LG indicates iPad supply will be constrained into Q2 next year

Reuters reports this morning that LG cannot keep up with Apple demand for iPad displays.

The fact that they are constrained in the short run is old news that they will not catch up until 2011 is a big deal.

During their earnings Call Apple was asked several times in different ways about the nature of the current pipeline contstraints of both iPad and iPhone 4s. And while they would not say when they will get demand/supply in balance I for one left the call with the impression that there were no particular issues that would prevent a reasonably short term ramp to a much bigger number.


Tim Cook...
Both of these products, the iPad and specifically the iPhone 4, we had backlog at the end of last quarter that we were not able to fill. And currently, we are still selling both of those products as fast as we can make them. So we still are quoting longer lead times than we like and we’re looking around the clock to try to get supply and demand at balance.

Early in the questions Tim Cook mentioned that they targeted a million iPads a month for the launch but have been blown away by demand. Why did no one ask the question... How blown away? 1 million 2 million? So we know they are making more but not likely MANY more than 1mm a month right now and LG is saying they are nog going to be able to meet Apples current demands until Q2 2011. Isn't that when V2 will be out with the magical retina display and front facing face time camera?

Again Tim Cook
because if it turns out that the iPad cannibalizes PCs then I think it's fantastic for us, because there is a lot PCs to cannibalize. It's still a big market.

I took this comment initially as a little snarky but when you take it at face value it is indicative that Tim Cook believes it is at least possible that the iPad becomes a truly transformative device that ultimately (in a much later version) replaces the PC

off topic a little, ok a lot. Why did not a single analyst ask about Apples Cash position? I know we are going to get a crap answer but at least ask. More on this later.

Antennagate the Because we Can't Let it Go Edition

First it aint over...  Antennagate is guaranteed to be in the news at least thru September when they either announce more free cases OR as Steve said in the briefing  Who knows maybe we will have figured out something better by then.

I thought it made sense to apply a little critical though (ok very little)  to Antennagate the press conference.  

What is interesting  about the drop call rate is that according to Anand Lal Shimpi from Anandtech (on TWIT Sunday iTunes link) the iPhone 4 really does have a measurably more sensitive antenna and will hold onto a call in weaker areas better than previous iPhones but then he went onto explain that that in their testing the iPhone4  did have more dropped calls in stronger signal areas where the iPhone 3GS did not.  Are you fascinated yet  I mean this is scintillating stuff!  OK so what you say is the point. 

Add the fact that Steve Made clear in his presentation that they actually do not know why the drop rates are higher than the 3GS.

What if the antenna is in fact performing exactly as designed and the drops have nothing to do with the antenna?   ( I know but you can put your finger on the thing and the bars drop forget about the frickin bars for a minute)

As one possibility not because I think this is the solution but just as an example... What if the issue is something different about the way the software controls the radio in medium signal areas (ostensibly to improve battery life) that is buggy or needs tweaking?

Other stuff

It also seemed very clear to me that Consumer reports sucker punched Apple.  They effectively outlined the problem, and posed what they thought was solution.  Apple came out and provided the solution Consumer reports telegraphed would make them happy and BLAM not good enough.  

Why just AT&T returns?  I mean why not Apples?  look no black hats here just a weird omission.

I have seen it other places but the whole 1 out of a hundred thing was intentionally designed to minimize the size of the issue.  based on all the numbers I have seen none of which may be right the droped call difference is somewhere between 10 and 50% worse than the iPhone 3gs.  Try this.... Only one more out of a hundred flights crash  ( you get the point)

Look this is a real issue but it is not the reason not to buy the phone.  Apple looks standoffish they (Steve) says stupid things but over time when confronted with issues with their products Apple has  the right thing

Look for my semi annual where is my dividend rant coming soon to this blog...

Flipboard: an Electric Motor in a Steam Powered World

Ben Vested

I do not write about APPs.  I am just not drawn to reviews.  So this is not a review per-se That said... What is cool about Flipbook is what it represents.  Innovation.  I downloaded Flipboard and spent like 10 minutes just flipping the page back and forth.  It is just so frickin cool.  It is not a finished product but that is beside the point.

When the first electric motors came into use they were used to replace water/steam power in mills.  Mills were designed and optimized over time to make effective use of centralized power.  So when electric motors came along the only way people saw to use them was as a substitute for the water power.  It was years and years before factories and equipment began to be designed around the unique qualities of the new type of motor.

The iPad is an electric motor in a water and steam powered world and Flipboard is the most obvious example I have seen yet of what the future will bring.   We have no idea what this platform will look like in 10 years time.  All the existing magazines on the iPad....  Steam baby.

Look I am not saying Flipboard will survive or replace Wired/Time/People Magazines but something is going to.  The vast majority of stuff that has been produced so far has been regressive,trying to recreate the experience you get with a paper magazine.

