Apple is addressing the larger market with China. The middle class in China is growing every year and soon will be larger than the entire US population.
So why is guidance flat for this current (fiscal 2nd) quarter?
I talked to an Apple engineer over the holiday break and he was genuinely excited about the product pipeline. I'm looking forward to more great Apple products
Weren't you arguing on another thread a week back saying that 100 years from now people will still use Google Search, whereas Apple may not be there because they are not exploring new products?
Now that you have spoken to an Apple engineer, you think they are exploring new products?
Anal guys can't stand the fact that Apple has become mature company with stable product supply and ongoing innovation. They are mad at Apple because it doesn't bring shocking surprises each 2-3 quarters that can make the AAPL to be as manipulative as before. They are trying to make it as volatile as possible, but they are also not very good at it any more, because they brought it at such idiotic low P/E ratio level.
Apple is by far the most innovative company in the IT business but still they can't deliver more that one breakthrough product at a pace of every 3-4 years. Apple has done so for 3 decades, however, anal guys think Apple started with iPod.
A publicly held company lives under a microscope. Analyst comments go with the territory. Yes, the stockholders are the owners. It is not anybodies private sandbox in which they are not accountable. In this case analysts may be concerned about Apples near-death experience some years back now.
No I'm not expecting a new product. I think that idea is horse shit. Apple needs to grow its platform. Start competing more on price and take market share. Yes that hits margin, but Apple can make up for it on services. It will sell more software and apps.
A bigger platform would allow it to dominate the mobile payment landscape. Hell, Apple could be a bank with its cash pile. It can't dominate mobile payments if it becomes a niche product.
Apple should be acquiring more and better assets that provide services that build the platform. Anything is better than sticking their heads in the sand by saying, "we'll just build good products and it will all work out"
Apple could pivot by striking deals with carriers to push the iPhone in exchange for discounts. Yes it would hit margin, but Apple doesn't need more cash, it needs a platform that will last. All these ideas can be done without sacrificing product quality.
If Apple really wanted to go crazy aggressive it could change its app hosting policies and start charging for free apps once the developer reach a certain number, like 100 million downloads. This would allow Apple to start skimming revenue from some of the big players like Google and Facebook. The cheaper Apple goes with the phones the more phones it would sell and the more leverage it would have against google and Facebook to charge for providing their app. Apple could kick Google's ass if it would just start thinking outside the box.
I don't disagree that Apple needs to grow their platform but to say they don't need new product(s) is horse shit. Over 50% of Apple's revenue comes from one product. That is not healthy. Apple market cap dropped $40B in one day because one product didn't meet analyst expectations. That's nuts. Apple needs new revenue streams so they're not living and dying by iPhone.
Are you fucking kidding me? You think the mobile phone market could be like the iPod market? Want to place any bets on that? I predict the mobile phone market is going to be like the indoor flushing toilet... It's here to stay FOREVER.
Everyone has a mouth and an ear and they run them more frequently than their urethra, which is serviced by the toilet.
And I agree Apple's next big money maker is probably a service. However, they need to use their pile of cash and great products to dominate the handset market so that they have a chance to provide that next service product.
Tim Cook needs to ask himself if he wants to be like IBM or Blackberry. Remember when the crackberries said Blackberry would never go away? If Blackberry were smart, it would have bought the push email patents instead of fighting against them and then locked everyone out of the market of push email. Had blackberry done that I would be typing on a Blackberry instead of an iPhone.
Apple is never going to win by getting in a race to the bottom just to attract more market share. There will always be another company that can and will bring to market a similar product for cheaper. Plus the important metric is profitable market share. Just increasing market share for the sake of it isn't meaningful to the bottom line.
Apple needs to focus on making really great products that people are willing to pay for and aspire to own one day. The only way for Apple to be both high end and low end would be to have some sort of spin off business (like some of the big fashion houses or car companies do) for the low end. Personally I think Apple should focus on building a superior product with the best looking design that people drool over and want to own (and will pay a premium for). I think Apple ceases to be Apple if they start building cheap products in an attempt to gain market share.
