Mav
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Post by Mav on Jan 3, 2013 13:25:25 GMT -8
DO NOT hyperfocus on lost/delayed/whatever sales. You'll go crazy. Growth rate subsumes ALL of that. I don't feel I need to explain why.
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Post by Deleted on Jan 3, 2013 14:23:26 GMT -8
You assume the iPad mini was available to purchase, which in most cases in the retail chain it was NOT in the lead up to Christmas. How about the scenario where one goes to buy an iPad mini but didn't find one in stock and refuses to buy an iPad, where they would have otherwise purchased an iPad had the iPad mini not existed? How many sales were "lost" or "postponed" due to the stock shortages of the iPad mini? The pricing of the low end iPad mini is approaching impulse buy territory and not having them in stock at big box stores, walmart, target, best buy, not to mention Apple's own stores...is really going to hurt. I think the number of people who would have bought an iPad Retina and ended up buying nothing is negligible, especially considering Christmas deliveries of the Mini were guaranteed in early December, and supply was good in the latter half of Decmeber. If you can put together a reasonable scenario where the iPad Mini is a net negative I'd love to see it. From what I can see anecdotally the situation resembles that of going from the single classic iPod being the only model, to when the iPod mini was introduced. The iPod mini immediately became the best selling model. However, I don't remember the iPod mini being supply constrained during a Xmas season. I disagree with the notion that all those that wanted to buy a mini as Xmas gifts got one - I did a fair amount of lurking in the 2 weeks before xmas around apple sections at some big box retailers in Wellington and Melbourne (2 cities in 2 countries) and the mini was by far the most popular object being queried about, but unfortunately most queries were responded with "next shipments due late Dec/Early Jan" - those customers (from what I could tell) did not follow up with queries about the retina iPad (although they may have gone that way later - who's to say for sure).
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Mav
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Post by Mav on Jan 3, 2013 14:29:34 GMT -8
Here's where things get surprisingly intriguing when you look at guidance.
If iPad comes in light - and by all accounts, everything in the production ramp is going according to plan, probably even the iPod classic-ification, sort of, of iPad 4 - there's only one product line that could pick up the slack.
Anyone can always spin anything, but stronger-than-expected iPhone would be the better upside surprise IMHO. iPad is "holding its own" much better, and iPad mini's crazy popularity is tough to deny.
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Post by Deleted on Jan 3, 2013 14:39:56 GMT -8
Here's where things get surprisingly intriguing when you look at guidance. If iPad comes in light - and by all accounts, everything in the production ramp is going according to plan, probably even the iPod classic-ification, sort of, of iPad 4 - there's only one product line that could pick up the slack. Anyone can always spin anything, but stronger-than-expected iPhone would be the better upside surprise IMHO. iPad is "holding its own" much better, and iPad mini's crazy popularity is tough to deny. I think your upside surprise scenario is most likely. My 'iffyness' on iPad numbers would account for a couple million units either way at most, but it means little to EPS when I'm projecting 50 million+ iPhones.
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Post by Tetrachloride on Jan 4, 2013 11:36:47 GMT -8
Prazan's numbers are close enough to mine. Let's dissect for our lurkers.
1. Macs unit sales, same. ASP is different, resulting in Prazan loss of 4 cents. I believe that iPad cannibalization, fiscal cliff and iMac availability are the impact.
2. iPhones. My unit sales are higher. Prazan's ASP is higher. Gregg Thurman's analysis of iPhone manufacturing capacity is compelling.
3. iPods. Prazan has lower unit sales. Impact of 10 cents on EPS.
4. iPads. Prazan has higher unit sales. Our ASP is the same, but there's compelling arguments that we are too low. We may be low by 37 cents EPS.
5. Software/Peripherals/Music: Prazan is higher for a benefit of 6 cents.
Total revenue comparison: 55.78 B vs 55.9. basically identical for this line.
Gross revenue comparison is lower, but taxes are also way lower.
I may take issue with the tax part.
Most analysts are either asleep at the fiscal cliff or waiting for the Earnings Smackdown pre-release at PED's Apple 2.0 column.
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Mav
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Post by Mav on Jan 4, 2013 11:46:59 GMT -8
Note: PED is away in Thailand this whole month. We might not get those previews we're used to.
