PhilipElmer-deWitt
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Three times as many Samsung users switch to iPhone than the other way around
Though Samsung's snarky ads like to make jest of iPhone users, while Apple's just show how well various functions -- the camera, the music player and FaceTime -- work, new information from Consumer Intelligence Research Partners (CIRP) suggests those Samsung ads aren't too effective. As reported by Fortune, the CIRP report reveals that three times more people switch from Samsung handsets to iPhone than the other way around. The CIRP numbers also show that iPhone users tend to skew younger (about 69 percent are younger than 35 years old, compared to about 64 percent for Samsung), have more income (only 32 percent of Apple buyers have less than a US$50,000 income, while almost 45 percent of Samsung buyers are in that range) and are more educated (about 48 percent with a college degree or greater, compared to only about 32 percent for Samsung buyers). The Fortune post by Philip Elmer-DeWitt has some other gems that show just where the two companies get most of their customers. It's some of the best demographic information that we've seen so far detailing the customer base for the two largest smartphone manufacturers. [via 9to5Mac]
Apple's April 'mugging'
Philip Elmer-DeWitt over at Apple 2.0 had an interesting post today talking about why Apple's share price took such a beating in April. Elmer-DeWitt pointed out a column by Canadian money manager and financial columnist Mal Spooner in which he describes a burst of short-selling between April 2012 and April 2013. Short-selling is the brokerage practice of selling stock that you don't own, betting that the price of the stock will drop. The short-selling of AAPL that started last April was described by Spooner as being like swarming, where an "innocent bystander is attacked by several culprits at once." At the time Spooner wrote his column in early April, things were quite bad for Apple. Short interest in Apple had climbed from 8 million shares in April of 2012 to 20 million in April 2013. During the last two weeks of April 2013, short interest doubled again to 41.6 million shares -- and that's when Apple's share price fell to $385.10 (it's currently hovering around $444 - $450). Spooner's comment in early April points out how unethical the practice of shorting a valuable stock really is: "I've never claimed to be all that smart, but I just can't figure out how aggressively attacking a company's share price, selling stock that the seller doesn't even own, for the sole purpose of transferring the savings of innocent investors into one's own coffers... is a noble thing. Isn't it kind of like a bunch of thugs beating someone up and stealing his/her cellphone declaring it was the loner's own fault for being vulnerable?" The bears are still shorting AAPL, but the short interest has fallen to 26 million shares in just two weeks. For Apple, hopefully that's a sign that shares may recover some of their value in the future and that the muggings are over for the time being.
More realistic guidance from Apple results in better analyst estimates
Apple 2.0's Philip Elmer-DeWitt put it the best in the subhead for his Apple Earnings Smackdown article this morning when he said "Apple management may have found a way to tame the wild beasts of Wall Street." What he was referring to was the fact that most Wall Street analysts were actually quite close on their estimates of how Apple performed in the second quarter of its fiscal year, thanks to new guidance rules that had been announced by CFO Peter Oppenheimer in January. The Smackdown is a quarterly roll call of analyst estimates and how well various institutional and independent analysts fared in their educated guesses of Apple performance. On the Q1 2012 earnings call, Oppenheimer stated that the company would no longer give analysts conservative forecasts, or as Elmer-DeWitt put it: "Rather than tell them what the company was reasonably confident it could achieve the following quarter, it would offer a range of guidance that reflected what it believed it was likely to achieve (emphasis is Elmer-DeWitt's)." Oppenheimer's pronouncement appears to have been embraced by the financial wizards, as 26 of 62 analysts picked the March quarter revenue and earnings within 2.5 percent. That's a vast improvement over the 2011 estimates for the same quarter that were off by a combined average of 11 percent. And while independent analysts used to do a much better job of making accurate estimates than the pros, the difference was essentially non-existant this time around. Perhaps between better guidance from Apple, closer estimates by analysts and the company's agressive dividend payout and stock repurchase plans, Apple CEO Tim Cook and Oppenheimer may have developed a method to sooth the nerves of Wall Street and hopefully halt the recent slide in the value of the company's share price.
