KenC

Take Advantage of Apple's Q2 Guidance Misdirection

According to Apple's 10K in regards to the iPhone and AppleTV:

The Company recognizes the associated revenue and COGS on a straight-line basis over the currently estimated 24-month economic lives of these products with any loss recognized at the time of sale. Costs incurred by the Company for engineering, sales, marketing and warranty are expensed as incurred.

Blame it on iPod's Near Zero Growth

In regards to Nick's comment, I did buy an iPhone instead of an iPod Touch or Classic.

What's interesting is that while the price of an iPhone vs a Touch or Classic is not that far different, Apple probably recognizes $250 less revenue, in the quarter of sale, if a buyer chooses an iPhone over a Touch or Classic, due to the way revenue is recognized. It's possible that $500Million less revenue was recognized in this quarter, if all 2Million domestic iPhones were sold instead of Touchs or Classics. That's a big number.

Apple's Extra Billion in Deferred Revenues

@kfc, yes, future deferred rev is included in the forecast, but of course, those deferred revs incurred in Q2 will be deferred as well. Not until 2 years have passed, will Apple catch up so that deferred revs will approximate currently recognized revs. Right now, Apple booked $10.5B in revs, but only recognized $9.6B. Next quarter they guide to $6B in revs, but will actually book something closer to $7B, since about $1B will be deferred. The question is whether the market is fully understanding this, or is it only looking at topline figs.

Apple Should Increasingly Dominate Key CE Markets

Wow, SeekingAlpha must be scraping the bottom of the barrel to let someone write on a topic, they know so little about. He gets the iPhone's price wrong, his knowledge of the cellphone market must be nil if he thinks an iPhone Nano is going to topple Nokia. He doesn't know the PDA market is dying. And then, the gist of his commentary is the "internal value" of Apple, and yet, never discusses the "internal value"!?! What is that all about?

Why Does Apple Always Give Low Guidance? Is this a Rhetorical Question?

"dramatic lowered guidance'?!? That's nonsensical. Lowered from what? They guided conservatively, as they always do.

The guidance was 29.3% higher in revs from the previous year. Did I say HIGHER?

If Apple guides, consistently, the market should internalize that knowledge and adjust accordingly. There should be no opportunity for an option strike manipulation. The point is that the guidance is consistently conservative. If it was arbitrary high one quarter and low another, then you could make an argument for manipulation, but Apple is consistently conservative. Even last quarter was conservative from Apple's position. Who cares what the analysts have cooked up. Apple beat its guidance again. There's no conspiracy here.

Controversial Morning for Apple

The plans in europe are pretty good, relative to the what they are used to. Especially the all-you-can-eat data plans. Just like here in the US.

I saw Orange's 70k December number which seemed low, but I suspect UK figs are much higher. Germany, I don't think anyone has a clue yet.

Waiting for Dell's iPod Moment

<<As for shares of Microsoft languishing between $20 and $30 for years, they did until achieving a decisive breakout above $30 in October. I know because The Kelly Letter owns shares and we were waiting for Vista earnings, Xbox successes, and online inroads to finally pay off in Redmond, and they have. I expect that continue>>

I think basing your premise on the assumption that MS has made a real "decisive breakout" is the weakest part of your argument. Vista and Xbox earnings need to show they are sustainable. And, Google is just eating their breakfast, lunch and dinner in online advertising search.

iPhone Price Drop Is A Bad Sign

This analysis is sooooo basic. It shows a serious lack of understanding of Apple's business practices. Did you look at the price points of the newly released iPods? Did you see that the iPod touch is an iPhone without the cell service? Did you see the price on the iPod touch? Well, it's obvious that an iPhone is unattractive if it's priced $300 more than the comparably sized iPod touch.

Second, if you have followed Apple's approach to pricing of iPods in the past, you'd know that they tend to keep price points with new releases, and drop the prices on the older models that now seem less featured. Normally, the drop in price on the iPhone would come hand-in-hand with a new iPhone assuming the top price point. This didn't happen, because yesterday was iPod day, not iPhone day. In a month, you should expect to see the 16gig iPhone at the $499 price point. It's obvious, as the 16gig iPod touch is $100 more than the 8gig version. And, before the end of the year, you should expect a 3G version of the iPhone for either $499 for 8gigs or $599 for 16gigs. If Steve had released all the new iPhone models yesterday, then no one would have complained about the price drop on the old models, it was only the vacuum of news about new models that created the sense that iPhone sales must be slow. Without the context of Apple's past history, that might be the case, but knowing how Apple has released products in the past, should make it patently obvious that your contention about iPhone sales is absurd.

Of course, I bought 200 more shares at $134 today.