Stuff and Nonsense

Apple Remains Overvalued, Despite Its Gadget Glory

Isn't the deferred revenue stream from iPhone and AppleTV accounted for as "restricted cash"? A large jump in the amount of "other assets" could therefore simply indicate that there's a whole lot of money piling up in the bank due to the subscription accounting model.

As for accounts payable increasing - it seems to me that until and unless Apple's creditors start complaining / filing lawsuits / deferring production, then I, as an investor in AAPL, would prefer that my company pay its bills exactly when they are due, and not a moment earlier. Interest on all the money Apple pays its suppliers isn't chump change.

Beyond this, you don't provide any specific target for AAPL's valuation, nor do you show how you got there. It's just "overvalued". Bah. Show me numbers. Prove your case, or begone.

Apple Hits 100,000 iPhone Apps: Is the Choice Worth the Cost?

Your analysis falls flat. About Windows Mobile, you claim: "All the apps that could have been made for it have been made for it and, like a tired mule team, the developers just can’t push out any more juice."

...which sounds a lot like the director of the US Patent Office allegedly resigning his post in 1899 with the statement: "Everything that can be invented has been invented." Platforms far older than Windows Mobile continue to have robust developer communities. Windows Mobile lacks for software because its developers don't make much money at what they do - in spite of your claim (which you don't back with any evidence). Their job is further complicated by the myriad configurations of devices in the wild, and by Microsoft's abysmal support for those devices once they are fielded (Hint: Count all of the people you, personally, know who have upgraded the operating system on their windows mobile device. Now compare that number to the number of people you know who have upgraded their iPhone operating system. Which represents a greater proportion of the user community?).

As for Android, I have seen anecdotal evidence that it suffers from the problem you note: software written for one Android platform doesn't necessarily run on different Android platforms. This will inevitably lead to increased costs for developers to support they myriad Android devices that people will be carrying. Given that it's not in the DNA of cellphone developers to continue to support (via operating system upgrades, etc.) their products on anything near the level that Apple provides for the iPhone, I see it as likely that Android phones will remain the domain of the techno-geek user base, while iPhones will become the tool of choice for the "rest of us".

You omit mention of Blackberry, but most of my argument regarding Android applies to RIM as well, with the exception of RIM's longstanding policy of releasing operating system updates as necessary (but, to my recollection, not generally using those updates to provide a great deal of added value, as has been the case with the major Apple updates (whole versions 1,2, and 3 provided huge improvements, and the point updates often provide nice incremental value-adds).

If I'm a developer, I want to devote my resources to where the return on investment is likely to be highest. A user base in excess of 40 million seems like a good starting place, provided that my product differentiates itself from the competition. I'd pick iPhone.

Two Lessons from iPhone Piracy

Piracy is 50 to 90%??? What's he smoking? I direct you to the following article, at:
www.ipodnn.com/article.../

which says, in part: "Regionally the largest ratio of pirated apps, over 37 percent, is said to be found in China. Almost 25 percent of Russian apps are pirated, and in Brazil the figure is approximately 22 percent. Japan, Great Britain and the US are said to exhibit the smallest piracy rates, no higher than 5 percent and closer to 3 percent in Japan. Piracy is believed to be roughly correlated to the poverty of a country, as rates are higher in countries with lower per capita gross domestic product."

Your conclusion is pretty far off, as well; your assertion that Apple needs to emulate Xbox Live would be comical if I didn't think you were serious. The App Store works because it makes it easy and inexpensive to be honest. It works because it trusts the user. If you don't like Apple's model, buy yourself an Xbox; but don't suggest that Apple needs to inflict pain on the rest of us.

Running the Numbers: The Roller Coaster That Is Apple

The fact that there was not even any mention of GAAP vs. non-GAAP earnings leads to the conclusion that this is either a deliberate hit-piece, or the "analytic" product of someone who knows nothing at all about the company and its business.

It's really rather sad that people pass this stuff off as "analysis" when it is so glaringly lacking.

