Apple Margin & Valuation NoteReggie Middleton is an entrepreneurial investor who guides a small team of independent analysts, engineers & developers to usher in the era of peer-to-peer capital markets.
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TechCrunch reports: iPhone 5 Sells Over 5M In Opening Weekend, Limited Only By Device Supply
Apple broke records again opening weekend, with the iPhone 5 selling more than 5M in its first three days, compared to 4M for the iPhone 4S.
Wait a minute! Apple's share price was spiking due to speculation that the iPhone 5 debut may double or more the sales of the iPhone 4S, remember? Let's take a gander at some of the bullshit that came out of the press.
- Analyst Estimates On iPhone 5 Launch Weekend SalesRange From 3M-10M TechCrunch - 5 days ago Analysts have begun making their predictions about the iPhone 5's odds of success for launch weekend sales, and in fact there's quite a range ...
- Blockbuster iPhone 5 launch expected to push Apple stock to $850 Apple Insider - 3 days ago
- iPhone 5 Crushes Sales Forecast In First Weekend - Forbes – Apple (AAPL) announced today that pre-orders for the new iPhone 5 have now exceeded supplies, forcing some phones to be shipped in ...
- Surge in iPhone 5 sales forecast - FT.com Sep 13, 2012 – Apple's rapid international rollout of the new iPhone 5 has prompted many analysts to upgrade their sales forecasts for the smartphone, with ...
- Some analysts increase iPhone 5 sales predictions - CBS News Sep 13, 2012 – (CNET) Some analysts expect the iPhone 5 to be so popular that they've recalculated their iPhone sales estimates for September despite a lack ...
- Holiday iPhone sales projected to reach 46.5M as pundits ... – Holiday iPhone sales projected to reach 46.5M as pundits 'underestimate' Apple. By Neil Hughes. Tech pundits who find the iPhone 5 "boring" ...
- iPhone 5 Sales Projections: 10 Million Units to be Sold Following ... – The iPhone 5 has high expectations upon its release, not just for Apple customers, but the effect it could have for the US economy. Apple began ...
- iPhone 5 sales to hit 170 million over next year, predicts analyst ...cnet.com/.../iphone-5-sales-to-h.. And based on past sales, the iPhone 5 will capture around 85 percent of ... Schiller explained the company's ...
From Business Insider:
Apple sold the iPhone 5 in 9 countries over its opening weekend. It sold the iPhone 4S in 7. It actually sold fewer iPhones per country this year than the last. That's not just deceleration, that's shrinkage:
Decelerating growth is not good for a company like Apple, which despite a modest P/E ratio, has one of the most generous trailing 12 month revenue multiples of any hardware company on the public markets.
As I explained in detail on the Max Keiser show, Google will be a very difficult company for Apple to successfully compete with. The problem is that practically no one seems to understand what kind of company Google is, and hence why Apple will have a nigh impossible time competing....
This thesis has come into its own with Apple's new iOS6 operating system and its exclusion of Google Maps for its inclusion of its own in-house mapping system. The end result? #FAIL, ##disasater!!!
Hacker reportedly ports Google Maps to iOS 6 CNET
iPhone 5 Problems: Apple Tries to Steal Google Maps Staff to Fix Its iOS 6 Maps Mess PolicyMic
iOS 6 Maps problem, maybe Apple should have called it beta ... www.phonesreview.co.uk/...
Wrong turn: Apple's buggy iOS 6 maps lead to widespread - The Verge Apple has a maps problem. The major new feature of the company's new ...
Apple Mapocalypse Sends iOS 6 Users Into a Tizzy, Riverbank - Wired
Apple On iOS 6 Maps Flubs: This Is Hard, Okay?
Apple statement apologises for iOS 6 Maps problems | Electricpig
This is what happens when a handset manufacturer attempts to take on the world's largest data company. Now to be fair, Apple had very liitle choice in the matter since its relationship with Google and its OEMs have gotten global litigation level bad, but still this is an area where Apple is sorely outclassed and it will never hav a chance to catch up while maintaining those uber-fat margins that the hedge fund hotel crowd has grown to relay on.
