clarker99

rogifan_new said:

Why Apple is focusing on users not units? Because units aren’t growing like they used to. I will say though seeing Apple become a company focused on extracting more money out of existing users is kind of depressing. Not nearly as exciting as the great product reveal on stage.

gmgravytrain said:

Whether this market cap thing is temporary or not, Microsoft as a company continues to remain valued much higher than Apple, by Wall Street standards, because of its cloud business. Apple was so stupid to pass up on acquiring a cloud business considering all the money Apple had in the bank. Cloud businesses are always claimed to have unlimited growth but Apple keeps sticking only with its iPhone business which has hit a solid wall of no-growth. Apple probably could afford to acquire a cloud business if it really wanted to.

I can only imagine Microsoft shareholders are laughing hard at how stupid Apple shareholders are for believing in the company. It's still difficult for me to believe Apple shed so much market cap value in just a couple of weeks due to barely missing iPhone sales expectations. The result looks as though Apple is on its way out of business.  As soon as Nadella took over Microsoft he was able to turn it around almost instantly and Wall Street accepted it without any doubts.  He was able to correct the problems and double the company's value in a couple of years and Microsoft is now worth more than Apple.  Apple's trillion-dollar market cap practically disappeared overnight.  Apple had enough money to build its value on a foundation of titanium.  Apple apparently built its value on a foundation of cotton.

Apple is simply too volatile and not a very trustworthy company for big investors. It seems as though nothing Apple does or has can stop the stock from totally crashing on unsubstantiated rumors. It's really crazy from my point of view. Why is it so difficult for Apple to make it's business more solid like other tech companies are able to manage? It seems as though there must be something wrong with its business model or management techniques that aren't quite reliable enough for investors.

I'm not really complaining, but I'm very puzzled about this. A month ago, Apple looked relatively solid and then poof!, a huge loss of value. Apple should learn how to diversify its revenue streams. I thought Apple had some hooks into the enterprise but I must have been mistaken. How can any investor really put any faith in Apple if this sort of loss is going to occur every few years?  I can only hope they have the ability to recover but the iPhone can't be depended upon anymore.  Apple has had years to outdistance Microsoft in value but basically threw its chances away by sitting back and relying on one product.  What's done is done and I can only hope Apple has learned some sort of lesson.

One commenter said that if the iPhone sneezes the entire company catches a cold.  Ain't that the truth.  An ugly, freaking truth.  Apple has actually caught a bad case of pneumonia.

macxpress said:

ireland said:

Lest with forget Apple's inevitable price hike for them. $2,000 iPhone... you can do it, Tim. Sigh.

Because nothing else in this world is also increasing in price...*sighs*

avon b7 said:

macplusplus said:

avon b7 said:

Rayz2016 said:

avon b7 said:

Rayz2016 said:

zoetmb said:

lkrupp said:

rogifan_new said:

pjs_socal said:

Microsoft has a P/E ratio of 45 and Apple has a P/E ratio of 15.

Apple and Microsoft have similar margins and Apple had better growth in 2018. Apple makes 2.5x more revenue and 3x more profits. So, why are Microsoft shares valued at 3x Apple’s? Because investors are morons.

In reality Microsoft is worth ⅓ the value of Apple.

Because Microsoft is diversified with recurring revenue streams which Wall Street loves. With Apple if iPhone sneezes the entire company gets a cold.

So when did the iPhone sneeze? I must have missed that. The only thing I’ve heard are the predictions of analysts based on supply chain reports which Tim Cook has consistently advised against using to provide meaningful data about Apple. So remind me, when did the iPhone sneeze and give the entire company a cold? In your wet dreams?

Reality doesn't matter.  It's about perception.   The iPhone is approximately 66% of Apple's gross revenue.  And Apple announcing that they're no longer going to break out iPhone units sales is sending the message, correct or not, that they expect declines in unit sales.  Wall Street doesn't like a lack of transparency and in that regard, I don't blame them.   Combine that with the insanity of believing supplier chain complaints and that's a recipe for killing the stock and that's if the stock is not being manipulated.   

Declines in iPhone sales wouldn't surprise me one bit.  At least in the U.S., the market is mature, phones are no longer subsidized and Apple keeps raising the prices.   Does Apple really think that their users are going to buy a new phone every two years for $1000 or more per pop?   

On the Mac side, Apple's price hikes combined with the inability to replace the battery, memory and storage as well as the fact that so many people don't really need a computer anymore is going to continue to affect sales, but the Mac is only about 10% of Apple now anyway.   Apple probably thought they could replace Mac sales with iPad sales, but that's only about 8% of Apple.    While I realize that Apple has never wanted to be the low-end, low-margin provider, I think the high salaries paid to Apple managers and executives has completely warped their perception of what most people are willing and able to spend, especially for a machine that can't be upgraded after purchase.    A 15" MBP now starts at $2400 and tops out at $6700.   That's ludicrous.   The MBA starts at $1000 at tops out at $2600.   The Mini tops out at $4300.   $5K for the 27" 5K Retina iMac (topping out at $13,200)?   IMO, this is either desperation to keep revenue high or unbelievable arrogance.     

