Turley Muller

Apple: Weaker Dollar Will Benefit Revenue Growth and Margins

Thank you Sir, much appreciated


On Nov 03 12:57 PM Julian Ivan-Alexander wrote:

> Turley Muller .. as usuall leading the way most analysts fear to
> tread: towards insightful, well-informed, big-picture lateral-thinking
> analysis.
>
> Is it any wonder Wall Street always gets Apple wrong and the independents
> get it right?
>
> Nice piece Turley.

Apple: Weaker Dollar Will Benefit Revenue Growth and Margins

How many Windows Mobile phones are being sold these days???


On Nov 03 02:31 PM Shaftsinker wrote:

> In the event of a continuing decline of the US dollar, the edge provided
> to other computer manufacturers and Microsoft will significantly
> outperform Apple.
>
> The increased strength of the Euro and Yen relative to the US dollar
> will pale in comparison to the strength of the currencies of emerging
> economies, where Apple's presence is negligible and PCs dominate.
>
>
> My point is a declining dollar will merely help Apple's competitors
> bridge the gap. While Apple may still lead the pack for other reasons,
> it will lag its competitors in the edge provided by a sinking USD.

Apple: Weaker Dollar Will Benefit Revenue Growth and Margins

Exactly... You totally get it.... Apple doesn't compete on price, It's highly differentiated. It's the fact that currency translation will lead to earnings surprises, or if Apple cuts prices it will stimulate an replacement cycle among current users as well as enticing those pondering jumping the fence.


On Nov 03 02:41 PM thotdoc wrote:

> I believe that Apple does not really compete with other PC makers;
> Apple provides a certain feel good to owners of its products. Everyone
> else sell machines that do things.
>
> If that is correct, and I think it is, comparing Apple to other machinery
> makers is not really a comparison that will lead you to a good decision.
>

Apple: Weaker Dollar Will Benefit Revenue Growth and Margins

Hello!
That's not the point! the point is that ASPs and GM will rise due to currency translation. Not competition. As other astute readers have opined, Apple doesn't compete with other PC firms on price because it offers a differentiated offering.


On Nov 03 02:31 PM Shaftsinker wrote:

> In the event of a continuing decline of the US dollar, the edge provided
> to other computer manufacturers and Microsoft will significantly
> outperform Apple.
>
> The increased strength of the Euro and Yen relative to the US dollar
> will pale in comparison to the strength of the currencies of emerging
> economies, where Apple's presence is negligible and PCs dominate.
>
>
> My point is a declining dollar will merely help Apple's competitors
> bridge the gap. While Apple may still lead the pack for other reasons,
> it will lag its competitors in the edge provided by a sinking USD.

Palm Has a PREcarious Channel Issue

Sell-in is what is counted as sold and recognized in revenue. Sell-through doesn't have any accounting implications in terms of revenue recognition. Certainly it plays a role in what the next quarter's sales or (sell-in) will be.

The accounting rule you are referring to about the six months doesn't apply to Pre, it's for specified elements not yet delivered, but will in six months and it's value is known. An example would be- buying a computer that includes new OS for free when in comes in two months. If management knows that it will sell it for $50 to others, then the revenue from the computer can be recognized, and just the $50 is deferred until delivered. if VSOE can't be established, all of the revenue has to be deferred.

The Pre accounting is totally different. PALM may time to time provide free software upgrades. They are not specified, so the revenue is amortized on straight-line basis for 24 months.

It doesn't matter how long a phone sits in inventory with respect to it's economic life. The economic life is based on concept of how long the device still retains value before it becomes obsolete. New software upgrades might not be supported for older phones, so the rationale is that after 24 months that the device is introduced, OS upgrades will still likely run on that device, but in 3 years? or longer ? no guarantee. OS upgrades are developed around the most recent devices. Like there are features in iPhone OS 3 that only work on 3Gs and some that won't work on the 2G iPhone (MMS) and it's possible that OS 4 won't run at all on 2G iPhones. as iPhone hardware becomes more advanced resulting in more powerful software not capable of running on old hardware.

Apple does the same thing, when iPhones are sold to carriers or resellers, it's a sale and it starts amortizing the revenue even if it's not sold to an end-user for months. There are probably iPhones in Russian carrier inventory that could be 6-12 months old.

I didn't realize, and I would agree many didn't know that Palm's sell-through included sales to non-carrier resellers. In Apple's case, since they distribute direct to Best Buy and Wal-Mart, as wells as carriers, there isn't a 2nd tier distributor, so Apple's sell-through is units sold + change in channel inventory.

I estimated that activations were 600K-650K, not I see why that's too high., Analysts didn't underestimate sales (in the sense of activations), if they based them on in-store activations at Sprint. I knew end-user demand had to be lower. Great find, thanks for pointing this out, terrific analysis.

New XM SkyDock Offers Sirius Investors Nice Profit Margin

That's 50 million devices, not 40 million---- 30M iPhones + 20M iPod touches

Apple: Exploding iPhone Profits

Stephan... Hell of job here, fantastic work. Seeking Alpha needs more articles like this as it's of tremendous value. Not surprised though, being that you are submariner which are the brightest in the armed forces. Thanks for sharing your work.

