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Apple's secret $3.9B investment could buy 136M iPhone, 60M iPad displays

post #1 of 52
Thread Starter 
The most likely use of Apple's secret $3.9 billion long-term supply investment is for tens of millions of displays for the iPhones and iPads the company plans to sell in the near future, one Wall Street analyst believes.

Katy Huberty with Morgan Stanley issued a note to investors this week in which she estimated that Apple's $3.9 billion investment could purchase about 136 million iPhone displays, or approximately 60 million iPad displays. If those displays were coupled with touch panels, the money could buy Apple 100 million iPhone panels, or 40 million for the iPad.

The fact that Apple is pre-paying for inventory indicates that the company is very confident in its outlook on demand for the company's products in the near future. Apple Chief Operating Officer Tim Cook said during his company's quarterly earnings report this week that he believes that the tablet market potential is "huge," and Apple has a head start on the competition with its iPad.

He also noted that Apple has tremendous growth potential for the iPhone, even as it has seen major sales increases. He noted that most people do not yet own a smartphone, and attracting those upgraders presents a major growth opportunity for Apple.

It was Cook who hinted at Apple's long-term component supply contracts this week while talking with analysts. He revealed that the company had made secret deals that he felt were a "fantastic" use of $3.9 billion from his company's $59.7 billion in cash reserves.

Cook declined to reveal what the investment might be, because he said he viewed the strategic move as "competitive" in nature. Revealing where Apple spends its money could tip off competitors to future products, he said.

Cook compared the investment to 2005, when Apple prepaid for flash memory. That NAND flash has become a major part of Apple's strategy, found in devices like the iPhone, iPad and new MacBook Air.

In addition to speculating on Apple's investments, Huberty also noted the company's impressive fourfold increase in revenue in China last quarter. She said she believes Apple is now ahead of the ramp carmaker BMW experienced in China over the last four years.

"[China] could contribute well over half (and as much as 100%) of the total company earnings growth we expect [for Apple] through [fiscal year 2012]," Huberty wrote.



This week, after Apple's record setting earnings, in which it exceeded Wall Street expectations for revenue by $2 billion, Huberty upped her estimates for AAPL stock. Morgan Stanley now has a 12-month price target of $410, though in her "bull case" scenario, the stock could hit $540 in the next year.
post #2 of 52
I've always liked Katy Perry... wait, what...?

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #3 of 52
Just a note for the younger viewers ... The BMW connection is funny since in the old days Apple was often compared to BMW while PCs were analogous to GM or similar, to demonstrate the concept of quality and profit over volume.
From Apple ][ - to new Mac Pro I've used them all.
Long on AAPL so biased
"Google doesn't sell you anything, they just sell you!"
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From Apple ][ - to new Mac Pro I've used them all.
Long on AAPL so biased
"Google doesn't sell you anything, they just sell you!"
Reply
post #4 of 52
Another good reason to have done the Verizon deal. Though CDMA is a trade-off in quality, who cares if it means expanding sales in China. Go Apple, sorry I mean, Go AAPL!
post #5 of 52
Attention AppleInsider readers

In a recent analysis of the earning prediction accuracy, Katy Huberty was one of the absolute worst. And she has been for a long time.

Do not listen to what she says. She will be wrong. Do not believe what is written in this blog entry.

It would be better if AppleInsider did not quote Katy Huberty due to her long-standing reputation for inaccuracy. What would be newsworthy is if she actually got something right. Just don't hold your breath.
post #6 of 52




Err.....so what?

My guess is that Apple's "trajectory" is also "stronger" than Tiffany, Rolex and Rolls Royce.

Why does anybody care, unless they are choosing between investing in carmakers or investing in jewelry manufacturers or investing in gadget sellers?
post #7 of 52
NOT!

Cook: "I won't tell you what we spent the money on, because it would tip competitors off to what our new products are going to contain."

Analyst: "I know what it must be! They're going use that money to make a crap-ton more of what they're already making!"

Yeah, that seems like it fits. It would really give Google an advantage to know that Apple is going to sell about 200 million iPhones and iPads...

15" G4 Powerbook, 13" White Macbook, Apple TV 2g, iPod Touch 2g
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post #8 of 52
Quote:
Originally Posted by digitalclips View Post

Just a note for the younger viewers ... The BMW connection is funny since in the old days Apple was often compared to BMW while PCs were analogous to GM or similar, to demonstrate the concept of quality and profit over volume.

Thanks for the background to that. I was sat thinking it a somewhat bizarre comparison to make.
post #9 of 52
Quote:
Originally Posted by cvaldes1831 View Post

Attention AppleInsider readers

In a recent analysis of the earning prediction accuracy, Katy Huberty was one of the absolute worst. And she has been for a long time.