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Post by Tetrachloride on Jan 4, 2013 14:16:50 GMT -8
This post is devoted to refuting critics out there. Same outline as above but a bit different. 1. Mac sales. EDIT: NPD Group comes out with report about laptop sales in the US being lower from last holiday quarter. Regular readers of this thread knew I anticipated a slowdown. However, the NPD group has a higher ASP than mine. EDIT: US ASP is not the same as worldwide ASP. It is hard to estimate the impact to EPS. NEW EDIT: NPD data may be skewed2. iPhones. We've seen some true iPhone FUD this quarter with abysmal estimates. Wall Street and conservative independents have iPhone sales at 47 M, plus or minus 2 M. Peter Misek, historically an above average Apple analyst, projects 53 M. Investors.com on Dec 5, 2012 3. iPod ASP estimate of 152 may be low. The high end iPods may bring up the ASP to as high as 180. So, even 165 may considered normal. 4. iPads. Most people assume heavy cannibalization by iPad mini from the iPad larger size, now and in the future. Most estimates are 23-25 M. 27 M is not out of the question. 5. not much to say here. fairly stable. Low end estimate is 4.0 B to 4.7 B. 6. Gross margin. Apple warned all so dramatically on 36 %. Common estimates are 38.5 to 39.8. Bulls are looking for a sandbag that other holiday quarters have produced. I stayed in the consensus range for now. ----------- Then we have the Oppy Sandbag ratios. Holiday sandbags have been great. Q3 and Q4 have been the worst EPS sandbags of 11 quarters at least.
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Post by Tetrachloride on Jan 4, 2013 14:46:54 GMT -8
The Sandbag spreadsheet. Q1 assumptions of $ 55.56 B revenues and $ 15 EPS. (I play around with the numbers a lot. This screenshot had those numbers in the spreadsheet at the time. The revenues are a typo. For $ 15 EPS, the revenues should have been higher to 57.2 billion or a bit more.) Anyway, the "Sandbag Ratios" and the 15 EPS estimate are quite moderate historically. Once again, its Q3 and Q4 which has the investor community concerned. If I had to guess, Oppy chose the $ 11.75 number with a certain amount of precision and caution. EDIT: since the Revenue is too low, the .270 ratio on the upper left is too high. Adjust to around .255 to .265 EDIT: also, depending on the circumstances, adjustments to account for the 14th week last year are warranted under some circumstances. So, the averages are not cast in concrete exactly. NEW PIC on next page or so Attachments:
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Post by Tetrachloride on Jan 4, 2013 17:47:46 GMT -8
The YOY for EPS does not make sense. Do not be alarmed. The reason is that the gross margin is expected to be low.
The key numbers to watch are the "Sandbag ratios" of the blue and purple columns. Another interesting pair of numbers are the EPS/Revenue for both guidance and actual columns. In all but 1 quarter, the actual ratio was higher than the guidance column. Sometimes a little, sometimes a lot.
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Mav
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Post by Mav on Jan 4, 2013 17:53:18 GMT -8
Interesting. Sorry, I'll need some of the weekend to recalibrate my thinking though. I don't think in terms of sandbag ratios.
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Post by prazan on Jan 4, 2013 20:13:28 GMT -8
Tetrachloride, thanks for your detailed take on the numbers. I could easily choose yours over mine on iPhone and iPad estimates. I feared going over 50 million units on iPhones, even though I base calculations on daily run rates. I'm also higher than most on iPad Mini sales, with just over 11 million units. This may be irrational exuberance. Our similar ASPs indicates our iPad/Mini mixes are about the same.
I've also been keeping track of sandbag ratios lately, though the weight of the sandbag varies so widely they're difficult to use as a measure anymore. Has the TC era ushered in lighter sandbags? I'm not sure about this.
I don't understand your comment on taxes. Over the past ten quarters the rate has averaged 24.3%, though hit 25+% in the three quarters before the most recent one, when it dropped to 24.5%. I haven't yet devised a way to estimate this reliably, so I'm pretty much guessing at 24.6%.
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Post by prazan on Jan 4, 2013 20:16:59 GMT -8
Note: PED is away in Thailand this whole month. We might not get those previews we're used to. He's planning to post the Braeburn numbers, but I don't know if he'll break the numbers down by product segment as before. But the posts can be easily written in advance, so I suspect the feature will run as it has in previous quarters.
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Post by Mav on Jan 4, 2013 20:17:44 GMT -8
Prazan - re: iPad mini, you think you're high? *ahem* My baseline estimates (which I really should work on in the next couple weeks) has a 2:1 mini-to-iPad 4 sales ratio. Something like 15M minis. On the one hand, it does feel a little more "where the puck is going to be" if you know what I mean due to supply constraints. On the other hand, if iPad is as "less popular" as it seems, maybe the low/mid 20M iPad range is too much! Far as taxes, I see nothing wrong with just following Oppenheimer's guidance. US sales will factor in due to earliest availability of iPhone and iPad. He's planning to post the Braeburn numbers, but I don't know if he'll break the numbers down by product segment as before. But the posts can be easily written in advance, so I suspect the feature will run as it has in previous quarters. Sweet. Didn't know he mentioned it. I may have one or two "contributions" to e-mail his way, one in particular being the 14-week vs. 13-week reminder to normalize for best context in case it's overlooked.
