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JP Morgan: Apple is a sector unto itself
JP Morgan's hardware analyst Mark Moskowitz has laid bare exactly how huge Apple has become lately, calling the company an actual "sector," not just a company any more. Of course, on paper, Apple is competing with other computer and device manufacturers like Dell and Samsung, but the numbers just don't make that comparison meaningful any more, says Moskowitz. Apple's stock is by far the largest single stock in the S&P 500 index, and when you compare the company's income to other tech sectors like Pharmaceuticals and Software as a whole, Apple's take actually lines up within the top 10. I'll say that again, because it's important: Apple's income and operations actually compete with whole industries, not just the rest of the PC market. This isn't just the iPhone or the iPad being a new class of device, it's Apple as a whole company creating a tech sector of its own. That's pretty incredible, and if you haven't yet realized how big Apple has gotten in the past few years (as if the $98 billion in cash wasn't clear enough), maybe that's your wakeup call. Now, this may all seem like financial types just making much ado about numbers, but it actually holds quite a bit of meaning, both for Apple and its competitors going forward. Apple's huge growth in the past few years will have lots of consequences, both for the company and the technology industry at large, and we still haven't figured out just what a lot of those consequences will be.
Amazon elbows past Samsung for No. 2 tablet spot in Q4, according to IHS
Amazon had some serious trombone action going on last year -- what with all the horn tooting it did about Kindle Fire demand. Turns out Amazon was on to something, as the company has apparently grabbed the No. 2 spot from Samsung for tablet sales in the last quarter, according to research firm IHS iSuppli. Based on its numbers, Amazon sold 3.89 million tablets during the fourth quarter, eclipsing Samsung's 2.14 million units. The numbers equal a 14 percent share of the tablet market for Amazon while Samsung grabbed an 8 percent share, down from 11 percent in the third quarter. The brisk sales came at a price for Amazon, which saw fourth-quarter profits drop since it sold Kindle Fire tablets at a loss. Amazon's tablet sales also were still below the 15.4 million iPads sold by Apple for the period. All the competition is apparently taking a bite out of Apple's market share, however, which fell to 62 percent in 2011, compared to 87 percent in 2010. Samsung did manage to hold on to the No. 2 spot for the year, but with rumors already swirling about new iPads plus the Galaxy Note 10.1, the tablet wars aren't likely to cool off anytime soon.
Star Wars: The Old Republic performance fears are overblown, says analyst
While Electronic Arts has seen its stock price dropping since the (somewhat rocky) launch of Star Wars: The Old Republic, at least one firm believes investor concerns are "overdone," reports Gamasutra. A new report from Macquarie Securities suggests that the concerns about SWTOR's sales numbers have risen largely from outside "speculation" (you mean like this?), as EA has yet to officially divulge the game's performance so far. Furthermore, while SWTOR's NPD performance was poor during launch -- it failed to break into December's top ten -- Macquarie's Ben Schacter thinks that the majority of copies were likely sold digitally via EA's Origin service, something the NPD doesn't track. He predicts that the game may have sold as many as 1.5 million copies, which seems reasonable given its initial player base. It's important to note, however, that SWTOR's true success will only be measured by how many players actually maintain their subscriptions -- especially now that players actually can cancel their accounts.
