Secrecy around Apple's new 64-bit A7 chip may have incited spurious $AAPL stock downgrades

Posted:
in iPhone edited January 2014
Apple's iPhone 5s announcement included a surprise leap to a new 64-bit ARM chip architecture, a subject that has sparked lots of confusion and misinformation. But the secrecy surrounding the A7 may also have fooled analysts into slashing their sales expectations and downgrading the company's stock targets.

iPhone 5s

Known Unknowns about Apple's new 64-bit A7

A variety of details are still unknown about Apple's A7 implementation. This includes exactly what CPU cores it is uses (it may be a extension of Apple's custom Swift cores in the A6, now implementing the 64-bit ARMv8 instruction set, or it could be either a stock or customized version of ARM's Cortex-A50 series cores); how many CPU cores it uses; and what GPU cores it uses (new support for OpenGL ES 3.0 suggests it uses Imagination Technologies "Rogue" Series6 GPU design).

It's also not known for certain who is fabricating the A7, despite mounting evidence suggesting that production may have shifted from Samsung to TSMC.

Apple may not want to promote this fact for competitive reasons, or to avoid a new wave of criticism decrying the inevitable shift from Samsung's chip fabrication in Austin, Texas to (apparently) TSMC's fabs in Taiwan.

It's interesting to note, however, that back in June, Jefferies analyst Peter Misek reported that Apple had cut production orders for iPhones, based on his "inventory checks." Misek didn't detail all of his research, but he did specifically note one reason for believing that Apple was cutting its iPhone orders.

"Our checks also indicate," Misek wrote, as covered by CNET, "that Apple's wafer starts at Samsung's Austin fab have likely been cut."

We don't know that Misek's understanding of Apple's "wafer starts" in Austin were accurate, but if they were, there's more than one reason for that to occur.

Peter Misek
Source: Bloomberg

Problems with Misek's supply chain checks

Misek interpreted his supply chain checks to mean that Apple was sharply reducing the number of iPhones it planned to build, but it's also possible that Apple was having another vendor fabricate wafers of chip that neither Misek (nor, apparently, Samsung) knew anything about.

This is an example of one of the supply chain checks that Apple's chief executive Tim Cook warned analysts at the beginning of the year not to base significant conclusions upon, due to the vast global complexity of Apple's operations.

"The supply chain is very complex, and we obviously have multiple sources for things," Cook said during the January quarterly earnings conference call. "Yields might vary, supplier performance might vary."

Cook added, "even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business."

Problems with Misek's product predictions

Misek's predictions based on cuts in Samsung's Austin wafer starts could be as off the mark as his outline of Apple's plans from last December, as detailed in a report by Philip Elmer-Dewitt, writing for Fortune Apple 2.0.

Misek described the iPhone 5s as having "new super HD camera/screen, a better battery and near field communications." He also wrote that Apple was building a new iPad for release in June, a new television set and a cheap new iPhone model.

"Our checks indicate a low-cost model would be a retooled iPhone 4 with a scaled-down modem, apps processor, etc," Misek reported, further warning that this predicted new cheap iPhone's gross margin "would be impinged in order to reach the desired $200-$250 price point."

In February, Misek predicted that Apple would hold an Apple TV-related event in March.

But when March arrived with no Apple TV event, Misek issued a steep $80 downgrade on Apple's stock and cut his estimates for the quarter's iPhone sales from 37.5 million to 35 million, while predicting revenues of $41 billion. He also shifted his price expectation for the cheap iPhone to cost between $350 and $450.

Apple's actual revenues for the quarter were $43.6 billion, and the company sold 37.4 million iPhones. However, fears that the predicted new cheap iPhone model would erode Apple's profits in the future continued to be repeated through the year, and were eventually overshadowed only by new concerns that the iPhone 5c model that Apple actually unveiled last week didn't turn out to be cheap at all.

