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Apple, Cirrus Logic rally after iPhone/iPad supplier reports strong sales

  • iPhone/iPad power management IC supplier Dialog Semi (DLGNF), which receives over 70% of its sales from Apple (AAPL +1.2%), has reported preliminary Q4 revenue of $352M (+31% Y/Y). That handily beats prior guidance of $310M, which itself was above a previous forecast of $270M-$295M. Shares rose 7.4% in Frankfurt.
  • Apple is trading higher following Dialog's announcement, as is Cirrus Logic (CRUS +2.8%), a chipmaker just as dependent on Apple as Dialog.
  • Dialog's numbers are overshadowing a downbeat note from Cleveland Research regarding early China Mobile (CHL -0.8%) iPhone demand. Cleveland says its checks point to disappointing China Mobile pre-registrations, and lead it to think the carrier will sell only 10M iPhones in 2014 (below peer estimates of 15M-30M).
  • Wedge Partners has also provided cautious commentary about China Mobile's iPhone pre-registrations. The world's biggest carrier begins selling the iPhone on Friday.
Comments (48)
  • scott trader
    , contributor
    Comments (4511) | Send Message
     
    But wait. Hold the presses.......Bloomberg reported this Monday morning , that Cleveland research China pre orders are having a small demand.... And Jason Whitmer head of Cleveland research is a grocery chain and pharmaceuticals analyst...looks like everyone is jumping on the hubris bandwagon...Cleveland research also sponsored some conferences with key speakers from google and amazon....coincidental...
    13 Jan, 02:16 PM Reply Like
  • rcpatrick5443
    , contributor
    Comments (678) | Send Message
     
    Given the substantial cost of the iPhone for customers in China, I'd be surprised if many people decided to order one without seeing and holding it and having its features demonstrated and explained. Who set the expectations that prompt Cleveland Research to call the pre-registrations disappointing? Let's wait and see how sales go before drawing conclusions.
    13 Jan, 02:18 PM Reply Like
  • Skaterdude
    , contributor
    Comments (499) | Send Message
     
    Totally agree with you. There are market and cultural differences that I think play heavily into this. It's folly to try to predict market performance in a new market like this based upon US market behavior.
    13 Jan, 02:31 PM Reply Like
  • Davidoff
    , contributor
    Comments (284) | Send Message
     
    I don't believe in cultural differences since iPhone became the most selling phone in Japan. No one could predict that in a country where national product are sacred. If Chinese buy all the Louis Vuitton, Hermes, Chanel, Todd's, ... goods they'll certainly spend a little bit more to get iPhones. Social status become the new religion in China.
    13 Jan, 03:21 PM Reply Like
  • Rjmontealegre
    , contributor
    Comments (133) | Send Message
     
    I understand that China Mobile has not even set the price level for the iPhones, so until that happens and they market it, which presumably will happen closer to 1/17, these reservation numbers do not mean much.

     

    From another article I understand that there may be some kind of price war between the three celular companies serving China, which, if true, could be significant.
    13 Jan, 04:06 PM Reply Like
  • gensearch2
    , contributor
    Comments (1379) | Send Message
     
    No one has ordered anything. China Mobile hasn't even set pricing. They've asked prospective customers to basically indicate interest, sic pre-register ... CHL will tell them later what it will cost.

     

    I find this non-priced product to come out on the 17th to be an "unusual" approach. The only plausible explanation is that CHL is holding out pricing so the other carriers don't undercut them before they're available for sale.
    13 Jan, 04:33 PM Reply Like
  • 2ng
    , contributor
    Comments (83) | Send Message
     
    It looks like apple's delay for the EC to the 27th could have to do with CHL having a chance to have preorders or sell from the 17th and then preannounce estimated numbers during the event
    14 Jan, 04:25 AM Reply Like
  • Chris Matuszewski
    , contributor
    Comments (2) | Send Message
     
    Might have something to do with CHL not setting a price for pre-sale orders? I read this in an article a few days ago.
    13 Jan, 02:25 PM Reply Like
  • apple_investor
    , contributor
    Comments (177) | Send Message
     
    How many people will pre-register for a product when nobody knows what it costs? Until China Mobile announces their subsidy program, orders will be light.
    13 Jan, 02:32 PM Reply Like
  • aardvark3
    , contributor
    Comments (335) | Send Message
     