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Post by Tetrachloride on Jan 4, 2013 20:18:29 GMT -8
Hi Prazan.
Guidance for taxes is 26.0. Unless there are some blowout international numbers or Apple was sandbagging the US domestic political scene, I kept my own tax number at 25.7. The result is usually not sandbagged more than 0.5 %, as I recall.
I am thinking of iPad mini is low this quarter, but rising rapidly to 20 M per quarter by the end of next Dec 2013.
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Post by Mav on Jan 4, 2013 20:22:38 GMT -8
Keep up the great discussion, all. New voices and insights welcome at any time!
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Post by prazan on Jan 4, 2013 20:45:52 GMT -8
I missed the guidance on the tax rate. I'm missing a lot of things this quarter. Like sleep.
Mav, I think 15 million might have been achievable given supply. Which we didn't have.
One of the problems in estimating iPad sales is the opacity of enterprise. I suspect that the ratio of consumer:enterprise:education is about 80:10:10 for the Mini; about 18:2:80 for the iPad 2; and 45:45:10 for the iPad 4. I'm pulling these numbers from you know where but you get the drift. The Mini is overwhelmingly a consumer driven product; the iPad 2 is for the educational market; and the iPad 4 is split between consumer and enterprise markets. We can see the demand in the stores and online to gauge (if inaccurately) something about the consumer market. But we get pinpricks of data here and there about the enterprise market, in reports of X company buying Y iPads, or in X% of Fortune 500 companies testing or deploying. How large is the enterprise market and how fast is it growing? Knowing this unknown (there are known knowns and unknown knowns, according to a former defense secretary) would allow an analyst to gauge iPad 4 sales more accurately. Mini sales this quarter essentially boil down to how many Apple could make.
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Post by Mav on Jan 4, 2013 20:50:13 GMT -8
I think we all may be very surprised by how quickly iPad mini becomes the MacBook Air of iPads, to mix my metaphors. I could say iPod mini, but it's not as apt given the times and the relative unimportance of the iPod line.
iPad regular must be maintained for the foreseeable future, and there will still be a good market for it (as the flagship with the fastest and latest technologies), but I get this feeling that iPad mini will be a cross-demographic, consumer/education/enterprise smash hit, even though it's destined to be a step behind its big brother.
Maybe a certain black mock turtlenecked fellow is smiling from somewhere else right now. Having "tricked" the competition into going bigger, the most popular iPad of all could be the one that got "smaller".
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Post by prazan on Jan 5, 2013 6:40:18 GMT -8
"The Macbook Air of iPads." I like that.
Do you see opportunities for the mini in enterprise? I suppose the opportunities would be vast, but right now it's an iPad 4 world. Screen real estate might be important for commercial purposes, but how to weigh that against pocketability? Might be both products prove popular for both enterprise and consumer.
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Post by fas550 on Jan 5, 2013 7:09:40 GMT -8
"The Macbook Air of iPads." I like that. Do you see opportunities for the mini in enterprise? I suppose the opportunities would be vast, but right now it's an iPad 4 world. Screen real estate might be important for commercial purposes, but how to weigh that against pocketability? Might be both products prove popular for both enterprise and consumer. If it is bought in the Enterprise it will be a niche industry. Most of the popular apps that connect to the popular back office services are usable on the 9.7 but not anything smaller (keep in mind prior to the tablet the dominant screen size in the enterprise was a 14 inch laptop). To make the mini a valid platform nearly all the back office apps would have to be rewritten for a much smaller screen. If they are not it will be way too much pinching and stretching thus making the app basically unusable. Some apps value stems from seeing a lot of info on a single screen e.g. Salesforce. Salesforce has a mobile app specifically written for mobile platforms but the functionality is very diminished. Interestingly IMHO in the consumer market, the mini is now substituting SOME purchases that would have been a regular iPad. There is some canabalization as people bought regular iPads because that was all that was there and they were not willing to compromise on it being an apple product. The mini's very popular with people that couldn't afford or could not justify the forking out the price of a regular iPad. In addition the portability of the mini is a huge draw. The apps dont matter so much as the consumer market doesn't use Enterprise apps. I've used the mini, its very neat and soon creates a bond (think personal assistant that knows you well) with the user. Whereas a few times I may not take my iPad somewhere the size of the mini makes it perfect for carrying around. I have seen a lot of girls and women pull out a mini just about anywhere. I think it's purely because of size as it fits in just about any purse. It also completely eliminates the threat to younger girls of looking like a bit of a geek. It's an accepted accessory and has no geek factor about it (whereas the larger iPad did have somewhat of a geek or business factor).
