On Analysts and Earnings Apple Reports today

This afternoon Apple will report another record quarter with both unit sales and revenues the best in the companies history.

If you knew before the announcement how many computers, phones, music players, Apple sold AND how much revenue they took in, you still could not reliably come up with a per share earnings number within 10% of what will actually be announced.

Analysts come up with a number because we (the investing public) goad them into it. It is a spectator sport. Some analysts will come closer to the actual number than others. Assuming they do not have inside information it is simply chance. Most of the analysts know this simple fact yet they submit to the kabuki because, well, they want to make a living.

Here, I can prove it.
If you knew Apples Gross Revenue all you would have to do to come up with an earnings number is accurately predict gross margin and tax rate. (that's all?) so on earnings of say 8 billion a 4% difference in gross margin would indicate a range of ~ 23 cents a share. Compound that with a 4% difference in tax rate (12 cents) and you could be off by 35 cents a share. And you knew the earnings!

Is that enough of a disclaimer?
Because I have to...
1.22 on 8.3 billion in Revenue

Writer is long Apple. Don't believe a thing he says, he is not particularly stable as evidenced by his willingness to predict (guess) earnings KNOWING he cannot possibly be correct.

So listen to what the Analysts say about the business

Apple Taxing Users Offering "More" than customers need...Microsoft Sez So

Ina Fried in an interview on cnet, speaks with Brad Brooks of Microsoft.  Who explains in repeated and excruciating detail how it is that Apple "Taxes" its users.  It is an interesting point of view that goes something like this.

You want a laptop.  So you and your PC Wanting self  you might walk in to PC store.   Say you spend $799 and left happy.  OR in Brads alternative universe you poor consumer you, instead you walked into the shiny Apple store and they (clearly unfairly) charged you $1099.  For a clearly superior product.  Now Brads contention is that Since you spent $300 bucks more for the computer that you were "Taxed" unfairly by Apple....  Now setting aside for a moment that the computer and operating system are VASTLY different Assume Brads logic is good.  (strain) 

Now.  Here we are in Brads World.  How much would the "Tax" be in Opportunity time spent clicking on security dialogs, hangs, crashes, lost productivity due to other system being underpowered  do not exist on OSX?   What is the value of your time Brad?  Hmmm?  What if the "comparably equipped" PC actually cost more than the Mac as it often does?  is that a Tax Cut?

It is a crap argument Brad, I like it though,  Its like arguing that the difference in price between "American Process Cheese Food" and a lovely organic imported goat cheese is also a "TAX"

Here is Brad on OSX Vs. Windows viruses...

You know, it's hard to get a direct comparison, Ina. I want to be very specific in any kind of the data or the information that I give you there is that you're running one system versus another. The best way to really look at it is based on the Internet services, and what's really going on out there in terms of things like phishing or other types of scams that can actually happen through your browser or Internet experience. That really is much more of a direct comparison.

Good thing there is not a "TAX" on the cost of rebuilding your system after a virus then.  I guess that fee would be called a "shoulda bought a Mac" fee?

Paying a Premium price for a premium product is not a Tax, it is called getting what you pay for.  

Psystar Delays Delays Delays

Last Week Apple filed for dismissal of Psystar's Anti-Trust countersuit filed in California.  There is an excellent summary of what is going on along with links to all the public documents over at Groklaw (LINK)  .  

The next pertinent date appears to be Nov 6th when the judge could rule on the request for dismissal.  In the mean time Psystar has until Oct 15th to file some counter arguments to the request for dismissal.  Should the case not be dismissed it would appear to my non legal mind that this "ADR" agreement moves the case out of the court and into private mediation.  Private mediation would mean no more public documents.

Where is the fun in that?!

Just as a reminder, I am not a lawyer, (nor did I play one on TV) I barley passed english and most everything I write is made up.  Except for the disclaimers nothing here is presented as fact.

