Apple: China Push, iPhone Sales For Q3, And Thoughts On The Retina Display

| About: Apple Inc. (AAPL)

One thing mentioned more than once during the Apple (NASDAQ:AAPL) WWDC keynote address was the company's China push. First off, there is better support for the language (new dictionaries, fonts and input methods) and there is more integrated support for Chinese social networks. This is obviously a good thing, because I expect a lot of Apple's growth to come from China.

That brings us to the question of Q3 iPhone sales. The general estimate for Q3 iPhone sales from analysts is below 30 million, a lot less than the previous quarter. The reasons for this are slowing sales at major networks in developed markets and anticipation of the new iPhone in a few months.

However, there are two reasons I think analysts are wrong. The first reason is China: I expect spectacular iPhone growth in China. The second reason is prepaid U.S. carriers. The iPhone just hit two prepaid networks in the U.S. -- Cricket and Virgin Mobile. Anyone who can do basic math can understand that the price difference between prepaid and two-year contract plans can be recovered in less than one year for the iPhone. My personal expectation for Q3 is 30 million or more iPhones.

Also, smartphones on prepaid plans were generally low-end Android phones, which marred the Android experience with low memory and poor screens and cameras -- especially in the U.S., where the major prepaid carriers are CDMA and require that you buy a phone from them. The only notable exception to that rule is Straight Talk, and the iPhone is not properly supported on that network (it requires jailbreaking and other dubious schemes).

There were several announcements made at WWDC, including the new iOS maps powered by TomTom (OTCPK:TMOAF), whose stock up about 10% today. Other stock movement was caused by Apple switching from Advanced Micro Devices (NASDAQ:AMD) to Nvidia (NASDAQ:NVDA) graphics processors in its MacBooks, causing Nvidia stock to jump. However, the most anticipated news from the conference was a retina display MacBook. The disappointing part of that was that the MacBook Air display wasn't updated, only the MacBook Pro.

Personally, I think the 2880x1800 resolution is serious overkill on a 15.4" display, and it looks like making use of that super resolution is difficult. It looks fantastic, but I wouldn't be surprised if you don't notice any significant difference between that and the ASUS Zenbook Prime display. In my opinion, 1920x1200 would have been good enough, with 2880x1800 as an option for blowhards. Also, having a retina or at least 1920x1200 option for the MacBook Air would have been great.

The other thing to notice here is that the MacBook Pro is getting thinner and lighter. By the time the next generation comes along there might be no reason to buy a MacBook Air.

There were no surprises at WWDC and no exciting new reasons (such as a new AppleTV OS or APIs for the existing one) to buy Apple stock. It is still a buy for all the reasons it has been a buy, but nothing significantly new or exciting has been added.

Disclosure: I am long AAPL.

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