Apple's execs are not the best-paid
A report earlier this week from Businessweek claimed Apple has four of the five highest-paid employees among Standard & Poor's 500 companies. The figures cited in this report included both base salary and vested stock packages, which has some people, like Philip Elmer-DeWitt of Apple 2.0, crying foul. DeWitt open his acrid retort to the Businessweek article by asking whether "Bloomberg's brainiacs know the difference between an RSU and a pay check?" DeWitt points out that the compensation packages for Apple's top brass may have increased, but their pay has remained steady. These compensation packages include restricted stock units (RSU) that are not immediately available for the Apple executives and should not be counted as part of their pay. These RSUs are part of a retention package that becomes available after an employee works a set number of years. If the employee leaves before the RSUs have vested, then he or she loses that money. It's a common method used by companies to entice their employees to stay put for a while.
Ranking Apple analysts
Philip Elmer-DeWitt at Apple 2.0 keeps track of the how well Wall Street analysts -- and amateur Apple watchers -- predict the fortunes of the company. An overzealous estimate of earnings that isn't met by a correspondingly big figure by Apple always seems to result in a hit on share price, so Elmer-DeWitt has been ranking the analysts by accuracy. In the not-so-distant past, the amateur stock watchers were doing a much better job than the professionals, but that's changed. Now the professionals have taken eight of the top 10 positions on Elmer-DeWitt's list. He points out that this doesn't necessarily mean anything, since professionals also filled nine of the bottom 10 in his "Top 40." Based on the last nine quarters, the most accurate analyst on The Street appears to be Colin Gillis of BCG Partners. Some other familiar names from the Apple earnings calls don't fare as well. Gene "Apple TV" Munster of Piper Jaffray is about halfway down the list in the No. 19 spot, while perennial earnings call questioner Katy Huberty of Morgan Stanley barely made the Top 40 by coming in at No. 39. During the second quarter earnings call sometime in April, we'll be sure to give participants in our live blog Elmer-DeWitt's ranking information for each analyst who asks a question so you know how much credence to give their opinions.
Apple stock buyback to begin today
Part of Apple's plan to burn up a bit of that US$117.2 billion cache of cash starts today, according to Fortune's Philip Elmer-DeWitt. Over the next three years, Apple will use US$10 billion to repurchase shares of AAPL. Elmer-DeWitt notes that one Wall Street analyst, Bernstein's Toni Sacconaghi, was less than thrilled by the announcement of the stock buyback when it was announced back in March. Sacconaghi wanted the company to give back some of the cash horde to shareholders, in particular the institutional investors who hold 70 percent of the total ownership of Apple. The repurchase plan really doesn't accomplish that, and Sacconaghi believes that many institutional investors wanted to see a larger dividend instead. The impact of most stock buyback programs is an increase in earnings per share (EPS), since the earnings are spread over a smaller number of shares. Sacconaghi believes that EPS will only climb about 1-2 percent per year as a result of the buyback program, and that there won't be a rise in the share price as a result.
Apple VP Eddy Cue: Apple TV not likely in the near future
If you were hoping for a 60-inch Apple-branded HDTV for Christmas, get prepared to buy yourself another toy instead. Pacific Crest analyst Andy Hargreaves met Wednesday with Apple CFO Peter Oppenheimer and Senior VP for Internet services and software, and today he published a company update saying that "An Apple television appears extremely unlikely in the near-term." Hargreaves noted that it doesn't appear to be technology that's holding up the entry of Apple into the TV or cable set-top box -- instead, it's the cable TV companies and content providers that are holding up the works. From Hargreaves' report: The key problems in the television market are the poor quality of the user interface and the forced bundling of pay TV content, in our view. While Apple could almost certainly create a better user interface, Mr. Cue's commentary suggested that this would be an incomplete solution from Apple's perspective unless it could deliver content in a way that is different from the current multichannel pay TV model. Unfortunately for Apple and for consumers, acquiring rights for traditional broadcast and cable network content outside of the current bundled model is virtually impossible because the content is owned by a relatively small group of companies that have little interest in alternative models for their most valuable content. The differences in regional broadcast content and the lack of scale internationally also create significant hurdles that do not seem possible to cross at this point. According to Apple 2.0's Philip Elmer-DeWitt, that message is in line with published reports about the slow pace of Apple's negotiations with cable TV companies. Elmer-DeWitt's take? "Apple's much-rumored breakthrough in television -- whatever form it takes -- is likely to come later rather than sooner."