I don't disagree that Apple needs to grow their platform but to say they don't need new product(s) is horse shit. Over 50% of Apple's revenue comes from one product. That is not healthy. Apple market cap dropped $40B in one day because one product didn't meet analyst expectations. That's nuts. Apple needs new revenue streams so they're not living and dying by iPhone.
is that the products fault? or the analysts.
When apple had multiple product streams... truly multiple... in the 90's... they lost focus.
They need to be innovative in the consumer space. smart phones and portable computing (always on) is the future now. the iPod was that first inkling of it from apple... the iPhone is a pocket computer that makes calls. The iPad will effectively lead to the elimination of the desktop computer. My guess is Apple is working to eliminate the TV as dumb device (and by dumb... I mean the concept of I select a channel, whether it be channel 12, 238.2, disney app, or netflix), but that won't have the reach as the iPhone.
So back on point. for analysts, Apple needs a new phone, not a new product, because there is no other market where people will spend $$250 a year on a technology device where Apple can make 30-50 margin (on top of 250-500 a year to connect it and make it useful).
For the corporation, Apple needs a new product. and my guess is that its electronic payments... in effect, Apple becomes your bank (or the retailers bank). yes the margins are smaller much smaller, but the penetration is pervasive.
Apple needs someone with LONG TERM VISION. Seriously. All they are doing now is milking the innovations of the past 7 years with incrementally better phones and tablets. Stop. As seen by the last 6 Quarters grow is stuck at 5-10% revenue and profits are down 10%.
LONG TERM VISION.
Don't make the same mistake as the PC vs MAC era. People want iPhones and iPads. But face it. Its WAY too expensive for so many people. What Apple needs to do is increase market share. PERIOD. The top end is obviously saturated. Apple grew top end by 7% and Samsung shrunk, and every other phone company shrunk. Isn't it obvious that top end growth is over?
IMO, this is what Apple should do with the iPhone/iPad business:
CEO must make it known that margins will drop and they will agressively go for marketshare.
Be willing to let gross margins drop from 38% to 30%.
Expand the iPhone lineup:
price points from $300 - $700
screen sizes from 4 inches to 5 inches
The goal is to capture 25% of the worldwide market.
Then turn to services. That is the key. Once you own a massive marketshare Apple can make money off of payments, search, and software. Eventually they need to charge for iOS. PERIOD. Even if its only $10 a year. That alone would bring in $3B a year in pure profit (compared to now)
Bottom line is this: Apple to needs to transition from a hardware company (hardware makes 90% of the profits for the company) to a mix of hardware, software, and services. Possible even expand to business consulting for large IT conversions to iOS/OSX. It has to come to a point where hardware is only 50% of revenue. With that type of structure they can grow 15-20% again.
But Cook needs to make it CLEAR that margins and PROFITS will be hurt SHORT-TERM as they transition to growth again.
What have you done with sog35? Not that I necessarily want him back but, still, it's not right to kidnap people and then pretend to be them. " src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />
Are you fucking kidding me? You think the mobile phone market could be like the iPod market? Want to place any bets on that? I predict the mobile phone market is going to be like the indoor flushing toilet... It's here to stay FOREVER.
Everyone has a mouth and an ear and they run them more frequently than their urethra, which is serviced by the toilet.
And I agree Apple's next big money maker is probably a service. However, they need to use their pile of cash and great products to dominate the handset market so that they have a chance to provide that next service product.
Tim Cook needs to ask himself if he wants to be like IBM or Blackberry. Remember when the crackberries said Blackberry would never go away? If Blackberry were smart, it would have bought the push email patents instead of fighting against them and then locked everyone out of the market of push email. Had blackberry done that I would be typing on a Blackberry instead of an iPhone.
No, you need to ask yourself why you are so short sighted, because if you are thinking in terms of devices, incidental features and price points you have missed the point of innovation, and technological game changes. If you think personal communications has reached its pinnacle in the form of a handheld smartphones and that building strong holds in existing technologies will keep you viable after the next big disruption You may as well be a card carrying member of the telegraph operators union.
You are right, the future is mobile. Even the iPod proved that. But the future may not, and probably won't, be a phone. I'd hate to be the CEO that built an enterprise delivering cheap phones to the masses erroding profits in the name of marketshare when the world is now using newfangled device X and you can't shift focus because Wall Street will eat you alive for abandoning your "core" business. By the way how is Jormal Ollila doing these days?
last earnings report from Apple and Samsung changed my mind. I'm 100% convinced that the highend smartphone market and tablet market is totally saturated. Combined Apple/Samsung shrunk YoY in the holiday quarter for highend phones and tablets. It happens.
