Charge for services and software. That is the future.
Apple needs to realize that hardware is just a trojan horse. The real money and MARGINS are made with selling services and software. They need to expand marketshare to 20%. Even if this means sacrificing margins in the short term.
Yes. And that's partly the need for the boatload of cash.
For those criticizing the stock pile of cash need to realize the significance of being cash strong in a competitive environment. A cash horde intimidates any competitor looking to make desperate moves/inroads into your revenue stream, provides potential to buy out any tech/company, and allows for major disruption (even at a loss). Apple may not have the "monopoly" that amazon and google has, but its cash horde provides almost as much security that a "monopoly" does.
AAPL deserves a P/E closer to that of a value-growth stock...around 14 NOW. Tim said it himself that 2014 has big things in store, and if that happens, price will hit 650 on the announcement(s) alone.
The growth Apple experienced in the past is unsustainable without the introduction of products in new categories. I'm sure that once the watch or the TV comes out, Apple will be the darling of investors it used to be. As it stands now, Apple's stock is going to be stagnant because the company seems to be slowing its pace.
Just as a quick tutorial in stock pricing (for which there is really no accurate model), the current price is supposed to represent the present value of all future earnings. If earnings are expected to grow rapidly, the current price should increase. If earnings are expected to remain level forever, the price of the stock theoretically shouldn't change. Apple's expected future earnings are closer to the second case than the first, so the stock price should remain relatively level or grow slightly. Obviously in the real world, the price wouldn't sit at one point indefinitely even if earnings were expected to be flat, so in Apple's case you might expect the price to go up more than down on average but to change little year-over-year until a new growth opportunity is realized.
""It's becoming increasingly clear that markets such as the U.S. are reaching high levels of consumer saturation and while emerging markets continue to show strong growth this has not been enough to sustain the dramatic worldwide growth rates of years past," said Tom Mainelli, tablet research director for market research firm IDC."
Ok. And?
We still need to upgrade our devices.
Apple's marketshare isn't going to change just from people moving from an iPhone to an iPhone every two years.
The only entity on Earth with enough money to even make it be possible is themselves. I’d love them to go private. No more idiots who don’t comprehend the company decreasing its value, no more idiots who’ve done no work whining about how they “deserve” the money earned by others…
Does Apple even need to sell stock anymore? I'm unclear of the benefit for a company like Apple.
It's great when a company is starting out and they get that big infusion of cash.
But now Apple has no problem making a ton of cash by selling products.
The only entity on Earth with enough money to even make it be possible is themselves. I’d love them to go private. No more idiots who don’t comprehend the company decreasing its value, no more idiots who’ve done no work whining about how they “deserve” the money earned by others…
Apple couldn't sustain its operations without public investment. As stressful as the market can be, it provides funding on a scale that Apple would be unwise to substitute with debt alone.
Until Apple does come up with its next big thing, it should focus on stealing from Android to grow. The market is saturated at the high end, but there are an awful lot of Android users for the picking. A good phone release this year (probably with a bigger screen), plus a stronger marketing/advertising effort could push up the growth quite a bit, and for several years if done right. Look at how much headway Samsung made with its huge marketing/advertising push. Apple has done it in the past and could do it again.
Fortunately… they sell products. That result in 13 billion in profit per quarter. Amassing billions in cash to be used for those operations.
Right now they have a market cap of $446.73 billion, which means that they would have to take on a couple hundred billion dollars in debt to take the company private. Let's say it would require a $300 billion loan at 5% per year over 15 years. That profit per quarter would be diminished by $7.117 billion per quarter simply to service the debt, and it would only get worse if the interest rate were higher or the term shorter. With the remaining $6 billion in profit they would have to cover any increases in R&D to develop new product lines, make acquisitions of attractive companies, service any new debt required to build out facilities, etc. Plus they would have to pause all ongoing development because the buyback could potentially require every last dollar of their current cash hoard.
Apple's marketshare isn't going to change just from people moving from an iPhone to an iPhone every two years.
The good news is... Apple has been selling more and more iPhones each year. This proves that it's not just the same people buying iPhones over and over again.
And Apple is profitable while selling those iPhones... another bonus. (and arguably the most important thing when running a business)
But remember... the entire market is growing. The market is made up of dozens of companies. Apple is just one of those companies. Of course Apple's market share will be affected by everyone else's market share.