Study: 38% of iPhone customers come from RIM, Android
With sales of iPhones still booming, you might be wondering where all of those customers are coming from. Philip Elmer-DeWitt at Fortune is citing an April survey by the Consumer Intelligence Research Partners (CIRP) that shows that more iPhones were sold to consumers leaving Apple's competitors than to owners of earlier iPhone models. Data from CIRP indicate that 42 percent of iPhone buyers in April were switching from another smartphone, up from 36 percent in February. 38 percent of those buyers were switching from either Android or BlackBerry -- that's up from 29 percent in February. Buyers who were coming from a feature phone or who had never owned a mobile phone before accounted for 24 percent of the buyers, while 34 percent were upgrading from an earlier model of the iPhone. Just after the iPhone 4S launched last October, that number was at about 71 percent.
Videos of the new iPad's international launches
Phillip Elmer-Dewitt of Fortune's Apple 2.0 blog has compiled several videos from Apple's latest international iPad 3 launch, which kicks off today, Friday May 11. The iPad will land in 23 South American, Asian and African countries on Friday and seven Middle Eastern countries on Saturday. You can watch the launch videos from Taiwan and Vietnam below and then head over to Apple 2.0, which will add more videos as they come in.
Survey: 24% of Americans plan to buy the new iPad in the next three months
While all surveys should be viewed with a skeptical eye, a recent study from Baird Equity Research should make Apple watchers happy. As reported by Fortune's Philip Elmer-DeWitt, the survey of 488 "younger, tech-savvier" online respondents by Baird showed some surprising results. The first result showed that 24 percent of respondents plan to buy the new iPad. If that result is applied to the entire American population, then Apple had better get the plants in China and Brazil fired up, because they'll need to produce about 75,180,000 iPads just to keep the US market happy. The next surprising result of the survey showed that 29 percent of international respondents planned to purchase the new iPad within the next three months. That figure should also keep the Foxconn factories working overtime. Other information points provided by the survey include that 48 percent of existing iPad owners plan to purchase a new iPad, including 35 percent of those who already own an iPad 2. 15 percent of the US respondents said that they'd like to purchase the newly discounted iPad 2, while 28 percent said that they would purchase an iPad instead of a laptop. Sure, 488 respondents is a small sampling, but the numbers certainly point towards a banner year for iPad sales.
Apple stock gains nearly $100 since Steve's passing
Apple 2.0 editor Philip Elmer-DeWitt is back today with another fascinating Apple statistic: "[Apple] has gained nearly one Facebook in value since Steve Jobs died." Elmer-DeWitt remarks that the share price of AAPL on October 4, 2011, the day before Jobs passed away, was US$372.50 and that the market capitalization of the company was about $347 billion. Now, just four short months later, the stock price is (as of this morning) $472.66, over $100 greater than before Jobs died. That puts the market capitalization of Apple, Inc. at about $440 billion -- over $90 billion of growth in just four months. Those numbers are staggering. $90 billion is about nine-tenths of the value that Facebook has been given in advance of its upcoming IPO. Elmer-DeWitt notes that it's hard to argue that Apple is overvalued. He quotes Erik Savitz of Forbes noting that even after backing out Apple's $100 billion cash horde, valuation of AAPL is just 2.6 times revenues and 10 times earnings. The Apple 2.0 post ends on a rather dour note, with Elmer-DeWitt noting that "two prominent Apple bulls" agree that Apple's shares are ready for a sell-off.
Apple rollin' in the dough: 75% of cell phone profits
The news just keeps getting better for Apple in the mobile phone business. Just yesterday, IDC reported that the company is in third place in terms of worldwide mobile phone sales. Today, Asymco analyst Horace Dediu announced that with a relatively small piece of the pie (IDC said 6 percent of market, Dediu says 8.7 percent), Apple is pulling in a whopping 75 percent of profits in the industry. Philip Elmer-DeWitt at Apple 2.0 notes in an analysis of Dediu's numbers that out of the top eight manufacturers, only five are showing meaningful profits. Samsung has about a 16 percent profit share, while "Nokia, Research in Motion, and HTC are just scraping by. Motorola, LG and Sony, which bought out Ericsson last month, are still in the red." As Elmer-DeWitt points out, this is for all mobile phones, not just smartphones. And these numbers are for the worldwide market, not just the United States. He concludes that "This doesn't bode well for the manufacturers who have hitched their wagon to Google's Android or Microsoft's Windows Mobile 7."
