.”

Instead Apple told us that the Mac and OSX were going to become more like Devices and iOS. iOS innovations were what’s going “back to the Mac”

So it wasn’t “back to talk about the Mac” it was “OSX went to iOS and iOS is going back to OSX.” The strategic upshot of it is that “the Mac is an extension of the device portfolio.” Heady stuff. We’ll need to chew on this for a while.

But some implications are easy to foresee. For example, the consequences for competitors. When Apple launched the iPhone, competitors followed suit, powering their phones with a variety of “open” operating systems. When Apple launched the iPad, competitors followed suit, powering their devices with a variety of “open” operating systems. These reactions to Apple’s initiatives by dozens of “open-wielding” competitors are all being touted as the inevitably winning strategies.

So, as we’ve observed all of Apple’s strategies being copied, I can’t wait to see the competitors follow its “back to the Mac” strategy:

  • It won’t be long before Dell takes UI and hardware design elements from the Streak “back to the PC.” Think of the magic that will happen when Android Froyo “hooks up” with Windows 7.  Both Android and Windows being “open”, if I squint hard enough I can just visualize the tweet from Andy Rubin of the command line to build a new Windows  8 with Android mojo. The Android Market selling Windows Apps. It will be beautiful.
  • Or perhaps we’ll soon see “back to the Blackberry” as RIM takes QNX interface elements back to their core business. Not so sure about the command line make statement there.
  • Or maybe Nokia will announce “back to Symbian” as they take gestures from the ultra-open MeeGo to do an evolution of their majestically open Symbian.

These initiative will surely be helped by the vast community of open developers surging to support the great open merged PC/tablet/device future.

As a clue to the sarcasm challenged: The power of Apple’s integrated approach across its product lines goes deeper than the user experience.

iPad vs. iPhone: why we got the iPad forecasts wrong

The iPad was announced to a loud chorus of disapproval and disdain. It’s easy to forget the overwhelming scorn and insult poured on the product for months before and after sales start. Analyst forecasts were comical. At this time it looks like all 12 month iPad unit forecasts will have missed by more than 100% (mine included).

As data on iPad performance was published for the first quarter’s sales, the mood swung from ridicule to ridiculous. Continue reading “iPad vs. iPhone: why we got the iPad forecasts wrong”

[Sponsor] Pi Cubed: Touch Your Equations

I would like to thank Sunset Lake Software for sponsoring Asymco over the past week. Unlike traditional calculators, Pi Cubed lets you construct, typeset, and instantly evaluate mathematical expressions using an interactive menu system.

The ability to compose complex equations visually and then evaluate them instantly makes the iPhone a superior scientific calculator that, with this app, takes the concept to a new level. You literally touch the equation to edit it and can enter values to evaluate it. The visual representation lets you instantly recognize errors in composition, unlike formulas encoded in textual representations. You can share it, use templates and re-use it. It even exports to PDF for use with other documents.

If you are a student of any discipline where math is used, this $9.99 app is a no brainer. If you are a professional engineer, scientist, or an analyst like myself, this is an app you can’t afford not to have.

Available at the App Store here.

Highly recommended.

60 percent of Apple's sales are from products that did not exist three years ago

This chart speaks for itself. Note the bottom two bands and the proportion of the total that they make up.

Also note the seasonality with the holiday spikes. This last quarter is not a holiday quarter. Now imagine what next quarter will look like on this chart. Continue reading “60 percent of Apple's sales are from products that did not exist three years ago”

Apple OPEX: Never have so many owed so much to so few

Apple sales are growing faster than its operating expenses. Although all eyes are on gross margin, the company continues to run a tight ship in fixed costs (costs which do not vary with the output).

In terms of R&D, spending has dropped to 2.4% of sales, a level seen only once since 2005. Sales, General and Administrative costs also dropped to 7.7% of sales, a new record low.

The total operating expenses as a percent of sales stands at 10.2%. The following chart shows the trend. Continue reading “Apple OPEX: Never have so many owed so much to so few”

Apple's cash quintupled in last four years and doubled in last two years.

During the last quarter the company added $5.2 billion to its cash, long- and short-term marketable securities accounts for a total of $51 billion. This amounts to about $53 per share vs. $49.43 per share in July (making the share price about $250 ex-cash).

I would caution again that when reading commentary about Apple’s cash that many observers exclude long-term securities from the “cash” total.

To see the difference in the total, this chart breaks out the three different accounts over time. Continue reading “Apple's cash quintupled in last four years and doubled in last two years.”

Apple's P/E drops below 20 (again), ex-cash P/E at 16.44

Following earnings growth of 68%, after hours trading of AAPL at $300/share shows a P/E of 19.8. The company added over $5 billion in cash for a total of $51 billion or $52.9/share.

Excluding cash from the price of $300 leads to an enterprise value of $249 and a trailing twelve months earnings of $15.15. The ex-cash P/E is therefore 16.44.

P/E/trailing Growth is 0.29.

My guess is that this is keeping AAPL cheaper than the S&P 500 on both P/E and P/E/G.

Which size really matters? Market Share vs Profit Share

One of the most hotly debated subjects in the mobile phone business is the importance of market share. It’s also a topic of lore in the PC industry. Briefly the two arguments are:

  • Market share matters more because it drives network effects which ultimately drive competition out of the market, creating the opportunity for monopoly rents.
  • Profit share matters more because profit is the only fuel that can drive innovation. Any macro downturn or shift in strategy can cause a company to cease investing in unprofitable projects.

The old disruptor’s adage: “Be hungry for profits and patient for growth” is challenged by the equally disruptive: “Grow share with lower prices in exchange for new revenue sources.”

There are many rich anecdotes to support each strategy, but how about some data? Continue reading “Which size really matters? Market Share vs Profit Share”