Every two to four years, most of those customers will be hitting their upgrade cycle. If Apple continues to make great, competitive products, then they'll be selling through at a brisk pace indefinitely. And there's clearly plenty of up market yet to win over. And to compete for. And every day, more people in developing countries are earning enough to afford them.
I just did a round of upgrades last November/December. Replaced my iPhone 3GS with a 5s, my iPad (1st gen) with a Retina iPad Mini, and added a 13" MacBook Air to the 'family'. I'll be upgrading my 2010 iMac when the next-gen arrives.
There's nothing remotely compelling to jump ship from Apple for. I looked long and hard at the "androids" on the market and although a few are interesting, they were far from being a real alternative to iPhone for me. Not yet anyway! No alternate tablets on offer either.
And besides, it isn't only the hardware, it's also the underlying UX philosophy, and the ecosystem, and once you get a taste of all that working together so seamlessly, it's hard to imagine going anywhere else if it's even slightly more fragmented...
I think Apple has years of upside ahead. People who bought an iPhone for the first time this quarter will very likely be future iPad and Mac customers, and have a >90% chance of being a return iPhone customer.
I don't understand this panicked worry over their long term health. I honestly don't.
Charge for services and software. That is the future.
Apple needs to realize that hardware is just a trojan horse. The real money and MARGINS are made with selling services and software. They need to expand marketshare to 20%. Even if this means sacrificing margins in the short term.
Sorry to say it, but... Apple would quickly become a sad ghost of its former self with someone like you in charge of it....
Apple already enjoys better than ***Thirty Seven Percent*** NET MARGINS on Profit!!!!! What is it that you think they need to realize that they don't?
Apple's marketshare isn't going to change just from people moving from an iPhone to an iPhone every two years.
Of course not. But, as evidenced by yet another record sales quarter, they are still adding NEW customers at a healthy pace (Over $8 billion in China alone).
Half the people I know who were introduced to Apple via the iPhone now ALSO own at least one iPad and at least one Mac.
A good number of people I know who started on iPhone, ended up buying them for spouse and children as well.
One iPhone sale rarely stays one iPhone sale. The halo effect isn't only on the personal level. We all become brand ambassadors, walking around loving our devices, and just getting stuff done.
Recent polls showing what people aspire to or plan to buy remain very much in Apple's favor.
Again, it's REALLY not clear to me why the pundits and markets are reacting this way. If it's not hysteria, or gross manipulation, then it's a serious oversight...
People had already seen that for a few quarters. Now is just a confirmation. Had to happen eventually, nothing new. I already imagine when Apple will sell less phones than the years before, maybe next year. People will bash it stupidly, even if it's meant to happen, sales can't possibly grow indefinitely.
Charge for services and software. That is the future.
Apple needs to realize that hardware is just a trojan horse. The real money and MARGINS are made with selling services and software. They need to expand marketshare to 20%. Even if this means sacrificing margins in the short term.
What are you talking about? Apple makes money mostly from hardware. Why should that change?
I find myself feeling exactly the same. I spent a lot of time scraping money together to build a position in AAPL because I believed in the company and loved the products. I hoped that it would help to secure my retirement. But now I am not so sure. Cook is a weak leader who inspires no confidence. As CEO he has a fiduciary responsibility to the stockholders that I feel he has failed at. Yes, the stock is higher now than the day he got the job, but it may not be for long unless something changes. A new product catagory. Expanding market share of current product categories. Something to reignite growth.
As a financial analyst I am disturbed when I hear "we've had the best week of activations ever in China" and then hear that he expects revenues to be flat or even down from a year ago, which was before adding a potential of up to a Billion new customers. This tells me that he is expecting the gains from China to only (maybe) offset losses in other areas. At least in the next quarter or two.
Long term I am disturbed by the hoarding of cash. What exactly is Cook afraid of that he feels it is necessary to keep $150 Billion or so in (net) cash? Is he afraid that growth is slowing to the point that it will cease altogether? That they will actually have YoY sequential declines in profit until they are making no profit at alll? That sounds absurd on the face of it, but his refusal to do anything with that cash is also absurd, in my opinion. I would love them to buy DuckDuckGo and have their own search engine. I would love them to agressively go after content for Apple TV. I would love them to reduce the float by buying back more shares. But as of now they don't seem inclined to.