Apple's Future as a Services Business

greenskyrocket, I don't think you missed anything. He didn't add any value to the article.

Incidentally, I think it's safe to say that Gassee' doesn't have a clue what he's talking about. An iPhone is a piece of hardware. It is sold to AT&T, or whatever other carrier, but it's a piece of hardware. The revenue from the sale is deferred, but there's no difference between Apple selling, for example, an AppleTV to a consumer and Apple selling an iPhone to AT&T. In both cases, Apple has an end user to support, and in both cases the revenue is recognized over a 2-year term. Claiming that Apple is now a "services company" is just stupid. Apple gets paid to deliver hardware. It doesn't matter who is writing the check to Apple - it matters what they are paying for, and what they're paying for is a handheld computer with a cellular radio built in and some really slick software that ties it all together.

Market Remains Bullish, But at a Price

Shorting AAPL may or may not be a clever move on your part, but it doesn't make sense as a "macro move" given what you've written above. Consider: AAPL and its products are priced in US dollars, which are cheap. AAPL appears poised to introduce the iPhone in the Chinese market, and is growing sales pretty much everywhere. I'm curious how you justify shorting AAPL as "macro".

A Million App Downloads for Palm

A million app downloads - but which apps are in the Palm store? Only those whose developers were invited by Palm - specifically, those apps that are wildly popular iPhone apps. There aren't any Palm-original apps; all of these are apps that are "must haves" on the iPhone - so people who wanted Pre or needed to stay with Sprint for some reason, and who have iPhone envy, can get a few of the apps their iPhone-wielding friends have.

The Apple App Store didn't take that approach. They released the development environment to the public and got a wild, rich, diverse, and fun assortment of apps. Lots of crap, and a good many unexpected wonderful surprises. Crowing about a million downloads of already proven popular apps is akin to saying that people like the songs on "greatest hits" albums - that's why they are called "greatest hits".

Apple's Refreshed Macs an Unlikely Catalyst of Growth - RBC

Abramsky said "70% more than the average selling price" - that is, if you average all the stuff they sell, pro machines right on down to netbooks. Abramsky's probably right about that. But Apple has already said that they don't know how to make a $500 laptop that's not a piece of junk, and that it's not in their DNA to ship junk. Many analysts want Apple to join the hardware cost race to the bottom, destroying their margins in the process. Apple's products aren't luxury items, in the sense of a "luxury" like a Prada purse; they are tools that can be used to generate value - and yes, they can be enjoyable and even be status symbols. But underneath it all, they are still computers, and those are used as means to an end. If they make you more productive, or they make you a lot happier while allowing you to operate at a comparable level of productivity, then there is a reason to pay extra for them. Apple therefore charges extra.

Apple's market share is growing for those segments in which they compete, so they have apparently figured out a model that works. Could Apple sell more units by lowering price? According to the law of supply and demand, that's how it's supposed to work. If Apple lowered the price too far, they'd probably see declines in customer satisfaction, since they'd have to skimp and cut corners to maintain reasonable margins. One of the reasons I buy Apple products is because I prefer having a superior customer experience relative to, say, Dell.

Abramsky's analyses are interesting to me in that he frequently gets the data right, but always manages to interpret things in the worst possible way for Apple. His firm is in the tank for RIMM, and as far as I'm concerned, he's completely tainted.


On Mar 05 09:25 AM Petoveritas wrote:

> Abramsky estimates Macs cost 70% more than the industry average.
> Interesting, because Yair Reiner from Oppenheimer took the iMac and
> did a spec-by-spec comparison with comparable Dell and HP machines.
> His surprising conclusion... iMacs are "a better value than competing
> Windows-based products - ($100-$250 cheaper [though it lacks a TV
> Tuner, ~$60-$100 upgrade])”
>
> apple20.blogs.fortune....
>

A Good Time to Buy Apple

@nyoneway: the P/E you cite for AAPL entirely discounts their deferred realization of revenue for iPhone and AppleTV sales. If you account for those things in the "standard" way - as ordinary income from sales - you get a P/E of about 5. That's FIVE.

