Apple Reports Fourth Quarter Results
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I think it is a pretty astounding change. For a while everyone was thinking "Tablets would kill PCs/laptops". Instead, I think these "super phones" may end up killing (OK, not killing, but at least taking a big bite from) tablets, while laptops remain unscathed because they are still better for heavy duty content creation.
They are allowing cannibalization of the iPad to the iPhone Plus because the margins on the iPhone Plus are higher, and people actually upgrade it every 2 years. I don't know a single person, including myself, that has had any impetus to upgrade their iPad, so this is a way of shifting people over to a phone model where there is a more defined upgrade cycle.
We may well buy 2 new iPads over the next 10 months. The point being that there is an upgrade cycle that is more like the Mac than the iPhone, but there is a cycle.
Allow me to introduce myself :)
I've had the iPad 2, iPad 3rd gen (Retina), and iPad Air, and I will absolutely be upgrading to the Air 2 as soon as it hits the Apple Store (by the way, what's up with them not announcing an in-store release date?). It has become arguably my primary non-work computer, as my 3 year old Windows gaming PC begins to gather dust due to my not playing games any more.
iPad sales were flat or dropping even before the bigger iPhones landed.
http://hyderabadjunction.com/wp-content/uploads/2014/07/iPho...
And over the past few quarters, PC sales either stopped declining or are actually increasing or flat. So the post-PC trend doesn't seem to be in full swing.
The iPhone is pretty exceptional product, is it really fair to hold everything else to that standard? Are people going to cry foul when consumers don't replace their Apple Watch every 18 months?
I know many developers wish the thing would die since it's the only A5 and non-Retina iPad.
Also don't forget to consider that when the time to upgrade an iPad comes up, you can decide not to upgrade it and wait until it's completely dead or whatever. With the iPhone, you can usually sell your 2 year old phone for at least $200 and use that for a free upgrade to the next model. Since most people are gonna keep their plans for that time frame anyway, it's stupid not to use the subsidy.
[1] According to Gartner, there were 68% more tablets sold in 2013 compared to 2012. Android’s share of the tablet market rise from 45.8% in 2012 to 61.9% in 2013 while Apple’s share has fallen from 52.8% all the way down to 36%.
Is that so? I've always wondered what percentage of iPhones sold are the base storage tier. I certainly would never buy the base model, at least until they up it to 32GB.
My iPad3 still works fine for what I use it for and won't get upgraded until it no longer works.
Before, it was between phones- which were small-- and laptops-- which were big. But the Air is becoming a lot more mainstream, laptops overall are becoming knife thin, and phones are getting bigger.
I think the iPad was meant to replace the PC for most use cases-- e.g. the email, web surfing etc.
and I think it's been somewhat successful at that. But like pcs people don't replace them every year (wheras phones seem to be replaced every 2-2.5 years).
Now with the Apple Watch, the phone has moved up to be more tablet sized, and the new smallest form factor is the watch.
Will the iPad move up and become more like a PC?
I think the magazine form factor is here to stay. I definitely prefer reading journal articles in PDF or paper over html, and in PDF form, I prefer my iPad to my phone or my daughter's iPad mini. I was just at a friend's house yesterday. He had a similar problem with his smaller droid tablet, and he was showing me his 12" droid that he recently bought to solve this exact same problem of reading journal articles.
I own an iPad 4 and it's pretty rare that I buy iPad only software. Developers just don't seem to make that much even though the markets a pretty decent size. Mostly it's just simple iPhone apps or games that have been scaled up.
The article was suggesting that because theres no trials or demos in the app store, as well as the inability to return things, people are very hesitant to buy at any reasonable price point and those developers are unwilling to put the time and effort in making it that should cost $20 or $30. Since consumers won't pay more than a few dollars high-quality in-depth apps are in short supply.
In the end it means the iPad feels like nothing more than a giant iPhone, and that's basically been my experience. I really would like to see more large fancy apps that would give the iPad its own strong purpose but for whatever reason that's not happening.
Games are really nice on the iPad, but I only play those the few times a year I fly.
If you go back 18 months or so there where a whole slew of articles describing peoples experiences trying to go iPad-only for trips. They all ran into problems caused by the lack of direct access to the file system, making the sharing of content between productivity apps quite difficult.
With the release of ios8, Apple has addressed this problem. In particular, extensions are a potential game changer, making it easy of apps to work together. For the time being I'm holding off on predicting the iPad's demise - I'm going to wait and see how the market responds to these new capabilities in ios8. For now it's an open question as to the iPad's ability to replace a normal computer for many people. Last year the answer was no, this year I'm not sure.
There is only 1.5B PC, some of these not even active, and some are business usage.
Which means there are still lots of people not exposed to the usage of computing. And iPad is where that fits in. For Grandparents, and in some countries, parents. iPad is ALL they need. To consume and do very very lightweight content creation.
EDIT: it's more like cash + easily sellable market securities and the like (so not the "real" things in the assets like property for their campus or the like).
Acquisitions, where they make sense - take on products that have good tech but need to be shepherded by a large corporation to become something the wider population can benefit from.
