Posts Tagged ‘Steve Jobs’

Apple Has No Choice But To Make A Larger iPhone

Apple Has No Choice But To Make A Larger iPhone

Apple (AAPL) will have no choice but to make a larger iPhone. This is something which is becoming more obvious as the days go by. At first, it seemed just like something the Android phones could do they could differentiate over a much larger number of form factors, and hence they’d have larger, as well as smaller, screens.

However, right now this trend has morphed into something else. It has turned into a definite disadvantage for Apple. And it’s a disadvantage Apple doesn’t need to have, since Apple continues to control the best ecosystem with iTunes.

First, as the smartphones see increasing web and media usage, a larger screen shows itself to be significantly better. Web browsing is much easier to do on a 5″ screen than it is to do on the iPhone’s 4″ screen. Also, screens are converging towards 1080p resolutions 1920×1080 pixels. This is the traditional HD resolution we’re used to from our home LCDs. It will be the natural resolution to see video. It’s now rumored that the upcoming Samsung Galaxy IV will have precisely that resolution on a 5″ screen.

Second, there might be a demographic angle for the larger screens as well. you have the baby boomer cohort retiring massively. This segment of the population controls significant buying power and is now also familiar with web browsing. But for this segment, seeing is not as easy as it once was. A larger screen makes this task much easier, and it can become a decisive factor when choosing a phone.

Why hasn’t Apple followed the trend

Jony Ive explained it during the launch of the iPhone 5. Apple wanted to keep the ergonomics of using the iPhone 5 similar to those of the iPhone 4S, allowing for single hand operation. Hence it kept the width of the phone and just increased the length, making for a slightly longer screen. This means Apple already saw the need for a larger screen but still went with a compromise. But since every other competitor continued to bring larger and larger phones, the compromise cannot hold for much longer. The Samsung Galaxy IV at 5″ is probably the drop in the bucket which will spring Apple into action.

In a way, we could say that at this point, screen real estate has superseded the need for single hand operation.

Much like with the iPad, Apple will change courseFor a while, Apple faced the same dilemma regarding the iPad’s screen size. It’s well known that Steve Jobs said 7″ screens were simply too small for tablets. And yet, during 2012 Apple finally came out with a 7″ iPad mini.

The situation is exactly the same with smartphones. As every competitor Samsung (OTC:SSNLF) chief amongst them keeps pushing larger screens and these find ready acceptance in the market, Apple has no choice but follow suit.

Also, like with the iPad, it’s likely that Apple will broaden its product offering, keeping the present form factor, and introducing a new, larger, form factor alongside it. The rumors regarding a larger iPhone are already swirling, but they usually point towards a larger, but cheaper, model. It remains to be seen whether Apple would want to cheapen its image. That’s a path it didn’t take with the iPad mini, though its specs could be higher end, something which Apple is probably going to address during 2013.

Other relevant smartphone newsHTC’s monthly revenues for February 2013 plunged 44%. It seems likely that the entire smartphone market is cooling down while also being oversupplied by countless companies. This has negative implications for Apple as it’s almost certain that it, too, is seeing part of this slowdown in its own sales.

At the same time, concomitant with further iPhone supply reductions, comes the rumor that the iPhone 5S is entering production. The iPhone 5S is not yet the larger iPhone I’ve talked about here, and with the same design and slightly higher specs, at this point it’s not likely that it will be enough to rekindle sales.

ConclusionMuch as it happened with the iPad, the competitive realities of the marketplace should be enough to drive Apple to launch an iPhone with a significantly larger screen. The Samsung Galaxy IV, about to be launched and rumored to carry a 5″ 1080p screen, should be the enough to push Apple over the hedge and make it launch its own larger screen model.

The trends toward mobile web usage as well as aging of the population make this move by Apple all but inevitable.

Source: Apple Has No Choice But To Make A Larger iPhone

Disclosure: I am short AMZN. 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.)

Apple Girding For Big iPhone Sales

Apple Girding For Big iPhone Sales

By David Berman

Expectations are rising for the next generation of the Apple iPhone. All Things Digital has a roundup of some recent rumors surrounding the iPhone 5, noting that one of Apple Inc. (AAPL) manufacturing partners is producing 150,000 iPhones a day, and is schedule to produce a total of 6 million of the mobile devices in September alone.

An analyst at BTIG estimates that Apple will sell 21.5 million iPhone 5s in the fourth quarter alone and potentially far more if it adds Sprint (S) as another carrier in the United States. Apple hasn yet announced when the new device will be launched, but the scuttlebutt is some time in October.

Apple shares have been riding the same roller coaster as the rest of the stock market over the past month or so. Since hitting a high of $404.50 in late July, they fell below $355 in August. They have since recovered most of that lost ground and are currently up 3 per cent since Steve Jobs resigned as the company chief executive in late August, raising concerns about whether Apple can continue to produce popular leading edge consumer technology devices.