At its most basic Flipboard is an RSS/twitter/facebook reader that aggregates your social feeds in a very unique and pleasing way.  The Tweets in your stream are presented with the entire content of the link for you to page thru.  The feeling is very much like the serendipity of reading the sunday paper.

And it is "Made with Love in Palo Alto, California"


The Wow factor is strong with this one .  Itunes Link,   Macworld Review link


The writer has no affiliation with Flipboard or Palo Alto although both seem pretty cool.  I am long Apple.

My Q3 guess

A point estimate is crap  but fun anyway  3.30 per share on 15 billion in income.  The real wildcard is what the gross margin will be.

Based on the fact that current iMacs are getting long in the tooth (read higher margin) and iPhone continues to grow as a percent of total business that gross margins will stay over 40%

A real number is somewhere between 2.90 and 4.40 a share.

There will hopefully be lots of good information on the call about pipeline constraints since current demand for iPhone and iPad appears to be outstripping supply.

Listen in at. www.apple.com/investor
5:00 pm Eastern.

Apple Earnings Preview

Ben Vested

First I was going to do a bunch of tables and charts and then I was going to do some really cool finance voo-do all over it but then I found out Andy Zaky  already did a fine job on that.  Here.  I did do a couple of charts you will find below.

This will be more information than you require (hat tip Hodgman) but here it is anyway.  I follow Apple as a company because (within normal healthy adult limits) I love tech, Apples products, the way they go about their business and the fact that they are a large successful easy to follow company.  I invest in them because in addition to all of those things, their business and the engine that drives their earnings can be understood.  Look, GE is a great company but based on their published financial statements three PHD's with a Ouiji Board and a bag full of darts could not figure out what is going to happen next with the company.

Apple is simple by comparison.  iPod, iPad, iPhone, Mac, and other stuff.  Apple is unique in the hardware space in that they make coin...  Apple is making money in two industries populated by companies fighting to do their best impression of Eastern Airlines (commodity out of business).    Nokia by far the largest maker of mobile phones by unit sales is losing money.  Dell the largest US maker of PC's has a 3% profit margin.  Their relative performance in the stock market over the last 6 years tells the story.

Apple is a hardware company, and they win because they innovate.  They refuse to compete on price and over time have produced time and again products that customers are willing to pay a premium for.  Apples ability to grow in the future will be tied to this simple equation.

You can argue at the margins but something between 45-55% of the companies earnings this year will be derived from product classes that did not exist before June of 2007.  iPhone came out in June 2007 and will have something over 20 billion in revenue this year.  iPad just came out this year and already is lighting up the revenue meter it should represent ~8% of 2010 revenue.

Here are two charts that show both revenue growth AND the contribution to growth by product.
This is revenue growth in dollars broken out by product.

Note 2010 projections are from Andy's analysis, they are as likely to be right as any (a little optimistic)  I used Apples presentation for products because It shows how the growth in Macintosh has been driven almost exclusively by laptops over the last 5 years, the last 12 months being an exception.  I have written about this before but Apple OWNS the over 1,000 computer market.  During a time when Dell and Asus are fighting over fifty bucks for a netbook Apple has been able to get the average price per unit for desktops to go up.

Iphone is obviously experiencing explosive growth as is iPad.  What has been surprising about the iPhone is that three years after launch the iPhone has maintained a PPU of over 600 bucks.  Estimated margins on iPhone are 60% so as the product mix moves towards iPhone Apples overall margin continues to expand.

This chart is the same data presented as a percentage.  It is here that you can see the relative importance of new products as a percentage of earnings.  The three big growing categories iPhone, iPad and Other music and related services (read this as APP store).  This category is going to grow like Kudzu in July over the next few years.

Longer posts coming on the following

Apples Cash position.  Apple is piling up cash at a rate that will force it to change its current accumulate cash forever strategy or not.  Currently they have about 47 bucks a share in cash and short term securities.  It is a stupid amount of cash that management cannot with rational argument hold onto given that they have zero debt and are continuing to accumulate cash at a rate of OVER 1 billion a month.  More on this later.

What happens next.  Apple will not make any new product announcements today but as sure as Microsoft will announce products that they will never make, the NEW is coming and it will be Magical and Revolutionary from a profitability standpoint .

Risks.  Apple is now huge. a lot of the poor PR in the last year has had to do with this size.  Size is also an issue in that they are running up against the law of large numbers in terms of their ability to grow.  Exxon Mobil is the only US company with a larger Market Cap and in order to maintain its current growth rate would have to create 20 billion in revenue next year that it did not have this year.  I am not saying it won't happen just pointing out that it is a big number.  Life after Steve not a happy thought.  There are others... Margins.

More after the announcements tomorrow.

The author of this post is long Apple but makes no recommendation for purchasing equity positions in the company.  Your grown people make your own decisions.  The author has no holdings of Eastern Air, Dell, Nokia or Greek sovereign debt.

