Hold on here. Are we supposed to take "shipped" as meaning "sold" when speaking about Apple?
Shipped = sold, either directly to an end user via an Apple store... or to carriers and retailers who will (eventually) sell them to end users.
Quote:
Originally Posted by Tallest Skil
What of other, smaller "everything stores", such as Buy.com and Overstock.com? I realize that we can discount an individual retailer's online store, as that's a different model than Amazon, but those two?
What I thought mstone meant (and please correct me if I'm wrong), is that all those online stores depend on fairly steady sales, all of which go up and down depending on the same general economic drivers. It's a slowly changing environment. There's rarely anything disruptive that gives one or another a huge advantage selling items.
Whereas in the fast paced phone / tablet business, a single poor selling model, or a huge hit designed by a competitor, can have much larger (and quicker!) ramifications on sales and revenues.
Ironically, Apple's lawsuits have helped cause the worry on that topic, because of previously secret info that came out from the trials. E.g. Analysts were surprised to find out how much Apple's profits depend on iOS sales... even more than was thought.
This showed Apple to be more vulnerable to unforeseen events like missing out on China sales, slow manufacturing output, competing devices, removal of subsidies, etc. The unpredictability is driving analysts crazy.
I'm sorry, what magical production method has Apple developed to produce iPhones with with less screens? To my knowledge, each iPhone requires one screen, if they are ordering less screens, it is because they are producing less iPhones. "Never and availability problem?" Do you read the news? iPhone 5 was plagued with production problems.
Whenever faced with an assertion that Apple has screwed up in its supply chain, your first reaction ought to be one of suspicion. Consider the level of expertise at Apple around supply chain. Does it really even pass a basic smell test that Apple over ordered a single critical part by a magnitude of 2x versus what they actually needed?
Ok, fine. Don't want to discount it yet because you can't understand a scenario where such a supply chain "issue" exists? Here is one rather reasonable possibility. Apple orders millions of screens from multiple sources. It does this to secure supply and quality. Actually, it "over orders" the screens in total. It does this for a few reasons. First, it doesn't want to risk a single source to supply all the screen. Second, it doesn't want to risk some suppliers not being able to meet the quality standards. Third, it wants to optimize pricing for the screen. So it does this by contracting with all the suppliers with certain requirements in place. If the supplier meets those requirements (within a certain timeline) then the supplier gets more of the total business. The contracts allow Apple to "cancel" parts of the order without penalty because the actual demand was always going to be less than the contracted orders.
There's nothing magical about that approach. It's not even magical to understand it. In fact, it's pretty much best practice.
Hold on here. Are we supposed to take "shipped" as meaning "sold" when speaking about Apple? I thought we poke fun at "shipped" numbers when we talk about Google/Android/Samsung phones because of them stuffing the channel to make it sound like they "sold" more than they actually did but now when talking about Apple we're supposed to be using the term "shipped" also? Did I miss something?
Hi Dick,
At every Apple quarterly earnings call, soon after the number of iPhones shipped is made public, Apple executives tell how many weeks of inventory are "in the channel", and it always looks good and reasonable. Had they been lying, it ultimately would show up as a write off or diminishing future sales as inventory is worked off. This has not happened yet for Apple, and according to all available hard numbers so far, it isn't going to happen this quarter either.
You get no such channel inventory information from most other handset vendors, and, outside of Samsung, it probably wouldn't look very good if you did.
@jragosta "I doubt it. It undoubtedly costs a lot less to make a 4 or 4S than a 5. And the selling price difference is not that great (say, $649 vs $749). It may even be that the margins are greater on the older models (but revenue is lower, of course)."
Economies of Scale. If the iPhonne 4/4s was being produced at the same levels as the iPhone 5, then it would be plenty cheaper to manufacture, but the sheer fixed cost of running a production line for a smartphone is so high, the manufacturing cost is higher than you think, even if on paper, the price of the components isn't all that much.
I suspect that I know quite a bit more about manufacturing than you do - considering the variety of multimillion dollar manufacturing companies I've run.
First, the cost of components is about 1/3 to 1/2 of the selling price, so it's not insignificant-especially given the rate of decline of prices for electronic components. It's not hard to believe that the costs have dropped by enough to make the margins acceptable. Heck, the CPU alone is probably less than half the cost of the iPhone 5's CPU.
