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reinharden
54 Comments
Apple: Great - In the U.S.
I gather you mean aside from that whole growing faster than the worldwide market with US growth actually being slower than worldwide growth thing? Or that unit growth of 46% in Europe?
Yeah, that's probably really not a sign of anything.
reinharden
Apple: Great - In the U.S.
I gather you mean aside from that whole growing faster than the worldwide market with US growth actually being slower than worldwide growth thing? Or that unit growth of 46% in Europe?
Yeah, that's probably really not a sign of anything.
reinharden
Apple: Great - In the U.S.
I gather you mean aside from that whole growing faster than the worldwide market with US growth actually being slower than worldwide growth thing? Or that unit growth of 46% in Europe?
Yeah, that's probably really not a sign of anything.
reinharden
Apple: Great - In the U.S.
I gather you mean aside from that whole growing faster than the worldwide market with US growth actually being slower than worldwide growth thing? Or that unit growth of 46% in Europe?
Yeah, that's probably really not a sign of anything.
reinharden
Apple: The Best Is Yet To Come
reinharden
The iPhone's True Market Cap Value: Apple to Double By 2008
Also, according to Apple, average purchase of music per iPod is less than $5, or a tenth of your estimate.
</blockquote>
I'm not sure about the $5; however, with a touch more than 100 million iPods sold and more than 2.5 billion iTunes songs sold, we know that the number is around $25 per user. But I wouldn't want to try and project a revenue run rate from that.
On the other hand: 1.5 billion was announced in September, 2006; 2 billion in January, 2007; and 2.5 billion in April, 2007. With only 100 million iPods that's approaching $5/iPod/quarter.
The iPhone's True Market Cap Value: Apple to Double By 2008
<blockquote cite="Kenneth Hartog">
iTunes will have an extra 2 million customers. At an average spend of $50 per year per customer and 50% margins, that is $1 billion in extra revenue and $500 million in profits.
</blockquote>
First, that's only $100 million in extra revenue!
Second, Apple has repeatedly stated that they intend to operate the iTunes Store at breakeven.
Third Apple doesn't even get 50% of the gross revenue of an iTunes transaction, much less maintain 50% margins Allegedly, Apple pays 70%+ to the label. Another 3% to 5% likely to a credit card vendor. From the remaining 25%, they have to operate the iTunes store. Most sources estimate that Apple makes pennies per $0.99 transaction.
All that having been said, incremental revenue is incremental revenue. And it's not like there's any marginal cost of goods sold from Apple's perspective. But I wouldn't look for it to add substantially to the earnings number nor therefore the market cap number.
<blockquote cite="Kenneth Hartog">
Each marginal market share of the PC market is worth at least $20 billion in market cap on APPL’s stock price
</blockquote>
Apple's market cap is currently only $115 billion and allegedly up to half of that is predicated upon the iPod. Realistically, I expect it's more likely 1/3 iPod, 1/3 iPhone speculation, and 1/3 Mac. But for the sake of argument, let's stick with 1/2 Mac. That means that your 8% market share (which is overstated on a worldwide basis...but let's ignore that as well) is responsible for perhaps $57.5 billion. Which would arguably yield a value of a touch more than $7B per point of market share.
I'm just saying...
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As we move into the realm of AT&T, life gets interesting. I wouldn't invest based upon guessing that maybe Apple got something good from AT&T. Although I would perhaps speculate upon that thesis. That having been said, if Apple and AT&T had entered into a materially significant contract, in theory they would both have been required to disclose some portion of that information in their various SEC filings. So, if nothing else, I look forward to reading the small print of the next quarterly and annual reports. ;-)
Verizon, by the by, is mostly full of crap on this issue. There's simply no way that Apple would have shipped a CDMA phone first. Doing so limits you essentially to the Americas in terms of a target audience. A GSM phone allows you to sell to 80% of the world's population. Apple may *never* ship a CDMA phone. I'm not saying that they won't, but CDMA is "on the way out" (although one could argue that CDMA is about to explode because most of the 3G technologies use a next generation CDMA approach...but they won't be backwards compatible with plain old CDMA). Anyway, lots of chipset families have GSM and 3G in very similar packages. As I mentioned above, Apple needed a GSM approach which meant launching with T-Mobile or AT&T. And if they had to go exclusive, that math is pretty easy (AT&T 62 million, T-Mobile 25 million).
I wouldn't be surprised if Apple did manage to get a revenue sharing arrangement; however, I'm all but certain that Apple did *NOT* get AT&T to pay upfront fees. AT&T's management would have been nearly criminally negligent to have made such a deal. Doing this deal with Apple was already going to require AT&T to spend probably upwards of $100 million on network and infrastructure upgrades (and that number might easily be twice that). Seeing as how they famously signed up without having ever seen the iPhone, I'm pretty sure that the deal was conservative on the front-end but perhaps heavily tilted to Apple's favor on the back-end.
#####
All that having been said, I don't disagree that Apple will do well over the coming year and they might well double. If they hit the 10 million iPhone number at even $500 per, that's $5 billion in revenue and perhaps $2.5 billion in gross profits (although net would be lower, but let's stay overly optimistic for now). A 30 to 40 multiple on top of that enhances the market cap by $75 to $100 billion. Toss in the Mac business, the iPod business, and the current $14 billion in cash. And there's definitely room to the upside. But that's, in theory, out towards the end of fiscal 2008, so it's a bit more than a year from now.