Amateurs beat pros at predicting Apple's Q1 performance
When it comes to predicting Apple's financial performance, you may want to ask bloggers, day traders, and amateur analysts instead of listening to Wall Street analysts. As cited in a post by Apple 2.0's Philip Elmer-DeWitt, the real analysts blew it big time predicting Apple's financial numbers for the first quarter of 2012. As noted by Elmer-DeWitt, "although even the most bullish independents were surprised by the strength of Apple's Q1 2012 results, at least they were in the ball park." In a ranking of accuracy, the independent analysts took the top fifteen positions, while the Wall Street gurus brought up the bottom of the chart. That's not to say that Wall Street's finest aren't capable of making at least a few good estimates. Asymco's Horace Dediu and Sterne Agee's Shaw Wu were both accurate on predicting the Mac sales numbers. TUAW's favorite analyst, Piper Jaffray's Gene Munster, was right on target with his estimate of iPod sales. When it came to iPads and iPhones, though, the independents beat the street. Gabriel Dubois was close with his estimates of iPhone sales and gross margin, while Gregg Thurman "missed narrowly on iPads." Elmer-DeWitt notes that "The company that Steve Jobs built is still that rare beast in American business: A $400 billion giant that acts -- and grows -- like a start-up." That ability to be agile, design and sell innovative products, and make huge margins on sales of those products make it difficult for even the most highly-trained Wall Street analysts to make accurate predictions.
Daily Update for January 9, 2012
It's the TUAW Daily Update, your source for Apple news in a convenient audio format. You'll get all the top Apple stories of the day in three to five minutes for a quick review of what's happening in the Apple world. You can listen to today's Apple stories by clicking the inline player (requires Flash) or the non-Flash link below. To subscribe to the podcast for daily listening through iTunes, click here. No Flash? Click here to listen.
Elmer-DeWitt: Apple in "no hurry" to settle iPhone patent lawsuits
To Apple-watchers -- in particular tech bloggers -- it seems like Apple is taking forever to settle the lawsuits that are pending against Samsung and other smartphone manufacturers for allegedly infringing on the company's intellectual property. On Fortune's Apple 2.0 site today, long-time Apple analyst Philip Elmer-DeWitt explains why a slow, measured march through the patent courts of the world might work out to the company's advantage. Elmer-DeWitt cites a recent analysis by Deutsche Bank's Chris Whitmore that outlines four possible outcomes to Apple's legal attack against the Android ecosystem: A settlement, with a per-unit license fee paid to Apple; a "more favorable outcome" where Apple is able to have certain features removed from Android handset or can limit the distribution of Android phones, resulting in capturing 25 percent of Android's future market share; neutral with no winner; and Apple loses and must pay a counter claim to Android manufacturers. As Elmer-DeWitt notes, Whitmore apparently doesn't think outcomes 3 and 4 are very likely, as he spends the majority of his analysis trying to figure out just how much Apple could reap from the first two outcomes. Whitmore thinks that a license fee could cost competitors about US$10 per handset, which would add about $35 to the value of each share of Apple stock. However, if Apple holds out and fights for outcome 2, it could easily a growth in share price closer to $260 per share. That's why Whitmore believes that "Apple is unlikely to settle cheaply." His advice to investors? Hold tight and let the legal drama play out, as investors are "gaining exposure to a potentially very lucrative favorable IP outcome for little or no cost."
Jobs bio fosters resurgence in Apple-branded TV rumors
The Walter Isaacson biography of Steve Jobs has just been officially released and now everyone from TUAW readers to Wall Street analyst Gene Munster is reading between the lines to see what Apple's "next big thing" will be. The biggest rumor? That Apple will be coming out with a branded HDTV that will revolutionize the television-watching experience. A lot of us don't expect this to happen -- in a recent TUAW poll, about 57% of readers thought it was unlikely that Apple would every make a TV. But based on a statement in the biography, Munster is even more convinced that Apple is going that way -- and he's even starting to forecast revenues for an Apple HDTV line. Munster has been "certain" of an Apple-branded TV since 2009, and according to Apple 2.0's Philip Elmer-Dewitt, he keyed on a particular section of the book where Jobs said "I'd like to create an integrated television set. It would be seamlessly synced with all of your devices and with iCloud... It will have the simplest user interface you could imagine. I finally cracked it." Munster thinks that the "code" that Jobs "cracked" is combining live TV with shows that were previously captured and stored on iCloud. The Piper-Jaffray analyst also believes that Apple could add Siri support "to bolster its TV offering and simplify the chore of inputting information like show titles, or actor names, into a TV." There are a number of meetings with suppliers and patent filings (including the one noted by Patently Apple in the screenshot above) that Munster cites as more evidence of an upcoming Apple TV. He goes on to show that the device, if released in 2012, could add as much as US$6 billion to Apple's bottom line in calendar year 2014.
