Lion's AppleWatch

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"Attempting to analyze Apple through the general mediocrity of the industry they're part of, is just not the way to look at Apple..."

  Sunday, February 7, 2010

Apple overtaking Microsoft in cash, how Steve Jobs 'smoked' competition with iTunes

Look at that chart up there - it shows the total cash and short term investments of tech companies and comes to us from the Silicon Valley Insider. Isn't it interesting to see the company people rejected as a spent force in the mid-to-late 90's (Apple) now has more cash in hand than Google or Intel and is rapidly moving to eclipse Microsoft.

Only another half billion dollars or so and Apple will be a bigger company by cash on hand than Microsoft.

How did we get here? There's a lot been said on reports that Microsoft's dated competitive corporate infrastructure and its focus on internal competition is partly to blame.

We also like the look of this Groklaw report here, which points out that all the way down the line since Steve Jobs return to Apple, Microsoft execs felt they had been "smoked".

The report publishes a whole host of internal Microsoft emails from 2003 when the company reeled in shock at Apple's launch of iTunes.

Here's what Bill Gates really had to say about Apple's iTunes Store in 2003.

"Steve Jobs ability to focus in on a few things that count, get people who get user interface right and market things as revolutionary are amazing things.
"This time somehow he has applied his talents in getting a better Licensing deal than anyone else has gotten for music.
"This is very strange to me. The music companies own operations offer a service that is truly unfriendly to the user and has been reviewed that way consistently."

He added in a somewhat visionary moment, "I am not saying this strangeness means we messed up - at least if we did so did Real and Pressplay and Musicnet and basically everyone else." (Editor's note, yep. so they did.)

Jim Allchin's response is charming:

"1. How did they get the music companies to go along?
2. We were smoked.
jim" 9:31:04 PM    


  Tuesday, February 2, 2010

AAPL upgraded by Barclays

Apple Inc (NASDAQ:AAPL) is higher by +0.32% in pre-market trade after analysts at Barclays issued an analyst upgrade on the stock.

Barclays Capital set a higher price target up to 285 on the stock. 1:40:31 PM    


  Saturday, January 30, 2010
Jim Goldman: Today's plunge makes no sense.

Shorts Might be Short-sighted on Apple

Betting against Apple has become a kind of bloodsport on Wall Street, and following the company's earnings earlier this week, it bears repeating just how stellar these numbers were, and how extraordinary the opportunities are that lay ahead for this company.

All of which apparently completely disregarded on Wall Street today.

So what's happening? As near as I can tell, with the lukewarm reviews of the iPad, and so much wait-and-see going on, some investors might be worried that the tremendous revenue stream they were counting on may not be nearly as robust as they hoped.

But wait a second, it's not like Apple is Palm or something. iPad might be exciting, and important, and intriguing, and someday even compelling, but while we wonder and wait, Apple's got plenty of other ways of making money.

Mac sales last quarter were tremendous: 3.36 million Macs sold soundly beat estimates. The 21 million iPods contributed to the Steve Jobs factoid earlier this week that Apple has now sold 250 million of these things. iPhone might have been a little light, sure, but 8.7 million is nothing to sneeze at, and what other company can boast of a 100 percent jump in year over year sales for such a key product line?

Earlier this week, when AT&T said it activated 100,000 fewer iPhones then the previous quarter, there was instant worry that there was some kind of slowdown, that somehow that was some kind of surprise. But didn't we get that news earlier when Apple itself told us of its iPhone unit sales? Surprise? What surprise?

Today, Apple shares are in wholesale retreat. So apparently investors have turned up their noses at the company's monumentally huge cash position, or its enviable retail strategy with 284 stores now, and an eye-popping 50 million visitors last quarter. Yes, you read that correctly. (As a comparison Disneyland, hosts something like 25 million visitors a year)

But you know all this. Yet these shares continue to tumble to the tune of a 4 percent haircut as of this writing on very heavy volume. I heard some analysts talking about the lack of catalysts left in the Apple playbook, now that we have an iPad to consider. The classic of buying mystery and selling history.