This guy Ben Parr over at Cnet was the only one in the Apple adoring press that seems to have gotten it right, read on...
Mapping is a core function of any smartphone. Every person who has a smartphone has a need for maps. If Apple removed Maps from iOS completely, customers would start switching to other smartphones. It's just that important.
So if you're Tim Cook, you have two choices. You can either A) let your enemy Google continue to power your default Maps application, or B) you can build your own Maps app and kick Google to the curb.
This is the decision that Tim Cook and his team faced when they decided to jettison Google Maps as the default mapping application for iOS. Instead, Apple decided to build its own Maps application, powered partly by data from TomTom.
As many of you know by now, Apple Maps has been under fire since its release. The complaints are numerous: Maps doesn't come with transit directions, mislabels cities and other landmarks, forgets rivers and thinks farms are airports. There's even a popular Tumblr dedicated to the mistakes iOS 6 Maps makes.
iOS 6 Maps, while a beautifully-designed application, clearly wasn't ready for prime time. This shouldn't come as a surprise: Google Maps is more than seven years old, and Google employsmore than 7,000 people on it, including the thousands of drivers who make Street View possible. Apple, on the other hand, is frantically hiring engineers to fix the gaping holes users have uncovered in Maps.
Let's go back to the original question: did Apple make the right decision with Maps? It's easy to say in hindsight that Apple should have stuck with Google or waited another year to release its own Maps app. However, consider the factors that Apple had to deal with:
- Allowing Google to control a key piece of iOS was unacceptable. If Apple had no alternative to Google Maps, the search giant could have made high demands that Apple would have had to accept. Having no default Maps application is unthinkable for a major smartphone.
- The longer Apple took to release its own Maps app, the more entrenched Google Maps would be.
- The only way to test a new map application at a large scale it to release it to users. They will be able to find holes quicker than a small team of engineers.
- A mapping application can only go so far without large amounts of user-generated data.
....iOS 6 Maps is a disappointment any way you slice it. I have friends who refuse to upgrade to iOS 6 because of Maps. But Apple wasn't going to learn anything keeping Maps locked away for another year, and there was no way it was going to let Google control its mapping technology for a minute longer than it had to.
Apple's taking some serious blows for its buggy Maps app. But it made the right decision releasing it. Now it's just a question of how quickly Apple can fix iOS 6 Maps' many flaws and stem the negative press it has generated. Apple's probably going to be feeling the pain for a while.
I clearly called Apple's problem in the Max Keiser interview above. Google is light years ahead of Apple in cloud/distributed computing/applied data tech, experience and capabilities. This maps fiasco is merely the beginning, for Apple TV will face a real challenge from YouTube once it becomes an actual network in lieu of simply a platform (witness and reference the push for new, original content) and Google's many cloud based apps start making the iOS functionality appear as dated as it is. Apple has a very, very slim chance of catching up, and if it does it will because it spend a LOT of money, chopping up those margins.
Hence the prophetic, yet lonely and controversial piece from two years ago - Apple on the Margin, as well as Evidence Of Apple's Margin Compression Crops for its tablets.
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All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade.
Google still exhibits the likelihood that they will control mobile computing for the balance of the decade.
Subscription research:
Google Q1-2012 Valuation Summmary 04/20/2012Google Q1 2011 results 04/18/2011Google Q3 2010 reveiw 11/08/2010Google Final Report 10/08/2010
Google Valuation Model 09/21/2010 Google's VOIP and Telephony Services 09/16/2010A couple of bits from our archives...
The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as valuation for each business line.
Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.
Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.
Unique, Indpendent and Accurate Apple Research
Apple 2Q2012 results analysis
04/26/2012Apple Margin & Valuation Note03/15/2012Apple Margin Strategem WIP02/13/2012Apple - Competition and Cost Structure05/16/2011Apple Earnings Guidance Analysis08/12/2010