Amherst College The Land of Mac Tech

Amherst College.  Appleland

Approximately 1/2 the incoming class of Amherst College (2012) has an iPhone or iPodTouch.  YOW! And is more likely to own a MAC (laptop) than a PC.  14 poor souls trudged to campus with desktops.  I suspect that at least half of these guys are first order geeks that wanted desktops, the rest just could not convince Dad to pony up.  

While that stuff is cool the Earth shattering number is that 1/3rd of the incoming class of 2003 applied online.  89% of this years class applied online.  That is dramatic.  

5 ...  Number of students with a landline phone.  FIVE.  

The world is changing.  Quickly.

Despite all the change that has occurred over the last thirty years we have only just begun to see the changes that will effect all of our lives as a result of the Personal Computing Revolution.

RIMM Blood on iPhone's Touchscreen

Research in Motion (RIMM) announced stunning earnings yesterday.

the Waterloo, Ontario-based company said it earned $495.5 million, or 86 cents per share, in the fiscal second quarter, which ended Aug. 30. That was a 72 percent rise from net income of $287.7 million, 50 cents per share, in the same quarter last year

RIMM is down 78.01 -19.52 (-20.01%) this morning in pre-trade as a result of their margin forcast going forward.

[RIMM] warned on Thursday that profit in the current quarter would come in lower than analysts had expected because of higher costs related to its newest BlackBerry smartphones

RIM did not share but we know why they are willing to spend so much to grow. iPhone.

If there is one thing that has settled in my mind over the last few days is that (for right now) the iPhone is literally in its own market space. We can talk about iPhone Vs. Blackberry or iPhone vs Android (GooMo love it) or iPhone vs WinMo (sad) but the reality is that every phone that claims to do more than just make calls is compared to the iPhone. There are phones that do things better (email Blackberry) and there are phones with features the iPhone does not yet have but the entire handset industry is running to keep up with just one player. iPhone.

The quarter ends in a couple of weeks and Apple will report similar stunning earnings with outstanding unit growth in all segments. And then their stock price will get killed too.

More to come

Writer loves his mother and is long AAPL, you should love your mother but what you do with AAPL is up to you

Android comes to Play: GooMo and the Future

Ahhh the future.  Three weeks ago we knew there would always be investment banks....

The first "GPhone" is being released today and so is born the first credible competition for the iPhone.  Do not misunderstand, the phone released today could be terrible.  

It is the first credible competition for the iPhone.  Google does not care about the device, they continue to look for ways to expand and protect their search and advertising franchise.

Great Article by Greg Sterling outlines the market and how the iPhone has been really a "proof of concept"  device that will lead to other, more and better devices.  Regardless of what WinMo and Blackberry had done up until the iPhone was introduced, they did not actually get used in a way that makes the internet the internet.

There are a lot of WinMo and Blackberry devices sold and in use, its just that they are not used for anything but texting and email.  (as measured by hits )  [if WinMo is WinMo, should Android be GooMo?]

To Google the internet is advertising and the "Mobile internet" is the future.  Andy Rubin points out in the Google Blog There are more mobile phones in use today by people that have NEVER had a PC (of any kind) than there are currently PC's.  To grow Google must be as ubiquitous in Mobile as they are on our desktops.  It is not important to Google that Android be anything but a minor success, they just need it to be enough of a threat to insure that Google will continue to serve mobile advertising on many devices.

So later today when people are talking about how Great or terrible the actual device is remember that this is the first of what will be MANY from many competitors.  WinMo will eventually be trashed by Microsoft and they will start from scratch and there may be even more players that we have never heard of that will innovate their way into the space.  The point is that in a couple of years there will be better internet enabled phones than we have now available from a number of sources.  

Today is the day that Apple begins to give up some of its 100% market-share in the next generation of mobile platforms. (of which the iPhone is the only current offering).  

We know that there will be insane growth in this market for the next couple of years and that we all will get to benefit from innovations in the devices /methods / cost.  We do not know what those devices would be.   For the Near term iPhone will play "PC" to Googles "Mac"/Android.  It will be fun to watch.