So i will be selling my entire position soon. I am hoping for a dead cat bounce tomorrow or Monday so I can get a decent exit point. Then I will wait. Since Cook has already told us not to expect any growth for at least the next three months I don't expect the stock to do much until the summer. Hopefully the iPhone 6 will have a larger screeen which might get new customers as well as current customers who are upgrading. Hopefully they will come out with a NEW product catagory, and get into mobie payments. Otherwise the stock may continue to disappoint.
Of course AAPL is also one of the largest holdings in many mutual funds, so even after I sell my common shares I will still have some skin in the game, but at least it won't be as painful as watching my stock portfolio die a slow death because of one bad investment.
You twice wrote 'catagory'. For an expert you need to work on your English.
Anyway, 78% of Android phones have a screen of 4 inches or less. Even if people want so much a bigger iPhone, making one wouldn't bring that much more people than are now buying it. And if they didn't keep the smaller size at the same time, they might even lose customers (yes, I really think that some people don't want a bigger phone).
The only entity on Earth with enough money to even make it be possible is themselves. I’d love them to go private. No more idiots who don’t comprehend the company decreasing its value, no more idiots who’ve done no work whining about how they “deserve” the money earned by others…
Totally agree. What are the investors useful for? People will try making excuses but in reality Apple doesn't need them and on the contrary would be better off without them. Maybe when they get to 300 billion in the bank they will do that **dreaming**
Comments
Charge for services and software. That is the future.
Apple needs to realize that hardware is just a trojan horse. The real money and MARGINS are made with selling services and software. They need to expand marketshare to 20%. Even if this means sacrificing margins in the short term.
Yes. And that's partly the need for the boatload of cash.
For those criticizing the stock pile of cash need to realize the significance of being cash strong in a competitive environment. A cash horde intimidates any competitor looking to make desperate moves/inroads into your revenue stream, provides potential to buy out any tech/company, and allows for major disruption (even at a loss). Apple may not have the "monopoly" that amazon and google has, but its cash horde provides almost as much security that a "monopoly" does.
AAPL deserves a P/E closer to that of a value-growth stock...around 14 NOW. Tim said it himself that 2014 has big things in store, and if that happens, price will hit 650 on the announcement(s) alone.
The growth Apple experienced in the past is unsustainable without the introduction of products in new categories. I'm sure that once the watch or the TV comes out, Apple will be the darling of investors it used to be. As it stands now, Apple's stock is going to be stagnant because the company seems to be slowing its pace.
Just as a quick tutorial in stock pricing (for which there is really no accurate model), the current price is supposed to represent the present value of all future earnings. If earnings are expected to grow rapidly, the current price should increase. If earnings are expected to remain level forever, the price of the stock theoretically shouldn't change. Apple's expected future earnings are closer to the second case than the first, so the stock price should remain relatively level or grow slightly. Obviously in the real world, the price wouldn't sit at one point indefinitely even if earnings were expected to be flat, so in Apple's case you might expect the price to go up more than down on average but to change little year-over-year until a new growth opportunity is realized.
""It's becoming increasingly clear that markets such as the U.S. are reaching high levels of consumer saturation and while emerging markets continue to show strong growth this has not been enough to sustain the dramatic worldwide growth rates of years past," said Tom Mainelli, tablet research director for market research firm IDC."
Ok. And?
We still need to upgrade our devices.
Apple's marketshare isn't going to change just from people moving from an iPhone to an iPhone every two years.
Does Apple even need to sell stock anymore? I'm unclear of the benefit for a company like Apple.
It's great when a company is starting out and they get that big infusion of cash.
But now Apple has no problem making a ton of cash by selling products.
The only entity on Earth with enough money to even make it be possible is themselves. I’d love them to go private. No more idiots who don’t comprehend the company decreasing its value, no more idiots who’ve done no work whining about how they “deserve” the money earned by others…
Apple couldn't sustain its operations without public investment. As stressful as the market can be, it provides funding on a scale that Apple would be unwise to substitute with debt alone.
Apple couldn't sustain its operations without public investment.
Fortunately… they sell products. That result in 13 billion in profit per quarter. Amassing billions in cash to be used for those operations.
Until Apple does come up with its next big thing, it should focus on stealing from Android to grow. The market is saturated at the high end, but there are an awful lot of Android users for the picking. A good phone release this year (probably with a bigger screen), plus a stronger marketing/advertising effort could push up the growth quite a bit, and for several years if done right. Look at how much headway Samsung made with its huge marketing/advertising push. Apple has done it in the past and could do it again.