    This is ridiculous. Betting on slow China iPhone sales? Are you kidding me?
    But this has been the spin for the last few quarters. A week or two before earnings a stream of AAPL negativity to beat the stock down. Any negative rumor, real or false is consumed as gospel. This will be the last quarter that this garbage is even minimally credible. AAPL is going up as fast as it came down.
    13 Jan, 02:32 PM Reply Like
  • tallgary
    , contributor
    Comments (3) | Send Message
     
    Agree. It seems that most people replied here were never been in China before and did not know many janitors, clerks, young kids are using Iphone now. The simple reason is the better connection and prestige (I was told by two Chinese girls in the airplane back to US). Money is not an issue. We may see an astonish CM orders on Friday.
    13 Jan, 05:49 PM Reply Like
  • FAT BANKER
    , contributor
    Comments (828) | Send Message
     
    RE. aardvark3. Comment 218

     

    "This is ridiculous. Betting on slow China iPhone sales? Are you kidding me?"

     

    Yes, agreed.
    Hope it knocks back Mr Manipulative, sorry I mean Mr Um at Wells Fargo and Mr Arrogant , sorry my mistake,I meant to say Mr M Blair.
    14 Jan, 08:58 AM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (366) | Send Message
     
    Hmmm... "checks" from a research firm I've never heard of, or 30% revenue growth from one of Apple's suppliers.

     

    If only I knew which piece of information was more valuable.
    13 Jan, 02:34 PM Reply Like
  • User66224
    , contributor
    Comments (192) | Send Message
     
    Stop asking rational questions. You'll upset the analysts.
    13 Jan, 02:51 PM Reply Like
  • Applocrat
    , contributor
    Comments (754) | Send Message
     
    So does anyone know what exactly they supply and who their other customers are? Let's see if we get some more rigorous data out of this!
    13 Jan, 02:53 PM Reply Like
  • Dennis Baker
    , contributor
    Comments (1075) | Send Message
     
    "Rally"? AAPL is up half a percent following a down week. Let me know when it's tickling then high it set 3 weeks ago and we can talk about 'rallying'.
    13 Jan, 02:55 PM Reply Like
  • Rjmontealegre
    , contributor
    Comments (133) | Send Message
     
    Let's do some math.

     

    1.- We know that Apple is producing 0.5 million iPhone 5S a day, if we assume that those levels on average were maintained by 75 of the 90 days of the quarter (with no production in the remaining 15 days to be conservative), we have 38 million iPhone 5S. Now, we know that China Mobile deal starts on 1/17, presumably because Apple needed to build up inventory, because before Xmas they sold every one of them. So we have 38 million iPhone 5S in the december quarter.

     

    If we assume that the iPhone 5C sold at a ratio of 3/10 the iPhone 5S we have 11 million 5C, and if we assume 60% of the C being the 4S we have 7 million 4S, for a total of 56 million iPhones sold in the quarter.

     

    That would be a 17.2 increase from the same quarter last year.

     

    2.- We know that this was the iPad quarter, so I assume that a 17% increase would be reasonable from the low levels of last year. This year we have new models, last year we did not.

     

    3.- From the last press release we know that App Store Sales were $10 billion, which double the level of last year.

     

    So, all and all I see an increase in sales of some 17% and an EPS much higher than $15.5, perhaps even above $16.

     

    I am long Apple
    13 Jan, 04:01 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1296) | Send Message
     
    RJ, Interesting comments. They also pointed out that app downloads were up a whopping 50% for December. I didn't think there was any way Apple would go back to sandbagging, but today's numbers from DLGNF sure make it look like they do intend to blow out this quarter without a guidance adjustment. Trying to make the analysts look stupid? I have no idea why they think that is a good idea, but that seems to be the way the instruments are pointing. More under reported evidence: Foxconn revenues were up close to 20% YOY for Nov and Dec! This didn't get any press, but it confirms that DLGNF isn't a fluke. Apple isn't their only game, but this is a very strong indication that the analyst's number of just over 5% growth is too low. Macs are way up, and Quanta (Apple's producer) also said their revs for laptops are way up--over 25% YOY. I am shocked that Apple wants to contribute to the high beta, massive swings a big blowout will produce (assuming it happens). Wonders never cease. I thought they would hit the low 60s all along, but I thought they would raise guidance.
    13 Jan, 04:22 PM Reply Like
  • rubber duck
    , contributor
    Comments (193) | Send Message
     
    I like it. Keep quiet and blow out earnings.
    13 Jan, 04:26 PM Reply Like
  • Applocrat
    , contributor
    Comments (754) | Send Message
     
    the guidance is the biggest puzzle to me.. I like running through the numbers that way. It brings much needed clarity to the proceedings. But if those numbers are correct, and they seem eminently reasonable, why the low guidance in an era of supposedly accurate guidance?

