Tuesday, March 12, 2013

iPhone is losing ground

Here's some of my latest thoughts on Apple:

I think the iPhone is losing ground..  Apple is not capturing marketshare like Samsung is..  I firmly believe that Apple has  the better product, and in the long run the Apple eco system is going to pay off.... but it's taking too long.  However - again, in my opinion, key mistakes have been made, and I believe the lack of a larger screen option is going to be painful.  That impact will be felt over seas and in the US.  Android growth, Microsoft's strategy, Amazon with their tablets, Even BB is threatening a real comeback.  We all know that all it takes is taking your eye off the ball, and in the blink of an eye, your playing catch up. What do I mean by key mistakes made?

With the resources that Apple has, there is no excuse for: 

1.  Not having China Mobile locked up already - This is probably the biggest point.  They are going to lose this opportunity to the companies that produce the good cheap phone.  There's no reason why Apple can't do this, and lock 100+ million into their eco system ASAP. Get in the game. TC always talks about first mover advantage - Where is it?  Whats the strategy?  I'm not saying it's too late, but TC should be leading the party.
2.  Young people LOVE the big screen.. Don't lose this demographic.  I'm seeing more and more of these gargantuan phones in the wild.. and its not just young people.  I have a friend close to 50, she just got a big Android phone and she's in love with it.  This is costing Apple market share....
3.  The maps disaster..  THIS WAS HUGE.  No telling how many people changed their buying decision on that alone.  The google maps availability came way too late.  This software should have never been launched.  Google maps blows Apple's solution out of the water.

That's just three examples - I know, I can hear the rebuttals already, It's not Apple's way, What about the margins??  Blah Blah Blah - I don't care.  This is Apple!  Devote the resources and quit losing marketshare.  If Apple doesn't turn this around, they are going to turn out like the Apple of old. (Pre iPod)  A small niche player in a really big pond - or should I say ocean.

To those that say, that was never Apple's strategy to dominate the world, I dispute that.  Over and over you hear Apple management say "we want everybody to own our products, we want everybody to enjoy our great solutions.  We want our products in everybody's hands.."  Well, how come you're not doing it?  This market - this opportunity, is just too large to miss out on..  

Someone asked me earlier -  "how will Apple's 5" phone (iPhone 6) be received outside the US?  

My opinion - SENSATIONALLY - That is, if they ever make it..  No one knows what they're going to do...  Maybe that should be huge mistake #4 on my list.  The inability to communicate a strategy, that is timely, effective, and worth waiting for the next refresh.

I need to see some changes before I jump back into this stock again...

The Thursday presentation for the new Galaxy will be watched closely by the world. Samsung is trying to achieve Apple-like mania, and they might be able to pull it off..  Once a copycat always a copycat I guess..  I'll be posting on Thursday about it...  


I do not own AAPL 

Saturday, March 9, 2013

Q2 2013 - Gross Margin YOY make for a tough compare

On my last post, I said that Apple would report an EPS of $12.00 for Q2 2013. It turns out I was being optimistic again.

Last years Gross Margin was a stellar 47.4%.  I'm giving Apple an optimistic GM of 39.1%, which is a 17.5% decrease from last year. This fact alone will wreak havoc on the EPS.  My calculations have Apple's EPS at $10.39, which is a 16% YOY decline....

Compounding the tough compare is the tax rate, which last year came in at 25.19%  This year, I have Apple at an optimistic 25.71% which places additional downward pressure on the EPS.  My preliminary numbers are as follows:

Revenue - 42,226,400,000   +8% YOY
EPS - $10.39   - 16% YOY
GM - 39.1%  - 17.5% YOY

iPhone - 37,500,000   +7% YOY
iPad - 17,500,000      +48% YOY
iPod - 6,300,000         -18% YOY
Mac - 3,800,000         -10% YOY
Software / iTunes / other - $3,750,000,000  +154% YOY

With this YOY tough compare, it appears that Apple's growth has come to a screeching halt. Long term, this is not true, as I see the GM's staying in the 38% range, and the growth will show up again in the Q3 and Q4 quarters as the "tough compares" go away. (Albeit - a slow rate of growth)

My opinion is that Wall Street will brutalize the stock with these YOY results in Q2, and I see the share price dropping to 390. Hopefully, it stabilizes and starts the climb back up as seasonal product refreshments generate excitement.  I still see the share price at 511 come March 2014, with a strong showing in the fall and Christmas quarters, continuing into early 2014.

The Samsung/Android juggernaut coupled with Microsoft's recent innovative resurgence is muting the iPhone growth, as well as iPad's, but not to the degree of the iPhone.  I view Microsoft as a huge threat to Apple, (and Samsung) with their new and improved integrated operating system strategy amongst all platforms. The Nokia/MS partnership is looking like it will be successful.  I personally have checked out the new windows 8 operating system, and I see it as a winner from MS.  The fact that MS office can be integrated on all platforms easily just enforces their position.

More to come

I do not own AAPL shares.