Apple Sitting on Excess Inventory?

Morgan Stanley notes this AM that the key bear case on Apple (NASDAQ:AAPL) shares is that iPod unit growth is slowing with no clear indication of new products to pick up the slack. While they don't disagree this would be a negative scenario for the stock, growing research and development expense indicates a product cycle is in the works. If history is any indicator, this is the wrong time to bet against AAPL.

Apple R&D (reported + capitalized) grew faster in the last three quarters than at any time in the company’s recent history. This line item has proven to be a clear indicator of future product cycles that drive fundamentals and stock performance. MSCO believes the last 9 months present a fourth cycle that is supportive of long-term fundamentals

Ultimately, future product cycles are key to stock performance and they view late Spring/Summer as the next potential timeframe for announcements.

Stock Implication: While macro concerns may prove an overhang in the near-term, investors should take advantage of pullbacks to build positions over the next three months - ahead of March quarter results and potential mid-year product announcements.

Notablecalls: Nice defense by MSCO's Kathryn Huberty. Yet, the news from Synaptics (SYNA) tells us Apple is sitting on excess inventory and that it likely told vendors to expect lower-than-normal ordering in the March quarter.

Yet the June quarter guidance coming from SYNA was OK. So, just a blip, likely because of iPod. But that should not come as a surprise.

I think SYNA is a bounce candidate here at $24, and I continue to be positive on AAPL.

Comments

[Tommo_UK]

Probably just a change in component suppliers; APple changes them frequently, and often uses more than one to supply the same part.

You can read nothing WRT Apple's inventory here.

They could even be gearing up for a model change, and thus cutting back on supplies for existing models.

More Roman priests examining sacrificial goats' entrails to try to read the future.

[HarMegiddo]

i know they thoroughly talked about this in the CC. go read it. actually some of their inventories were low because of excessive high demand.

[digivision]

It is very likely they are gearing up for the new iphone 3G and possibly some changes to the ipod touch
and I still don't see any tangible news regarding excess inventory only rumors

[TanToday]

>>>Morgan Stanley notes this AM that the key bear case on Apple (NASDAQ:AAPL) shares is that iPod unit growth is slowing with no clear indication of new products to pick up the slack. <<<

Morons.

They are seeing a slowdown in the iPod growth RATE/UNITS, whereas the DOLLAR VALUE PER UNIT SOLD increased by 18%. Showing that upgrades to more powerful and more expensive music players has begun.

Two...

They TOTALLY ignored the MASSIVE INCREASE of 50+% in the VERY EXPENSIVE and profitable desktop units.

So, we focus in on the slowing sales of $100 ipods and IGNORE the massive increase in $2,000 full featured units?

Some days I honestly believe that analysists could not figure their way out of a paper bag unless they ALL RAN in the same direction suddenly to puncture the sides and escape that way.

Sheesh.

You have SALES UP huge, you have VOLUME UP where it counts, and you have THREE NEW REVENUE streams, rental movies, the NEW MARKET the MacBook Air opens up, the ultraportable, and the revamped and improved Apple TV with DIRECT purchase from the net without even owning a computer, and what do they focus on?

The crumbs, YIKES, the crumb sales are slowing down, and they push off the table the main courses with MOST of the "calories."

And the end result?

The LEMMINGS all decide that DESPITE a rousing and encouraging INCREASE IN EVERYTHING THAT *COUNTS*.... they will exit now and chase FAILING BANKS as the best thing since sliced bacon.

NO WONDER year after year, 80% of them UNDERPERFORM the market averages.

[frs]

These analysts are MORONS !!!!!
"Morgan Stanley notes this AM that the key bear case on Apple (NASDAQ:AAPL) shares is that iPod unit growth is slowing" - SHEEESH!! - Don't they ever note that the revenue/iPOD is increasing because the consumer is buying higher-end, more expensive models?? That is a critical factor in the analysis - so why do these idiots just plain not notice reality?

And for God's sake - how can the sale of 22 MILLION iPODs in asingle quarter be construed as disappointing?

[Jeff Shek]

frs, that's not the point. Those sales are already accounted for in its current valuation.

[gofer]

Boy, the life of an analyst can be a tough one.
When they agree with you they say:

"Brilliant article"
"Truly insightful piece"
"A thoughtful and in depth analysis"
"Finally, a rational assessment backed by pinpoint data"

When they don't agree with you, they go:

"MORON!"
"YOU'RE AN IDIOT"
"WHERE'D YOU GO TO SCHOOL AT?"
"YOU'RE GAY"
"YOU'RE A PAGAN... AND UGLY TOO!!"
"YOU'RE STILL GAY!"
and the all popular "F%$%# S#*&% B@$%^#%DS"

...sometimes being a gofer ain't so bad.

[NickB]

No there aren't any new products oh wait yes there is. Iphone, Ipod touch, Apple TV and Macbook air. Also within 5-6 weeks the new Macbook Pro will come out I think they will sell very well this quarter. As I have stated before the iPhone is an iPod so you add total iPhone numbers to the iPod numbers and it looks very impressive.

[TanToday]

Oh, yeah....