Dividends for investors, so that they can judge for themselves whether they want to hold cash for safety or something riskier.
1. Apple's P/E is way to low for a company that literally sells the best and highest rated products on the market. Historically you pay a P/E _premium_ for these types of stocks, not a discount. The company is downright cheap.
2. ApplePay has a ton of potential. Just in the other news thread others were complaining that moving to chip & pin cards is basically just changing the fraud, not fixing it. ApplePay's tech passes the smell test, and the people who will be using it have expendable money.
3. The Apple Watch. Who knows how it will sell? I will say I am always impressed with Apple's design and polish and it's hard to picture a crappy product. Maybe it's a hit or maybe it just raises their bottom line, either way it's unlikely to drag on profits.
We'll see how it works out. These earnings include only 6 days of iPhone 6 sales... I worry about Apple in my portfolio probably the least compared to other stocks in the S&P 500. It pays a dividend for crying out loud! I have to remind myself not go over diversification rules...
1. The P/E is low because of the future growth potential. Investors don't think it can grow at this pace in the future. It's not like a Coca Cola which grew earnings consistently in the double digit percentages over decades.
2. ApplePay has a lot of potential, but not in terms of moving the needle in earnings anyway. A billion dollars here and there isn't enough for Apple to significantly improve earnings. The company is just too big.
3. Same as 2.
The market will price the stock according to the risk it perceives. If you think you know the business better than the market, only then trust your own analysis and declare the market to be wrong and your analysis to be right. That's what value investing is all about anyway.
Nobody really cares of this. The price and P/E doesn't have to do anything with 'how good the products are' (well, not too much at least). What (essentially) matters is risk -- upside and downside risk. Apple looks quite safe at the moment with little upside risk (it's not probable that they'll suddenly double their revenue, but they make a lot of money) and not too much downside risk (very-very little probability of failure, but if something like the iPhone loses its profitability then there isn't really anything else to rely on).
Microsoft has exactly the same PE, but it's different. The upside characteristics are the same (not too probable that it's going to grow a lot), but the downside risk is different: Microsoft has many 'legs', it's very unlikely that a large part of their profit just disappears because of losing in one particular market segment, but it's quite likely that they will lose one or two profitable segments
High quality products mean it's unlikely they will release something that shoots them in the foot.
Microsoft, on the other hand, is constantly shooting itself in the foot financially -- from their danger based phones to the slate to the xbox (a lot of market share but also a lot of losses.)
Thus MSFT and AAPL having similar PEs shows that apple's PE is lower than it should be.
People have never believed in Apple, or never "got" it. This is why they thought it would fail without Jobs, they don't understand it.
this is why they discount it.
When they discount it, as measured by PE, this gives the investor opportunity.
What percentage of Samsung's yearly revenue is smartphones? Is that a large part or a small part of their revenue?
What would a 90% drop in Samsung's smartphone revenue do to their overall revenue? Would that be 90% of Samsung's overall revenue or some smaller number? What's that number?
Is that a large part or a small part of their revenue?
That assumes that Apple can grow much bigger. Can it? I don't know, there are not that many high end markets out there.
Their growth is slowing down and even reversing it seems:
Annual: http://i.imgur.com/lHgSuIg.png
Quarterly: http://i.imgur.com/FJd5P1h.png
Say you have 100k. You could put it all in Apple, or put 99k in Apple and then buy puts to protect against a sudden decline in Apple with the remaining 1k. (might cost more, not sure.)
Or you could split it up into 6 companies. Are any of the other 5 going to be as high quality as apple?
I think diversification comes from the belief that you can't pick stocks so you might as well pick several and hope they work out on average.
I think that this is not so much the case when you spend a bit of time investigating. I've not found it to be the case, at least. (What I can't do is pick timing, but I can pick stocks, pretty reliably for 20 years or so.)
Right now Apple is at $100ish, and a Jan 2016 $90 put would cost $8ish.
This means that the most you could lose in that time period is %18 of your money... and that's assuming the company completely craters.... if it just drops to $90 because they multiply the dividend by a lot, you don't really care.
If, however, a nuke hits cupertino, you're covered.
I like that a lot better than guessing what Tesla will be at in the future. (I think Tesla is a good company, for instance, but the risk is orders of magnitude higher.)
I agree with you in general, but sometimes you get bit there too.
Back in 2007, I felt that the US economy was in trouble. So I thought I'd be smart and went the full diversification route in my Fidelity retirement portfolio: split it among market funds for different economies around the world. Eastern Europe seemed to be poised for growth, so some $$ there; China was ticking up, so that got some; same for Latin America, Canada and Asia.
But then guess what happened? US got jolted and recovered. But my diversified funds? Most of them are still below what I bought them for in 2007. Especially that f*cker "Mathews China Fund" ($MCHFX). FML.
With 85% of new phones running Android [1] I think it's only a matter of time before the 'app gap' tilts in Android's favor. At that point it will be game over for iPhone.
On a more personal note I have found my $420 Nexus 5 to be on par with an $869 iPhone 6 - and that can't be good for Apple's long-term financial health.