While I don't much care about P/E ratios as a stock picker, if you're going to use them, at least get them right.

And to all of those who claim that it's bad to sell luxury products in a recession - well, that all depends on what the luxury product IS, and what it DOES. Snap-On continues to sell tools; people still need to do work, and they make good tools. Buying an inferior tool at a discount, rather than buying the best tool for the job, is often a false economy. Only a few percent of people need to recognize that fact for Apple to gain market share.

Recession Takes a Bite Out of Mac Sales

I stopped reading after the first point - that fewer people are planning to buy a new computer now than were in November - because, SURPRISE, in November, people are planning on buying stuff for CHRISTMAS. A quick look at the graph shows that the dropoff from Nov 07 to Jan 08 was actually greater than the drop from last November until now.

It's tough to tell the difference between incompetence and deliberate attempts to mislead. Heaven knows there's enough of both on Wall Street right about now.

Mac vs. PC vs. Gold

If you don't look at AAPL's books using GAAP, and account for iPhone sales in the quarter in which they are sold, AAPL's P/E is around 5. FIVE. If you want to base your investments on P/E - which I think is oversimplistic - then you should at least try and make certain that you're counting every firms' earnings in the same fashion.

To do otherwise is indicative of either cluelessness or dishonesty. You shouldn't claim to be an analyst if you can't figure out that different accounting procedures necessitate different interpretations of the numbers.

Apple's Next Big Content Push?

Very interesting - and plausible. Although much (if not all) of the content on iTunes U is currently free, Apple could conceivably try to monetize educational content. I'm uncertain as to how much they'd take in, though; for starters, they'd be going into competition against, for example, The Teaching Company, which has a substantial course catalog, and they would be competing against the sometimes excellent free content already on iTunes U.

An alternative hypothesis would be that his new job is to figure out how to train Apple Store employees in "selling cool" and ensuring that Apple remains an aspirational brand even as it is more and more widely adopted. That's much closer to your example of Hamburger University, but it could be an interesting job for someone with serious sociological credentials. As for why he'd leave the academic world for that, the answer is pretty straightforward - large sums of money.

Awaiting Apple Earnings and Guidance

Here's a crazy idea for Apple...

At current pricing, the market capitalization of General Motors (NYSE:GM) is under $4 billion. How about if Apple just buys them, for cash? If Apple installs integrated iPod / iPhone holders in each and every new model, they'd probably get at least several million more iPod sales... They could get Jon Ive to work some of his magic on the GM product line, and maybe come up with vehicles that people around the world would want to buy....

Bernstein Raises Apple's Target on Higher iPhone Forecast

Eric, really - would you be so kind as to disclose what relationship you have with Toni that causes you to publish this dreck? Toni Sacconaghi has been astonishingly, mind-boggling wrong on many occasions with respect to AAPL analysis. What would cause you to give any weight to (her? his?) opinions?

Klausner Technologies Sues Over iPhone

Look up the two referenced patents - neither one of them applies. Both state, and I quote:

"...These codes or numbers are decoded by means of the caller entering DTMF signals into the telephone which are recognized, recorded and processed by the [Telephone Answering Device]. ..."

Since an iPhone doesn't require the caller to enter DTMF signals - it gets its information from callerID info - neither patent is applicable. Nice try, but bogus claim. I don't know what the specific claims were against the other companies that Klaussner rolled, but it since iPhones DO NOT rely on callers to enter DTMF signals, the Klaussner claim loses. As I read it, Klaussner claims to have invented a way to signal to the recipient of a voicemail message by sending DTMF tones as part of the message - which, by the way, seems like a non-patentably obvious bit of "inventing".

Work with me on this... hmmm.... I have a recorder here, which can be used to save messages... these messages are in audio format.... they could be people saying words.... or they could be other sounds that were somehow meaningful.... like, oh, I dunno, maybe DTMF sounds. That's it! We could record DTMF sounds to pass messages, just as we could modulate our voices to say "words" that could leave messages, too! Patent that! Get me some lawyers!

What rubbish.