New Zynga titles struggle, analysts call for increase in daily active users
Zynga's two latest games, Hidden Chronicles and the iOS-only Scramble With Friends, have failed to accumulate the same daily active user (DAU) totals as two of the social giant's previous releases, Castleville or Empires and Allies. This spells big trouble for the company's trading value and future growth, at least according to a report released by financial analysis group Cowen and Company. Hidden Chronicles' 12 day post-launch DAU total of 710,000 is well below the over 5 million DAU figure reached by Empires and Allies and Castleville during their first 12 days of existence; similarly, Scramble With Friends has failed to penetrate the Top 20 barrier on the App Store. Historically, Zynga's DAU totals peak 3 months after a game has been released (according to the report), and while it's possible that both Hidden Chronicles and Scramble With Friends could slowly acquire a larger user base, there's nothing in Zynga's statistical history to make that extremely plausible. Now, 710,000 daily users sounds like a ton of people, but Zynga has set the bar so high that it's not enough to keep the company's overall growth even: "The quarterly rate of DAU decline for Zynga's titles that are at least three months old has averaged 18.4 percent per quarter for the last two years," explained Doug Creutz of Cowen and Company. "Assuming Zynga averages a 20 percent quarterly rate of decline for titles beyond their launch windows in 2012, the company must add 9-10 million DAUs per quarter from new games just to keep total DAUs constant." So basically, any game Zynga releases in 2012 has to achieve at least 5 million daily users in order for the company's user base to break even. In other news, Zynga has constructed a super-sonic ultra-high-altitude aircraft to recover the bar it's accidentally set for itself in the exosphere.
Analyst believes Star Wars: The Old Republic had a $500 million price tag
Is Star Wars: The Old Republic the next big thing in MMOs? The same old thing in a new shell? Innovative? Routine? Polished? Buggy? Ask seven different people and you'll get nine different opinions. The one thing that everyone can agree on is that the game was expensive, and while most analysts are estimating somewhere between $100-$300 million, analyst Doug Creutz suspects that Electronic Arts has sunk nearly half a billion dollars into the project. This is in stark contrast to the estimate from analyst Michael Pachter, who targeted the price tag at roughly $80 million when all was said and done. Unfortunately, the precise cost won't be known unless EA decides to release the game's official budget and how much was spent on development, which seems unlikely. What is certain is that the performance of Star Wars: The Old Republic is going to be under close scrutiny over the coming months among both fans of the game and fans of financial speculation. [Thanks to Ben for the tip!]
Analyst claims that Star Wars: The Old Republic points to a healthy MMO market
The gaming industry is pretty morbid when you get right down to it. 2011 has seen several people predicting the death of the MMO market and the death of subscription games, often times in the same sentence. But according to analyst Colin Sebastian, the launch of Star Wars: The Old Republic makes it clear that these reports of death have been greatly exaggerated. As Sebastian puts it, the unprecedented growth of SWTOR's player figures indicates that the market still possesses a demand for new games and still responds favorably. Sebastian goes on to predict that the game will likely move around three million units by March 2012, the end of the fiscal year, although he believes that staying power is a bit more questionable. He believes that predictions of up to two million paying users by the end of 2012 might be overly optimistic. That having been said, the game has certainly come out of the gate with real strength; it only remains to be seen if it can maintain that.
Analyst claims SWTOR could already have 1.5 million players
It's not exactly a secret that big things are expected of BioWare's recent entry to the MMO market, Star Wars: The Old Republic. Cowen & Company analyst Doug Creutz speculates that the game could have up to 1.5 million players already, even though the game doesn't officially launch for another day. This conclusion comes about based on the fact that EA had 140 servers running by last Saturday. If that's the population right now, we can assuredly expect that the game's official launch will see big numbers indeed. We'll just have to wait one more day to find out.
IDC: iPad maintains tablet dominance, HP's TouchPad fire sale burned brightly
While the Android tablets continue to roll in, Apple can still lay claim to the lion's share of the tablet market according to IDC's latest report. Its research suggests that the iPad holds onto 61.5 percent of the worldwide market share, down from 63.3 percent last quarter. Android devices in total also saw a slight contraction, down from 33.2 percent to 32.4 percent. This is partly explained by the HP TouchPad's final hurrah, which rocketed the ill-fated webOS tablet up to third place with a 5 percent of share of tablet sales and an estimated 903,354 devices sold. Samsung maintained its Honeycomb tablet crown, nabbing 5.6 percent of all tablet sales. The Korean manufacturer was closely tailed by Barnes and Noble's Nook Color with 4.5 percent and Asus, arriving at fifth place with a four percent share. Tablets in total sold less than the analysts had predicted, although growth has still exploded 264 percent compared to this time last year. Meanwhile, E-readers outperformed estimates, with 6.5 million E-readers sold in the third quarter, up 165.9 percent from last year. IDC expects some disruptive new tablets will spice up the fourth quarter results and you can take a look at its findings and predictions at the full press release below.