Wall Street analysts think iCloud's future has a silver lining
Apple fans and developers apparently weren't the only people who liked the iCloud announcement on Monday at WWDC. As reported by Fortune's Philip Elmer-Dewitt, Wall Street analysts are almost unanimous in their positive comments about iCloud's effect on the financial future of Apple. For example, Credit Suisse's Kulbinder Garcha is quoted as saying "Although Google and Amazon are already offering cloud based offering, we believe Apple has continued to lead innovation in the services space with the introduction of its iCloud, which we believe is superior to existing cloud services from competition." RBC Capital's Mike Abramsky was even more enthusiastic when discussing the PC-Free capabilities of iOS 5, noting that by "'cutting the cord' to the PC, Apple may expand its addressable device market by 4x, addressing the ~3B handset users who have a phone -- but not a PC." TUAW's favorite analyst, Piper Jaffray's Gene Munster, also chimed in on the ability of future iOS devices to work sans PC, and commented that "Bottom line is that Apple is increasing the likelihood that consumers buy multiple Apple devices ... Apple will be giving away iCloud for free (we had expected it to be priced between $25-$99 a year) ... sharing non iTunes music will cost $25 a year. (As a point of reference, Amazon's Cloud drive could cost up to $200 a year.)" The future for Apple looks as bright as the sunlight in those architectural renderings of the proposed Cupertino campus of our favorite company.
Analysts release their Q2 2011 earnings estimates
Apple will announce its quarterly earnings after the bell closes on Wednesday, April 20. The Cupertino company will unveil sales figures for the newly launched iPad 2 and possibly the Verizon iPhone. Long lines and delayed ship times indicate the iPad 2 is selling well, but early estimates suggest the Verizon iPhone is not selling as strongly as expected. Before Apple makes these figures official, analysts are weighing in with their preview of Apple's completed quarter. In previous quarters, blogger analysts and professional analysts differed greatly in their prediction of Apple's sales figures. This quarter, though, the two groups are in relatively close agreement. According to the predicted figures compiled by Fortune, Apple's revenue will beat its guidance of US$22 billion and land between $23 and $24 billion. iPhone sales are expected to hit the 16 to 18 million units sold mark, iPods 9.82 to 9.96 million, iPads 6.2 to 6.7 million, and Macs 3.6 to 3.7 million. For additional details, point your browser to Fortune's website where you can find a detailed chart listing the previews from approximately 50 analysts. Be sure to mark your calendar for 5 PM on Wednesday, April 20, as we will be covering Apple's earning conference call. Join us as we discover how these estimates compare to Apple's reported numbers.
The case for an Apple stock split redux
Just about a year ago I wrote a post explaining all the hoopla over an expected AAPL stock split which never happened. At that point AAPL shares were trading at $202.86 and many felt that it was just too expensive for most small investors to buy. Last week, Apple closed at $348.14 after a few weeks of a roller coaster ride taking the stock down from a 52 week high of $364.90. No one really knows why the fairly quick drop happened. Rumors covered everything from the health of Steve Jobs and the question of a succession plan, to delays of the iPhone 5 and the iPad 2; but the fact of the matter is that an annual increase in price of around $145 ain't chopped liver. The vast majority of AAPL stockholders are investment firms, with the little guy being mostly left out due to the high stock price. It's emotionally unsatisfying to buy a handful of shares, and with only five or six shares in your portfolio the profit potential is decreased. That's mostly emotions talking, but the market is strongly influenced by emotions like fear, excitement and greed. So what would happen if Apple decided to split its stock anywhere from two to one, up to a four to one split? AAPL has split two for one three times, in 1987, 2000, and 2005 -- but it hasn't happened in the last six years. Philip Elmer-DeWitt writing for Fortune's Apple 2.0 posed an argument asking if the time is right. He made a reasoned case both for and against splitting.