Come on. If Apple were somehow trading at 20 (Yahoo's trading at 25x), 30 (Amazon's at 34x) or 40 times next year's earnings, then I'd understand a little pullback, a little taking-money-from-the-table. But Apple is instead at 15 times next year's earnings, meaning it's not only affordable, it's downright cheap when you consider this thing will do $11 or $12 a share in earnings for its fiscal 2010. And you know all that, too.

I'm no Pollyanna, and I don't want merely to accentuate the positive. But facts are facts. Fundamentals are fundamentals. Digital music, digital video, digital books, apps, Macs, iPods, iPhones, retail, software, and yes, the iPad.

Unlike Palm , or even Research in Motion for that matter, when one thing isn't working for Apple, it's got five or six other things that are. It isn't a zero sum game for these guys. Over at its peers in the market place, if the Pre is a bust, so is Palm, plain and simple.

If BlackBerrys stop selling, or slow down significantly, RIM should get creamed. They don't have a safety net woven with the golden silk of so many compelling revenue streams. Apple does. If there are concerns over early sales about the iPad, that should do nothing to color the overall Apple story.

(Kind of like everyone going nuts that the iPad would be an Amazon Kindle killer, and Amazon shares began to quiver because of it. The Kindle is what, 5 percent of Amazon's overall revenue? Come on people, a little perspective here!)

After earnings on Monday, we witnessed a pretty significant upgrade parade on Wall Street. So many targets at $265, $275 or higher. Broad market sentiment might have changed for one reason or another this week, but Apple's fundamentals certainly haven't. Today's plunge makes no sense.

1:45:19 PM    

Coming soon: 4-5 million Chinese iPhones

A survey of high-end Chinese buyers suggests the Street has underestimated demand

Photo: iPhonAsia.com

Morgan Stanley's Katy Huberty — a long-time Apple (AAPL) bear who seems to have switched her drink to Kool-Aid — issued an optimistic report Friday about the Chinese market for iPhones. It includes scenarios by which she sees Apple's share price hitting $325 to $435 within a year.

(The stock closed at $199.29 Thursday, down more than 4% for the day, and then fell another 3.36% on Friday.)

Central to Huberty's "Bull Case" is a scenario in which iPhone sales — which got off to a famously disappointing start in China — hit a cruising speed of 4-5 million units per year and then accelerate dramatically when and if Apple introduces a lower-cost phone with a pre-paid plan.

Her findings are not that different from those of other China watchers, but they are probably based on better data — the results of a survey of 1,050 Chinese consumers representing what calls "the core iPhone addressable market in China."

Huberty's key findings:

  1. The current installed base of unlocked iPhones in China (2 million) is already similar to the largest European and Asian countries, pointing to strong underlying demand at the high-end of market.
  2. We see an attractive addressable market in China of 50 million consumers, with strong interest in smartphones and the Apple brand.
  3. The survey indicates the potential for Apple to sell 4-5 million units annually in China over time.
  4. Importantly, we believe there is an opportunity for Apple to increase demand by 100%+ by introducing a lower-cost, pre-paid device and still generate 45-50% gross margins.

The report is supported by an array of charts, graphs and spreadsheets focused on that addressable Chinese market — a population of about 50 million people (4% of the population) with an annual income over $20,000 and an average cellphone bill of $22 per month.

It's a market, she maintains, comparable to the U.K. (76 million) and Spain (53 million) — with a difference:

"Importantly," she writes, "this 50M person addressable market has high smartphone and Apple product penetration rates relative to the market as a whole, according to our survey. We believe the survey responses indicate the interest and affinity for smartphones and the Apple brand among the high-end segment of the population in China."

Below: A selection of those supporting diagrams.

Source: Morgan Stanley

Source: Morgan Stanley

Source: Morgan Stanley

See also:

1:43:19 PM    



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