[1] http://bgr.com/2014/07/31/android-vs-ios-vs-windows-phone-vs...
FWIW, I made the exact same switch as well -- Nexus 5 to iPhone 6 -- and I definitely prefer the iPhone.
To be honest, as a consumer I would be ok with this, if not for the software ecosystem. (I like the iPad and it’s useful to me personally. What do I care whether it sets the world on fire.)
Devs jumping ship is something I do worry about, but it seems with size classes Apple is working towards making changing the UI depending on device size easier – and if devs have to change their UI anyway for the larger phones the extra work of making that UI viable on an iPad is hopefully still worth it in the future. (Or maybe Apple could do something cool with iPads. The hardware is already pretty mature, but on the software side there is lots of room for making it a more powerful device. Maybe that will help sell more in the future. Or maybe not.)
What I do enjoy about the Mac are these small indie devs, selling their software at relatively high prices (read: $50 instead of $3). The Mac doesn’t have all the software, but it has some really cool, high-quality software that shares my values when it comes to design and UI.
The App Store (to some extent even the App Store on the Mac) was never really like that and always a more toxic place with cutthroat pricing. You can’t sell $50 software on the iPad (even $10 software is hard to sell), so the situation is just a different one on that device.
I mean, devs are frustrated with their inability to make money on the iPhone by just charging for software – and that device is way, way, way bigger than the Mac ever was.
Selling software on iOS has its own quirks that makes it different from the Mac.
That said, it has always been harder to find devs that share my values on iOS, so maybe that's a general problem of the platform (maybe it’s just a problem with discoverability and there are in fact more devs that share my values on iOS than on the Mac!) and has not a lot to do with how well these devices sell.
I keep hoping they will add phone capabilities to the iPad mini, and create a larger version of the iPad air. The notion earlier of checking out the Surface Pro 3 intrigued me, it is a nice piece of hardware but the reading experience is not as nice as the iPad. We'll see.
Bottom line I agree that from this report it seems like iPad is under performing the rest of the portfolio. Tim if you're reading please make a 12 - 13" iPad, I'll buy one of those today if you make it. :-)
2. apple 4th quarter is tied closely to the exact timing of launch and availability of the new iphone versions in US and an enough number of other countries. it's an engineered quarter in that sense.
3. even years' 4th quarters (2012,2014,2016) and following quarters do better historically due to renewal cycles of past good performing quarters.
4. in the light of 3, next apple quarter will also be quite well for iphones.
5. iwatch is a better metric to measure cook.
That's ~$5 billion per week. iPhone 6/6+ must be doing amazingly well internationally.
Only difference is that at $8Bn/quarter, their biweekly paychecks are for $1Bn. Not too shabby.
Macs up to 5.5 million.
I did end up buying at 280, 320, 500 though. Sold it all off just before the last split.
Can't change the past, but oh, there are times.
Didn't have nearly as much room as that house I coulda bought in SF. :-/
But I was gambling with it (it's the only time in my life I've bought a single company's stock like that), and I think in retrospect the result is quite good. I just can't shake away the "if only..." feeling. :-)
Despite my missed opportunity, I think the car is far better than any other vehicle on the road. There really is no comparison. 8-speed double-clutch automatic with paddle shifters? I prefer no transmission. I could go on and on.
Hopefully, someday in the distant future, all of our cars will be non-smoking.
Even a tiny investment would've paid off easily even by the mid 2000s.
Today TSLA is worth at least 3x what I sold for, but I never would have held though all those ups and downs let alone for two decades. I didn't buy the stock as a real investment, just a little fun in a company I liked.
Still have it (well, them) :).
Since June the 7 pieces has gone from $94/each up to today's value of $98.32/each, or $688.24 pre-split. If they invested at $400/share they'd have made +75% profit if they sold today ($288 profit/each). That is before taking into account inflation, tax, and opportunity costs.
If they owned their stock pre-2005 then they have experienced two splits and their stock is worth twice as much ($800) in the above estimations.
I don't personally know a single person personally under the age of 32 with a Mac. For kids under 18, their parents almost universally buy them cheap $500-700 laptops at Costco. They're basically a yearly disposable item at that price (though most of those same kids have iPhones). None of my friend's kids in college seem to have changed that purchasing habit since it's pretty sensible.
If you gathered all my friends and family together with all their computers, probably <15% would have Macs. Of the people with Macs, only myself and one other person work in tech.
At my local coffeeshops, about half of the people there mess around on some kind of tablet, of the other half, most (maybe 90%) are on corporate Windows machines or Surface tablets (they're really popular around here with the corporate sales types for some reason). And then I and maybe 1 other guy or a college aged kid with a 3 generation old used Macbook are the only people running any version of OS X.
I use a Mac because it's what my work issued to me - a West Coast based startup btw. I'm about to change companies soon and I already know my new place is going to issue me a Windows machine.
I live in the wealthiest town in the wealthiest county in the United States. Most of the neighboring counties are also in the top 10. My county is also in the regional home to one of the 5 largest tech industries in the United States.
Welcome to the world outside of the SV bubble.