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Apple execs confident iPhone will ship on time and in volume

post #1 of 25
Thread Starter 
Investment banking analysts for UBS just returned from a meeting in Cupertino with members of Apple's executive team, who were described as being "confident" about their company's strategy and "very upbeat" about the prospect for new products.

In attendance at the meeting were USB analyst Ben Reitzes and Apple executives Peter Oppenheimer (Chief Financial Officer), David Moody (Vice President of Mac Product Marketing), and Eddy Cue (Vice President of iTunes). Topics ranged from the component cost environment and new Mac products to the status of the iPhone and sustainability of the iPod+iTunes ecosystem.

"While Apple obviously did not reveal any new products, management still seems very confident in its market position in music and its ability to drive the 'multiplier effect' in various other businesses including Macs, iPhones and much more to come," Reitzes wrote in a report shortly after the sit-down. "We believe Apple is in great shape in terms of product momentum and believe the shares should benefit in what could be an extremely strong year that should be punctuated by another exceptional December quarter."

iPhone

When speaking about the impending iPhone launch, management seemed "confident the product will ship on time with volumes to meet customer demand," said Reitzes. For his part, the analyst is expecting "initial demand to be very strong," with the handset holding the potential to add $0.35 to Apple's per-share earnings run-rate within two years.

"We believe Apple will provide customers with an innovative method of in-store activation and in-store displays for the iPhone, along with customer-friendly billing that could tie customers further into the Apple online store," the analyst wrote. "We believe Apple will introduce new models and partners for the iPhone in Europe and Asia within a year."



Apple TV

On a separate note, Reitzes said his checks with Apple management reinforce his believe that Apple TV "could be huge," with several growth opportunities likely to manifest as momentum builds into the holidays -- especially as more movie content becomes available on iTunes, which would make the product more compelling as a DVD player replacement.

"We really enjoyed our meeting with Eddy Cue, being it was our first time meeting him," he remarked. "Eddy Cue clearly believes this product is the next generation DVD player for the home."

The analyst informed clients that Apple TV has a decent chance of emerging as a challenger in the 420 million unit DVD player market, especially as more content becomes available on iTunes. Along the same lines, he said, iTunes can start to become a bigger player in the 1.6 billion unit DVD market.

"As a result, we believe that Apple TV could be a $1 billion ecosystem for Apple within a few years," he wrote.

New products

As part of its current June quarter, the UBS analyst expects Apple to ship iPhone, new Macs, and receive some help from the launch of Adobes Creative Suite 3 and its own new Final Cut Pro Studio 2.0.

"We believe new products should help stimulate revenue acceleration through fiscal year 2008 for Apple and it seems management is very confident in its secret pipeline," he wrote. "For the rest of calendar 2007, we expect new video iPods including a widescreen video iPod with multi-touch technology (likely flash), higher capacity nanos and shuffles and new Macs into the holidays."



Other opportunities that are still not fully reflected in Reitzes model include: ultra-portable devices, additional movie partners and services, gaming opportunities and additional phone models.

"We remain excited about Apples new multi-touch ecosystem the 'Mega-Platform' as we call it, and believe it may be becoming an 'open-ended' story once again with a logical chronology of new products for years to come," the analyst reiterated. "We expect the 'MP' to be prevalent in each of Apples major hardware products within 3-5 years."

Considering the potential multiplier effect of bringing multi-touch technology into additional Apple devices, Reitzes estimates the platform could add about $1.00 ($0.35 from iPhones, $0.30 from Macs, $0.06 from Ultraportables and $0.33 from iPods) in annualized per-share earnings power at some point in fiscal 2009.



He noted that the aforementioned math doesn't include the added benefits of improving retail profitability and catalyzing the services and accessories businesses like the iPod did.

Margins and component costs

Following his sit-down with Apple's leadership, Reitzes said he still believes consensus estimates for Apples long-term margins may be conservative based on leverage to higher revenues. He currently estimate that gross margins will average 32.1 percent in fiscal 2007 (up from 29 percent in fiscal 2006) and fall to 29.4 percent in fiscal 2008.

"While Apple is clearly saying margins should retreat to more historical levels (even well below 32 percent over time), we believe that its vertically integrated business model is in the process of garnering more long-term margin power than expected," he explained.

Summary

Overall, the UBS analyst walked away from his meeting in Cupertino feeling quite bullish on Apple, leading him to inform clients that his existing estimates may prove to be conservative.

For the Apple's third fiscal quarter ending June, he's forecasting earnings-per-share of $0.70, reflecting revenue growth of 20 percent year-over-year to $5.22 billion (down 1 percent sequentially) with gross margin of 32.0 percent and operating margin of 14.9 percent. The estimate factors in iPod unit growth of 19 percent year-over-year to 9.6 million and Mac growth of 25 percent year-over-year to 1.66 million.