Second, there's also production experience that you're neglecting. As you make a product, you get better at it, improving productivity and yields. Apple has been making the 4 and 4S a lot longer than the 5 and the assembly cost is therefore probably also lower.
The $100 difference in selling price between the 4S and 5 is only about 12%-20% of the selling price. It is not at all hard to believe that they're at least that much less expensive to produce.
And its doubling in stock price in like 4 months last year was all technical as well. It's called a bubble, and it looks like there's only about $70-$90 to go before the bubble is fully deflated and it will resume to trade like a normal, high quality stock.
If you are going to toss around the term "bubble" then you should at least know what it means. It refers to an artificial inflation that isn't warranted. If you look at Apple's revenue growth, profit growth, and operating cash flow then there's essentially no rational argument to be made for Apple to be only at $500/share ... especially in the context of it's price history. It's P/E is unusually small compared to the market. That said, even at $500/share it has significantly outpaced the S&P's growth rate.
Now, one could argue that future market conditions are being factored into the price. Things like increased competition, a reliance on a revenue stream that will shrink, or just having permanently shrinking margins. However, even those things don't make sense in relation to Apple's current stock price. While smartphones and tablets are increasingly competitive, the overall market for them is growing so fast that a lot of players are benefiting - and Apple is one of the primary beneficiaries despite that its market share is decreasing. Each iPhone so far (and we'll see tomorrow that the iPhone 5 is likely continuing this trend) has outsold all previous iPhone models combined. That's called growth. High growth. The iPad's sales history has shown itself on a faster upward trajectory of adoption as the iPhone.
Apple's share price is currently the victim of nothing less than significant shorting at the same time that institutional investors were taking out their profits on the stock. That drives down the share price, which will recover soon after tomorrow when it's seen that Apple's fundamentals remain real and the tax equation has stabilized for the year.
But, but, but Fortune says Apple needs to license iOS and build a bunch of iPhones at different price points to survive,
http://tech.fortune.cnn.com/2013/01/17/apple-risks-repeating-the-1980s/ There are a number of things Apple could do today to ensure it doesn't relive its 1980s meltdown. It could for one open up its iOS so that other manufacturers could integrate it with their phone. This will bring a new line of customers into the iTunes orbit. It could also create a larger line of phones to fit a multitude of price points. After all, the iPhone is simply a delivery device for content—the more people you have on your network, the larger your revenue. If Apple continues on its current path, it could lose—a lot.
Watch Apple's stock tank if they announce 49.9 million phones sold- from a company that wasn't in the phone business a few yrs ago.
Who am I kidding, it will probably tank or barely move regardless of what they announce.
100% this. Apple could announce they sold 500 million phones, and that these phones single-handedly were able to cure all forms of cancer in the world, and people would still complain that there weren't a billion of them and they didn't cure AIDS too.
Older units = lower cost to consumer so lower gross revenues per unit, but higher margins on the unit.
Well, I for one don't believe that for a minute. I can see where the cost to produce would be lower but it would be directly proportional to the consumer price at the very most and, in my experience, would take a bit of a hit in pricing just because it is an older unit, and therefore margins would be slightly lower.
... and, yes, you can rave and rant all day that I'm wrong but so far I haven't seen any definitive evidence to prove otherwise.
But, but, but Fortune says Apple needs to license iOS and build a bunch of iPhones at different price points to survive,
http://tech.fortune.cnn.com/2013/01/17/apple-risks-repeating-the-1980s/
There are a number of things Apple could do today to ensure it doesn't relive its 1980s meltdown. It could for one open up its iOS so that other manufacturers could integrate it with their phone. This will bring a new line of customers into the iTunes orbit. It could also create a larger line of phones to fit a multitude of price points. After all, the iPhone is simply a delivery device for content—the more people you have on your network, the larger your revenue. If Apple continues on its current path, it could lose—a lot.
The dimwits at fortune forget that Apple is a hardware company.
100% this. Apple could announce they sold 500 million phones, and that these phones single-handedly were able to cure all forms of cancer in the world, and people would still complain that there weren't a billion of them and they didn't cure AIDS too.