Forgot to add... "F%$%# S#*&% B@$%^#%DS"

Which is deservedly earned for FAILING to note, that in the first 15 days of the year, Apple was the FIRST to introduce, include, and implement not ONE, but TWO entirely new INTEL chips, one into the totally ignored MacPRO

Mac Pro with our suggested configuration:

Two 2.8GHz Quad-Core Intel Xeon “Harpertown” processors
2GB memory (800MHz DDR2 fully-buffered DIMM ECC)
ATI Radeon HD 2600 XT graphics with 256MB memory
320GB Serial ATA 3Gb/s 7200-rpm hard drive1
16x double-layer SuperDrive

YAWN, sheesh, only the MOST POWERFUL PERSONAL computer on the planet....

Then the new MacBook Air with INTEL producing a completely renovated chip with a SIXTY PERCENT size reduction....

YAWN.

It WAS duly noted however, that Steve Jobs DID FAIL to walk on water at the presentation however, leading analysts to conclude that his Messianic Powers of innovation were less than the year before and his return to "merely mortal with just insanely innovative" was below expectations.

I only have one question, WHY do ANY of us listen to these "Bozo's-in-Wonder... ?

[yet anothersteve]

Count me in on the "why are we focusing on $100 ipods instead of $2000 computers?" And then add: "Why are we focusing on $79 ipods instead of $300 ipods".

Selling everyone on the planet a $29 throwaway device ins't nearly as lucrative as selling a whole lot of people a $300+ handheld wireless platform. Apple is turning the ipod into a computer. The important announcement isn't a new product... it's the SDK next month.

Meanwhile the company, largely through its mac business, is practically printing money.

This is a company whose earnings are growing north of 30%, who will make about $5.50 THIS year, who is building a subscription profit stream through the iphone business and who has $22/share in CASH. AAPL is NOT priced for perfection... it's cheap.

And a real inventory issue would show up on the balance sheet. Instead the balance sheet shows.... CASH.

[blah-blah]

Count me in on 'Here go a bunch of Apple morons jumping all over any negative news about Apple as being ridiculous because it could never happen'

[TanToday]

Negative news?

OK, give me ONE "negative news" item that will REDUCE INCOME or PROFIT.

I dare you, theres isn't any, none, nada, zip.

THE *ONLY* "news* here, is the ANALYSTS don't agree with each other, isn't it?

And WTF to analysts DO anyway, GUESS, and we have all seen recently just how ACCURATE they have been with the banks, mortgage companies, and general economic conditions.

Now if we can only instruct the Jihaadist suicide bombers that ANALYSTS are the enemeny instead of Israeli schoolchildren, the world just might be more rational. Every explosion would rid the world of a Jihaadist AND some soothsayers with shit for brains.

[mag]

""
Jeff Shek
02:46 PM
Fri Jan 25th
frs, that's not the point. Those sales are already accounted for in its current valuation.


What do you mean by 'current valuation'. By who? By god? who decides what the valuation is? So called investors, big guys, dumb money, call them whatever you want, just fear and panic, selling everything left and right, if you check the tape, the vast majority of trades are 1,2,3,5+ shares...this is not the little guy panicking

So called analysts are the parasites of this society, do not contribute anything creative. Just sit in their holes and wait for the conference calls so the next they they issue some stupid Am notes to their clients. What a fraud.

[TanToday]

Back in the good old days, they AT LEAST had the courage to call themselves what they really are, ORACLES AND SEERS.

And a good temple and some smoke and incense with a powerful array of impressive clothing, moans, groans and utterances AT LEAST made the "show" more impressive.

[NickB]

Aren't we all forgetting about the new Xserves can't wait to get my hands on that.

[JIM]

Buy!

[DonnyB]

I may be new at this but just using common sense. If Oppenheimer and Jobs knew ATT would report their activation numbers following the apple call why in the world would they so obviously misrepresent the number of iphones sold? It just doesnt make any sense that they would do that.

I dont pretend to know what is going on. But i think common sense would tell you that they wouldnt make such an obvious mis representation of sales.

[CrossProfit]

It is all about consumer confidence. See article "The Overconfident Consumer" (click on article beneath AAPL 2008 chart) here:
www.crossprofit.com/vi...

You can see the same article on Seeking Alpha, but read the comments regarding the change in title...here:
seekingalpha.com/artic...

Saul Sterman
CrossProfit

BTW, have you noticed the latest consumer confidence reports? When the figures start to swing the other way, it will be time to buy again. There is absolutely nothing wrong with AAPL as a company and sales going a little this way or that way do not justify a run to 200 or a fall back to 130.

Just read the article and you will have a clear picture how AAPL trades.

Good luck to all.

[vitaminc]

To all the Apple fans in the thread - it's not able the reported quarter but the guidance for the next quarter.

Apple did an amazing job last quarter, no doubts about that. But the forward guidance is a bit disappointing and all the fears of consumer spending slowing down contributed to the sharp decline of Apple share price.

[top_tier]

Forward guidance is ALWAYS conservative by Apple

[JIM]

I think that Publix sold somewhat fewer grapes last month, but I think they did better than expected with corn on the cob.

Who cares?

Let Apple run its business. The banks/hedges/investmen... houses obviously can't run theirs...