Do not listen to what she says. She will be wrong. Do not believe what is written in this blog entry.

It would be better if AppleInsider did not quote Katy Huberty due to her long-standing reputation for inaccuracy. What would be newsworthy is if she actually got something right. Just don't hold your breath.

Retracted!
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post #10 of 52
As a marketing guy that IS a bizarre comparison to make. BMW and Apple sounds fine on the surface, however the nanosecond you get past the word "premium" the comparison falls completely apart (repair frequency, planned vs impulse purchase, cost of ownership, % of time used by owner,.....)

Didn't someone say she has been one of the worst analysts?
post #11 of 52
Quote:
Originally Posted by cvaldes1831 View Post

[B]
It would be better if AppleInsider did not quote Katy Huberty due to her long-standing reputation for inaccuracy. What would be newsworthy is if she actually got something right. Just don't hold your breath.


Accuracy and newsworthiness are secondary or tertiary factors when deciding on what stories to run. This ain't journalism.

Instead, there is a ratio between clicks generated, which translates into how much AI gets paid by Google, and how much it costs AI to run the story.

Accurate stories seem to garner less Google Money for AI than the alternative - stories like this one are the ones that Google pays AI the most for. These stories get clicks. Clicks put Google Money into AI's pocket.

Remember: You are the product that AI is selling, and their customer is Google. They bait you with these types of posts, and you keep on clicking and generating Google Money for AI.

Personally, I like AI, so I try to always click on their Google Flash Advertising, because without it, AI wouldn't be here. I thank Google for funding these types of stories on AI. But I use a proxy server so AI can't allow Google to track me. That way I can support Google and Support their vendor, AI, without becoming a mere product, bought by Google and sold to them by AI.

Works for me.
post #12 of 52
the panels are for televisions, as well as iphones/ipads.
post #13 of 52
Quote:
Originally Posted by deuxlavabo View Post

I see no mention of Huberty in the linked post...

#36 out of 41.
post #14 of 52
Quote:
Originally Posted by studiomusic View Post

#36 out of 41.

Hah -- thanks... I'll have to get my eyes checked...
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post #15 of 52
Quote:
Apple's secret $3.9B investment could buy 136M iPhone, 60M iPad displays

... or a secret volcanic lair.
post #16 of 52
Quote:
Originally Posted by deuxlavabo View Post

NOT!

Cook: "I won't tell you what we spent the money on, because it would tip competitors off to what our new products are going to contain."

Analyst: "I know what it must be! They're going use that money to make a crap-ton more of what they're already making!"

Yeah, that seems like it fits. It would really give Google an advantage to know that Apple is going to sell about 200 million iPhones and iPads...


My thoughts exactly. They could also buy a lot of office supplies, but I suspect their imagination goes a bit further than that. I think that any bold move on their part is likely to mean that they have a big good new idea that they deemed worth exploring despite the relatively large investment required.

And yes, I can't help but feel a little bad for Katy Huberty. She seems to always be far off the mark.
post #17 of 52
Quote:
Originally Posted by RichL View Post

... or a secret volcanic lair.

Or sharks with fricken laser beams on their heads
post #18 of 52
Quote:
Originally Posted by SomeCallMe...Tim View Post

Remember: You are the product that AI is selling, and their customer is Google. They bait you with these types of posts, and you keep on clicking and generating Google Money for AI.

Personally, I like AI, so I try to always click on their Google Flash Advertising, because without it, AI wouldn't be here. I thank Google for funding these types of stories on AI. But I use a proxy server so AI can't allow Google to track me. That way I can support Google and Support their vendor, AI, without becoming a mere product, bought by Google and sold to them by AI.

Works for me.

I block ads for security reasons.

http://news.cnet.com/8301-1009_3-20016517-83.html
http://news.cnet.com/8301-27080_3-20000898-245.html

My position is now unassailable.

Oh, and I am absolutely aware that journalism died in the early Nineties.
post #19 of 52
Seriously that would be very bad use of the money. A portion of that money might go for three months inventory and another portion to new manufacturing lines and R&D but it would be very foolish to buy a years worth of screens up front.

They used the term capital and that means production lines. So we are talking machines to make things of which one is likely to be LCDs. I still think a good portion of that cash will be shared with Samsung to build new foundry capacity. Apple already represents or I should say uses a good percentage of Samsungs foundry capacity. This I believe a good portion of that cash will go to expanding that capacity so that they can build advanced SoC for Apple.
post #20 of 52
Quote:
Originally Posted by SomeCallMe...Tim View Post

Accuracy and newsworthiness are secondary or tertiary factors when deciding on what stories to run. This ain't journalism.