Investors were so worried about the iPhone 5s not being as cheap as some analysts speculated that they ignored the news that Apple was in fact selling a new, broader range of iPhones in China and other key markets, anchored at the low end by an iPhone 4 without either "a scaled-down modem or apps processor," but selling for around $420, the very price target a variety of analysts thought Apple needed to reach to expand its market share in China.


iPhone range in China


Source: Apple China


Last Friday, after Apple's event delivered none of Misek's product predictions, including the "impinged" gross margins of a cheap iPhone he feared to would spark "high cannibalization," Misek issued another severe downgrade for Apple's stock from $450 to $425.

This appeared to spook Wall Street so much that investors forgot that all of Misek's scary previous predictions from last year had all been grievously wrong, too.
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Comments

  • Reply 1 of 105
    Peter Misik from jefferies told my daddy and grandpa to load up on bbry at 14 promised us 18 and now were going to lose the house.
  • Reply 2 of 105
    gtrgtr Posts: 3,231member
    Boy,

    The more we learn about what Apple has been up to in the last nine months or so while they were 'stagnating' from 'lack of innovation' the more I'm impressed.

    Mavericks, iOS7, the Mac Pro, the mobile 64 bit chop 'n' change, addressing labour issues, bringing jobs back to America, supply chain changes (jobs out of America - thank you, Samsung), and God only knows what software and iPad updates we'll see shortly.

    They don't muck around...
  • Reply 3 of 105
    iqatedoiqatedo Posts: 1,595member

    So, I take it from this that when an analyst gets the picture so wrong, or perhaps completely wrong in Misek's case, that said analyst then downgrades Apple because it was Apple, in missing the analyst's (Misek's) goals, that actually got it wrong! Got it!

  • Reply 4 of 105
    The Street makes decisions and predictions about lots of companies that have little to do with reality. Misek isn't any different than many financial prognosticators that have either no clue about Apple or are simply attempting to manipulate the market for financial gain.

    It's sad that there is no recourse against these "analysts". The media should do a better job of pointing out their historical track record so both the public and the Street can see them for what they are.
  • Reply 5 of 105

    Two interesting threads on SemiWIKI

     

    http://www.semiwiki.com/forum/content/1940-debunked-tsmc-apple-rumors.html

     

    http://www.semiwiki.com/forum/content/2763-intel-bay-trail-fail.html

     

    In both, it is claimed that Samsung for A7 and TSMC for the next iPhone.

  • Reply 6 of 105
    @gtr They don't muck around...

    I could not agree more. They're doing the same all over again... at their own pace, bit by bit, before they go for the kill once again. Just watch and learn...
  • Reply 7 of 105

    It appears Tim Cook was not referring to the angle of the chamfer or even the fingerprint scanner on the iPhone with his 'doubling down on secrecy' statement, but rather we now see that he meant the very well kept secrets that the so called analysts are only now discovering.

     

    Touché Tim, he who laughs last certainly laughs the loudest.

  • Reply 8 of 105

    Originally Posted by AppleInsider View Post



    Last Friday, after Apple's event delivered none of Misek's product predictions, including the "impinged" gross margins of a cheap iPhone he feared to would spark "high cannibalization," Misek issued another severe downgrade for Apple's stock from $450 to $425.

     

    How to be an Apple stock analyst:

     

    1. Get a job at a major Wall Street parasite firm.

    2. Rise up the ranks by hook or by crook, to the point where the media gives you credence.

    3. Make sh*t up about future Apple products.

    4a. Blame Apple if your sh*t was wrong by lowering your AAPL estimates, or

    4b. Become the next analyst superstar if you guessed right and your sh*t came true.

     

    Misek's career path has repeatedly led him to step 4a, obviously.

    Don't give up, Peter.  Fake it 'till you make it.

  • Reply 9 of 105

    I could listen to Misek and short AAPL for a small profit or I could lose my shirt when the stock price goes back to $700.