Apple: Exploding iPhone Profits

t0000-
Dividing the current DR by 4 to find next quarters DR recognition is slightly flawed.

Current DR comprises of revenue to be recognized over next four quarters, but each quarter the amount isn't equal. There is only one period of 3Q07 sales left to recognize, and 2 qtrs of 4Q07 and 3 of 1Q08 left as well.

So these amounts (sales from Q3,Q4 '07 ,Q1 '08) that are included in current DR will obviously not be recognized equally over the next 4 quarters.

I don't know if that makes sense. I didn't realize this phenomenon right off, and it really is only important when trying to ascertain the mix of iPhone revenue reported for the quarter. Take a look at this link.

spreadsheets.google.co...

According to my estimations, Apple recognized 1,474 in DR for Q3. So 223 was from current period sales. Your estimate of 50 from handset sales is about what I have. Leaving the balance to accessories etc. as you mentioned. 2,900 in Q3 handset sales (50 recognized) is 362 per quarter (2,900 / 8 qtrs) with 7 periods of 362 and the final being 312 (362 - 50)


On Sep 05 10:17 AM t0000 wrote:

> You need to back all the numbers
> out and start from scratch to find aapl's true iPhone sales revenue.
> When doing this the figure that apple reported of 1,698 is almost
> irrelevent in this procces.
>
> The way apple got to that figure was to divide current D/R by 4 =
> 5,467/4 = 1,367, that is the base number that apple would have reported
> if all iphone sales stopped 1 year ago. Now add 331 to 1,367 gets
> you 1,698 and what was reported. So apple added 331 to recognized
> revenue from Q3.......And only about 50 was from the actual iphone,
> the rest is from acc/carrier/other.
>

> By the way not trying to be malicious or anything just trying to
> help out and if anyone has any questions I would be happy to try
> and help. As I know appl's accounting is not cut and dry.

Apple: Exploding iPhone Profits

This ASP you are calculating (from the 3.094B adj revenue) includes accessories, carrier payments (remaining legacy iPhones and bounties).

t0000- explains it above- The $557 is a good ASP.

The actually ASP varies by country and by channel. Apple may get 600/700 sold through its stores, but only 540/640 when sold to Best Buy etc. So.... It gets real complicated trying to back into the mix using set ASPs. If every unit were sold at 500/600/700 price points, then that would be a good method.

On Sep 04 02:44 PM Federico wrote:

> I cmae ut with the same asps as you did for the previous quarters.
> I believe you are wrong abut the declining asps. The ASPs will pickup
> as more 3GS are sold. The 3GS ASPs are above US$600.
>
> anyway here is a stab at computing the mix of 3GS (16gb, 32gb) and
> the 3G (8gb) for the previous Q.
>
> Assuming a base price of US$500 (rounded price for the 3G), total
> revenus would have been 500 * 5208 = 2.604. But as you said the
> total revenue was 3094 million. Computing for the difference we
> have 490 million. 490 million is the amount of revenue the 3GS must
> have added to the mix. since the price of the 3GS are 600 and 700
> (16gb, 32 gb respectively rounded), I assume the mix was about equal,
> the ASP for the mix is 650. the difference then is made up of the
> difference in ASPs of the 3G and 3GS, which is 150.
>
> 490 million / 150 = 3.2 million units of 3GS. I propose that apple
> sold 3.2 million units of 3GS for the period June 19 to June 26 (end
> of quarter for apple).
>
> this scares the hell out of WS and their good friends MSFT, VZ and
> RIMM. they know that this momentum continues and in fact I am willing
> to bet their sales pace of over 3 million per week carried through
> the month of July. this is the reason that Credit Suisse is suggesting
> that folks buy calls to optimize their returns.
>
> In all, I think the analysts are holding back on their projections.
> Or maybe they are not. Maybe they have those weekly trading huddles.
> after all, don't they try to emulate the masters of the universe.

Sirius XM's Game Changer About to Rock

Most people "I know" who bought a new vehicle with sat radio and didn't renew or eventually cancelled. Myself included. I am not saying that people don't love it, there are die hard fans. For some, it's an awesome service that they love. But, that's not the majority. They majority of subs have canceled.

when you factor in that there have been over 30M gross subs, almost half have deactivated. More than half cancel after the trial, thus the sub growth is inflated since more than half don't convert. If it weren't for the trials/promotions and OEM support there would be very little growth.

I am not bashing the company, just giving my opinion and analysis. I think SIRI needs to try to extract more revenue from their heavy users, ones that love sat radio because they are obviously willing to pay a lot more because they perceive substantial value in SIRI offerings. The iPhone app and dock are good strategies to accomplish that.


On Aug 20 04:40 PM drevil6406 wrote:

> turley muller,
> I do not know who you work for...but you could not be more wrong.
> Define ....most people...Do you mean most people who have never heard
> the service? If so I agree....because they are clueless as to what
> it is. However, I can tell you from personal experience...that anyone
> who I know that has ever listened to SIRIUS XM either in my car or
> at my house...has become a sub,and I don't think you can make a comment
> like that when they have over 18,000,000 subscribers...that's not
> nobody!