Instead, there is a ratio between clicks generated, which translates into how much AI gets paid by Google, and how much it costs AI to run the story.

Accurate stories seem to garner less Google Money for AI than the alternative - stories like this one are the ones that Google pays AI the most for. These stories get clicks. Clicks put Google Money into AI's pocket.

Remember: You are the product that AI is selling, and their customer is Google. They bait you with these types of posts, and you keep on clicking and generating Google Money for AI.

Personally, I like AI, so I try to always click on their Google Flash Advertising, because without it, AI wouldn't be here. I thank Google for funding these types of stories on AI. But I use a proxy server so AI can't allow Google to track me. That way I can support Google and Support their vendor, AI, without becoming a mere product, bought by Google and sold to them by AI.

Works for me.

What a horrible, negative view of the world you portray here. If I believed this stuff, I'd probably have to go kill myself.

It doesn't occur to you that there is any possible motive for this stuff other than just money?

How terribly sad and empty your life must be.
post #21 of 52
Quote:
Originally Posted by cvaldes1831 View Post

Attention AppleInsider readers

In a recent analysis of the earning prediction accuracy, Katy Huberty was one of the absolute worst. And she has been for a long time.

Do not listen to what she says. She will be wrong. Do not believe what is written in this blog entry.

It would be better if AppleInsider did not quote Katy Huberty due to her long-standing reputation for inaccuracy. What would be newsworthy is if she actually got something right. Just don't hold your breath.

Does anyone know if she maintain a personal blog or a facebook account, people like this could not hit a nail if their life depended upon it. She is the reason wallstreet is a mess, she is making prediction and tell investors how to invest and has no clue. We should all slam her anywhere we can and let the investment world know she has no clue.

Think about this way, it is pretty clear what Apple is doing it does not take much of an imagination to predict what they are doing. The only question is how will it look and work, and we know from the track record it will be a successful since everyone now likes Apple coolaid.

This women has no clue about Apple, what do you think she is saying about companies which do not have people like this group following them and giving insight into what they are doing. This person is dangerous to the investment community. She making people think they should be investing in the Display companies, not that is not a bad idea, but the $4B is going to displays, memory, batteries and Camera since those are all very strategic to apples plans.
post #22 of 52
Quote:
Originally Posted by SomeCallMe...Tim View Post


Personally, I like AI, so I try to always click on their Google Flash Advertising, because without it, AI wouldn't be here. I thank Google for funding these types of stories on AI. But I use a proxy server so AI can't allow Google to track me. That way I can support Google and Support their vendor, AI, without becoming a mere product, bought by Google and sold to them by AI.

.

So which country proxy do you use, and do you like seeing ads that are not from your location. The only down side to using a proxy especially one outside the US or your home country is information google present is location specific so if really wanted to find something then google may not show it or bury it pages back.

Personally I use Saft with Safari and just block ads, and use littlesnitch to block google analytics from phoning home to them about my viewing habits
post #23 of 52
Quote:
Originally Posted by RichL View Post

... or a secret volcanic lair.

...or jetpacks...definitely jetpacks.
post #24 of 52
Quote:
Originally Posted by Prof. Peabody View Post


It doesn't occur to you that there is any possible motive for this stuff other than just money?

.

The line of reasoning I replied to suggested that AI was irresponsible for passing on, without sufficient qualification, this particular analyst's work. I disagree. I think that AI is acting responsibly. I'm sorry if that did not come through clearly.
post #25 of 52
Maestro is right (above) but that doesn't preclude additional motivations for AppleInsider.

Most of us have conflicts of interest inherent in our work (faster, better, cheaper, bigger, more innovative, tried and true...). The bottom dollar, I believe, is as Maestro describes, but I suspect that the AI editorial department strives for integrity, timeliness, and value for its audience, for salaciousness, alone, can drive away business.

As for what Apple bought, I think it's one of those... whaddaya call it... SONY.
[how's that for sensational?)

Success,

NotScott
post #26 of 52
Quote:
Originally Posted by AppleInsider View Post

The most likely use of Apple's secret $3.9 billion long-term supply investment .

ALL supply contracts are Business Confidential and Proprietary. That is the civilian equivalent of Secret.

Do you guys actual pay editors?? Or is that a secret?
post #27 of 52
okay this guy sums it up for us

http://seekingalpha.com/article/9680...s-price-target

AI should ban any information she publish as fictional

BTW she graduate in 2000 U of Wisconsin business school and holds a VP position at Morgan Stanley.

I am sorry if you going top follow tech company maybe you should have technology background.