Now its time to focus on marketshare. I'm not taking cheap ass phones for $100 but the $300-$600 level. With a 25% share and 700,000,000 users Apple can start pumping out services and software for profits. Software/Services have a much higher gross margins and those are much more sustainable once intrenched. Look at friken windowsOS. At some point when Apple has over a BILLION iOS users they can charge for software updates and make tens of billions of dollars on software. Add iSearch. iPayments, ect.
Bottom line is hardware earnings growth is over.(but not unit growth at mid range) But software and services are HUGE opportunities. Even if they only 'steal' 10-15% of revenue from Microsoft/Google that will lead to BILLIONS IN EARNINGS.
Hey, watch your language. "Apple can start pumping out . . ." / "Look at friken windowsOS . . ."
And worst of all, including all-time worst cliché: "Bottom line is hardware earnings growth is over . . ."
You want Apple to become a sleaze parasite and milk their customers like some other companies we could name here.
Making the greatest hardware keeps you honest. Technology doesn't lie. Microsoft's and Google's problem is that they never made serious hardware, and still don't. Their values haven't been tempered in the furnaces of what makes hardware hard.
Or, you target the 10% of the world population that control 70% of the gross domestic product.
Tim Cook needs to ask himself if he wants _Apple_ to be like Sotheby's.. a 270 year old company. Sotheby's does quite well NOT trying to be everyone's auctioneer.
The computer market is not like auctioneering services. The computer market is going to be commoditized. Any fool can see that. Apple has done a nice job of delaying the commoditization and extracting value. It has been a great strategy, but it is time to change. The long term play in handsets is services. You can't dominate services unless you have a platform. You can't have a platform if you only sell to the high end of the market. I'm not saying Apple needs a shitty phone. I'm saying they need to drop their prices to take more market share and then make money from services.
To give you an example of why it needs a platform, consider a scenario where Gucci wants to provide a service that allows people to interact with their Gucci purses. It would be a complete failure because there aren't enough people with Gucci purses to collaborate.
Am I the only one that sees the long term problem with Apple's strategy? Apple and its loyal followers can all stick their heads in the sand, but it doesn't change the fact that Apple has a long term problem and Wall Street isn't a bunch of idiots for expecting Apple to address the problem. I haven't sold my Apple stock because I think there is plenty of time to fix the problem and the shift may still be a bit premature (Apple is making a hell of a lot of money). However, the shift likely needs to happen in the near future. Maybe 1-2 years. Who knows, maybe Cook has it in the works.
the 150K a year household income consumer and the -20K a year consumer (college student) is a different market and you know it.
The enterprise server market is Premier league Football... Totally different game;-) And the Bronco's didn't try to win that league either.
I understand your passion, and I do understand your underlying logic. I just feel it's flawed. I spent dinner with a person who told me I was arrogant in saying Apple didn't need to do NFC (after he spent 5 minutes saying NFC sucks). He was wedded on the fact that 'no one is buying iPhones' because 'everyone' is buying android based phones.
My feeling is you buy what you can afford. BMW isn't failing because it can't sell cars to college students. Eventually, people begin to generate cash flow and they learn what then need from a car and if they aspire a higher performing car will purchase a BMW once they can afford it. A lot just need a car. any car.. or a bus. But some people 'value' a 'good car,' and are willing to pay a premium for it. Apple's job is to make sure their devices attract enough of those people.and keep the 'delta' far enough to validate the profit premium.
The fact that people are not buying bicycles anymore (dumb cell phones) and are buying $0.99 android phones (Chevy Geo Metros) are learning how to be mobile device users, and what the desire in their phone. A lot of people just want a phone and a browser and maybe 1 more app (FaceSpaceter). They are not iPhone users. And they aren't Samsung users... they are 'cheap phone users.'
Eventually the question is ecosystem and experience stickiness. I'm arguing that apple has to innovate enough to keep the tactile experience above android/Samsung experience, give developers tools to build killer apps and establish a stickiness to the iTMS/AppStore (and eventually other transactional sub ecosystems).