There is of course, the third option: you have the details wrong.

Let's begin with the most obvious stumble (the real drop off the cliff is that Apple actually sells phones at a range of prices, but that's so obvious it doesn't really need covering):

Declines in iPhone sales wouldn't surprise me one bit.  At least in the U.S., the market is mature, phones are no longer subsidized and Apple keeps raising the prices.   Does Apple really think that their users are going to buy a new phone every two years for $1000 or more per pop? 

Er, no. Apple doesn't expect that because no one has ever done that.  What happens is that on each new release, Apple gets picks up customers from other platforms, but also gets a massive boost from people with folk with much iPhones much older than two years. I have just replaced my iPhone 6s, which means I missed out on the 7 and the X. The assumption that Apple thinks folk update their phone every two years is laughable. Which brings me to your other point:

Yes, the price. And here again, the problem is narrow thinking. Saying that no one would buy a $1000 phone is a bit like saying no one would buy a house for $300,000 or a $30,000 car. Clearly they will, because I've seen houses and cars that cost several times that amount. So how do they do it?
Well, I'm going to clue you in, but you have to keep it under your hat because I'm thinking of taking out a patent on the whole idea.

Ready?

This is going to amaze you, but people don't hand over the whole amount for houses and cars all at once. They pay it off in chunks. Buying a $1000 iPhone (which, by the way, is not the most expensive smart phone on the market) is best done on the Apple payment scheme: they throw in AppleCare and you can change the phone after a year if you want. Oh, and it's interest free, so if you're paying the whole cost up front then you're doing it wrong. 

But that's kind of an aside. The point is that folk have been saying Apple gear is insanely expensive for as long as I can remember, and for as long as I can remember, they've been shifting it. So that leads me to believe that Apple understands basic economic theory better than anyone here who comments on it. All this braying about  Apple pricing always misses one vital piece of information: Apple's demand curve.

This little bit of paper sitting on Tim Cook's desk will show you is that the demand for Apple kit is comparatively inelastic: movements in price have fairly negligible effects on demand.  If they increase the price, the sales will not drop significantly.

But far more importantly, dropping the price will not actually produce a significant increase in sales, and this increase may not be enough to cover the price drop.

So why is Apple's demand inelastic? Simply because the combination of hardware and software is perceived as unique in a very crowded market. 

The details aren't wrong. You are interpreting things wrong.

There are pricing ceilings on everything. Financing (including interest free) also has ceilings, or do you think someone will be willing to take on financing to pay for a phone over 5 years when it will be upgraded before it is paid off?

The increasing cost of iPhones (and every other phone in the same price band) is taking users one step further up to their individual ceilings.

You are taking his 1,000 dollar point completely out of context. He is speaking in general terms. We already know people buy 1,000 dollar phones every year. The point is those people aren't most people and three or four years of flat sales is telling in itself.

The higher the price the harder the sale in high numbers, even with financing and upgrade options but that ceiling becomes ever nearer or you are hitting it. And if the cheaper options mean sacfricing features or getting an older iPhone, then the sale is equally hard.

People argued that users were on longer upgrade cycles (provoked in part by pricing itself) and that is probably another reason while sales flattened, but how many people do you think are still using iPhone 6?

But that argument doesn't take into account the vast potential pool of Android users that are there for the taking, right? 80% of the market. 1,000 dollar Android phones sell in the millions even while they are a fraction of the 80%. Why isn't Apple able to take a slice of that premium Android Pie (sic)? Why aren't people switching from Android in enough numbers to move the Apple needle off 'flat'? It's clearly not price for those users. It's value (among other things). The longer upgrade cycle really isn't doing much except allowing Apple tread water.

Apple is on an 's' cycle - through its own choice - which only makes the sale look worse when compared to rival flagships that are pushing the pedal to the metal. So while Apple takes a breather on innovation and brings the A12 and little else to the table while still including a 5W charger in the box, others are innovating on everything and showing no signs of slowing down. That means 'new' tech is flowing down the lines into the middle ground at an incredible pace and upping the value proposition of those phones.

How can you say that movements in price have a 'fairly negligible effect on demand? Apple doesn't break down unit sales on price.

Price is the number one factor for most people when it comes to buying a Phone. The iPhone X hit new price highs for Apple. It was the 'most popular' 2018 iPhone for Q1, 2 and 3. But Q4? Estimates said demand for the 'most popular' iPhone dropped off sharply in Q4. Far more quickly than any other Apple flagship from previous years in the same quarter. But 'most popular' isn't truly quantifiable is it? 

That inelastic demand you are referring too is new found. From 2015, and really means FLAT but that inelasticity is shorn up at the other end of the spectrum. The middle and the low end. If Apple hadn't widened its spread in 2017, do you think things would have remained flat or that demand would have dropped? There was no such inelasticity in demand up to 2015.

