Apple Reports First Quarter Results
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Last night my wife and I were organizing our room, and ended up putting our computers together, and we found three MacBooks (one is really old), two iPads and two iPhones - about $3500 worth of product. The phones are heavily subsidized by our phone bill, the computers are simply "must-haves," and the iPads are our most expensive ($350 ea.) toys. We're one year out of school and make $40,000/year.
Some are for nostalgia, like an SE, a Portable, a 12" PowerBook and my well-worn first-gen iPhone. My G4 tower was still getting regular use as a file server until pretty recently. Now that we just upgraded to Airs, I have a couple MacBook Pros waiting around for something creative, too. I won't drag on, but I definitely have a hard time letting some of these things go.
There's a graph somewhere of yearly sales figures of various cars vs the cost of those cars. There's a general exponential decline from say the toyota camry, which costs reasonably and sells a lot, to a Bentley, which is the opposite. But there's an irregular data point with the BMW 3-series, because many, many people stretch to afford it. It sells disproportionately well for that reason.
I'm not assigning judgment on how anyone spends their money, just pointing out that there are human reasons for business success and failure.
In the case of my recent upgrade, I justified it as an investment in my future. I don't consider the money I spent on it to be a purchase that I would be comfortable making frequently.
Wether you are a college student of an independent developer, the technology you use affects your success. Apple has a reputation in both industries as being above-average, further demonstrated by the loyalty many users have.
There will still be a market of ultra-fashion-conscious buyers who really need this years model, just like there are people who lease brand new cars every year, but that market isn't big enough, IMO, to sustain the growth that Apple, Samsung, etc have enjoyed thus far.
But those issues are sort of cheating since they are basically planned obsolescence features that could trivially be solved if there were any incentive to do so. But there isn't, so more landfill generated for little actual new value.
I'm going to guess you're neither a computer hardware nor a battery engineer.
See: Teslas, which have to live by the same rules as everyone else when it comes to battery life issues but whose solution isn't 'throw your car out when it won't hold a charge anymore'.
When Teslas have seen the kind of prolonged use and abuse people's phones and computers have taken, let's see how their battery packs do.
And of course, Apple sells battery replacements at pretty reasonable prices, but most people don't bother because depreciation makes it not worthwhile.
Our kids are using our original iPad 1s and abuse the heck out of them, and they still get decent battery life.
battery as you said is almost the norm now.
sd card dissapeared from all android devices save from some expensive sony ones. and with storage prices dropping (ssd just broke the 50c/gb barries) this is a sure way of making next year device much more appealing.
scren resolution being improved in homeopatic doses. year over year. this also contributes to new storage needs as apps space quadriplicate to support all screen sizes, reinforcing point above.
Which is why Apple is pushing so hard into "Developing markets" like China, Brazil, India, etc. etc.
There are hundreds of millions of people on the planet that have never really even had the option of buying an iPhone or iPad. I'll wager tons of them have the means to buy one, and they clearly have the desire.
Computers don't need to be screaming away rending this form at 60fps but that's what we're doing at the moment just to make panels as simple as possible.
I think faster WAN technologies will end up being gated by our terrible cell carriers though, who are already fucking up widescale LTE and generally doing a bad job of anything other than overcharging for poor service and getting away with it due to massive industry price fixing and collusion.
"Apple's iPhone business is finally going to fail this year" is the new "this is the year of the Linux desktop"
This latest quarter, revenue has grown 5.7% and income per diluted share 5.0%. This could actually be the end of limitless growth.
As for the "this is the year of the Linux desktop", this is the most annoying straw man meme ever. I have yet to meet anyone who ever claimed so except for a couple of articles on cnet or so a few years ago. Linux market share on the desktop worldwide is at 1% which is pretty significant when you think that macs, with all Apple billions are at 5% only. MS has won the desktop war. On mobile however, linux seems to be doing pretty good and so is ios, simply because the market is still growing and there is place for more than one winner. Isn't that great? :)
Non-replaceable naturally create refresh points for mobile devices, in a way they don't even with laptops. I have a Macbook Pro from 2009 with a totally dead battery, but it doesn't matter since I most use it at home, where it's easy to keep it plugged in. That doesn't work with a phone or tablet.