In my analysis... the real threat isn't Samsung... It's Amazon. Only Apple and Amazon are positioned to deliver that hardware/software/apps/ecosystem that will compete in the Web 4.0 world.
Again, what you are failing to understand is that the handset market WILL get commoditized. When that happens, extracting value from services will be the name of the game. If Apple doesn't drop its prices it will dwindle to extinction. I will bet you any amount of money that phones will not cost $650 dollars (inflation adjusted) in 10-20 years from now. If Apple charges $650 it will have about as much market share as the ball point pen manufacturers selling $300 pens today. The time is shortly approaching where no one will give a shit about the next feature in the iPhone. At some point Apple won't be able to differentiate itself, even if it keeps inventing because nobody will care about the additions. What's the plan when that happens?
Both Samdung and Amazon are a huge threat. They both have a propensity to commoditize the market. Apple can't stop that from happening. Pricing pressure will drive down margins.
Apple's platform is big enough now that it would take some time to dwindle away. But it may look a lot like Microsoft if it doesn't change its strategy. Although, Apple appear to be outcompeting with the iPad, which may end up being the platform device that saves the iPhone. Interestingly iPad has lower margins. I think Cook should take the same margins on the iPhone and capture more market share.
BTW, completely agree with your analysis of NFC. It is a tougher nut to crack than most people think. Same with the TV.
Comments
Apple is addressing the larger market with China. The middle class in China is growing every year and soon will be larger than the entire US population.
So why is guidance flat for this current (fiscal 2nd) quarter?
So why is guidance flat for this current (fiscal 2nd) quarter?
Because guidance can get bent, as can analyst expectations. The only thing that matters is what actually happens.
Because guidance can get bent, as can analyst expectations. The only thing that matters is what actually happens.
I doubt it. Oppenheimer has gone out of his way to ensure that it doesn't.
[unless, of course, you are making a direct correlation to Oppneheimer's abilities with analyst's abilities.]
Have you not read anything about China Mobile's slow buildout of their LTE network?
I talked to an Apple engineer over the holiday break and he was genuinely excited about the product pipeline. I'm looking forward to more great Apple products
Weren't you arguing on another thread a week back saying that 100 years from now people will still use Google Search, whereas Apple may not be there because they are not exploring new products?
Now that you have spoken to an Apple engineer, you think they are exploring new products?
Anal guys can't stand the fact that Apple has become mature company with stable product supply and ongoing innovation. They are mad at Apple because it doesn't bring shocking surprises each 2-3 quarters that can make the AAPL to be as manipulative as before. They are trying to make it as volatile as possible, but they are also not very good at it any more, because they brought it at such idiotic low P/E ratio level.
Apple is by far the most innovative company in the IT business but still they can't deliver more that one breakthrough product at a pace of every 3-4 years. Apple has done so for 3 decades, however, anal guys think Apple started with iPod.
In this case analysts may be concerned about Apples near-death experience some years back now.
Exactly
Apple needs to focus on making really great products that people are willing to pay for and aspire to own one day. The only way for Apple to be both high end and low end would be to have some sort of spin off business (like some of the big fashion houses or car companies do) for the low end. Personally I think Apple should focus on building a superior product with the best looking design that people drool over and want to own (and will pay a premium for). I think Apple ceases to be Apple if they start building cheap products in an attempt to gain market share.
I don't disagree that Apple needs to grow their platform but to say they don't need new product(s) is horse shit. Over 50% of Apple's revenue comes from one product. That is not healthy. Apple market cap dropped $40B in one day because one product didn't meet analyst expectations. That's nuts. Apple needs new revenue streams so they're not living and dying by iPhone.
is that the products fault? or the analysts.
When apple had multiple product streams... truly multiple... in the 90's... they lost focus.
They need to be innovative in the consumer space. smart phones and portable computing (always on) is the future now. the iPod was that first inkling of it from apple... the iPhone is a pocket computer that makes calls. The iPad will effectively lead to the elimination of the desktop computer. My guess is Apple is working to eliminate the TV as dumb device (and by dumb... I mean the concept of I select a channel, whether it be channel 12, 238.2, disney app, or netflix), but that won't have the reach as the iPhone.
