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

Posted:
in iPhone edited January 2014
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.
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Comments

  • Reply 1 of 51
    I've always liked Katy Perry... wait, what...?
  • Reply 2 of 51
    MacProMacPro Posts: 18,215member
    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.
  • Reply 3 of 51
    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!
  • Reply 4 of 51
    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.
  • Reply 5 of 51








    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?
  • Reply 6 of 51
    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...



  • Reply 7 of 51
    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.
  • Reply 8 of 51
    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!
  • Reply 9 of 51
    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?
  • Reply 10 of 51
    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.
  • Reply 11 of 51
    the panels are for televisions, as well as iphones/ipads.
  • Reply 12 of 51
    Quote:
    Originally Posted by deuxlavabo View Post


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



    #36 out of 41.
  • Reply 13 of 51
    Quote:
    Originally Posted by studiomusic View Post


    #36 out of 41.



    Hah -- thanks... I'll have to get my eyes checked...
  • Reply 14 of 51
    richlrichl Posts: 2,213member
    Quote:

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



    ... or a secret volcanic lair.
  • Reply 15 of 51
    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.
  • Reply 16 of 51
    Quote:
    Originally Posted by RichL View Post


    ... or a secret volcanic lair.



    Or sharks with fricken laser beams on their heads
  • Reply 17 of 51
    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.
  • Reply 18 of 51
    wizard69wizard69 Posts: 12,785member
    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.
  • Reply 19 of 51
    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.
  • Reply 20 of 51
    maestro64maestro64 Posts: 4,562member
    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.
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