This is how it has gone with things like graphics, animation, even sound. In principle the core elements of the Mac OS don't require extremely fast chips/hardware ... but once you get into the fancy desktop animations, the sound processing, face recognition (e.g. iPhoto), etc etc, you require fancier hardware.
There are still lots of directions for Apple to push their software, directions that will be aided by better and/or more specialized hardware.
If all you need is a text editor, an email client and some CPU power for crunching spreadsheets then for sure, all you "need" is a desktop circa 2000 (or even earlier ...) ... but if you want to run the latest OS, even if you don't need/want all the features of that latest OS, you need to keep up with the hardware.
Never mind games.
SmartPhones are much closer to that 'good enough' point though I think subsidized devices are still very much in impulse buy territory for a lot of people. Given the cost of your cellular contract there's questionable value in saving $100-$200 every two years skipping an upgrade. You have to pay for the service either way it's in your best interest to have a device that can make the most of it. For unsubsidized devices (non-Apple devices at least) there is a healthy low-mid range market developing where the same trends should play out.
The Company sold 51 million iPhones, an all-time quarterly record, compared to 47.8 million in the year-ago quarter. Apple also sold 26 million iPads during the quarter, also an all-time quarterly record, compared to 22.9 million in the year-ago quarter. The Company sold 4.8 million Macs, compared to 4.1 million in the year-ago quarter.
If I were to play armchair quarterback, I'd say that iPhones are reaching saturation (which, given the 5C, is relatively surprising) and the iPad is where the majority of Apple's growth lies in the coming quarters.
EDIT: Apple's trailing twelve-month revenue (credit to Benedict Evans): https://pbs.twimg.com/media/BfBIdoYCEAAzNqI.jpg:large
I would agree Apple's current/last-generation iPhone pricing/sizing/models have hit saturation. If they offer a larger iPhone 6 and perhaps push the 5C downmarket to be a competitive unsubsidized device they will sell a ton of iPhones. I suspect we will see new iPhones (much?) earlier than Fall 2014 this time around.
1) Some people will say the sheer amount of money they are making shows they are not doomed anytime soon
2) Some people will say that making a ton of money now does not mean they will continue to do so in the future, and could still be doomed (if not to bankruptcy than at least irrelevance) in the future.
Both are right. Both will argue the other is wrong.
The iPhone numbers missed expectation, and as Apple's main product it didn't look good. http://www.businessinsider.com/apple-q1-earnings-2014-1
EPS, Mac and iPad all did well.
Analysts' expectations were not in line with reality. The iPhone numbers are what they are, irrespective of incompetent analysis.
A fairer way to state this would be that analysts, as usual, were over-optimistic and this optimism caused a lot of investors to be overly optimistic too, which caused an over-inflated share price, now corrected.
The price of that uncertainty is what you capture in the options pricing model. aka. "premium"
Two scenarios:
(Short-selling) AAPL: Sell 10 lots (1000 shares) short -> now you OWE someone 1000 shares but have the cash in your account of 1000 shares worth of AAPL stock. The next day, AAPL loses 99% of its value, you buy the shares back at their now 1% value, deliver them to the person you borrowed them from, and keep the rest of the cash in your account. OR, the next day, the shares DOUBLE, and now you owe that person shares that are worth twice as much as you got selling them in the first place. Bad news. Nearly 100% loss on the trade.
(Buying a Put Option) You buy 10 AAPL PUT contracts (100 shares each) "at the money" (strike price equal to the last sale of AAPL) for $XX that expire at some point in the future (lets say one month). Anytime between now and then, if the price of AAPL doubles, your PUT OPTION may most-likely will be worth more than what you paid for it and you can sell it for whatever the market wants to pay for it. If you do nothing, at the end of 30 days, your option is worth exactly ZERO.
The difference in the price movements of the underlying securities in both scenarios is what makes up the premium you pay OVER AND ABOVE what the difference is between what the security trades at and the price you paid for that "option" on the security.
In reality, you "short" a stock by purchasing a Put option. For example, these are made up numbers, but if you thought Apple would tumble on earnings and wanted to short it, you'd buy, say, $525 put options. This is a contract to sell 100 shares of apple at $525. It's worthless if they trade above $525 but if it drops below, you're in the money.
Suppose you pay $150 per contract, and you short 1000 shares -- 10 contracts. The most you can lose is $1500. And if the stock tumbled down to, say, $475, you would make $525-$475 = $50 * 1000 shares = $50,000, or $48,500 profit.