Peeve of the day iTunes Advertising

One of the benefits of Mac ownership has been NOT having to wade thru crapware on my computer all the time.  Now comes this  

Almost everytime I sync my phone I have to click thru this MobileMe Ad?  At first I thought it was just when I synced my new iPhone 4 for the first time.  but it has been there almost every day.

CRAP!

Make it end Apple

Regardless of the relative merit of MobileMe (not good for me but I am hopeful long term) I find this type of  advertising putoffish and invasive.

Now, lets try a thought experiment.   Assume that  customers that sync their phones are better Apple customers than non-syncers.  (we know who you are). The presumption being that syncers use their phone more, buy more apps, and are happier overall with their user experience and as a result more likely to buy another phone or even better MORE apple products.

Do you think having to click thru an add every time I want to sync my phone makes me want to sync more or less? It adds friction.  like a paywall or even a registration wall does.  (see Rupert Murdoch Times 60% traffic drop off for Free restration wall went up)

There are two lessons here.

First,  If their is value in the product people will find their way to it.  Make the product better.

Second, and it is a correlary to the first.  Advertising it more make increase sales but it will not increase satisfaction and repeat customers (see rule number one)

Lastly,  I know there are opt outs for email marketing and even for iAds so if there is an opt out for iTunes I have not found it yet.  If I find it. OR if the add goes away so will my Peeve.

Bad day to be a case manufacturer

I think the most important news to come out of today's press conference was missed by most if not all of the scads of reporting firepower assembled to record the event.

Apple is in the case business because of the failure of existing manufacturers to keep their collective mouths shut about upcoming products.

Can you imagine being the CEO of an accessory maker and having to hear that today? Ouch. It reminds me of the take the cookies away from all the kids until whoever scratched dads car door comes forward. ( it wasn't me really ).

Steve Jobs...

Sometimes websites buy stolen property and they get out there... and case makers have a history of showing off their new cases for our new products. The case vendors haven't had a history of helping to keep our work under wraps

Maybe they already knew they were screwed, maybe Phil or Steve told them just how screwed.

But now they have been screwed.

Antennagate: The pre presser briefing

Ben Vested

Only a few people know what apple will announce at tomorrows press conference. Every news outlet in the country will be covering the pressed as the biggest story of the day...

Did anyone notice BP stopped the oil today on day 90 (maybe)

This silly season frenzy is fun ( maybe not so much for the few at the center of this), a welcome diversion from the real news that is so serious and depressing. There are also a huge number of stakeholders in the outcome. The two to three million of us that already have the phone-4 the 80 million of us that have older iPhones. The stockholders, press/blogosphere.

Friday afternoon coverage will be wall to wall.

The facts have been well covered so I will not repeat them here. For my part I think that there is a perceptible reception issue with the new phone. That said, I have used mine daily since launch day I find it delightful to use with significantly better coverage and sound quality than the previous phone.

The real issue is that it is an issue. At every opportunity since the stunning 1.6 million unit launch weekend. Apple has stepped on it's collective wiener. (Hold Different?)
Apple is going to have 60 billion dollars in revenue this year they are second only to Exxon in US market cap. They are no longer the little guy they are no longer "The Rest Of Us".

I do not know what he announcement will be. I do expect it will be definitive and final. It is fun watching everyone try to guess. Who knew RF engineering could be cool?

Here are a couple of great links to articles summarizing the events of the last three weeks.
Anantech
A little geeky but very clear follow up on the actual issue and performance. Link

Arrington
He famously does not use an iPhone. Interesting take Link

Under Construction

Under Construction.

BnVseted is being reconstituted, rebuilt, and reworked. My Appologies for the font and layout obsessed in the world my CSS is non existant and my taste... well you can see. (best for the time being to follow RSS)

Layout suggestions are welcome as are suggestions for hosting.

Apple and Psystar Restore my Faith in Humanity

Hello Apple!

Welcome to my twisted world.  Where things make sense when you "Follow the money"

Hewdell Packovo you say?!!! Hewdell Packovo is behind Psystar?!!!! who would have thunk it possible that two twenty somethings could start a real (albeit illegal, imoral, cruel, ok maybe mot cruel) company, stick their middle fingers up in the air, hire a big expensive law firm to defend (dare I say OFFend) them selves against a 100 billion dollar company.

Someone finally figured out that there may be players in the current market place that might benefit from Apple losing control of their IP as it pertains to Hardware made to run OSX.   Hmmmmmm.

If I cannot pose that I called the housing crash (and I cannot, I did really but you know the saying... If it wasn't blogged it did not really happen.. its a saying, really)  Than I CAN say I called Hewdell Packovo the nefarious funder of all things Psystar.  

Here are some of the Psystar links from the last SIX months.

July

Aug story 1

Aug Story 2

Sept 1 

There are more just click on the keyword Psystar

First post in a while, I am pondering my navel trying to figure out the best way to take over the world.  When I figure it out, I will let you know.  Unless taking over the world means I cannot tell you first.  In which case, Sorry.