Posts Tagged ‘AAPL’
Photos Of Plastic Budget iPhone Allegedly Leak
market for over the counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AAPL) appears poised to launch another smartphone. According to according to1.
2. In keeping with: according to instructions.
3. most insider sources, however, Apple won’t be releasing just one
new phone this fall: The company is expected to launch a new, plastic
iPhone for consumers on a budget, as well as the anticipated iPhone 5S.
Although no official name has been announced, the expected budget iPhone
has been dubbed the iPhone 6 by some Apple fans. And, thanks to theTechdy Blog , we may (or may not) have a pretty good idea of what the
budget iPhone will look like.
On Friday, Techdy posted it had somehow acquired the body of
Apple’s budget iPhone. The blog post encompassed more than 40
photographs of the rumored budget iPhone body from various angles,
showing a new hard plastic case with a design reminiscent of both the
current generation iPhone 5 and surprisingly the original iPod.
Despite the rumored low cost of this iPhone, one thing seems clear
from Techdy’s description: It doesn’t feel cheap at all.
“The budget iPhone will be made substantially from plastic (we
can feel it’s actually polycarbonate A category of plastic materials used to make a myriad of products, including CDs and CD ROMs. material),” Techdy wrote.
Aways From Apple’s IPhone Event 2013 And A Positive Outlook For 2014
First things first: If you stuck to credible rumor sources (I listed some of them in earlier Instablogs about AAPL) you got over 90% of the September 10 Apple announcements correct.
For those still following talking heads or other sell side analysts disappointed why there was no Apple TV set and no dirt cheap iPhone please find my outlook below. It should hopefully prove more accurate.
This outlook is also reassuring to long term AAPL investors since Apple seems to be (once more) a victim of “buy the rumor, sell the news” on Wall Street following the Sept 10 event:
1. iPhone 5C: Cheaper Doesn’t Mean Cheap, Newer Isn’t New
The iPhone 5C introduction is not a new strategy behind the curtain it just looks like a new strategy to the average consumer in front of the curtain. It’s basically marketing the current iPhone strategy better: Apple simply put its second newest phone (iPhone 5) in fancier clothing for the first time. As long time Apple watcher Gruber aptly put it:
The iPhone 5C has nothing to do with price. It probably does have something to do with manufacturing costs (which are lower for Apple), but not price. Apple’s years long strategy hasn’t really changed. It’s just that instead of putting the year old iPhone 5 in slot 2, they’ve created the 5C to debut in that slot. The 5C is, effectively, an iPhone 5. This is the notion that one size does not fit all a radical idea for the brand. Its mechanism to address it is a “good+better” portfolio. Note that this is not at all like the iPad where the Mini is actually suited to different tasks. The iPad can be thought of as a “small+big” portfolio.
People clamoring for (really) “cheap” iPhones fell into the same trap as sell side analysts predicting a feature phone “iPhone nano” a few years ago (which of course never materialized). Same for netbooks or cheap desktops bundled with ISP contracts Apple never played in these low end market segments in the past.
Market share isn’t everything, gross margins do matter. There’s a good example for this playing out in the phone market right now a little quiz:
Globally, out of the 10 best selling mobile phones of all time 9 where made by whom?
You probably guessed the correct answer: Nokia (NOK) the company just called it quits and sold its devices division to MSFT. The only other phone on the top 10 list was made by Motorola Mobility now owned by GOOG and a shadow of its former self in the phone space (despite the billions invested by GOOG).
This ironic tweet from today sums up the situation nicely (as AAPL shares are being sold off):
Wall Street is most disappointed in Apple for not introducing cheap phones that lose money like the rest of the mobile phone industryThe only thing that puzzled me is why Apple didn’t differentiate the iPhone family with feature sets and colors earlier as it did with the iPod family in the past. 2013 looks a little late to make this separation.
2. Big In Japan (yes, Japan still exists)
NTT Docomo is finally an official carrier for iPhone this is understated by the market focused on China (more about this in 3.). Docomo long was a hold out for local Japanese brands also thanks to its i mode heritage. This is big news and probably the end of the line for most of the remaining “Galapagos” smartphones sold exclusively in Japan.
With about 60 million subscribers and a powerful 4G network (branded “Xi” with over 15 million subscribers ), NTT Docomo and high end Japanese consumers are as important if not more important short term for AAPL as China Mobile is longer term.
3. China Mobile Is Most Probably Coming, Wait For 4G Network
Many sell side analysts got the AAPL China Mobile story wrong for months. There are various technical reasons (TD LTE and before that a different 3G standard) why Apple isn’t on China Mobile yet. Details can be found in this good article, also indicating the technical hurdles will be resolved soon:
China’s Ministry of Industry and Information Technology (MIIT) has now certified both the 5S and slightly cheaper 5C with its network access license.