But if Apple announces a non-3G launch in Europe, I think we'll see a buying opportunity. :-( And if Apple doesn't announce their Asia launch plans by MacWorld 2008, I think we might see another one. Not to mention the Mac revs, the iPod res, shipping Leopard, and, oh yeah, whatever happened to the AppleTV and will there ever be any movies on iTunes and what about HD? So there's a lot of execution between here and two times here. ;-)
But I, for one, am still long AAPL...
reinharden
iPhones Sold Out at Majority of Apple Stores
> I doubt that too many stores are sold out of iphones.
Well, as of this morning, I believe that Apple was reporting less than 30 of their stores had any stock.
I will grant that 132 is "too many stores", but considering that there are only 162, it's a pretty danged large proportion. ;-)
reinharden
Mixing My Opinion Into the iPhone Stew
This has to be my favorite. Umm...I'd have to guess that that's a little out of the main-stream.
For phone, I wondered through 3 AT&T stores Friday prior to and at the launch-time. I found 40 to 50 people in line at each store prior to the launch (in Reston, VA).
I chatted with a dozen or so people standing in line and found the following interesting-to-me tidbits. 10/12 people in line did *not* have a Macintosh. 8/12 people didn't even have an iPod! More than half wanted an iPhone because they wanted a phone that "didn't suck" or "just worked" or some variation. Only a few cited "coolness" as a concern. To my surprise, more than half of the people I spoke with were, well, poorer than I'd have thought. The dozen I spoke to at some length included an auto mechanics, two teachers, a security guard, two restaurant workers, a grocery store clerk, a general contractor, and then the expected assortment of professionals/IT workers/geeks (which I usually count myself among).
Anyway, I mention these details because I was surprised. I was expecting Mac fans. I was expecting iPod users. And I was definitely expecting higher economic classes.
But these are not the kinds of folks who are going to be impacted by EDGE versus 3G and they're certainly not going to carry a second or a third device.
So...like I said
> 5) Nearly everyone who buys one will probably use a second device, probably a "boringphone"...
That's my favorite. ;-)
reinharden
Will the iPhone Suffer From Apple's First-Generation Problems?
Technically, the iPhones are actually cheaper seeing as how they're only $499.00 and $599.00. So I guess what you meant by "Did I mention that the iPhone is also more expensive than the Playstation 3?" was...well...umm... Nope, you're simply factually incorrect. No way to spin it.
Speaking of facts, the Airport Extreme base station was hardly a first generation product.
I enjoy your mention of YouTube because it makes it abundantly clear that you've not examined the technical tricks being played by Apple and Google. Among the reasons that Apple got Google to move YouTube to H.264 encoding is because it easily allows them to optimize the video delivery for not just a given screen size, but also a given transport rate. So Google automatically drops the video quality to compensate for an EDGE connection while creating the appearance of immediacy. Most people notice latency...without having a side by side comparison, they mostly won't notice the decrease in video quality. Doing this with their Flash-based system before was much more resource intensive. Now they essentially get it for free. And it doesn't hurt that H.264 delivers nearly twice the quality for the same bitrate as well.
#####
So, where does that leave us? What will the stock do next week? I wouldn't care to guess. But 18 months from now, I'd bet AAPL will be closer to $200 than $100.
reinharden
Five Reasons Intel May Weaken Microsoft
Far better to find a commodity part that works no worse than that of your competitors. Right now, AMD doesn't even bring that to the table since, at the moment, AMD's performance/dollar and performance/watt as well as top end performance all (at least arguably) fall short of Intel's.
Unless AMD does something relatively soon, they're getting down to the last generation of fabs that they can afford. AMD is slowly moving to 65 nanometers while INTC is moving on to 45 nanometers. That means that in terms of square millimeters that INTC marginal cost of goods sold will be about half of AMD's. And, at the moment, INTC can charge more for their products because they can outperform AMD's products.
So, unless you're a turnaround artist with deep pockets, now isn't the time to buy AMD.
reinharden
Apple's iPhone: Is 10 Million Units In 2008 Realistic?
While I did call out Japan and South Korea (although not their populations), I did so because serving them requires a CDMA-derived phone. Which means that in addition to serving the 85+% of the world using GSM-derived technologies, AAPL could offer a product to the CDMA Luddites back here in the States as well. ;-)
Which also expands us beyond AT&T's customers.
Like I said, by 2008, the iPhone will be launched pretty much world-wide. And that's a market that's buying one billion phones a year.
reinharden
Apple's iPhone: Is 10 Million Units In 2008 Realistic?
Europe adds another 725 million+ possible customers to the US's 300 million. Probably Canada and Mexico will have similar ship dates; that's another 33 million and 108 million.
During 2008, the iPhone is supposed to ship in Asia. That all but requires a CDMA-derived phone to serve Japan and South Korea.
Anyway, by 2008, the iPhone will be shipping pretty much world-wide. And the rest of the world is a lot more cell phone savvy than the US.
By the by, I think Jobs said that they hoped to ship 10 million by the end of 2008. Which means that their metric is across 18 months of shipping.
Also, by MacWorld, if supply and demand are close to balanced, I'd expect the first generation iPhone to move down price and a 3G phone with more capacity to be introduced. I could be wrong...but I expect some portion of that 10 million to sale at perhaps $349 and $399 instead of $499 and $599.
Would I bet on 10 million? That's an awfully big number. I'll have a better answer after I actually touch one.
reinharden
Intel vs. Negroponte: Time For AMD’s Take
reinharden
Berkshire Hathaway: Hold Off Until Buffett Steps Down
All I really know is that the 2006 Shareholder's letter said:
Overall Gain – 1964-2006 361,156%
I'll stick with the man who gave his shareholders a 361,156% gain rather than take the advice of the one who seemingly has more difficulty with math. ;-)
reinharden