So back on point. for analysts, Apple needs a new phone, not a new product, because there is no other market where people will spend $$250 a year on a technology device where Apple can make 30-50 margin (on top of 250-500 a year to connect it and make it useful).
For the corporation, Apple needs a new product. and my guess is that its electronic payments... in effect, Apple becomes your bank (or the retailers bank). yes the margins are smaller much smaller, but the penetration is pervasive.
Have you not read anything about China Mobile's slow buildout of their LTE network?
So you are saying that Apple is to expect absolutely zero gain [from China Mobile] for the next few months?
Apple needs someone with LONG TERM VISION. Seriously. All they are doing now is milking the innovations of the past 7 years with incrementally better phones and tablets. Stop. As seen by the last 6 Quarters grow is stuck at 5-10% revenue and profits are down 10%.
LONG TERM VISION.
Don't make the same mistake as the PC vs MAC era. People want iPhones and iPads. But face it. Its WAY too expensive for so many people. What Apple needs to do is increase market share. PERIOD. The top end is obviously saturated. Apple grew top end by 7% and Samsung shrunk, and every other phone company shrunk. Isn't it obvious that top end growth is over?
IMO, this is what Apple should do with the iPhone/iPad business:
CEO must make it known that margins will drop and they will agressively go for marketshare.
Be willing to let gross margins drop from 38% to 30%.
Expand the iPhone lineup:
price points from $300 - $700
screen sizes from 4 inches to 5 inches
The goal is to capture 25% of the worldwide market.
Then turn to services. That is the key. Once you own a massive marketshare Apple can make money off of payments, search, and software. Eventually they need to charge for iOS. PERIOD. Even if its only $10 a year. That alone would bring in $3B a year in pure profit (compared to now)
Bottom line is this: Apple to needs to transition from a hardware company (hardware makes 90% of the profits for the company) to a mix of hardware, software, and services. Possible even expand to business consulting for large IT conversions to iOS/OSX. It has to come to a point where hardware is only 50% of revenue. With that type of structure they can grow 15-20% again.
But Cook needs to make it CLEAR that margins and PROFITS will be hurt SHORT-TERM as they transition to growth again.
Are you fucking kidding me? You think the mobile phone market could be like the iPod market? Want to place any bets on that? I predict the mobile phone market is going to be like the indoor flushing toilet... It's here to stay FOREVER.
Everyone has a mouth and an ear and they run them more frequently than their urethra, which is serviced by the toilet.
And I agree Apple's next big money maker is probably a service. However, they need to use their pile of cash and great products to dominate the handset market so that they have a chance to provide that next service product.
Tim Cook needs to ask himself if he wants to be like IBM or Blackberry. Remember when the crackberries said Blackberry would never go away? If Blackberry were smart, it would have bought the push email patents instead of fighting against them and then locked everyone out of the market of push email. Had blackberry done that I would be typing on a Blackberry instead of an iPhone.
No, you need to ask yourself why you are so short sighted, because if you are thinking in terms of devices, incidental features and price points you have missed the point of innovation, and technological game changes. If you think personal communications has reached its pinnacle in the form of a handheld smartphones and that building strong holds in existing technologies will keep you viable after the next big disruption You may as well be a card carrying member of the telegraph operators union.
You are right, the future is mobile. Even the iPod proved that. But the future may not, and probably won't, be a phone. I'd hate to be the CEO that built an enterprise delivering cheap phones to the masses erroding profits in the name of marketshare when the world is now using newfangled device X and you can't shift focus because Wall Street will eat you alive for abandoning your "core" business. By the way how is Jormal Ollila doing these days?
Hey, watch your language. "Apple can start pumping out . . ." / "Look at friken windowsOS . . ."
And worst of all, including all-time worst cliché: "Bottom line is hardware earnings growth is over . . ."
You want Apple to become a sleaze parasite and milk their customers like some other companies we could name here.
Making the greatest hardware keeps you honest. Technology doesn't lie. Microsoft's and Google's problem is that they never made serious hardware, and still don't. Their values haven't been tempered in the furnaces of what makes hardware hard.
Meditation on the "ob-" prefix.
Obstructive, obfuscative, obtuse . . .