For all of fiscal 2007, Reitzes is modeling earnings-per-share of $3.53, reflecting revenue growth of 23 percent to $23.7 billion, gross margin of 32.1 percent and operating margin of 16.9 percent. The estimate factors in iPod unit growth of 34 percent to 52.7 million, while our Mac unit estimate calls for 6.7 million units

"We are optimistic about the potential for revenue and earnings upside in the upcoming December quarter when several new products and software come to fruition for the holidays," said Reitzes. "In addition to prospects with the iPhone, we also believe that Apple still has potential to gain share in PCs."
post #2 of 25
Quote:
Originally Posted by AppleInsider View Post

"Eddy Cue clearly believes this product is the next generation DVD player for the home."

Hmmm… he must know something we don't then, because currently the AppleTV doesn't have real surround-sound, DVDs have 50% higher resolution than iTunes movie downloads and much higher bit-rates, the AppleTV costs a fair bit more than a decent DVD player, and iTunes downloads are only a bit cheaper than DVDs.

Oh yeah, and obviously he can't have heard of Blu-ray or HD-DVD.
it's = it is / it has, its = belonging to it.
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post #3 of 25
i believe that apple stock can and will continue to skyrocket until the point where Jobs/Ive are spread too thin and don't invest the obsessive compulsive time into the product and software design that they do now.

this is bound to happen eventually if apple continues to expand into different markets [video games/digiCams/camcorders/gps/tv's... ...refrigerators with built in HDTV, automobiles, clothing lines, furniture, food and beverage.] mmm, i can taste the Apple Lager now.
post #4 of 25
iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone blah blah blah
post #5 of 25
Quote:
Originally Posted by bdkennedy1 View Post

iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone blah blah blah

Am I'm seeing a pattern here?
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #6 of 25
Quote:
Originally Posted by desarc View Post

i believe that apple stock can and will continue to skyrocket until the point where Jobs/Ive are spread too thin and don't invest the obsessive compulsive time into the product and software design that they do now.

Have you always been an optimist ?
post #7 of 25
Quote:
Originally Posted by K.C. View Post

Have you always been an optimist ?

He seems on target, actually, optimism, or lack thereof, aside.

If and when Apple loses a step, it'll likely be due to something like what he describes. \

.
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post #8 of 25
Quote:
Originally Posted by TBaggins View Post

He seems on target, actually, optimism, or lack thereof, aside.

If and when Apple loses a step, it'll likely be due to something like what he describes. \

.

Yeah so, that can be said of anyone and any business so there is absolutely nothing contributed by the statement.
post #9 of 25
K.C. - I disagree, Apple is fairly unique in (at least appearing) to be very much lead by the CEO - not many other companies are. As such, its a reasonable assumption to assume that if Apple does really get its fingers into too many pies, the core "creative team" at Apple may find that they're having to get product design done by less qualified people, faster, cutting corners etc.

I don't see Apple ever going into any of the markets desarc suggests - Apple are more interested in taking existing products and rethinking them and/or merging them together well.

We might see built in GPS in laptops, iPods and iPhones though - the technology is very cheap now, Apple could probably add a GPS chipset and antenna for a $10 or $20.
post #10 of 25
apple execs are stating publicly that everything is running smoothly. i'm shocked.
on the other hand, it's better than NO updates.

i wasn't suggesting that apple would develop autos, etc, just stressing a point. if you can't "use" that comment, there are plenty more in these forums from plenty of other people. hope they're more useful to you.
post #11 of 25
Quote:
Originally Posted by desarc View Post

i believe that apple stock can and will continue to skyrocket until the point where Jobs/Ive are spread too thin and don't invest the obsessive compulsive time into the product and software design that they do now.

It's true that Jobs/Ive are a limited resource - both in how much they can do themselves, and in how long they remain with Apple.

The longevity of Apple will depend on either finding replacements (or extras), or on Jobs/Ive building a culture that encourages exactly their methods for desigining great products. I don't know if they're doing that, so I'm neither assuming the best nor assuming the worst!

Quote:
Originally Posted by Mr. H View Post

Hmmm he must know something we don't then, because currently the AppleTV doesn't have real surround-sound, DVDs have 50% higher resolution than iTunes movie downloads and much higher bit-rates, the AppleTV costs a fair bit more than a decent DVD player, and iTunes downloads are only a bit cheaper than DVDs.

Oh yeah, and obviously he can't have heard of Blu-ray or HD-DVD.

I would hope that someone in his position in Apple would know something we don't know!

Yes AppleTV needs digital surround (which I think we'll see upgraded shortly). I also agree iTunes needs to sell at DVD quality and at 720p quality - and I assume that Apple is frantically working out how to make it work without people getting annoyed at slow speeds (ie without blocking up the net). Akamai servers, hosting with big ISPs, Peer-to-peer - whatever.

They also need to make their downloads do EVERYTHING a DVD can do. Menus, extras, etc.
post #12 of 25
Quote:
Originally Posted by eAi View Post

Apple could probably add a GPS chipset and antenna for a $10 or $20.

And they'll charge us $80 for the privilege.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #13 of 25
Quote:
Originally Posted by eAi View Post

the technology is very cheap now, Apple could probably add a GPS chipset and antenna for a $10 or $20.

