Elasticity of demand is a challenge for Android handset makers. There's little to differentiate competing products using the same operating system and common components. Market share is rarely gained without price and margin capitulation and inventory becomes antiquated quickly. All market share is not created equal and unit sales do not necessarily provide for satisfactory levels of profit.
The iPad mini is a clear winner with consumers this quarter and will have a material and positive impact on the quarter's overall results. I also expect a strong unit sales performance during this coming spring's education buying season.
Apple performed very well in the December quarter last fiscal year. Please remember the 14th week was added to the end of the quarter to align the fiscal quarters closer to calendar quarters. Ordinarily, Apple's fiscal quarters are 13 weeks long. Each year, because of calendar creep (365 is not wholly divisible by 7), the fiscal quarters move one day away from the calendar quarters. In leap years the impact is a two-day move away from calendar quarters. Every 5 or 6 years (based on the number of leap days in the multi-year period) an extra week is added to FQ1. That extra week encompasses the immediate post-Christmas shopping week. Most of that high volume shopping week will be included in the December quarter this fiscal year. Apple's fiscal quarters always end on a Saturday.
You make a valid point on the number of weeks the iPhone 4S was available for sale last year in the December quarter. But because the iPhone will represent 50% or more of Apple's revenue in the quarter, supply will heavily influence reported unit sales. Supplies of the iPhone 4S were constrained into the end of the quarter. Apple books sales to authorized carriers when ownership of the devices shipped is transferred to the carrier, not when the carrier sells the device to the consumer or end user.
The higher the unit shipments to carriers this quarter due to higher rates of production, the higher the reported unit sales in the quarter.
Please look to Apple's results in the June quarter of FY2011 for reference. In that quarter Apple kept iPhone production levels high into the first few weeks of the period. Last fiscal year the iPhone 4S delivered extraordinarily high margin, but peak demand ended in January. I expect the iPhone 5's new form factor to maintain global interest longer than the handset that preceded it.
In the September quarter conference call with analysts, management mentioned anticipation of the iPad mini adversely impacted iPad unit sales in the quarter. With a full complement of iPad products heading into the summer, I expect the strongest rates of revenue and earnings growth to occur in the final two quarters of the fiscal year. The extraordinarily high gross margin delivered by the iPhone 4S last year will reduce the rates of earnings growth in the December and March quarters this fiscal year.
The demand backlog for the iPhone 4S coming out of the December quarter was filled in January. However, supplies remained constrained in the Asia-Pacific region, particularly on China's mainland, into the Lunar New Year gift buying season. China Telecom was not added as a carrier until March.
Commencing shipments to the two authorized carriers on the mainland as early as this quarter will assist in boosting unit sales growth rates in both the December and March quarters. The Lunar New Year celebrations begin in February. This provides additional time to adequately address demand for product in the Asia-Pacific region.
That's a very good point. Apple's growth is driven primarily by the iPad and iPhone lines. The iPad has been available in the market for less than three years and the iPhone has been in the market less than six years.
There are large economic regions including India, Brazil and Russia that remain virtually untapped for product sales. Much of Apple's growth over the past three years has been fueled by geographic expansion and there are plenty of opportunities for continued geographic expansion over the next few years.
I expect solid but not spectacular earnings growth in the December quarter. Apple's ability to ramp production to meet increasing demand is the most important issue to be addressed in the quarter. Apple ended the December quarter last year with constrained supplies of the iPhone 4S. Consequently, the company lost January unit sales opportunities in the Asia-Pacific region. Apple is apparently ramping production to provide for big unit shipments into the Asia-Pacific region this quarter. The higher the unit shipments, the higher the gross margin in the quarter and the greater the unit sales growth for the iPhone device line in the October through March six-month period.
I've cautioned for weeks historical AAPL trading patterns in and around earnings may change dramatically. My view is the best approach is to follow the company's fundamentals, the well-established price/earnings valuation range and provide sufficient time to achieve a desired outcome while withstanding periodic share price volatility.
Apple's highest rates of year-over-year earnings growth this fiscal year will occur in the latter half of the period.
Price and margin capitulation to gain or sustain market share is a clear sign an enterprise's (or industry's) pace of production innovation is no longer satisfying the needs and demands of users.
This is why the Android v. iOS comparisons are invalid and lead to gross misunderstandings about Apple's primary product markets. The iPhone 4, in its 3rd year of release, still commands a high subsidy from carriers. Conversely, Samsung is spending heavily on advertising and price promotions to clear inventory of smartphone handsets in the current quarter.
Android is an amalgamation of handset device makers using a common series of OS releases because the cost of the OS is considered minimal, not because the OS offers a superior experience for users.