Or, you target the 10% of the world population that control 70% of the gross domestic product.
Tim Cook needs to ask himself if he wants _Apple_ to be like Sotheby's.. a 270 year old company. Sotheby's does quite well NOT trying to be everyone's auctioneer.
The computer market is not like auctioneering services. The computer market is going to be commoditized. Any fool can see that. Apple has done a nice job of delaying the commoditization and extracting value. It has been a great strategy, but it is time to change. The long term play in handsets is services. You can't dominate services unless you have a platform. You can't have a platform if you only sell to the high end of the market. I'm not saying Apple needs a shitty phone. I'm saying they need to drop their prices to take more market share and then make money from services.
To give you an example of why it needs a platform, consider a scenario where Gucci wants to provide a service that allows people to interact with their Gucci purses. It would be a complete failure because there aren't enough people with Gucci purses to collaborate.
Am I the only one that sees the long term problem with Apple's strategy? Apple and its loyal followers can all stick their heads in the sand, but it doesn't change the fact that Apple has a long term problem and Wall Street isn't a bunch of idiots for expecting Apple to address the problem. I haven't sold my Apple stock because I think there is plenty of time to fix the problem and the shift may still be a bit premature (Apple is making a hell of a lot of money). However, the shift likely needs to happen in the near future. Maybe 1-2 years. Who knows, maybe Cook has it in the works.
the 150K a year household income consumer and the -20K a year consumer (college student) is a different market and you know it.
The enterprise server market is Premier league Football... Totally different game;-) And the Bronco's didn't try to win that league either.
I understand your passion, and I do understand your underlying logic. I just feel it's flawed. I spent dinner with a person who told me I was arrogant in saying Apple didn't need to do NFC (after he spent 5 minutes saying NFC sucks). He was wedded on the fact that 'no one is buying iPhones' because 'everyone' is buying android based phones.
My feeling is you buy what you can afford. BMW isn't failing because it can't sell cars to college students. Eventually, people begin to generate cash flow and they learn what then need from a car and if they aspire a higher performing car will purchase a BMW once they can afford it. A lot just need a car. any car.. or a bus. But some people 'value' a 'good car,' and are willing to pay a premium for it. Apple's job is to make sure their devices attract enough of those people.and keep the 'delta' far enough to validate the profit premium.
The fact that people are not buying bicycles anymore (dumb cell phones) and are buying $0.99 android phones (Chevy Geo Metros) are learning how to be mobile device users, and what the desire in their phone. A lot of people just want a phone and a browser and maybe 1 more app (FaceSpaceter). They are not iPhone users. And they aren't Samsung users... they are 'cheap phone users.'
Eventually the question is ecosystem and experience stickiness. I'm arguing that apple has to innovate enough to keep the tactile experience above android/Samsung experience, give developers tools to build killer apps and establish a stickiness to the iTMS/AppStore (and eventually other transactional sub ecosystems).
In my analysis... the real threat isn't Samsung... It's Amazon. Only Apple and Amazon are positioned to deliver that hardware/software/apps/ecosystem that will compete in the Web 4.0 world.
Again, what you are failing to understand is that the handset market WILL get commoditized. When that happens, extracting value from services will be the name of the game. If Apple doesn't drop its prices it will dwindle to extinction. I will bet you any amount of money that phones will not cost $650 dollars (inflation adjusted) in 10-20 years from now. If Apple charges $650 it will have about as much market share as the ball point pen manufacturers selling $300 pens today. The time is shortly approaching where no one will give a shit about the next feature in the iPhone. At some point Apple won't be able to differentiate itself, even if it keeps inventing because nobody will care about the additions. What's the plan when that happens?
Both Samdung and Amazon are a huge threat. They both have a propensity to commoditize the market. Apple can't stop that from happening. Pricing pressure will drive down margins.
Apple's platform is big enough now that it would take some time to dwindle away. But it may look a lot like Microsoft if it doesn't change its strategy. Although, Apple appear to be outcompeting with the iPad, which may end up being the platform device that saves the iPhone. Interestingly iPad has lower margins. I think Cook should take the same margins on the iPhone and capture more market share.
BTW, completely agree with your analysis of NFC. It is a tougher nut to crack than most people think. Same with the TV.