But the most you can ever lose is what you paid for the options.
For one thing, a put (or call) option doesn't even trade on the same markets (usually), has a lot less liquidity (usually), and depends on the supply of people willing to write contracts against positions they already hold. (non-naked) Options also have the effect of limiting any possible loss to the price paid for the option.
When you short a stock, your loss is potentially UNLIMITED. In practice, your broker will buy the stock for you with whatever cash you have on hand if the price moves against you.
That doesn't happen with options but you also don't get the huge sums of money to play with by borrowing against a stock that you don't own but are positive will dive into the dirt.
edit: explanation.
Taking a short position on a security is a strategy.
Buying Puts is a tactic. Short Selling is also a tactic. Both accomplish the same goal of holding a short position -- making money when the price drops.
If you want to take a short position, you can buy Puts. And to wit, if you're a retail investor wanting a short position, this is most often how you'd do it.
Trading the derivitive here is a smarter play for precicely the reason I mentioned: It limits risk. Liquidity on the options market doesn't matter at all because if the price rises, your Puts are worthless anyway. And if it drops, you don't need to sell the contracts, you can execute them (on margin if necessary) and unwind the position that way.
"Going short" a security has a very specific meaning in the equities market. Same with "going long".
And buying puts is NOT the same thing. You've completely forgotten about the concept of premium and time value when pricing an option. For one thing, options are sold at MANY price levels (strike prices) and expiration dates.
Seriously man, with all due respect, you're so mistaken its scary. One of my colleagues designed the NYSE trading network and back-office trade clearing systems. This is how I earn my living. I'll bet you your 401(k) you can't get a floor trader to endorse that explanation you just gave. It's so wrong that I'm only commenting to give other people a chance to learn from your mistake.
Guys like you are how guys like me make money.
Here's the pricing for a put option on AAPL to sell the stock at $450. Expiration 16-Jan-2015 (roughly one year from now):
40.11 Down 3.09(7.15%) Jan 27
http://finance.yahoo.com/q?s=AAPL160115P00450000
That price is per share. So, for roughly $4011, you can buy the right to SELL 100 shares of AAPL between now and Jan-2015 for about one hundred dollars per share LESS than what it's closing price was yesterday. Figuring in the premium, that's about $140 loss per share built into that trade yet there are 1300 OPEN contracts for just that. By your thinking, those puts should be worthless, right?
Moreover, there are already ~1300 OTHER put contracts out there at this exact same strike/expiration. What was the volume yesterday in those contracts?
15. Fifteen fucking contracts.
Hey...what about at $550 strike? 12 contracts.
Liquidity and premium are important. A lot of the time liquidity is the MOST important thing. It doesn't matter what price someone else got if you can't get that price because there isn't a counter-party to trade with.
You can't buy what someone else isn't willing to sell and you can't sell what someone ain't buying.
e.g. short a low beta stock, hedge that position, short the higher beta stock, and hedge that position.
That just sounds like gibberish TBH...
Just buy and hold.
But my point still stands: it's trivial to create a synthetic short position that's dollar neutral.
The reason I recently purchased Apple stock is that I foresee a large number of users coming on board once Apple launches a larger screen size for their iPhone line up. That's the main reason I can't use an iPhone.
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I'd say they execute so well it doesn't matter.
Isn't that what Samsung did by coming out with the bigger screened phones? Samsung knew the market was ready for bigger screens when Apple didn't think so, no?
Secondly - Samsung was forced to sell bigger screen phones because they couldn't achieve good battery life with smaller devices.
Not only that, Samsung was more profitable than apple for 2 consecutive quarters in 2013 before newer iPhones were released. Of course ton of other profits of samsung came from non-phones. http://www.businessinsider.com/samsung-is-now-a-more-profita...
Second, source on that battery story?
Samsung has defeated all old brands that attempted to survive by adopt android, but is now itself being defeated by cheaper new Chinese brands that can steal its low end share while Apple consumes the high end.
What is the point of mentioning Samsung's temporary high profits from other sources when we are discussing phone strategy?
But any how, what's your source for this statement: Secondly - Samsung was forced to sell bigger screen phones because they couldn't achieve good battery life with smaller devices.