Apple is a bit tricky right now, it is an interesting time for the company. From an earnings prospective, it would appear that Apple will still be able to grow their revenues with new products (iPad Mini this year and iTV maybe next year?) as well as increased sales in emerging markets like Brazil and China, all the while maintaining the largest profit margins in the industry. Even if all of a sudden Apple products became un-cool in the U.S. and sales took a huge dive, international markets will still be going nuts for the stuff, so it would take a catastrophic event for Apple shares to suddenly take a significant dive (say, below $500). (Not to scare you, we are talking worst-case scenario here.) This is just for hardware, the iTunes store is often overlooked when putting a price on Apple…Q2 2012 revenue was almost $2B x 4 quarters = $8B x 20 years (this is a widely accepted number for a revenue driven valuation) = $160B just in the iTunes store alone.
It would appear that not much has changed since January when analysts had an $800/share target for January 2013. I hate to sound like everybody else, but what is different is that Steve Jobs is gone (I know - obvious). Here are the alarming things I have seen in the past 12 months with Apple:
iOS 6 completely fell flat. 1- They appear to care less about what is best for the consumer and more about distancing their users from Google. Apple took a shot at their own maps program and it is bad (even Mad Magazine is making fun of them), they have a long way to go before it is comparable to Google Maps. They also removed the YouTube App. 2- Passbook, while a very cool idea, is not receiving the proper support from Apple. This is a big idea that Apple should be going to work to get people to use. There are some bigger companies using it; American Airlines (I think?) and LiveNation off the top of my head, but this is a feature that I have been excited to have for a while now and Apple is really neglecting it. 3- Apple had a tracking system built into the OS that sent marketing data back to Apple for iAd targeting. As an investor, yes, great that Apple is getting valuable data. As a consumer, I am appalled by a sleazy move like this.
Retina MacBook Pro was released with screen issues. Apple was so ancy to get a retina display MBP out the door that they rushed it to market with defective screens. There was actually a very interesting article in Gizmodo today with a first-hand account of dealing with Apple with regards to this. Again, I have been told a story where Steve had an extra screw put in on the side of the original macBook simply to be symmetrical; he demanded perfection and the guy saying “no, do it again” is gone. This was a finance decision….again, borderline sleazy. Remember when Steve delayed the release of the white iPhone by a year because they weren’t coming out of the factory white enough?
Something fishy with iTV. It was reported to be released last year and pushed back, there is still no timetable for release. What many people do not know about this is that the reason for delay is supposedly the software. Around this time last year, it was “leaked” that Apple was going to push the iTV out the door with a modified version of software that Steve said no to about 2 years prior. (The former project manager got a look at it and said it was almost exactly what he had been working on that Steve shot down.) This may be true, it may be a lie, but unless Apple is waiting for the bill of materials to drop before they start selling, I do not see another reason why this product would be continually delayed. This point could turn out to be incorrect as it is based on rumor and speculation on my part.
Siri over-promised and under-delivered. There has not been much development by Apple to remedy this. This is in part because Siri is a machine learning application (a type of artificial intelligence) and gets better with more data. I gave it a pass on release and was convinced it would get better; it hasn’t. I may be getting nit-picky here, but my expectations for Apple are high.
Microsoft and Google are gaining ground in software performance. They are still nowhere close in areas like the App Store, music sales, etc…but their software is as good as Apple’s (and in some areas better). Apple has the devoted customers that will be difficult to draw away, but it could only be a matter of time before people begin to see the convenience of google’s cloud solution or Windows 8’s spectacular integration between laptops and mobile devices. It should be noted that this is coming from somebody who drinks the Apple cool-aid with no plans to jump ship any time soon.
So, to sum up on Apple. Do I think they are short-term undervalued? Yes. They will probably see a nice little jump upon the announcement of the iPad Mini, especially due to a spectacular price point for emerging markets. However, do I also think that they are fast-approaching a mature company whose mission is no longer to innovate, but is to make incremental supply chain improvements and move just fast enough to stay ahead of the competition. They are making profit-driven decisions and are losing their identity of delivering the top of the line products. Steve ran the company like a craftsman designing a piece of priceless furniture; every aspect had to be perfectly detailed, even the back of the piece of furniture that is against the wall and nobody ever sees. (I am paraphrasing this, it is one of my favorite things that he ever said.) Keep a close watch in the next 12 months as Apple will either make a turn-around and continue the march toward a $1T valuation, or they will accept their role as a profit-driven giant that sees slow growth, stability, and a solid dividend (which is not necessarily a bad thing).
Google’s Youtube account published this video today of their upcoming 3D maps feature that uses 45-degree aerial imagery to render these spectacular cityscapes complete with buildings, terrain and even landscaping. They aim to have 3D coverage for metropolitan areas with a combined population of 300 million people by the end of the year.