That's not true at all.
If Apple announced the sale of 500 million phones, best margins ever, then the price of the stock would definitely go up.... $10.
At every Apple quarterly earnings call, soon after the number of iPhones shipped is made public, Apple executives tell how many weeks of inventory are "in the channel", and it always looks good and reasonable.
Note that when Apple reports weeks of inventory, they mean how much they have ready to sell, not what's in retailer warehouses (the world's retailers don't do keep six weeks of inventory... that's Apple's job).
This is critical information for analysts, because it shows (as you said) that Apple's production is going well, and is prepared for new markets and sales, and possible production disruptions.
It is generally considered good practice for an electronics manufacturer to have 4-6 weeks' worth of inventory ready to sell.
Lowering inventory also tells us when/if Apple is preparing a new model. Or rather, used to. Now Apple lumps all their iPhone models together. (When people talk about other companies not giving info, well, Apple holds back critical info as well, by not breaking out the sales or inventory numbers for each model.)
Had they been lying, it ultimately would show up as a write off or diminishing future sales as inventory is worked off. This has not happened yet for Apple, and according to all available hard numbers so far, it isn't going to happen this quarter either.
Actually, it happened twice last year, once for iPhones and once for iPads.
Both times, Cook had to explain unusually low sales as being due to stores having millions of units of extra inventory left over from the previous quarter. The devices were eventually all sold, but the previous quarters' end user sales had not come close to Apple's announced "sales" for that quarter. That's not considered "lying", btw.
Apple does have a few tricks they use. One is to shift shipments of limited inventory of an older device to retailers instead of their own stores. This is because shipments to retailers count as sales, whereas shipments to their own stores do not. If you see limited availability in Apple stores but not in other retail stores, this is a sign of Apple wanting bigger numbers.
50M is a big number. I am surprised to know that Verizon has sold so many iPhones. Apple needs to be aware that Microsoft wants to make a dent in the sales of Apple%u2019s products. Microsoft in talks to invest up to $3 billion to help Dell go private. http://x.co/rmnP
50M is a big number. I am surprised to know that Verizon has sold so many iPhones. Apple needs to be aware that Microsoft wants to make a dent in the sales of Apple%u2019s products. Microsoft in talks to invest up to $3 billion to help Dell go private. http://x.co/rmnP
I doubt there is much, if any, overlap of potential customers for those two companies.
I also don't think Microsoft wants to make a dent in the sales of Apple products. At this point, they just want to become relevant in the smartphone/tablet space.
(When people talk about other companies not giving info, well, Apple holds back critical info as well, by not breaking out the sales or inventory numbers for each model.)
Why should they break it down by each model. They give you a total sold/shipped and the ASP. Unlike other electronic companies, they give actual numbers and not percentages or estimates or qualifiers.
Well, I for one don't believe that for a minute. I can see where the cost to produce would be lower but it would be directly proportional to the consumer price at the very most and, in my experience, would take a bit of a hit in pricing just because it is an older unit, and therefore margins would be slightly lower.
... and, yes, you can rave and rant all day that I'm wrong but so far I haven't seen any definitive evidence to prove otherwise.
We know the difference in price. There's a $100 difference in price, so $650 instead of $750. Even if you subtract a bit from both numbers to get a wholesale price, Apple is getting only about 12-15% less for the 4S than for the 5.
Based on 2 decades of running manufacturing companies and published numbers for electronics components, arguing that it costs them 12-15% less to make the 4S compared to the 5 is a no-brainer.
We know the difference in price. There's a $100 difference in price, so $650 instead of $750. Even if you subtract a bit from both numbers to get a wholesale price, Apple is getting only about 12-15% less for the 4S than for the 5.
Based on 2 decades of running manufacturing companies and published numbers for electronics components, arguing that it costs them 12-15% less to make the 4S compared to the 5 is a no-brainer.
No offence... but anecdotal evidence (ie. 2 decades of running manufacturing companies) from somebody on the internet just doesn't cut it.
Based on 2 decades of running manufacturing companies and published numbers for electronics components, arguing that it costs them 12-15% less to make the 4S compared to the 5 is a no-brainer.
I think you're wasting your time trying to explain to Tex how fixed costs for product manufacturing get amortized over the entire manufacturing lifespan.