App Store Blogstorm

So there is this kerfuffle regarding the App store.  On the one hand we have Gruber.  Defender of the liberal arts and on the other Mike Arrington of Tech Crunch defender of well gravity.

  

Gruber/Arrington make very different arguments so you would think that they could not both be right but they are.  The thing that makes this argument cool is that we are free to assign whatever motive we want to Apple since we have no way to know what really happened.

Gruber is right, Gruber is Always right (Daring Fireball.net )

It’d be different if Apple had published an explicit rule stating, for example, that podcasting apps are prohibited. But there is no such guideline. Podcaster seems to fully comply with Apple’s published guidelines, and yet it was rejected for violating a secret rule....

The point is not that Apple can’t reject apps arbitrarily. They can. Elsewhere in the SDK Agreement is a more or less wildcard clause that grants Apple the right to reject apps — and remove apps which were previously accepted — for whatever reasons it chooses. The point isn’t about what Apple can do but what they should do.

And they shouldn’t be doing this. 

Gruber gets hot about an issue once every couple of weeks and lets fly all of his substantial edumicated smoothyness.   Slick awsome and right.  He represents that part of us for the world as we would like it to be.  He is hopeful, but unyielding and ultimately willing to make a go/no go decision based on something that is a poor compromise.

Arrington:

The fact is that there are more than twelve million iPhones in people’s hands today, and another800,000 or so are likely sold each week. That is too much of an opportunity to pass up. Developers will complain, but ultimately they’ll play by whatever rules Apple demands. Even if those rules are ambiguous and subject to change regularly without notice.

Arrington is right, I mean he is seriously correct.  This is what will happen.  I like Arrington too, it's just that I don't want to agree with him.  He is drive, ambition, business everything I admire in someone that likely feeds his family.

The downside of Arrington's argument is that it means we live in that world that is not fair, where we don't necessarily like the choices we have at any given time.  There is this MBA/Machiavelli thing that while right is a little to grown up.  

(Daniel Dilger is involved in the argument too but besides being pedantic I don't think I like him and three ways are sooo confusing)

As an aside.  The App store continues to Explode with Apps.  Four Hundred have been added since last weeks iPod show (3405 current total). Including todays release of The Force Unleashed.  This is the first release on the App store by THQ and further evidence that the iPhone/iPod Touch are going to be taken VERY seriously as a gaming device.

Update:  Fake Steve Jobs Weighs in at his lucid best: Blow Blogstorm Blowww.

Apple Sucks less than Lehman and AIG

Apple was spanked yesterday (140.36 -8.58 (-5.76%) Sep 15 4:00pm ET) during a 500 point market sell off triggered by Lehman Brothers filing for Chapter 11 protection from creditors.   Fannie Mae and Freddie Mac two companies that together hold HALF of all home mortgages in the country were taken over by the government.  These are not good times.  And for those of you blissfully unaware of what is transpiring in financial markets know this.  If AIG, one of the worlds largest insurers, is forced out of business we will all be worse off.  Things are not good in the economy, this week has been one of the bleakest in the financial markets in the last hundred years (1929)

On the other hand

 

Apple has between 21-25 Billion dollars in the bank.  Mac sales growing 25-50%.   iPhone sales off the charts (as many as 12 million to date), and plans to buy a Mac hit an all time high.

 Apple is just fine selling overpriced, proprietary computers,  overpriced proprietary music players, and overpriced proprietary cell phones.  Be a believer in sustainable margins, sustainable market advantage, and remember cash is king.

Lost in the news today aside from half of Ohio not having electricity,  Citibank reiterated a buy on  Apple with a price target of $287!  You go Richard!  No one knows where stock prices are going but given Apples actual earnings and projected growth for the next year.  It would seem that the performance of Apple stock should suck less than the market at large for the next year.