The iPhone 5 rumor mill has been heating up the past few days. Although nothing quite as good as a prototype being left in a bar, we do have some great concepts and case leaks.
This concept sports the highly rumored 4” (diagonal) screen. Below are images from Niilo Autio:
9to5mac, one of the most reputable when it comes to Apple Rumors, posted what they claim to be leaked iPhone 5 enclosures. Notice that in these pictures you can see the smaller dock connector as well as a relocated headphone jack. I do not know how I feel about the metal back. Sacrificing beauty for durability, tisk tisk.
Check back for more updates and rumors as they trickle in.
When you ask for $100,000 on kickstarter and get $10,000,000, you know that you are on to something special. The Pebble E-Paper Watch looks to be the coolest iPod accessory since the sound dock was invented for the original iPhone back at the turn of the millennium. It connects to your smartphone via bluetooth and relays all sorts of information right to your wrist: text messages, emails, the weather…even the time. Wish I had seen this before it exceeded the quote 100x over! Watches ship in September and will retail for $150.
This is unbelievable - now all we need is pre-cogs, autonomous cars and jetpacks to be on the same tech level as Steven Speilberg’s Minority Report. Expect this to be a native launch feature for the highly anticipated iTV due to release fall 2012.
I just spent 30 minutes calculating the implications of the Foxconn wage increases on the price of Apple stock:
With no change in yearly income and a decrease from 60 overtime hours per month to 36, wage is essentially increasing 13.7%. Applying this to iPad (which accounted for 26% of Apple revenue in Q4 2011), manufacturing cost on the 16GB Wifi model (the one with the lowest margins) was $10. Therefore apple is losing $1.37 per iPad @ 65M expected to ship in 2012 = $90M. Distribute this across all devices, we are talking a maximum of $330M loss in 2012, or just over 1% of the $26.5B in profits expected for 2012.
What I’m trying to say is a 2.5% decrease in stock due to Fonxonn wage adjustments is an overreaction.
Here’s a little last minute rumor posted on 9to5mac this morning. It’s haptic screen technology that gives an electric pulse feedback when touched. This will give items on the screen different textures.
I’m skeptical that we’ll see this one today. The “no comment until after Apple’s announcement” comment would seem to imply that the iPad HD will have this technology. However, I’d be willing to bet we don’t see it until further down the road, maybe the iPhone 5 at the earliest. However, this would certainly be something exciting enough to warrant me purchasing Apple’s newest tablet creation…
The announcement of Apple’s next generation iPad tablet is but 12 hours away. Let’s take a final look at the rumors swirling around the fanboy blogosphere:
iPad HD: Almost every major tech news source is reporting that it will called iPad HD, not iPad 3. I think this is a safe bet to make considering the photo leaks of the new enclosure we have seen over the past weeks - they show minimal design changes to the exterior (and actually appear to be slightly thicker than iPad 2). Apple will not make the jump from iPad 2 to iPad 3 without redesigning the exterior.
Retina Display: This has been the strongest rumor for months now. The image at the top of this article is the one Apple sent out as their invitation to the event. I took a similar picture of my iPad 1 and you could clearly see how much better the resolution of the iPad is on this picture. I will go as far as to say this is a sure thing.
4G LTE: I initially reported that Apple would not go with 4G LTE because the technology was not ready; power consumption is still too high and the network is still not quite there. Looks like I was wrong on this one, as multiple news outlets are reporting this upgrade. Personally, I think it is unnecessary. But it sure will help with downloading 1080p movies and games from the iTunes store.
A5X Processor: Reports are that Apple has been working on both an A6 Quad Core processor and an A5X Dual Core processor. Most are reporting that Apple will go with the A5X processor. I would agree with this given that it appears Apple will go 4G LTE. Battery life is a strong selling point for Apple, and 4G LTE plus a Quad Core processor would lead to significantly decreased battery life. I’ll also add to this that there is a lot of chatter about upgraded RAM, seems to make sense to me.
HD Camera: No surprise here. There are already smartphones on the market with HD front-facing cameras. I can already hear Tim Cook talking about HD FaceTime.
Release Date: For you early adopters out there, reports are that the iPad HD will be released in the USA on March 16, 2012. Lucky you - you won’t even have to take off work to wait in line!
Follow me on twitter @nscricco for tweets about tomorrow’s event
Last week I posted pictures of an iPhone 5 Concept by Ciccarese Design and had a record number of hits. So, since I did not have time tonight to write a real post, I have decided to give the people what they want…check out an even cooler iPad 3 Concept.
Disclaimer: I hate to break it to you, but the iPad 3 will not have any of these ridiculously awesome features. Check my iPad 3 Rumor Roundup from earlier this month to gain perspective on realistic expectations for Apple’s new tablet. (Or check back before the March 7 launch event for my final predictions.)