  • Reply 10 of 105
    Quote:
    Originally Posted by jmgregory1 View Post



    The Street makes decisions and predictions about lots of companies that have little to do with reality. Misek isn't any different than many financial prognosticators that have either no clue about Apple or are simply attempting to manipulate the market for financial gain.



    It's sad that there is no recourse against these "analysts". The media should do a better job of pointing out their historical track record so both the public and the Street can see them for what they are.

     

    What really sucks is that he downgraded them because they didn't do what he thought they should instead of re-building new models on what Apple is actually doing. He is an f'ing moron.

  • Reply 11 of 105
    What's especially amusing about downgradng Apple for failing to do more than release iPhone updates last week is that we were told months ago by Mr. Cook that announcements about innovative products would be comng in October. Even so, we've gotten in the interim revisions shipping for the iPhone and an early unveiling of an upcomng major overhaul of the Mac Pro. I suspect Apple did an uncharacteristic early reveal of the Mac Pro to keep the natives calm while the company works on polishing up whatever is in the pipeline.

    I find it, as well, curious that we're being told Apple isn't operating along the lines it had been in Jobs' final years in so much as moving deliberately, with smart, measured advances is very much Jobs-like. It has to be remenbered that Apple was late in coming to the smartphone party, ignored the whole netbook misstep and then simply stepped up with dominant, polished, well-executed products that have made Apple into a powerful force. Apple is about bringing to market products when they are ready and not a second before. Yes there are missteps like Apple's Maps debacle but nobody gets it right 100 per cent of the time.

    Apple focuses on delivering a satisfying customer experience (hence no Apple netbook and a rather refined tablet right from the start) and as long as that remains the focus, Apple investors have nothing to worry about. Cheap, poorly executed, frustrating products abound. As long as Apple leaves such efforts to others, Jobs will have built a strong foundation. In a way, if Apple is successful and genuinely category leading over the long haul, it will go down as Jobs' greatest achievement. Apple would then be remenbered as the company Jobs built and less the company he worked for when he showed off his brilliance while alive. The former would be more impressive and valuable than the latter.
  • Reply 12 of 105
    How can these analysts possibly understand 64-bit computing when they don't have 1-bit of common sense¿
  • Reply 13 of 105
    Trying to overlay a rational explanation to explain stock movement is an exercise in futility. The stock went down because that was the "best" way shorts could make money. THAT is the real world explanation.
  • Reply 14 of 105
    Quote:
    Originally Posted by PhilBoogie View Post



    How can these analysts possibly understand 64-bit computing when they don't have 1-bit of common sense¿

    People working for these firms have 0 engineering knowledge (or knowledge about any kind).

     

    They weren't smart enough to be engineers, doctors, lawyers, etc., so they became Analysts. What is an Analyst? In theory, it must be someone that works with statistics and numbers, but isn't good at it, otherwise it they would be teachers or engineers. On the other hand, they should be good at reading industry and seeing beyond everyday's news, but if they were good at it, they would be journalists.

     

    They are losers, giving advice to more losers.

     

    Things like the a7, require some knowledge to be understood. An analyst can't see that, so for them it becomes irrelevant. We have reached a time were analysts should become responsible for what they say. Stupidity must have it's price.

     

    Apple cuts orders from someone (most likely in order to give those orders to someone else) and we have to deal with rumors of failing demand, and the stock goes down. Most stockholders are nothing more than ignorant gamblers, but they like their money and should understand things like these, so why no one sues guys like these is very strange.

     

    I mean, this is the sort of thing we get because of guys like Misek:

     

    http://www.forbes.com/sites/chuckjones/2013/09/13/jefferies-peter-misek-says-terrible-yields-on-iphone-fingerprint-sensor-hurting-production/

     

    "terrible yields"? Even if it is true, it's temporary, people will wait longer. But this guy is really putting the hammer down at manipulating the stock.

  • Reply 15 of 105

    So, let me get this straight.