I think this guy found her motivations, i am betting Morgan Stanley investors are shorting the stock every time she make any statement about apple

http://www.cnbc.com/id/28159562/Appl..._Stanley_Again

I think we all should file a FTC and SEC complaints about her.
post #28 of 52
i think it's for 3.9 billion dollar-menu items from mcdonald's.
post #29 of 52
Regardless of the veracity of the story ( it is generally in the ballpark with regards to what the $3.9B was spent). Here is an amuzing report on what happens when cheap manufacturers try and compete with the iPad on price.

http://www.electricpig.co.uk/2010/10...k-to-the-shop/

They had to use a resistive display because Apple - one of the best financed companies in the world, one of the biggest - has the capacitive market sown up.
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post #30 of 52
Quote:
Originally Posted by Maestro64 View Post

okay this guy sums it up for us

http://seekingalpha.com/article/9680...s-price-target

AI should ban any information she publish as fictional

BTW she graduate in 2000 U of Wisconsin business school and holds a VP position at Morgan Stanley.

I am sorry if you going top follow tech company maybe you should have technology background.

I think this guy found her motivations, i am betting Morgan Stanley investors are shorting the stock every time she make any statement about apple

http://www.cnbc.com/id/28159562/Appl..._Stanley_Again

I think we all should file a FTC and SEC complaints about her.


I see nothing wrong with the original report. People here may have worked out that the $3.9B must be displays, she is making this known to a wider audience. It is a *very* important story. It means that small manufacturers cannot compete with Apple as they have to pay more for their screens ( maybe twice as much) and Apple can undercut the market with a cheap entry device, soaking up the lower end of the market while maintaining margin at the higher end. The iPod strategy.
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post #31 of 52
Quote:
Originally Posted by Maestro64 View Post

This women has no clue about Apple, what do you think she is saying about companies which do not have people like this group following them and giving insight into what they are doing. This person is dangerous to the investment community. She making people think they should be investing in the Display companies, not that is not a bad idea, but the $4B is going to displays, memory, batteries and Camera since those are all very strategic to apples plans.


Actually my guess would be that it is all for displays. They are not competing to be the best in camera, and have already locked down some flash and RAM. ( This is extra). Batteries I dont know, seems that Apple gets more battery life using the OS, and doesnt have to concern itself with the best in class battery. Whats emphasised in their tech notes is not the charge on the battery but how the OS copes.

Quote:
Built-in 25-watt-hour rechargeable lithium-polymer battery
Up to 10 hours of surfing the web on Wi-Fi, watching video, or listening to music
Up to 9 hours of surfing the web using 3G data network
Charging via power adapter or USB to computer system
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post #32 of 52
Quote:
Originally Posted by SomeCallMe...Tim View Post

[IMG]
My guess is that Apple's "trajectory" is also "stronger" than Tiffany, Rolex and Rolls Royce.


Why does anybody care, unless they are choosing between investing in carmakers or investing in jewelry manufacturers or investing in gadget sellers?

Ok, look at the percentages of revenue which comes from China. I sincerely doubt that China will provide 100% of Apple's growth - that would mean that they would fall back in unit terms elsewhere.

however the Android market is huge in China - this is Apple's chance. With that, and an iPhone on multiple carriers in the US I would be certain of a market share reversal for Android in those markets. Apple just need to meet demand.
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post #33 of 52
Quote:
Originally Posted by Prof. Peabody View Post

What a horrible, negative view of the world you portray here. If I believed this stuff, I'd probably have to go kill myself.

Well don't kill yourself, that would be stupid. However his view isn't all that extreme. One of the biggest reasons we don't have subscriptions on the iPad right now is that Apple does not want to give out personal information to the magazines. Information that isusedin conjunction with advertisers to target you.
Quote:

It doesn't occur to you that there is any possible motive for this stuff other than just money?

Money is the whole point of advertising. That should have been learned in the sixth grade.
Quote:
How terribly sad and empty your life must be.

It is not sad to face reality, rather it is rational and defensive. There is an incredible amount of money spent on trying to get you to part with your cash in this country. What is sad is that it is mostly lost money and does nothing for the economy.
post #34 of 52
Quote:
Originally Posted by wizard69 View Post

Well don't kill yourself, that would be stupid. However his view isn't all that extreme. One of the biggest reasons we don't have subscriptions on the iPad right now is that Apple does not want to give out personal information to the magazines. Information that isusedin conjunction with advertisers to target you.

Money is the whole point of advertising. That should have been learned in the sixth grade.


It is not sad to face reality, rather it is rational and defensive. There is an incredible amount of money spent on trying to get you to part with your cash in this country. What is sad is that it is mostly lost money and does nothing for the economy.