The principle is simple. The longer you manufacture the same thing with the same investment, the lower the "per unit" portion of the investment because the capital investment (just like R&D) is amortized across all of the produced items. Even if all else remains equal - which it doesn't, because component costs and production efficiencies also factor into the cost structure - the per unit margin increases.
Comments
Quote:
Originally Posted by Dickprinter
Hold on here. Are we supposed to take "shipped" as meaning "sold" when speaking about Apple?
Shipped = sold, either directly to an end user via an Apple store... or to carriers and retailers who will (eventually) sell them to end users.
Quote:
Originally Posted by Tallest Skil
What of other, smaller "everything stores", such as Buy.com and Overstock.com? I realize that we can discount an individual retailer's online store, as that's a different model than Amazon, but those two?
What I thought mstone meant (and please correct me if I'm wrong), is that all those online stores depend on fairly steady sales, all of which go up and down depending on the same general economic drivers. It's a slowly changing environment. There's rarely anything disruptive that gives one or another a huge advantage selling items.
Whereas in the fast paced phone / tablet business, a single poor selling model, or a huge hit designed by a competitor, can have much larger (and quicker!) ramifications on sales and revenues.
Ironically, Apple's lawsuits have helped cause the worry on that topic, because of previously secret info that came out from the trials. E.g. Analysts were surprised to find out how much Apple's profits depend on iOS sales... even more than was thought.
This showed Apple to be more vulnerable to unforeseen events like missing out on China sales, slow manufacturing output, competing devices, removal of subsidies, etc. The unpredictability is driving analysts crazy.
Quote:
Originally Posted by RRtexasranger
I'm sorry, what magical production method has Apple developed to produce iPhones with with less screens? To my knowledge, each iPhone requires one screen, if they are ordering less screens, it is because they are producing less iPhones. "Never and availability problem?" Do you read the news? iPhone 5 was plagued with production problems.
Whenever faced with an assertion that Apple has screwed up in its supply chain, your first reaction ought to be one of suspicion. Consider the level of expertise at Apple around supply chain. Does it really even pass a basic smell test that Apple over ordered a single critical part by a magnitude of 2x versus what they actually needed?
Ok, fine. Don't want to discount it yet because you can't understand a scenario where such a supply chain "issue" exists? Here is one rather reasonable possibility. Apple orders millions of screens from multiple sources. It does this to secure supply and quality. Actually, it "over orders" the screens in total. It does this for a few reasons. First, it doesn't want to risk a single source to supply all the screen. Second, it doesn't want to risk some suppliers not being able to meet the quality standards. Third, it wants to optimize pricing for the screen. So it does this by contracting with all the suppliers with certain requirements in place. If the supplier meets those requirements (within a certain timeline) then the supplier gets more of the total business. The contracts allow Apple to "cancel" parts of the order without penalty because the actual demand was always going to be less than the contracted orders.
There's nothing magical about that approach. It's not even magical to understand it. In fact, it's pretty much best practice.
Quote:
Originally Posted by Dickprinter
Hold on here. Are we supposed to take "shipped" as meaning "sold" when speaking about Apple? I thought we poke fun at "shipped" numbers when we talk about Google/Android/Samsung phones because of them stuffing the channel to make it sound like they "sold" more than they actually did but now when talking about Apple we're supposed to be using the term "shipped" also? Did I miss something?
Hi Dick,
At every Apple quarterly earnings call, soon after the number of iPhones shipped is made public, Apple executives tell how many weeks of inventory are "in the channel", and it always looks good and reasonable. Had they been lying, it ultimately would show up as a write off or diminishing future sales as inventory is worked off. This has not happened yet for Apple, and according to all available hard numbers so far, it isn't going to happen this quarter either.
You get no such channel inventory information from most other handset vendors, and, outside of Samsung, it probably wouldn't look very good if you did.
Thompson
I suspect that I know quite a bit more about manufacturing than you do - considering the variety of multimillion dollar manufacturing companies I've run.
First, the cost of components is about 1/3 to 1/2 of the selling price, so it's not insignificant-especially given the rate of decline of prices for electronic components. It's not hard to believe that the costs have dropped by enough to make the margins acceptable. Heck, the CPU alone is probably less than half the cost of the iPhone 5's CPU.