Microsoft is stepping in as a hardware device maker because lack of device margin and global price competition are driving both HP and Dell from the consumer PC market. Microsoft will spend billions convincing consumers to purchase a Surface tablet while the global Windows PC market continues to economically implode.
Last Friday I was quite surprised by the size of the crowd hovering around the iPad display at my local Best Buy. The iPad mini is emerging as a real winner with consumers this holiday season.
Apple's highest rates of year-over-year earnings growth this fiscal year will occur in the June and September quarters. I expect the shares to retrace to the all-time high over the next 60 days and for the December quarter results to confirm Apple's ability to sustain attractive rates of revenue growth over the next few quarters.
I expect more retail stores to open on China's mainland over the next twelve months and for Apple to develop sales infrastructure in currently untapped markets to sustain the company's geographic expansion.
In my view the iPad with Retina display is the ideal device for mobile content consumption. I use a variety of apps that synch content and service across iOS devices and consider my iPhone a "pocket iPad" for project management and personal productivity. I intend to purchase an iPad mini in the spring as a complement to the iPad and iPhone I currently deploy. Remaining within the Apple product eco-system allows me to leverage my investment in apps and productivity solutions across devices without additional cost.
I do need a smartphone that fits neatly and conveniently in a pocket and can be held and used with one hand. My old iPhones have been redeployed for use as digital music players for the car and for other uses around the house. They will remain in active use for quite some time.
Apple will approach 50% domestic smartphone market share this quarter and the company is much better positioned this fiscal year to meet iPhone demand in the Asia-Pacific region ahead of the regional Lunar New Year celebrations.
Android device makers compete more with one another than any of the Android handset makers compete directly with Apple. Samsung invests billions in marketing and promotion and took advantage of the final four months of Apple's 26-month cycle on the iPhone 4 series form factor to push product. Samsung's earnings performance in CQ4 will be much different than the company's earnings performance in CQ3.
Apple's biggest competitors are time and manufacturing capacity. Samsung doesn't make the list.
Why Apple Will Beat The Street [View article]
Elasticity of demand is a challenge for Android handset makers. There's little to differentiate competing products using the same operating system and common components. Market share is rarely gained without price and margin capitulation and inventory becomes antiquated quickly. All market share is not created equal and unit sales do not necessarily provide for satisfactory levels of profit.
Why Apple Will Beat The Street [View article]
In addition to strong unit sales, the iPad mini will deliver attractive gross margin. Gross margin will rise as production scales higher.
Why Apple Will Beat The Street [View article]
The iPad mini is a clear winner with consumers this quarter and will have a material and positive impact on the quarter's overall results. I also expect a strong unit sales performance during this coming spring's education buying season.
Why Apple Will Beat The Street [View article]
Apple performed very well in the December quarter last fiscal year. Please remember the 14th week was added to the end of the quarter to align the fiscal quarters closer to calendar quarters. Ordinarily, Apple's fiscal quarters are 13 weeks long. Each year, because of calendar creep (365 is not wholly divisible by 7), the fiscal quarters move one day away from the calendar quarters. In leap years the impact is a two-day move away from calendar quarters. Every 5 or 6 years (based on the number of leap days in the multi-year period) an extra week is added to FQ1. That extra week encompasses the immediate post-Christmas shopping week. Most of that high volume shopping week will be included in the December quarter this fiscal year. Apple's fiscal quarters always end on a Saturday.
You make a valid point on the number of weeks the iPhone 4S was available for sale last year in the December quarter. But because the iPhone will represent 50% or more of Apple's revenue in the quarter, supply will heavily influence reported unit sales. Supplies of the iPhone 4S were constrained into the end of the quarter. Apple books sales to authorized carriers when ownership of the devices shipped is transferred to the carrier, not when the carrier sells the device to the consumer or end user.
The higher the unit shipments to carriers this quarter due to higher rates of production, the higher the reported unit sales in the quarter.
Why Apple Will Beat The Street [View article]
Please look to Apple's results in the June quarter of FY2011 for reference. In that quarter Apple kept iPhone production levels high into the first few weeks of the period. Last fiscal year the iPhone 4S delivered extraordinarily high margin, but peak demand ended in January. I expect the iPhone 5's new form factor to maintain global interest longer than the handset that preceded it.
In the September quarter conference call with analysts, management mentioned anticipation of the iPad mini adversely impacted iPad unit sales in the quarter. With a full complement of iPad products heading into the summer, I expect the strongest rates of revenue and earnings growth to occur in the final two quarters of the fiscal year. The extraordinarily high gross margin delivered by the iPhone 4S last year will reduce the rates of earnings growth in the December and March quarters this fiscal year.