Looking closely at the MIIT document, it shows two iPhone variants that have’t been announced yet: the A1516 variant of the iPhone 5C, and the A1518 version of the iPhone 5S. Perhaps those will support China Mobile’s 2.5GHz TD LTE network, which is expected to go live nationwide later this year.
So the certification points to the new iPhone 5S and 5C eventually appearing on China Mobile’s TD LTE network, but it’s still too early to tell. Indeed, China as a whole is awaiting its 4G roll out.
Cheap iPhone Now Appears A Certainty
Apple’s (AAPL) quarterly earnings call provided valuable insights into the possible future direction of a company that is still hurting from its delayed move to larger screen iPhones and the continued wrestling match with carriers over the consumers’ pocketbook. Time is still on the company’s side to adjust its business model; however, it seems obvious, given the worldwide commoditization of smartphones, that Apple must make a significant adjustment on its business model by building only one high end model for the subsidized user and a much lower cost version for unsubsidized users. In other words, the iPhone 5C ended up being a tweener, not good enough to be a significant player in either universe.
Apple’s expanded carrier strategy enabled the company to overcome weakness in the US and a late start in ramping the iPhone 5S. Many asked what could have been had it not been short on product in September and October. This is another case of the company placing all its marbles on the newest iPhone to satisfy its yearly pent up demand. It’s a very profitable strategy that tips on the knife’s edge of the company’s extreme logistics. The easier to manufacture iPhone 5C was offered as a buffer to any shortfall, but it looks like customers and carriers won’t buy a plan for a second rate product.
It is difficult for a heavily branded company like Apple to introduce the new star to the team while at the same time saying: “hey don’t forget the second stringer on the bench.” There are plenty of consumers in the developing world who would love to jump on the iOS ecosphere but don’t want to play the carrier subsidized game. Apple’s falling market share has to concern it for no other reason than it wants to pull in a steady stream of new, young users just like it does with school kids on iPads.
Apple’s rivals are not surprisingly shipping high volume in order to make a profit on miniscule margins. It is a repeat of the PC markets exactly where over 40% of the sales go to no name purveyors. Tablets are headed in the same direction. It is literally a black hole that Apple couldn’t chase and maintain a strong brand. However, Apple has yet to move down off of its $549 price point while the rest of the entry market has moved dramatically.
This stall in Apple’s iPhone sales is very reminiscent to what happened at Compaq in the early 1990s. At the time it engineered its own PCs down to developing its own chipsets to work with Intel’s (INTC) processors. Competitors like Dell, however, beat it to market with much lower costs. When Compaq matched Dell, the company turned around and sales soared. Apple faces this low end threat by not addressing it even though lower component costs are available. Stubbornly sticking to $549 on the entry level phone is a dead end that Tim Cook must address.
Given the build out of the carrier network with DoCoMo (DCM) and China Mobile (CHL), one would expect bigger upside in the coming year for Apple. Assuming it launches a larger iPhone 6 that refreshes Apple’s current customers this fall, then the dramatic shift to $300 is the key to whether the company grows more in line with the market. It is entirely possible that the iPhone 5C becomes the $300 phone if for nothing else but to fill the gap until a true successor is developed.
One of the key facts in the earnings call was the dramatic slide in iPod sales. The iPod is dying quickly and Apple needs a phone that carries tunes, plays video and takes photos for teenagers. It doesn’t need 4G LTE and it can be enclosed in plastic. Will the US carriers want to play that is the interesting question.
It seems clear that Apple holds the upper hand over carriers with its latest and greatest phones and there is no way it will lose this. Carriers may grumble, but these phones drive the data plan side of their revenue while cheap, cut rate phones drive the margin side of equipment sales. The minute a consumer says “I don’t want a contract” or “I was looking for a cheaper phone” is the point the carrier directs them to another brand or the house model and Apple loses by only having the tweener at $549.
In the longer term strategy, Apple has to consider when the crossover comes in regards to the uplift in a lifetime of iTunes and applications purchases outweighing the smaller margins of a low cost $300 smartphone. Tied in with a refresh of its Apple TV, the connected home can drive sales much higher than what we saw in Q4. Wall Street senses that the company, though very profitable, is leaving a lot on the table, unlike Amazon (AMZN), which is racing at lower margins to eliminate its brick and mortar competitors.
Source: Apple: Cheap iPhone Now Appears A Certainty
Disclosure: I am long AAPL, QQQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More.)