Piper Jaffray: iTunes Match likely breaking even for Apple
Gene Munster of Piper Jaffray believes that for all of Apple's success with iTunes Match so far, the company is probably still only breaking even on the service. Sure, $24.99 a year from all of the service's users is a lot of money flowing in, but there's a lot going the other way as well, from server costs to music royalties and all of the other charges with running such a complicated service. Munster believes there are 135 million active iTunes users in America, so if only a small fraction of those subscribe to the service, there's a nice chunk of change coming in to Apple. But at the same time, Apple isn't expecting huge earnings from Match; it's essentially a promotion to help get people into the iTunes system and a solid mechanism for keeping them there. Apple would much rather sell you devices to listen to your iTunes library, therefore it's not quite so concerned about how you get that music in the first place. As a result, Munster's guess that Match isn't a huge moneymaker for Apple is probably correct.
Goldman Sachs sees iPad demand slowing
Almost two years after the iPad launch, Goldman Sachs reports that demand is slowing down, just as the holiday shopping season begins. "While improving holiday demand into late November could certainly push the momentum in the other direction, we believe it is prudent to assume the iPad is facing some near-term demand challenges," writes Bill Shope. Shope believes price is the reason. Amazon's Kindle Fire tablet is much less expensive at US$199, for example. While many consumers are still willing to pay more for a quality product, there's no question price is a big driver in a market like this. Shope recommends that if Apple wants to keep demand for the iPad as high as it's been in the past, the company will need to get the price down. The iPhone's price dropped off sharply after introduction, but we haven't seen that same drop with the iPad. Shope also says that increasing adoption of iCloud and Siri integration would likely drive iPad demand back up. Shope does call the iPad's growth chart "remarkable by any metric," but his analysis says Apple must act soon to kick the iPad back out into the spotlight as competing tablets threaten to take it away.
Analyst suggests iCloud's services as important as iTunes
Analyst Ben Reitzes of Barclays Capital has released a report declaring iCloud as the most important service Apple has put together since iTunes. iTunes revolutionized the way people buy music and content online; Reitzes suggests that iCloud will be a similar revolution that transitions the main hub for digital content from the PC, iPad, or TV into the cloud itself. We already know Apple is planning on making a big investment into iCloud and its infrastructure, and Reitzes says that investment will come in many forms, including connections with partners to share and spread the data stored on Apple's servers. It's hard to argue with an estimation like this one. iCloud's effects aren't quite as obvious as a downloadable application like iTunes, but the service has already come in handy a few times for me. It certainly seems like Apple is aiming to make iCloud as dependable and seamless as possible, which is exactly what you want with a cloud service. We'll have to wait and see whether it becomes quite as revolutionary as iTunes, but if you buy into Reitzes' analysis, iCloud has a big part to play in Apple's future.
Modern Warfare 3 pre-orders near 9 million, analyst says
According to Lazard Capital Markets' Atul Bagga, as reported by GameSpot, pre-orders for Call of Duty: Modern Warfare 3 were nearly three times that of Battlefield 3, which pegs Activision's shooter at around 9 million pre-orders. The estimate puts Modern Warfare 3 pre-orders roughly 70 percent ahead of those for Modern Warfare 2 and 55 percent beyond Call of Duty: Black Ops. Furthermore, the analyst expects Modern Warfare 3 to move a full 20 million copies by the end of the year. Those aren't exactly outlandish estimates, given the success of the franchise. Perhaps a more interesting study would be to gauge how many people are skipping work to play. Frankly, with Skyrim launching later this week, we fear worldwide productivity will flatline forever.