If you buy this stock you must have money, can you share?  I make all this up.  Really.  If you take the word of anonymous, but deceivingly erudite bloggers including this one. You deserve what you get.  Do real research this is just fun.

Jobs: 10 Million iPhone Goal Reached!

Apple is telling the press that todays "Lets Rock event will be big because...

Steve Jobs will announce iPhone Sales to date and Apple may have reached their self imposed goal of  10 million iPhones for  calendar year 2008 3.5 months ahead of schedule. 

If the folks on the IMEA project at Investor Village are to be believed.  

To do this Apple has sold close to 6 million phones in the not yet complete September quarter. 

The Christmas quarter has always been big for Apple and iPhones are available in more places every day (point is that sales are going UP not staying flat or falling)  Should they sell 2.5-3 million phones a month for the rest of the year there could be between 17-20 million iPhones sold in Calendar year 2008.  Analysis is here   

Charles Jade had it on Sept 2nd

iPhone Ubiquity

The iPhone is the coolest gizmo I have ever owned.  Nothing, compares.  Not my baseball cards, my Camera, stereo high def-TV, convertible, toaster oven, None of it.  Not even my Mac Plus (which back in the day was pretty badass)

The iPhone is simply put the single most compelling computing device to hit the market since the first PCs 30 years ago. 

It is clear that the iPhone as a handset and platform are so dramatically different and better than current market offerings that sales growth will continue to be freakish.

Gene Munster Put Apple on its "Alpha"  (Piper Jaffray)List this week indicating that there is significant short term upside in the stock of Apple (AAPL).  While mentioning that he expects Apple to sell 45 Million handsets next year.  45 MILLION.  I have not seen another analyst reporting a number that big.

Reports of manufacturing runs of 800,000 a WEEK being reported by several sources.

Munster mentioned Apples Back to School promotion which gives buyers a $299 incentive to purchase a Mac  (Free iPod woo hoo).

So I did some analysis of my own.  and projected out Sales thru 2014.  It is a Projection so by definition it will be wrong. 

Assumptions

• 15-20% annual price declines
• 10-15% cost declines
  
• iPhone kabuki deferred earnings
• 30% market share in 2014 (Nokia has 40% today you think thats going to hold?)
  
• 37% tax rate
• Declining growth in the Handset market 20-7%

I project Apple with 30% of the handset market in 2014.  (I made it up)  Nokia has 40% of the market currently so it is not unreasonable to assume that one company could have a share of that size.  There will be competition from someone we don't know who yet but someone will come up with a compelling competitor to the iPhone platform.

As a thought experiment Apples earnings per share could be 12 bucks a share from iPhone sales ALONE in 2014.  Oh and BTW 23 Billion in additional deferred earnings.  

Enjoy.

Let me know.  I can send you the Excel...

The writer has been long AAPL for a long time.  The writer is not giving advice (call your mother) am not telling you to buy this stock, and think that people that don't do their own research are lazy and doomed to failure 

Mobile Me

         Like finding out Mom’s famous Home Made beans really came from a can

Mobile Me, is a huge disappointment.  I purchased the family plan on the “Exchange for the rest of us” tag.  Finally .Mac Makes sense to me.  The ability to manage a household calendar with multiple users that updates over the air to my iPhone!  Oh yea that is worth a subscription but Holy Crap!  Even without all the launch issues the omission of multiple user calendar sync the iphone made it a non starter.  You know what I hate about it though… the unfulfilled promise.  It’s so Microsoft to talk about all the features that don’t actually work. (yes I still have a resentment about the Win 98 computer that never woke up…) The Mobile Me overpromise/vaporware is like finding out your favorite ball player used steroids.  I want to return it.  It is sad really I should grow up and expect Apple to act like the Multinational corporation they are.  The thing is though I want it to work so I am continuing to play with it I downloaded Busysync (http://www.busymac.com/) to see if that will help me get close enough to what I need.  It seems pretty slick but remind me again why I need Mobileme if I can sync everything using Busysinc?…  More to come