So what has any of this to do with the actual report? What exactly do you have a problem with in the report besides the fact you think it may actually help bring viewers to this site and keep it alive. Whats the cost to you, if AI makes more money,
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post #35 of 52
She is pricing iPhone screens at $28.68 and iPAd screens at $65
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post #36 of 52
Quote:
Originally Posted by asdasd View Post

Actually my guess would be that it is all for displays.

A portion of it yes, all of it no way.
Quote:
They are not competing to be the best in camera, and have already locked down some flash and RAM. ( This is extra). Batteries I dont know, seems that Apple gets more battery life using the OS, and doesnt have to concern itself with the best in class battery.

This is also a mistake, Apples batteries are pretty much best in their class. That doesn't discount the value of energy management, just that Apple seems to have access to some of the best batteries going.
Quote:
Whats emphasised in their tech notes is not the charge on the battery but how the OS copes.

Well yeah tout your programming ability to the tech world. It is good copy. However the battery and the A4 play a huge role here.

As to the split of that 3.9 billion I suspect much is going Samsungs way. Apple already uses a good percentage of their foundry capacity tight now. Plus Samsung is expanding that capacity. If you read between the lines you will deduce that Apple is part of the reason for that expansion.

In the end we are not likely to ever find out all the details. I do believe however that Apple intends to move lots of product into the market place this year. It will be interesting just for the viewing pleasure.
post #37 of 52
Quote:
Originally Posted by asdasd View Post

Actually my guess would be that it is all for displays. They are not competing to be the best in camera, and have already locked down some flash and RAM. ( This is extra). Batteries I dont know, seems that Apple gets more battery life using the OS, and doesnt have to concern itself with the best in class battery. Whats emphasised in their tech notes is not the charge on the battery but how the OS copes.

My thought was that it also may be toward a goal to corner the market on dual CDMA/GSM chips so that they can make a world phone that works on Verizon and the other CDMA networks as well as GSM more cheaply and power efficiently than other manufacturers.
post #38 of 52
Quote:
Originally Posted by asdasd View Post

Actually my guess would be that it is all for displays. They are not competing to be the best in camera, and have already locked down some flash and RAM. ( This is extra). Batteries I dont know, seems that Apple gets more battery life using the OS, and doesnt have to concern itself with the best in class battery. Whats emphasised in their tech notes is not the charge on the battery but how the OS copes.

I see nothing wrong with the original report. People here may have worked out that the $3.9B must be displays, she is making this known to a wider audience. It is a *very* important story. It means that small manufacturers cannot compete with Apple as they have to pay more for their screens ( maybe twice as much) and Apple can undercut the market with a cheap entry device, soaking up the lower end of the market while maintaining margin at the higher end. The iPod strategy.

Actually, I know for a fact it is not all displays and it is cameras and memory Apple is securing capacity not actually buying physical parts. Not that they need to do this since they are second largest purchaser of electronic parts in the world. They are just making sure they are first in line for any parts, not that others customers will not get the parts.

It well known in the industry that Apple does not always pay the lowest price for their parts, with that said, with Apple willing to pay more to secure supply suppliers are more than willing to sell to Apple before another customer. Although this does not always work in Apples favor since they do not always treat their supplier well.

Obviously only apple knows exactly what the $3.9B is paying for, however, some of the money is ear marked for increase or dedicated factory capacity. Very few suppliers of the various technologies have made serious capital investments to increase production output in the last two years, because of this, Apple as well as every other electronic gadget manufacturer were not able to build and ship as much product as they could. Everyone was on allocations last year. Manufacturers are still caution going into 2011 and are not real willing to increase factory output without assurances and so the $3.9B is probably more of an insurance policy than anything less.

In reality if that is what is occurring this could help everyone since suppliers of parts maybe willing to do things they would not have done without the money Apple through on the table.
post #39 of 52
I am dubious about the Samsung link because some of the $3.9 billion is going towards capital investment and Samsun have revenues of $117.4 billion - do they need it?
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post #40 of 52
Quote:
Originally Posted by Maestro64 View Post

Actually, I know for a fact it is not all displays and it is cameras and memory Apple is securing capacity not actually buying physical parts. Not that they need to do this since they are second largest purchaser of electronic parts in the world. They are just making sure they are first in line for any parts, not that others customers will not get the parts.

Clearly with capital investment it allows the supplier to create more parts - so if Apple ever does change supplier, I am guessing the capital equipment stays. This will benefit other buyers, but they will be back of the queue.

I see this as kind of a futures market in components. The suppliers, and Apple, are no doubt locked in for a few years.
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