     

    Misek was downgrading Apple because he suspected they were going to introduce a super-cheap phone that would kill profit margins.

     

    Then upon news that Apple wasn't going to do that, he downgraded them anyway for not introducing a super-cheap phone that would kill profit margins.

  • Reply 16 of 105

    Yeah, I read so many articles as well! So I wrote this on one of the budding blog site - Digit Being. Here is the link if you guys are interested: http://digitbeing.com/2013/09/everything-right-about-iphone-pricing/

  • Reply 17 of 105

    Moral of the Story. Don't listen to dumb ass analysts like Misek when it comes to buying / selling Apple Stocks !

    These guys can't see beyond what there two eyes can interpret. His Career as an analyst is done. He might as well start looking out for other alternatives.

  • Reply 18 of 105

    Apple's financial performance is based upon analysts' estimates and their CNN-style, super-star wannabe, character. They are the cheerleaders for the most pessimistic of rumors. They throw "stuff" against the wall and when they get lucky, they may hit some on some of their questionable research and highly questionable sources. They cheer against the successful and seemingly even cheer harder against their own country's most successful. Why? 

     

    What happened to analyzing stock value by the tried and true "study the fundamentals" approach?

     

    How could Apple's stock possibly be valued lower than Google?

     

    Why is a company that consistently racks up record quarters, earnings, P/E ratios, and cash not be the best stock value and safest investment in the market?

     

    Why is every event that happens at a factory in China blamed on Apple? Does anybody ever report on Sony, Samsung, LG, Hyundai, Panasonic, ..... factory conditions?

     

    Why? Stupid, uninformed rumors, from stupid, un-informed wannabes who live to be quoted by Bloomberg, CNBC, WSJ, and the NYT.

     

    There seems to be an growing American culture that enjoys watching successful companies and people fail. Stupidity!!! These people seem to think this all of the jobs created by successful companies were created by the government. Frightening.

     

    China is Communist. Most of it's jobs were created by entrepreneurs when the government there learned that, if they get out of the way, that the economy will flourish. Now they are eating the rest of the world's lunch and will soon be taking breakfast and dinner away from the rest of us.

     

    These analysts / business reporters seem not to be accountable to anyone. Insider trading is a major crime. Why isn't mis-informing the public through bad or devious reporting? What is their agenda? They aren't serving their readers, nor are they serving their country. It doesn't seem possible to even protect your own inventions and Intellectual Property. These same analysts cheer every time a case goes against their true IP creator. 

     

    They don't report facts that are evident. Samsung, for example, out-sells Apple in Asia for one simple reason (and it isn't screen size!) ..... It is because APPS ARE FREE on Android. Not by design, but because they are exceptionally easy to rip off. Galaxy phone sellers in Asia will pre-install any apps you want for free when you buy a phone from them. It is much more difficult for the to do that in iOS. That's a story that should be investigated and published!!!

     

     

    USA finally has a world-leading consumer tech company. Please tell us who is the last one of those you can remember. RCA? Motorola? Magnavox? Digital Equipment (DEC)? It's been a very long time!!!!

  • Reply 19 of 105
    rogifanrogifan Posts: 10,669member
    There's one reason for the downgrades: Wall Street expected the unlocked price of colored iPhone to be cheaper than it is. Plain and simple.

    What I'd like to know is, does the carrier subsidy basically set a floor on price, so if Apple is getting $450 or whatever from AT&T an unlocked phone would never be cheaper than that? Or in markets where subsidies aren't the norm does Apple have more flexibility on the unlocked price?
  • Reply 20 of 105
    So, let me get this straight.

    Misek was downgrading Apple because he suspected they were going to introduce a super-cheap phone that would kill profit margins.

    Then upon news that Apple wasn't going to do that, he downgraded them anyway for not introducing a super-cheap phone that would kill profit margins.
    That summed it up. It's his same song and dance from February and March. I don't know how he isn't held accountable by the FCC, let alone keeps his job.
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