Sirius XM's Game Changer About to Rock

I doubt this will help SIRI very much. Truth is, most people don't care/don't like sat radio. It's just not for them. SIRI has only been able to gain subs by bundling radios/services into new car sales. But, almost all those subs cancel service when the first year expires. There are more subs deactivating than are signing-up. If SIRI didn't bundle its service with auto manufacturers and rental agencies, then there would be hardly any sub growth. And, all those subs end up leaving anyway. SIRI is a niche product/service that only appeals to a small portion of consumers. Integrating with the iPhone makes the service better for regular SIRI listeners, but won't help recruit new users. It may help current users renew, instead of letting the service expire, but it just means they have to spend more money for the add-ons. Almost everyone I know has, or rather had SIRI, and didn't care for it at all. Didn't meet expectations. I hear complaints about commercials when folks were under the impression there were none. The music content is poor, it's all the songs you never heard of from the artists everyone has heard of.... and those same songs play over and over, AND on multiple stations.

One or two like it for Stern or other niche content, but the other 90% feel it sucks for the money. iPhone users I know use Pandora and other streaming apps. Sat radio is novelty, not for the masses, and internet radio feeds will supplant potential sat radio subscriptions

Apple's Current Valuation Is Still Reasonable

Just to clarify-

Mac sales were strong in 2007, when the economy was still growing. In 2008-09, Mac growth has declined to the single-digits, as the economy contracted. My point is that, when the economy begins to grow again Mac sales should rebound. Since I used trailing earnings for my valuation metrics, those figures are on a depressed level, thus future earnings should be higher.

I doubt Apple will do a buyback anytime soon, but a cash build doesn't necessarily entail a mature company. Apple doesn't need much cash to grow since it has little physical assets such as PPE and inventory.

I think the market is assuming that Apple is a mature company, due to slowdown in Macs, iPods, the cash build, etc. Just as you pointed out. I believe that is priced-in to the stock, there fore there is upside potential in AAPL is growth is much better than expectations. And based on past successes and ability to innovate, I believe there risks are balanced in AAPL's favor


On Aug 12 09:57 AM Techtrader10 wrote:

> Mr. Muller uses numbers from 2007 to make his argument for increasing
> sales of MAC computer future earnings, everyone was doing well in
> 2007. He also talks about Apple as a growth company, however discusses
> the increasing un-used cash build up, the sign of a maturing company.
> He also discusses stock buy back, another sign of a maturing company.
> You can't have it both ways growth company multiple with a maturing
> company. It is doubtful Apple will buy back stock, and also doubtful
> they will admit they are transforming from growth to maturing company
> by declaring a dividend. Disclosure: Day Trader, long as of this
> writing.

Apple Gauge Scores for June 2009 Quarter

@ Old developer.

I would hope you would know what you are talking about before claiming that the author is wrong, especially given his experience and reputation.

BECAUSE: Carvin is correct. If you look on the balance sheet under "Current Assets" you will see that "Cash and SHORT TERM investments" is $24B.

The $31B figure includes long term marketable securities of $7B which is not a current asset, therefore is not included in cash management or working capital ratios, such as the current ratio.

LT securities Apple holds are perceived to be quite liquid and very low risk, but have maturities greater that 1 year, thus for accounting purposes they are classified different even though they are considered "cash & equivalents" for valuation purposes

On Jul 22 01:30 PM Old Developer wrote:

> "Apple's strong Balance Sheet features zero debt and $24 billion
> in Cash and Short-term Investments"
>
> I hope the rest of your data is more accurate than this statement.
> Apple has $31.1 billion in cash and short-term investments. So don't
> you think that this alone puts all of your figures in question.
> Your cash management figure couldn't possibly be right if you calculated
> it using $24 billion. So how right could the rest of your figures
> be?

Looks Like We're Still a BlackBerry Nation

iPhone doesn't compete in all the same market segments that RIM does. RIM has much larger potential market, due to diverse line of models as well as being available at almost all carriers.

An interesting way to assess which firm is beating the competiton, one an segment the markets along an axis of product attributes that consumers base their purchase decisions. Possibilities are price, function, carrier (AT&T and willing to switch, non-ATT & unwilling), Only in segments where RIM and iPhone are among the models considered for purchase would give the best representation of which models are the winners.

Consumers who won't pay more that $99, or won't switch to AT&T, who choose RIM would be excluded from the market share, the theory being, is that Apple could introduce a 99 model at another carrier one day.

I think what is important when thinking about RIM, is the growth of the enterprise segment RIM has that market locked up, so mostly increased sales there will come from growth enterprise users, meaning new users, not competitors users. Certainly that market growth has slowed. The consumer market is the area up for grabs, and the primary source of growth for both firms.

Apple's Valuation: My Stance

Well, hold on now, Uncle Sam going to want have his share. That could be 40%. i think


On Apr 23 01:54 PM peter02l wrote:

> Do you include earnings from cash in your estimate? At 1% Apple's
> 30 billion could contribute 300 million to earnings in 2009.