Financial, Real Estate, Stock Markets Trends and Current Affairs

Writing about Apple is like writing about gold, despite the fact that there is a strong fundamental argument for or against it, the emotional response and lack of empirical outlook clouds the fundamentals, ex. Apple  and the iPhone vs Android or Gold and fiat currencies/inflation. I am not a Apple hater, and I am probably one of the most advanced iPad users you know of. Apple has its pluses and minuses, but people (including many professionals) are failing to look at the facts and instead are joining their respective "fanboi" clubs. Thus, in continuing with my attempt to educate my readers on the folly of believing Apple's position to be unassailable, I am illustrating exactly how vulnerable Apple is to either a compression of margin on the iPhone or a slow down in sales. Apple is just penetrating the market and has a fertile field to conquer, it is just that it will not be able to pursue that field devoid of competition as it has over the past 3 years. This should dictate an adjustment to the highly optimistic aura attached to the multiples used in forecasting economic results.

The graph below illustrates the importance the iPhone represents to Apple's franchise. Believe it or not, this graph actually understates the importance of the iPhone to Apple for while it brings in 45% of the revenues, it is responsible for about 70% of the profits. Apple has become too reliant on one product, although that reliance was borne from the fabulous success of said product. While Apple will probably derive some much needed revenue diversification from iPad sales, the iPad will face the same hurdles that the iPhone is coming up against - and that is competition from Android-based devices and potentially even Windows Mobile 7 (albeit this is an admittedly much more speculative statement).