     

    Why go through the trouble of revising guidance last quarter, when only a slight beat was in the cards? Is it all because of the buy back?
    13 Jan, 05:22 PM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (366) | Send Message
     
    "I like it. Keep quiet and blow out earnings."

     

    I would like it too, except last quarter they revised their guidance upwards. No revision this time, so who knows. They set a precedent last quarter - they are not obliged to keep doing it, but it would be surprising to see them blow out expectations having not raised guidance.

     

    Here's hoping they are going to surprise us.
    13 Jan, 05:25 PM Reply Like
  • Rjmontealegre
    , contributor
    Comments (133) | Send Message
     
    They did the guidance early on in the quarter, at that time they did not know that sales would end up being so high.

     

    The interesting thing here is the timing of the China Mobile deal, why would they wait almost a month??? My guess is that they needed to build up inventory.

     

    We will know shortly if our guess is correct. But it sure seems to be.
    13 Jan, 05:40 PM Reply Like
  • Rjmontealegre
    , contributor
    Comments (133) | Send Message
     
    Apple does not adjust the guidance frequently. I do not know what criteria they use, but it does not seem to include higher sales from regular channels, since that is not an extraordinary event.
    13 Jan, 05:43 PM Reply Like
  • jjkiam
    , contributor
    Comments (331) | Send Message
     
    I totally agree Humble Eagle. I don't really understand why Apple did not raise guidance if in fact all these data points are correct in their upside. I DO NOT want a return to the analyst guesstimating game. It is somewhat confusing. I also believe that the very clear history of success that virtually every new Apple carrier has had in the past makes me dismiss any of these disappointing analyst CHL estimates. Whether Apple has a blow out of q1 results is less relevant to the stock price than the q2 guidance!
    13 Jan, 07:00 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1296) | Send Message
     
    As Gotlife points out well below, the driving motivation for many executives is executive compensation--maximizing profits for themselves through stock sales. Perhaps they see a big surprise as a way to do that? We will see what happens.
    13 Jan, 08:41 PM Reply Like
  • JG2000
    , contributor
    Comments (378) | Send Message
     
    Add me to the list of those baffled by this situation. All the evidence suggests a blowout but I've tended to assume Apple was serious about guidance accuracy. Could they be using blowout numbers to absorb some major expense or revenue deferment (knocking the numbers back into the forecast range)? No explanation leaves me completely comfortable although I'm not gong to cry over a great quarter if that's how it plays out.
    14 Jan, 11:11 AM Reply Like
  • Jack Baker
    , contributor
    Comments (886) | Send Message
     
    Cleveland has been a well known bear on Apple for a while. They will lose a lot of creditability as a research firm starting on 1/27 and especially when massive China sales this quarter.
    13 Jan, 04:02 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1296) | Send Message
     
    Remember, it was Wedge that threw down the gauntlet early saying CHL would only produce 1 million in extra phone sales! Unbelievable. Doug Young, who certainly doesn't seem to be a big Apple bull, says he thinks they could sell 1-3MM in the opening week! 1MM for '14, or 1MM-3MM in the opening week...quite a smorgasbord.
    13 Jan, 04:46 PM Reply Like
  • aardvark3
    , contributor
    Comments (335) | Send Message
     
    I'm with Doug.
    13 Jan, 04:51 PM Reply Like
  • NWCats404
    , contributor
    Comments (223) | Send Message
     
    @HumbleEagles and others: Do you know the regulations regarding how much revenue Apple can defer for this or any quarter, and how/when they can alter it? HE, you were the first I saw calling for guidance update, and it is an interesting/confusing situation. I think the company almost assuredly beat revenue estimates, but I think they may have (a) beat modestly and not by enough to increase expectations (b) spent [additional] CapEx ahead of schedule (c) deferred additional revenue. I think (c) would be the best case scenario, as it would both lead to positive sentiment on Wall St and maintain management guidance credibility. However, I don't know enough about the process to know if that is even a plausible explanation. Any thoughts or insight would be much appreciated.
    13 Jan, 05:05 PM Reply Like
  • GotLife
    , contributor
    Comments (1214) | Send Message
     
    I went to B school with a number of CFOs and they all stated their goal was to max out Exec bonuses. Their vehicle to accomplish was massaging the income and expenses across the year to that purpose. Unfortunately though, I don't have an absolute number for you. However, I would expect much creative planning for FY14 to be occurring if Q1 is a blowout. it would make the rest of the year so much easier.
    13 Jan, 05:28 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1296) | Send Message
     