Second, there's also production experience that you're neglecting. As you make a product, you get better at it, improving productivity and yields. Apple has been making the 4 and 4S a lot longer than the 5 and the assembly cost is therefore probably also lower.
The $100 difference in selling price between the 4S and 5 is only about 12%-20% of the selling price. It is not at all hard to believe that they're at least that much less expensive to produce.
Quote:
Originally Posted by RRtexasranger
And its doubling in stock price in like 4 months last year was all technical as well. It's called a bubble, and it looks like there's only about $70-$90 to go before the bubble is fully deflated and it will resume to trade like a normal, high quality stock.
If you are going to toss around the term "bubble" then you should at least know what it means. It refers to an artificial inflation that isn't warranted. If you look at Apple's revenue growth, profit growth, and operating cash flow then there's essentially no rational argument to be made for Apple to be only at $500/share ... especially in the context of it's price history. It's P/E is unusually small compared to the market. That said, even at $500/share it has significantly outpaced the S&P's growth rate.
Now, one could argue that future market conditions are being factored into the price. Things like increased competition, a reliance on a revenue stream that will shrink, or just having permanently shrinking margins. However, even those things don't make sense in relation to Apple's current stock price. While smartphones and tablets are increasingly competitive, the overall market for them is growing so fast that a lot of players are benefiting - and Apple is one of the primary beneficiaries despite that its market share is decreasing. Each iPhone so far (and we'll see tomorrow that the iPhone 5 is likely continuing this trend) has outsold all previous iPhone models combined. That's called growth. High growth. The iPad's sales history has shown itself on a faster upward trajectory of adoption as the iPhone.
Apple's share price is currently the victim of nothing less than significant shorting at the same time that institutional investors were taking out their profits on the stock. That drives down the share price, which will recover soon after tomorrow when it's seen that Apple's fundamentals remain real and the tax equation has stabilized for the year.
Quote:
Originally Posted by Technarchy
50 million? That's it?
Android had 50 million activations every minute.
Apple can't compete without a 6", 4K phablet...and a stylus...
Trouble is the iHaters are already saying that right here in this thread. And they actually believe it.
http://tech.fortune.cnn.com/2013/01/17/apple-risks-repeating-the-1980s/
There are a number of things Apple could do today to ensure it doesn't relive its 1980s meltdown. It could for one open up its iOS so that other manufacturers could integrate it with their phone. This will bring a new line of customers into the iTunes orbit. It could also create a larger line of phones to fit a multitude of price points. After all, the iPhone is simply a delivery device for content—the more people you have on your network, the larger your revenue. If Apple continues on its current path, it could lose—a lot.
Quote:
Originally Posted by Slurpy
Watch Apple's stock tank if they announce 49.9 million phones sold- from a company that wasn't in the phone business a few yrs ago.
Who am I kidding, it will probably tank or barely move regardless of what they announce.
100% this. Apple could announce they sold 500 million phones, and that these phones single-handedly were able to cure all forms of cancer in the world, and people would still complain that there weren't a billion of them and they didn't cure AIDS too.
Quote:
Originally Posted by island hermit
As someone else noted... the 4 and 4S numbers will be seen as affecting margins ...
Older units = lower cost to consumer so lower gross revenues per unit, but higher margins on the unit.
Quote:
Originally Posted by battiato1981
Older units = lower cost to consumer so lower gross revenues per unit, but higher margins on the unit.
Well, I for one don't believe that for a minute. I can see where the cost to produce would be lower but it would be directly proportional to the consumer price at the very most and, in my experience, would take a bit of a hit in pricing just because it is an older unit, and therefore margins would be slightly lower.
... and, yes, you can rave and rant all day that I'm wrong but so far I haven't seen any definitive evidence to prove otherwise.
The dimwits at fortune forget that Apple is a hardware company.
Quote:
Originally Posted by hittrj01
100% this. Apple could announce they sold 500 million phones, and that these phones single-handedly were able to cure all forms of cancer in the world, and people would still complain that there weren't a billion of them and they didn't cure AIDS too.
That's not true at all.
If Apple announced the sale of 500 million phones, best margins ever, then the price of the stock would definitely go up.... $10.