iPhone 4S demand persists, stores drain stock daily
The iPhone 4S is flying off the shelves in the US and abroad. An inventory check of 30 Apple retail stores by Deutsche Bank analyst Chris Whitmore suggests stores are selling their entire stock of handsets as soon as they hit the loading dock. Between 85% to 90% of stores surveyed run out of inventory each day. Apple stores are receiving daily shipments and customers unable to buy a handset due to low inventory are being instructed to make an online appointment for next day pickup on a first come, first serve basis. If you are looking to purchase an iPhone 4S, Apple stores may be your best option. Inventory at Sprint, Verizon and AT&T is "more sporadic" says Whitmore, with shipments arriving only occasionally. Some stores surveyed were out of stock and others were unsure when they would receive their next order. Online orders are also backlogged and subject to a one to week delay. This demand is not limited to the US or initial launch countries. According to Ticonderoga Securities's Brian White, the iPhone 4S went on pre-order last Friday in Hong Kong and sold out within 10 minutes. Besides Hong Kong, pre-orders for the handset also began in 14 other countries last week, bringing the total number of countries with the iPhone 4S to 44.
Apple's earnings "miss" more an issue with overzealous analysts
Apple reported its quarterly earnings earlier this week, and the results were lower than many Wall Street watchers expected (even though Apple beat its own revenue guidance by more than 12%). This miss was widely reported and Apple's stock took a hit -- AAPL dropped from above 420 before the announcement to under 400 on Thursday afternoon. But whose fault is this negative perception? Is it Apple's failure to perform this past quarter, or analysts' overenthusiastic predictions that led to this situation? According to Fortune contributor Andy Zaky, this foible is only a minor blip created by analysts whose predictions were off the chart. Zaky points out that Apple, in the past, has reported revenue that was about 12-18% above guidance. Analysts used this historical information and issued a consensus estimate that was 5-10% above guidance. That's how it worked. Analysts would predict on the lower side, Apple would earn on the higher side and life was good. This past quarter, though, analyst estimates had crept up to 18.8% ahead of guidance, while Apple's reported earnings were 13% above the company's guidance. Though Apple's earnings fell within the normal 12 to 18% over guidance, analysts got ahead of themselves and overestimated Apple's performance. And it's their own fault, says Zaky. Apple repeatedly warned analysts this was going to be a transitional quarter, but analysts failed to listen. [Via The Loop]
Samsung reportedly beats Apple in smartphone shipments
The Wall Street Journal is reporting that Samsung shipped more smartphones than Apple in the last quarter ending September 30. According to a person "familiar with the situation," Samsung shipped 20 million smartphones where as Apple shipped sold 17.1 million in its fourth fiscal quarter, which ended September 24, as announced in Apple's last conference earnings call. [Noting that shipping units doesn't mean selling them. Samsung may have shipped 20 million smartphones, but Apple sold nearly that many. - Ed.] As noted in Apple's last conference earnings call, sales of the iPhone slowed down in the second half of the last quarter (as predicted) due to speculation and rumor of a product refresh: namely, the iPhone 4S (check out TUAW's Chris Rawson post taking a closer look at this). However, with the iPhone 4S selling a hefty 4 million units within the first three days of its launch, things could look a bit different at the end of the next financial quarter!
Liveblog: Apple Q4 2011 earnings call
Thanks for joining us here for running commentary and analysis of Apple's Q4 2011 earnings announcement. We welcome your comments and questions, but please note that questions are moderated and will not necessarily appear in the liveblog content; also please note that TUAW cannot ask the Apple executives questions, as the call is reserved for financial analysts. You can also listen in on the live earnings call via QuickTime streaming.