    Cats, they can do pretty much anything they want, as long as it is legal. Blowing it out is perfectly legal, and so is raising guidance. I thought they would, in fact, raise guidance if it was warranted, but they aren't required to do it. The evidence is pointing toward a big quarter today, but we will have to see..
    13 Jan, 05:25 PM Reply Like
  • Piero A.
    , contributor
    Comments (333) | Send Message
     
    I personally believe that they will deffer enough revenue to pin the extreme high of the revenue and gross margin guidance. I do not believe they will exceed guidance but will show they killed it this quarter buy saying we made this much but really we could have made that much...I don't know if it really makes sense because it compromises they're credibility when it comes to providing accurate guidance. I believe the quarter was outstanding but I'm confused as to why they didn't raise guidance if they did do better than expected.
    13 Jan, 05:40 PM Reply Like
  • NWCats404
    , contributor
    Comments (223) | Send Message
     
    Thank you for the responses. In my admittedly limited understanding, there would be a few benefits to deferring additional revenue, rather than blowing out, even beyond the obvious loss of credibility for future reports. They would delay paying taxes on some of that revenue, and they would increase their rainy day fund which could, if need be, ensure that the company does not miss for the foreseeable future. If I am not mistaken, they could recognize those earnings whenever they want, so they have the biggest imaginable safety net. They could also mitigate some of the seasonality in earnings, therefore reducing some of the swings. Finally, by meeting but not blowing away expectations, they could keep shareholders happy but still continue buying back shares at a relatively low price.
    13 Jan, 05:43 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1296) | Send Message
     
    Well, remember that the current analyst numbers are toward the high end and about 5% more than last year. If iPads are up 25%, phones are up 15%, and Macs are up 25% they can't push that much. I do think they want Q2 guidance to be decent, and that might explain some of the CHL timing. GLTA!
    13 Jan, 05:50 PM Reply Like
  • Piero A.
    , contributor
    Comments (333) | Send Message
     
    Reporting 58 billion in revenue and deferring 5 billion says blow-out all over it in my book. However, if the goal is to defer money this is the may be the way it should be done. The issue is that going forward the guidance isn't clear unless they state the expected deferred amount otherwise we are back to square one with the analyst's expecting too much.
    13 Jan, 05:57 PM Reply Like
  • NWCats404
    , contributor
    Comments (223) | Send Message
     
    Don't forget AppStore, iTunes, SmartCovers, services, etc. Ha! I know what you're saying about a limit to the creative accounting. Could they have spent a ton of money elsewhere then, so that they beat handily on revenues but not on margins? I could see them spending a ton on shares during this big quarter, but then the share count would go down, so that would imply adjusted guidance too. I don't want to belabor the point too much, but it's intriguing to me. Thanks again.
    13 Jan, 06:05 PM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (366) | Send Message
     
    "I could see them spending a ton on shares during this big quarter, but then the share count would go down, so that would imply adjusted guidance too."

     

    This is interesting, as I'm not sure how the buybacks would impact the bottom line numbers. Is it a straight expense item? But Apple stopped guiding on EPS, so if they actually hit the earnings number while having significantly reduced the share count, the EPS could pop quite a bit.

     

    Lots of stuff to look forward to!
    13 Jan, 07:18 PM Reply Like
  • faramarz
    , contributor
    Comments (240) | Send Message
     
    IMHO apple will just report within the original guidance. I think that Apple will not make a rule of Guidance adjustments. Gross margin will be a better than guided. 1/2m 5s during 60 days & 350k during 30 days lead to 40.5m 5s to be added to +/- 12m 5c & 4m 4s = 56.5m iphones. ASP of 600 = 33.9b. Iphone accounts for +/- 58% of apple's income = 57.5b
    13 Jan, 06:24 PM Reply Like
  • NWCats404
    , contributor
    Comments (223) | Send Message
     
    @faramarz: That makes some sense, for sure. When I read that article about the 500K 5Ss per day, I was under the impression that the 500K figure pertained to one, albeit massive, Foxconn plant. I interpreted that to mean that some 5Ss were being produced elsewhere. Even if 10% were/are being produced elsewhere, that drastically changes the figures. Did I misread that? It was some time ago, so I'm not certain.
    13 Jan, 06:39 PM Reply Like
  • Humble Eagles
    , contributor
    Comments (1296) | Send Message
     
    faramarz, I agree with your phone suppositions, but here is the problem I have: that is almost 20% higher than last year. The estimates are only 5% higher than last year. So, you see the problem. We will have to see lower iPad and/or Mac sales to bring the overall numbers into guidance. I don't think that will happen. Mac sales may be up as much as 30%, but certainly 10% imo. The iPad is likely to be significantly higher, too. I don't see a way for them to hit guidance if iPhone sales are up 18%. We will see. All of the evidence that I saw today points to a blowout: Foxconn revs, Quanta revs, and DLGNF revs. We will see.
    13 Jan, 08:35 PM Reply Like
  • jjkiam
    , contributor
    Comments (331) | Send Message
     