Adding GPS & mapping to an iPhone, for me, is the "killer app".
GPS chips are tiny now.
post #14 of 25
Quote:
Originally Posted by GregAlexander View Post

Adding GPS & mapping to an iPhone, for me, is the "killer app".
GPS chips are tiny now.

But since the iPhone has Bluetooth, you could connect it to an external Bluetooth GPS sensor, such as the Haicom HI 406BT.
http://www.haicom.com.tw/hi_406bt.shtml

External units tend to have better sensitivity (20 channel tracking, etc) and because they have their own battery, wouldn't drain your phone's power supply. It also means you could clip/velcro it to a backpack to be best positioned to see the sky, and just flick your phone on to check a map when needed.

My Windows Mobile 5 based phone doesn't have GPS built-in, but works perfectly with both that Haicom and a Leadtek GPS sensor.
post #15 of 25
Quote:
Originally Posted by AppleInsider View Post

In attendance at the meeting were USB analyst Ben Reitzes and ...

Hmmm ... does a "USB analyst" report on how many bits per second are flying by? What the power levels are on our USB ports?

And can we string them together in a daisy-chain? (Oh, wait - that's firewire). So I guess we need a hub to talk to more than one of then at a time?

Just wond'rin' ....
post #16 of 25
Quote:
Originally Posted by eAi View Post

K.C. - I disagree, Apple is fairly unique in (at least appearing) to be very much lead by the CEO - not many other companies are. As such, its a reasonable assumption to assume that if Apple does really get its fingers into too many pies, the core "creative team" at Apple may find that they're having to get product design done by less qualified people, faster, cutting corners etc.

Yep, that's my fear as well. Apple is special in large part because they have some very talented people who truly sweat the details (and in a very user-oriented way), and who possess design and aesthetic sensibilities that don't seem to be that common at tech companies.

If those people are stretched too thin, Apple potentially loses much of what makes them different and better than the Dells, Creatives, and Microsofts of the world. The line between genius and mediocrity is narrower than you'd think. \

.
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post #17 of 25
Quote:
Originally Posted by plus View Post

Hmmm ... does a "USB analyst" report on how many bits per second are flying by? What the power levels are on our USB ports?

Depends. Was he a USB 1.1 analyst or a USB 2.0 analyst?

.
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post #18 of 25
Quote:
Originally Posted by plus View Post

What the power levels are on our USB ports?

OVER NINE THOUSAAAAAAAAND!
post #19 of 25
A new macosrumors.com story indicating the iPhone based (lookalike) 6G iPod will be released either just days or a couple of weeks before the iPhone release. Thats about 4 - 5 weeks from now.
I wonder what new features will be provided by the stripped down MacOS in this iDevice will offer. Will it be OS 10.5 stripped down, or OS 10.4 stripped down.

I am also interested in Apple's ability to breakdown their OS for use on whatever processor is being used by these devices. It must take some effort. Still they have been doing it for a while with the secret builds they did for all of those years on Intel chips. Could we ever see the Mac OS supplanting BMW's iDrive system in their 7 Series vehicles.

Hmmm..... ponderings.
post #20 of 25
Quote:
Originally Posted by petermac View Post

A new macosrumors.com story

And you can stop right there.
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post #21 of 25
Quote:
Originally Posted by Flounder View Post

And you can stop right there.

Care to explain yourself ?
post #22 of 25
Quote:
Originally Posted by petermac View Post

Care to explain yourself ?

macosrumors is for entertainment (ie making fun of how lame it is) purposes only. They haven't had inside information on anything for at least five years. They once predicted a dodecahedron mac, with a straight face.
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post #23 of 25
Quote:
Originally Posted by Flounder View Post

They haven't had inside information on anything for at least five years.

They used to be great. No longer. I can't help but think they simply want to put up enough hints that we look and they make google-ad-cents. Half their "links" to stories don't work, and they always talk about new info in the next few days. It gets traffic.

And yet their old reputation has me checking in every couple of months... the fool I am. At best, their stories are plausible guesswork. Nothing useful anymore.
post #24 of 25
Quote:
Originally Posted by petermac View Post

Still they have been doing it for a while with the secret builds they did for all of those years on Intel chips. Could we ever see the Mac OS supplanting BMW's iDrive system in their 7 Series vehicles.

I'd love that! I think the concept of iDrive is great, but I'm not so sure about the execution. Besides, I believe Intel is BMW's partner in F1.

BTW, not only the 7 Series, but every BMW today has iDrive either standard or available as an option.
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post #25 of 25
Quote:
Originally Posted by new imac View Post

I'd love that! I think the concept of iDrive is great, but I'm not so sure about the execution. Besides, I believe Intel is BMW's partner in F1.

BTW, not only the 7 Series, but every BMW today has iDrive either standard or available as an option.

Since Ford is going to be using M$ "technology" for audio in their cars they need to be able to overwrite Ford's audio too.
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