Quote:
Originally Posted by thompr
At every Apple quarterly earnings call, soon after the number of iPhones shipped is made public, Apple executives tell how many weeks of inventory are "in the channel", and it always looks good and reasonable.
Note that when Apple reports weeks of inventory, they mean how much they have ready to sell, not what's in retailer warehouses (the world's retailers don't do keep six weeks of inventory... that's Apple's job).
This is critical information for analysts, because it shows (as you said) that Apple's production is going well, and is prepared for new markets and sales, and possible production disruptions.
It is generally considered good practice for an electronics manufacturer to have 4-6 weeks' worth of inventory ready to sell.
Lowering inventory also tells us when/if Apple is preparing a new model. Or rather, used to. Now Apple lumps all their iPhone models together. (When people talk about other companies not giving info, well, Apple holds back critical info as well, by not breaking out the sales or inventory numbers for each model.)
Had they been lying, it ultimately would show up as a write off or diminishing future sales as inventory is worked off. This has not happened yet for Apple, and according to all available hard numbers so far, it isn't going to happen this quarter either.
Actually, it happened twice last year, once for iPhones and once for iPads.
Both times, Cook had to explain unusually low sales as being due to stores having millions of units of extra inventory left over from the previous quarter. The devices were eventually all sold, but the previous quarters' end user sales had not come close to Apple's announced "sales" for that quarter. That's not considered "lying", btw.
Apple does have a few tricks they use. One is to shift shipments of limited inventory of an older device to retailers instead of their own stores. This is because shipments to retailers count as sales, whereas shipments to their own stores do not. If you see limited availability in Apple stores but not in other retail stores, this is a sign of Apple wanting bigger numbers.
Quote:
Originally Posted by landbend
50M is a big number. I am surprised to know that Verizon has sold so many iPhones. Apple needs to be aware that Microsoft wants to make a dent in the sales of Apple%u2019s products. Microsoft in talks to invest up to $3 billion to help Dell go private. http://x.co/rmnP
I doubt there is much, if any, overlap of potential customers for those two companies.
I also don't think Microsoft wants to make a dent in the sales of Apple products. At this point, they just want to become relevant in the smartphone/tablet space.
Quote:
Originally Posted by island hermit
I'm always surprised at how many more people cry manipulation when the stock is headed down as to when AAPL is headed up.
Well, okay, I'm not surprised...
Finally someone with some sense.
Let the dummies bitch and moan, those of us who don't have on rose colored glasses will profit from the echo chamber that is this board.
Why should they break it down by each model. They give you a total sold/shipped and the ASP. Unlike other electronic companies, they give actual numbers and not percentages or estimates or qualifiers.
We know the difference in price. There's a $100 difference in price, so $650 instead of $750. Even if you subtract a bit from both numbers to get a wholesale price, Apple is getting only about 12-15% less for the 4S than for the 5.
Based on 2 decades of running manufacturing companies and published numbers for electronics components, arguing that it costs them 12-15% less to make the 4S compared to the 5 is a no-brainer.
Quote:
Originally Posted by jragosta
We know the difference in price. There's a $100 difference in price, so $650 instead of $750. Even if you subtract a bit from both numbers to get a wholesale price, Apple is getting only about 12-15% less for the 4S than for the 5.
Based on 2 decades of running manufacturing companies and published numbers for electronics components, arguing that it costs them 12-15% less to make the 4S compared to the 5 is a no-brainer.
No offence... but anecdotal evidence (ie. 2 decades of running manufacturing companies) from somebody on the internet just doesn't cut it.
Quote:
Originally Posted by jragosta
Based on 2 decades of running manufacturing companies and published numbers for electronics components, arguing that it costs them 12-15% less to make the 4S compared to the 5 is a no-brainer.
I think you're wasting your time trying to explain to Tex how fixed costs for product manufacturing get amortized over the entire manufacturing lifespan.
The principle is simple. The longer you manufacture the same thing with the same investment, the lower the "per unit" portion of the investment because the capital investment (just like R&D) is amortized across all of the produced items. Even if all else remains equal - which it doesn't, because component costs and production efficiencies also factor into the cost structure - the per unit margin increases.