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Tales From The Future. I picked my nickname because many advisors and investors claim they can predict the future of the (stock) markets and somehow pick the winners. I don't. I usually do not engage in short-term trading and myopic analysis (quarter by quarter, without looking at the big... More
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  • Understanding Apple Product Cycles Better 1 comment
    Jun 12, 2013 2:24 AM | about stocks: AAPL

    Each summer, Apple holds a developer conference in California: WWDC. Each summer, many people (both customers and investors) have unrealistically high expectations. Why? Probably because WWDC is the only scheduled conference left in the "Apple year" - since Apple no longer attends MacWorld or any other "physical" conferences and expos around the world. Each summer, there is disappointment Apple didn't bring world peace (or at least another magical iDevice) to WWDC and the stock sells off or at best stays put.

    This article aims to reset these unrealistic expectations and offer a short summary how Apple product cycles usually work and when to expect new products and services:

    1. Apple basically never shows/announces prototypes of actual devices, at best it gives some hints to the company's general direction*. For example, new features in the SDK on the software side which will later show up on the hardware side. (This year there was a hint towards higher 4K/retina resolutions coming to more Apple displays in the future).

    2. WWDC is not called WWIC (Worldwide Investors' Conference) for a reason. It's aimed at developers and mainly about software, the public keynote by the Apple CEO is just a small part. It's certainly not a conference intended to please shareholders or end users. Most new Apple products get announced at invite-only press events around the year. Just because no "iDevice XYZ" has been announced at WWDC in summer doesn't mean we have to wait for another 12 months. Apple calls these PR events just a few days in advance - whenever it's ready. This is much better for Apple because it can set its own timing - in earlier years it had to introduce new stuff at the bi-annual Macworld Expos in June/July and January. One other yearly event emerged in recent years: The event for iPhones and iPods/music devices is usually held in late summer or early autumn (likely in the September/October timeframe).

    3. Major product introductions don't come easy. Apple never worked in a different way and didn't lose its innovative edge. It puzzles me that (new? ) investors think Apple should/can introduce a new product line every few months or on a yearly basis. It never did so, also not under then-CEO Steve Jobs. Between new product lines, usually five or more years passed, for example: The original iPod launched in 2001, the first iPhone in 2007/2008. The iPad followed soon thereafter in 2010 because it could obviously borrow a lot of technology and software from the previous iPod touch/iPhone iterations. Using this timeframe as a reference, a new product line could show up in 2014/2015. For example, Bloomberg thinks Apple is hard at work on wearable devices.

    4. Apple is often about reduction and simplicity, also in the number of SKUs offered. Does anyone think Apple is technically not capable of producing a bigger iPhone screen or its own TV? Apple could offer all these devices in theory, it has enough engineers and 100+ billion in the bank. But I doubt these devices would end up pleasing Apple customers and be up to the standard people came to expect from an Apple device.

    Extending the product line for its own sake could HURT Apple a lot in the long term. As then-CEO Steve Jobs once famously said.

    "People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I'm actually as proud of the things we haven't done as the things I have done. Innovation is saying no to 1,000 things." (Apple Worldwide Developers' Conference, 1997)

    Now have a look at the introduction videos / ads from this year's WWDC:

    We can see that mantra - or at least the vision - still holds true for the current executive team over a decade later. In five words: Do not ship crappy products. (By the way, a goal Apple didn't achieve with Internet services in the past and is now working hard to correct.)

    5. Because of the law of large numbers there is no way Apple could and can (continue to) grow like a start-up company as it did in the past decade thanks to the iPod, iPhone and iPad:

    Only another new product line with big market potential, a double-digit billion size market in Apple's case, could probably lift the stock back to the all-time highs once again - but Apple is in no hurry: Tablets are doing great - the tablet market could be larger than the entire PC market by 2015 **. Together with the (rumored) cheaper iPhone line tablets can carry AAPL revenues for another two to three years from today.

    Summary: Enjoy the dividends and revise down the unrealistic AAPL (1000 or more USD/share, as some analysts predicted) expectations. AAPL is probably range bound around 350-550 USD before new product lines arrive.

    As for what to expect from Apple's new product lines, please see my earlier articles (new Apple products for the living room and wearable computing).


    * The new (black) MacPro was one exception in 2013, but that machine is for professionals in need of a road map for 2014 and beyond - and a very small pie of Apple's total revenue stream. There is little to no cannibalization fear with the MacPro product line, it' s not a consumer product.

    ** Tablet market vs PC market in 2015:,2817,2419532,00.asp

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  • Tales From The Future
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    Author’s reply » Concerning the next big introduction on Apple's product cycle - since we all like to make predictions:


    I think the next market for Apple is Wearable Computing (in addition to or rather instead of TV/living room innovations).


    Apple is poised to take over the Wearables market thanks to its brand halo and fashion appeal - while probably relegating GOOG glass to a techie niche.


    Think of "Wearables" as the iPod line for the next decade: 2015- 2025. I see a first product coming within 2-3 years from Apple.


    More details on this in my earlier Instablog posts under "iWatch".
    12 Jun 2013, 02:41 AM Reply Like
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