MMO subscription dollars in decline for the first time since 2002
With all of the free-to-play MMOs coming onto the market and the F2P conversion of formerly subscription-only titles, it should come as no surprise that the subscription model is losing its grip on the industry. Eurogamer reports that starting in 2010, the money brought in from MMO subscriptions has actually gone into decline for the first time ever since analysts began tracking it in 2002. 2010's subscription revenue added up to $1.58 billion, a respectable amount but still 5% less than 2009. 2009 saw a 10% bump in subscriptions, and 2008 witnessed 21.6% growth. Connect the dots, and subscription revenue has most likely peaked and begun a downhill slide. Analysts predict that by 2015, revenue from subs will be as low as $1.33 billion. However, with the popularity of RIFT this year and the coming storm of Star Wars: The Old Republic, the subscription model may see a resurgence. On the flip side, microtransactions from F2P models are rising exponentially, jumping 24% from 2009 to 2010 to account for $1.13 billion. With the two models combined, the industry saw a very modest 5% increase last year in revenue. Screen Digest analyst Piers Harding-Rolls sees the writing on the wall: "The focus of many PC game operators has clearly shifted to micro-transaction‐based models -- in part due to competition in the subscription market especially in the high‐end MMOG segment, but also because of the flexibility micro-transactions offer operators in monetising gamers."
MacBook Air, Mac mini drive strong Q3 sales
The NPD group released its sales data for the current quarter and things are looking good for Apple. Mac sales are up 22% year-over-year due primarily to the release of OS X Lion and new MacBook Air and Mac Mini hardware in July. In a research note, Piper Jaffray analyst Gene Munster crunched these numbers and presented a slightly conservative quarterly estimate. Munster believes sales climbed during the summer months due to this new hardware and will likely fall off in September after the initial enthusiasm wears off. Taking this seasonal drop into account, Munster predicts Apple will sell 4.4 to 4.6 million Macs in the quarter, a 13%- 18% year-over-year increase. Munster also estimates Mac revenue will account for 20% of Apple's overall revenue in the current quarter. Looking back at last quarter, Apple sold 3.9M Macs (14% yoy increase), but these were a mix of new MacBook Pros, iMacs and older MacBook Air and Mac mini models. With new hardware gracing almost every Mac product line except the Mac Pro, Mac sales should remain steady.
Online sales will dominate the market by 2013
If you purchase your video games from a brick and mortar retailer, chances are you will be in the minority in just a couple of years. GamesIndustry.biz cites a new report that predicts online game sales will become the dominant force in the market by 2013 through individual websites, retailers like Amazon.com, and video game distributors like Steam. A DFC Intelligence analyst noted that boxed game sales already peaked in 2008, and that as physical game sales slowly decline, online sales will pick up at a marked pace. DFC is a research and consulting firm that covers the field of video games. Last year, online game retailers sold over $19.3 billion worth of digital merchandise -- a figure that's expected to rise to $37.9 billion by 2016. While real-world stores have much to worry about as the market shifts in the direction of online sales, the industry as a whole is expected to continue to substantially increase its growth over the next half-decade. One of the "key drivers" for that growth is PC games. The analysts also predicted that in-game advertising will increase two-fold in the next few years as advertisers realize the potential for this blossoming market.
Single-player games will be dead in three years, says industry analyst
So game development studios desperately want to move the entirety of our hobby online in order to mimic the recurring revenue model of MMORPGs. That's not exactly news, but it is news when an industry analyst makes an eyebrow-raising claim regarding the immediate future of the genre. To that effect, Eurogamer recently attended a "closed-door, Sony-organized panel discussion on the future of video games," which featured an analyst predicting the end of single-player titles by 2014. Mark Cerny, a "veteran video game consultant," used the 2009 single-player RPG Demon's Souls as an example, saying that its mixture of traditional offline gameplay and social connectivity to other gamers experiencing the same title is the wave of the future. "The funny thing here is, we don't even know what to call this. Is it single-player or is it multiplayer? We don't even have the words. It's kind of Orwellian. If you don't have any word for freedom you can't have a revolution," Cerny said. What exactly is that revolution, and will it be good for gamers? Check back in 2014 to find out.