Year to date, though, Apple has been a star, with the shares up 20 per cent, versus a 4.9 per cent decline for the broad S 500.

Apple Expected To Beat And Raise With iPhone ASPs A Likely Catalyst

Apple Expected To Beat And Raise With iPhone ASPs A Likely Catalyst

Probably what matters most for Apple (AAPL) right now is estimates are currently trending higher and, starting with the fiscal first quarter earnings, the company is expected to finally start showing year over year earnings growth for the first time in over a year. It isn’t a coincidence that when estimates bottomed this past summer as shown in the chart below, the stock price also bottomed around the same time. On the chart, we have a trend line from the lows with three touches and with expectations for forward earnings estimates looking to get revised higher after the company reports, there is support for this trend to continue.

The two most common ways estimates get revised higher following an earnings release is for a quarterly earnings beat and to provide guidance for future quarters above current estimates. Apple should do both when it reports results after the market closes today.

For the fiscal first quarter, the company provided guidance for revenue of $55.0 billion to $58.0 billion with gross margins of 36.5% to 37.5%. Without adjusting for the lower share count, this comes to earnings of $12.80 to $14.24 per share. Consensus estimates call for revenue of just under $57.5 billion, gross margins of 37.2%, and earnings of $14.04 per share. These are based on expectations of 54.9 million iPhone sales, 24.8 million iPads, and 4.6 million Macs.

The biggest risk to these estimates is the gross margins, but this is probably more cosmetic than actual company performance. As announced last quarter, the company would start deferring revenue and make its Pages, Keynote, Numbers, iPhoto, iMovie, and GarageBand free for all devices and computers. This should shave approximately 100 basis points from the company’s margins in the near term. Otherwise, expectations are nearly for across the board beats. iPods have downside risk, but iPod sales have dropped to approximately 2% of the company’s revenue and will be dwarfed by even iTunes sales. Even Mac unit sales are generally expected to have upside risk. iPhone sales are whispered to be as high as 58.0 million units, but the whisper number is closer to 57.0 million while iPad whispers are around 26.0 million units.

Combined, this brings revenue whispers to $58.5 million. Gross margins are expected to be around 37.25%, which gives us an Earnings Whisper number of $14.42 per share based on just under 900.0 million diluted shares. If there is going to be a surprise, it is most likely to come from ASPs, especially iPhones, where the mix seems to have improved perhaps better than expected.

It wasn’t long ago that iPhones averaged well over $600, but when the company sold the iPhone 5 along with the iPhone 4 and 4s, many consumers found little difference between the low end devices. Now, the mix has changed and the more expensive iPhone 5S is soundly outpacing the 5C. Consequently, a $600+ ASP is looking more reasonable. Assuming unit sales expectations are hit, an average selling price for the iPhone back above $600 would change most models.

Besides the expected beat, estimates are also expected to get revised higher after the company reports because of the company’s guidance for the fiscal second quarter. As we tweeted last week, Apple is notorious for lowballing guidance and then soundly beating the guidance later. Of course that has changed now with Tim Cook at the helm, but analysts have generally had second quarter estimates too even when Steve Jobs was in charge and the company has actually provided guidance above second quarter estimates more often than not. That should be the case this time too, especially with the China Mobile deal that started on January 17, 2014. Estimates have ticked higher since the deal has announced, with the consensus earnings estimate now at $10.93 per share but whispered expectations are for second quarter earnings to be north of $11.00 and it is generally believed this will be reflected in the company’s guidance as well.

With estimates looking to get revised higher, there is little company specific reason for the trend in Apple’s stock price to fail and the valuation seems reasonable. So the rise estimates means there is fundamental reason for the valuation to lift as well. The stock has historically traded at 24.3 times forward estimates. Apple isn’t likely to see 24% earnings growth anytime soon, so perhaps it is a stretch to expect the stock to get to $1,200 where it will be trading at 24.3 times current fiscal 2015 estimates. However, at Friday’s close, the stock was trading at 11.15% times next year’s estimates. The consensus estimate for the current fiscal year is currently for earnings growth of nearly 11% and current consensus estimates are for acceleration to above 12% next year. A beat and raise should push estimates higher to make the forward PE below the expected growth rate.

Technically, that still brings us to the trend line. If the line is to hold, there is little downside from here with the line crossing around the $545 area and when the company has reported a beat and raise, the stock has averaged a gap higher of 6.53% on the news and modestly drifted higher over the next couple of days.

Source: Apple Expected To Beat And Raise With iPhone ASPs A Likely Catalyst

Disclosure: I am long AAPL, . 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.)

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