You say that if they increase the price, 'sales will not drop significantly'. Given that prices on the new phones have inched up with regards to last year, shouldn't we be holding off on that kind of affirmative conclusion until at least September next year? Or are you happy to take Apple's traditional blowout quarter and use it as a guide for the whole year?  No one can possibly know -today- if what you are claiming will prove true or not.

Price elasticity doesn't state that there isn't a ceiling on price. All it says is that some products are relatively unaffected by price changes when compared to others, and nothing you've said actually disproves that.  This is why Apple can increase the price of the phone and knows that the amount of sales that they will lose will more than make up for the increase in revenue.

Secondly, as I pointed out in my post, the whole argument falls flat because Apple sells phones at various price points.

You are taking his 1,000 dollar point completely out of context. 

He said folk will not upgrade a $1000 every two years. There's no context.

That inelastic demand you are referring too is new found. From 2015, and really means FLAT but that inelasticity is shorn up at the other end of the spectrum. The middle and the low end. If Apple hadn't widened its spread in 2017, do you think things would have remained flat or that demand would have dropped? There was no such inelasticity in demand up to 2015.

Price inelasticity is new found? Nope. Apple products have always been considered irreplaceable by the most valuable and price insensitive areas of the population, and Apple tends to leave everyone else to the Android manufacturers. Can't say that's right or wrong, but they seem to make a lot more money than everyone else. So in general, Apple products, across the whole range enjoy greater price elasticity than the competition, which is why the competition fights like dogs at the lower end of the market, and Apple would rather not.

But let's go back to the real point here. The problem you have is the one I have highlighted again and again. Apple sells a range of phones at a range of prices. But oddly enough, everyone always homes in on the most expensive flagship phone as if this is the only one available. Even Gruber has stated that the XR is better deal because it's almost as good and way cheaper. Apple has even said that the XR is it's best selling phone. 
So the problem isn't that Apple's phones are too expensive. The problem is that folk want the top of the range phone, but want to tell Apple how much they want to pay for it.

Ah, do want to look at one more point:

You say that if they increase the price, 'sales will not drop significantly'. Given that prices on the new phones have inched up with regards to last year, shouldn't we be holding off on that kind of affirmative conclusion until at least September next year? Or are you happy to take Apple's traditional blowout quarter and use it as a guide for the whole year?  No one can possibly know -today- if what you are claiming will prove true or not.

Riigggghty-ho then. So what you're basically asking us to wait long enough to give you a better chance of being right. Got it.

Well, we could do that, but I'm not sure I see the point. Because the thing about Apple is that it will not stick doggedly to its plans in the face of changing conditions. They never have. They won't keep increasing the price of the phone until they are not bringing in enough revenue to make up for the loss in sales units. The fact is they make these adjustments all the time, but because you're so focussed on the phone at the very top of the range, you completely miss that folk are buying the cheaper phones too.

I am certainly not asking anyone to wait for a better chance of being right. I have been proven right already. Flat sales says a lot. The market has spoken. Growth ended in 2015. 

That in spite of Apple widening its model spread and now releasing three new models each year.

I have never focussed solely on the premium priced phones and was probably the first person here to highlight the shift in business model as a result of the 2017 iPhone refresh. To the point that I praised Apple for trying that option. All increasing prices has done is increase ASP, (which the vast majority of buyers have no interest in anyway) and help to stifle growth which remains flat.

"He said folk will not upgrade a $1000 every two years. There's no context."

This is what he really said:

"Declines in iPhone sales wouldn't surprise me one bit.  At least in the U.S., the market is mature, phones are no longer subsidized and Apple keeps raising the prices.   Does Apple really think that their users are going to buy a new phone every two years for $1000 or more per pop?"

There is plenty of context there if you had wished to see it.

OK let's see that context then:

The key point of the "context" is that sentence: "Does Apple really think that their users are going to buy a new phone every two years for $1000 or more per pop?"

Otherwise why they keep launching iPhones at $1000 range? 

Because they can !.. Because they are Apple and they can do that!... They can control the upper end of the competition that way. They give the competition a false target to struggle with, they throw a bait in front of the competition to keep them busy devouring.  While the competition lay out the blueprints of 16-camera OLED phones, Apple silently launches a 1-camera state-of-the art LCD iPhone ! And novices like you jump over that 16-camera beast like a thing and applaud the "innovation"! Your reading of contexts is totally wrong because you are new to Apple culture. Think about these to understand the context instead of obsessing yourself with high-prices: why Apple has put the same A11 in the 8 series and the same A12 in the XR? The context lies there...

Please take a look a the 'old' P20 Pro and tell me how it compares to the 'new' XR. When you are done with that, move onto the Mate 20 Pro.

How will you squeeze x3 or x5 optical zoom out of that state of the art machine? Have you seen why those phones are leading the pack in so many areas? You do realise that the top players mix and match OLED and LCD at the top end too, don't you? 

Pricing is one of the biggest reasons Apple is flat on unit sales. No one is 'obsessed' with it but to ignore it wouldn't make a lot of sense.