Why Apple Will Beat The Street [View article]
The demand backlog for the iPhone 4S coming out of the December quarter was filled in January. However, supplies remained constrained in the Asia-Pacific region, particularly on China's mainland, into the Lunar New Year gift buying season. China Telecom was not added as a carrier until March.
Commencing shipments to the two authorized carriers on the mainland as early as this quarter will assist in boosting unit sales growth rates in both the December and March quarters. The Lunar New Year celebrations begin in February. This provides additional time to adequately address demand for product in the Asia-Pacific region.
Why Apple Will Beat The Street [View article]
That's a very good point. Apple's growth is driven primarily by the iPad and iPhone lines. The iPad has been available in the market for less than three years and the iPhone has been in the market less than six years.
There are large economic regions including India, Brazil and Russia that remain virtually untapped for product sales. Much of Apple's growth over the past three years has been fueled by geographic expansion and there are plenty of opportunities for continued geographic expansion over the next few years.
Why Apple Will Beat The Street [View article]
I expect solid but not spectacular earnings growth in the December quarter. Apple's ability to ramp production to meet increasing demand is the most important issue to be addressed in the quarter. Apple ended the December quarter last year with constrained supplies of the iPhone 4S. Consequently, the company lost January unit sales opportunities in the Asia-Pacific region. Apple is apparently ramping production to provide for big unit shipments into the Asia-Pacific region this quarter. The higher the unit shipments, the higher the gross margin in the quarter and the greater the unit sales growth for the iPhone device line in the October through March six-month period.
Why Apple Will Beat The Street [View article]
I've cautioned for weeks historical AAPL trading patterns in and around earnings may change dramatically. My view is the best approach is to follow the company's fundamentals, the well-established price/earnings valuation range and provide sufficient time to achieve a desired outcome while withstanding periodic share price volatility.
Apple's highest rates of year-over-year earnings growth this fiscal year will occur in the latter half of the period.
Why Apple Will Beat The Street [View article]
Price and margin capitulation to gain or sustain market share is a clear sign an enterprise's (or industry's) pace of production innovation is no longer satisfying the needs and demands of users.
This is why the Android v. iOS comparisons are invalid and lead to gross misunderstandings about Apple's primary product markets. The iPhone 4, in its 3rd year of release, still commands a high subsidy from carriers. Conversely, Samsung is spending heavily on advertising and price promotions to clear inventory of smartphone handsets in the current quarter.
Android is an amalgamation of handset device makers using a common series of OS releases because the cost of the OS is considered minimal, not because the OS offers a superior experience for users.
Microsoft is stepping in as a hardware device maker because lack of device margin and global price competition are driving both HP and Dell from the consumer PC market. Microsoft will spend billions convincing consumers to purchase a Surface tablet while the global Windows PC market continues to economically implode.
Why Apple Will Beat The Street [View article]
Last Friday I was quite surprised by the size of the crowd hovering around the iPad display at my local Best Buy. The iPad mini is emerging as a real winner with consumers this holiday season.
Why Apple Will Beat The Street [View article]
Apple's highest rates of year-over-year earnings growth this fiscal year will occur in the June and September quarters. I expect the shares to retrace to the all-time high over the next 60 days and for the December quarter results to confirm Apple's ability to sustain attractive rates of revenue growth over the next few quarters.
I expect more retail stores to open on China's mainland over the next twelve months and for Apple to develop sales infrastructure in currently untapped markets to sustain the company's geographic expansion.
Why Apple Will Beat The Street [View article]
In my view the iPad with Retina display is the ideal device for mobile content consumption. I use a variety of apps that synch content and service across iOS devices and consider my iPhone a "pocket iPad" for project management and personal productivity. I intend to purchase an iPad mini in the spring as a complement to the iPad and iPhone I currently deploy. Remaining within the Apple product eco-system allows me to leverage my investment in apps and productivity solutions across devices without additional cost.
I do need a smartphone that fits neatly and conveniently in a pocket and can be held and used with one hand. My old iPhones have been redeployed for use as digital music players for the car and for other uses around the house. They will remain in active use for quite some time.
Why Apple Will Beat The Street [View article]
Apple will approach 50% domestic smartphone market share this quarter and the company is much better positioned this fiscal year to meet iPhone demand in the Asia-Pacific region ahead of the regional Lunar New Year celebrations.
Why Apple Will Beat The Street [View article]
Android device makers compete more with one another than any of the Android handset makers compete directly with Apple. Samsung invests billions in marketing and promotion and took advantage of the final four months of Apple's 26-month cycle on the iPhone 4 series form factor to push product. Samsung's earnings performance in CQ4 will be much different than the company's earnings performance in CQ3.
Apple's biggest competitors are time and manufacturing capacity. Samsung doesn't make the list.