    I think the rational approach to the upcoming Q1 report is to assume that revenue will come in under the high range and margins will also come in within guidance. There may be some deferred income that explains the lack of increased guidance. I simply don't believe that TC and Oppenheimer want to reopen the analyst guessing game. The upside will come from reduced share count and consequential higher EPS. Also most importantly will be the Q2 guidance. If my expectations are correct we will see a huge pop to take the stock over the 575 resistance band. And then theive into the 600's becomes inevitable
    13 Jan, 08:11 PM Reply Like
  • Rjmontealegre
    , contributor
    Comments (133) | Send Message
     
    Apple can't play with the numbers. If sales and margin went over the guidance, well, that's what they will report. As to why they did not increase guidance, my guess is that Thedy William not review the guidance unless the change cames from a new variable. Guidance are not law, they are guesses, and no one can guess correctly 100% of the time. They did their best in the guidance, they also did their best in sales; guess the second effort overrule the first.
    13 Jan, 09:28 PM Reply Like
  • Ueldew212
    , contributor
    Comments (2) | Send Message
     
    They are inceasing their deferred revenue in Q1. They talked about it during the last earnings call. It is associated with the iWork, iPhone, iMovie apps that have value, but are now being given away at no cost with the purchase of a new iPhone or iPad. I believe Oppenheimer even specified the margin impact this additional deferal will have. Although I don't recall the number, 25 bps sticks in my head. Not huge, but a meaningful headwind. This was considered in their guidence

     

    I, too, am surprised there was not an adjustment to guidence. Everything seems to indicate a very strong quarter. I have a hard time believing revenues were north of $59M without hearing from them. Hopeful we are north of $58, though, and I really feel like $15.00 EPS is possible...
    14 Jan, 06:26 AM Reply Like
  • John Court
    , contributor
    Comments (123) | Send Message
     
    As many have said and some have dismissed, the lack of the usual guidance may have to do with the buyback. It's certainly logical that Apple would want the share price to stay at current levels or go lower so it can get the most for its buyback dollars. But there is another wrinkle to consider. If Apple were to issue increased guidance the stock would probably move higher. Then the question arises as to whether issuing the guidance could violate management's fiduciary responsibility to its shareholders. This would be an issue only if management believed increased guidance would push up the share price and make it unable to buy back as many shares as it could have if the price remained where it was prior to issuing the guidance. Since Apple is not legally required to issue guidance, one could speculate that it's not doing so is acting in the best interests of shareholders. Indeed, shareholder would have every right to be miffed if management unnecessarily squandered buyback dollars. Of course, we have no idea how the buyback is proceeding, and I only offer this as an alternative view.
    14 Jan, 06:42 AM Reply Like
  • faramarz
    , contributor
    Comments (240) | Send Message
     
    NWCats404. I thimk that 500k was the total production & not related to a particular producer but i may be wrong on that.
    14 Jan, 07:15 AM Reply Like
  • NWCats404
    , contributor
    Comments (223) | Send Message
     
    I found the article, and per AppleInsider, the Zhengzou facility was/is producing 500K 5Ss per day. That is the likely the largest Foxconn plant, but not the only one. The article also specified Foxconn as Apple's 'largest manufacturing partner', but did not say or imply that it was the only manufacturer of the 5S. This is mostly speculation/intuition, although I seem to recall reading an article about a plant 'shifting focus' from 5C to 5S, but I would find it strange for Apple to risk placing all of its flagship phone production in the hands of one single plant. My guess is that they hedged bets by producing at least some units elsewhere, at least in the initial stages. Thoughts?
    14 Jan, 11:20 AM Reply Like
  • siberian_chups
    , contributor
    Comments (2) | Send Message
     
    My 2 cents on guidance updates from Apple - Q4 was a Q with release of the new iPhone, with new records sales for the first weekend, while this Q1 is just 'business as usual'. IMO that's why Apple give no guidance update for Q1 - there were no extraordinary events, so no reason to update any expectation.

     

    Long AAPL since 2007.
    14 Jan, 02:05 PM Reply Like
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