Fortunately… they sell products. That result in 13 billion in profit per quarter. Amassing billions in cash to be used for those operations.
Right now they have a market cap of $446.73 billion, which means that they would have to take on a couple hundred billion dollars in debt to take the company private. Let's say it would require a $300 billion loan at 5% per year over 15 years. That profit per quarter would be diminished by $7.117 billion per quarter simply to service the debt, and it would only get worse if the interest rate were higher or the term shorter. With the remaining $6 billion in profit they would have to cover any increases in R&D to develop new product lines, make acquisitions of attractive companies, service any new debt required to build out facilities, etc. Plus they would have to pause all ongoing development because the buyback could potentially require every last dollar of their current cash hoard.
It's a bad plan.
It's a bad plan.
You’re absolutely right. I don’t support Apple taking on any debt for anything, particularly if they can pay for it.
The good news is... Apple has been selling more and more iPhones each year. This proves that it's not just the same people buying iPhones over and over again.
And Apple is profitable while selling those iPhones... another bonus. (and arguably the most important thing when running a business)
But remember... the entire market is growing. The market is made up of dozens of companies. Apple is just one of those companies. Of course Apple's market share will be affected by everyone else's market share.
Sold 150 shares at $500
I give up on this POS
And so, the source of the rancor and bitterness is revealed. Hahahahahaha...
Every two to four years, most of those customers will be hitting their upgrade cycle. If Apple continues to make great, competitive products, then they'll be selling through at a brisk pace indefinitely. And there's clearly plenty of up market yet to win over. And to compete for. And every day, more people in developing countries are earning enough to afford them.
I just did a round of upgrades last November/December. Replaced my iPhone 3GS with a 5s, my iPad (1st gen) with a Retina iPad Mini, and added a 13" MacBook Air to the 'family'. I'll be upgrading my 2010 iMac when the next-gen arrives.
There's nothing remotely compelling to jump ship from Apple for. I looked long and hard at the "androids" on the market and although a few are interesting, they were far from being a real alternative to iPhone for me. Not yet anyway! No alternate tablets on offer either.
And besides, it isn't only the hardware, it's also the underlying UX philosophy, and the ecosystem, and once you get a taste of all that working together so seamlessly, it's hard to imagine going anywhere else if it's even slightly more fragmented...
I think Apple has years of upside ahead. People who bought an iPhone for the first time this quarter will very likely be future iPad and Mac customers, and have a >90% chance of being a return iPhone customer.
I don't understand this panicked worry over their long term health. I honestly don't.
Charge for services and software. That is the future.
Apple needs to realize that hardware is just a trojan horse. The real money and MARGINS are made with selling services and software. They need to expand marketshare to 20%. Even if this means sacrificing margins in the short term.
Sorry to say it, but... Apple would quickly become a sad ghost of its former self with someone like you in charge of it....
Apple already enjoys better than ***Thirty Seven Percent*** NET MARGINS on Profit!!!!! What is it that you think they need to realize that they don't?
How much MORE do you need from them? FFS man!
Apple's marketshare isn't going to change just from people moving from an iPhone to an iPhone every two years.
Of course not. But, as evidenced by yet another record sales quarter, they are still adding NEW customers at a healthy pace (Over $8 billion in China alone).
Half the people I know who were introduced to Apple via the iPhone now ALSO own at least one iPad and at least one Mac.
A good number of people I know who started on iPhone, ended up buying them for spouse and children as well.
One iPhone sale rarely stays one iPhone sale. The halo effect isn't only on the personal level. We all become brand ambassadors, walking around loving our devices, and just getting stuff done.
Recent polls showing what people aspire to or plan to buy remain very much in Apple's favor.
Again, it's REALLY not clear to me why the pundits and markets are reacting this way. If it's not hysteria, or gross manipulation, then it's a serious oversight...
I'm quite certain nobody had to look up 'ye'
Oh you of little faith.
You twice wrote 'catagory'. For an expert you need to work on your English.
Anyway, 78% of Android phones have a screen of 4 inches or less. Even if people want so much a bigger iPhone, making one wouldn't bring that much more people than are now buying it. And if they didn't keep the smaller size at the same time, they might even lose customers (yes, I really think that some people don't want a bigger phone).
Totally agree. What are the investors useful for? People will try making excuses but in reality Apple doesn't need them and on the contrary would be better off without them. Maybe when they get to 300 billion in the bank they will do that **dreaming**