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Post by mbeauch on Jan 5, 2013 8:54:55 GMT -8
I was skeptical about the mini until I was able to hold one, then I became amazed. It is something I see parents buying for kids. I also see almost all women migrating to the mini just because of the way it fits in their hand. I like the mini, it is just not big enough for me. I like the bigger screen when an app is designed for the ipad (not a phone app expanded) . Apple is going to sell a lot of mini's and will most certainly slow the Android growth in the tablet sector. Tammy has the original ipad and I expect to get her a mini for Christmas. The next version of the mini should have the retina display which our eyes need.
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Post by fas550 on Jan 5, 2013 9:46:26 GMT -8
One thing in my own mind I have come to a firm conclusion of based on a litany of data: MOST people who buy an other than apple phone or tablet are doing so knowing they are buying second best and would prefer an apple device. Yes there are some die hard hardware geeks that want an anything but apple device however, that number is a very small minority when compared to the entire market. What makes that demographic seem larger is they are simply more apt to be vocal on a blog, comments etc on touting the "superior hardware" of what they have. Given this and the runaway success of the mini I really hope Tim C et al are working like busy bees to see how they can make a different model of phone with lower Cost Of Goods Sold (COGS) to reach the segment of the market that can't afford a 600 dollar phone but can afford say 200 dollars on a pay per go operation. All this without compromising quality (not asking for much am I?) but feature compromise is okay. If they could make a phone and sell it at about 200 dollars unlocked they would annihilate Samsung. People aren't buying Samsung because of quality or that its a better phone, they are buying it because its cheap. A cheaper unlocked phone would eliminate carrier negotiation issues in emerging markets also. IMHO Apple's leverage is way less than it was simply as more carriers have it the less exclusivity of the offering. Margins? Yes margins are probably going down. Margins go down as competition increases and the type of product saturates the market (the mass adoption model). This is a natural phase in tech and the only way to hold margins up is to come out with another exclusive product. Anyone in tech knows market timing is critical and the longer you stay above the competition the longer you can hold those margins up. Although margins will go down IMHO Apple's will still be way above any competitors. Here is my WAG at what the characteristics of a cheaper phone could look like that would do well in this market segment. Smaller screen if necessary. Less powerful processor (previous generation). Some kind of micro memory card slot (memory price quadruples from 16-64GB) or a fallback would be just 16GB. 3G Colors. If you look at the cost breakdown you can see what components cost the most. I do understand BTW some may not be able to be reduced. www.isuppli.com/Teardowns/News/pages/iPhone5-Carries-$199-BOM-Virtual-Teardown-Reveals.aspxA few notes: Obviously not suggesting they stop producing the high end phone. Different market segment. The assembly costs and battery are much lower than I expected. The current iPhone has some of the most expensive and latest parts. People buying a 200 dollar phone, looking for an iPhone don't care so much about this. Anyway sorry for the long post but its a slow Saturday and at this point in their lifecycle unless Apple is going to come out with a completely new disruptive product that was as revolutionary as the iPhone that will equal or exceed the revenue of the iPhone, the above path is probably necessary to grab a huge market share. I won't be waiting for Tim to call me BTW :-)
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Post by Tetrachloride on Jan 5, 2013 10:45:36 GMT -8
This just in. NPD report on lower Mac sales may be a FUD after all. Braeburn member Pat has dug up a NPD report from September which said the same thing. "US sales down 7 % year over year." Link: AppleInsiderMore dissection after the next coffee.
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Mav
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Post by Mav on Jan 5, 2013 11:39:00 GMT -8
MB - so you haven't gone Retina yet for iPad? It's a sharpness revelation. I'd say wait and see if iPad mini Retina might work for you too (I figure it should be on the way)
I agree that for "sit down" tasks iPad regular is king. But it's the on-the-go factor that's seriously making me lean towards iPad mini retina rather than iPad 5/6. My iPad 3 is just a little too heavy to comfortably use with a case on, though it shines as a travel computer (on a table).
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Post by Tetrachloride on Jan 5, 2013 11:49:24 GMT -8
From the annual report in Oct 2012, net sales by geography This is also good. Japan is the highest profit and Retail Stores are the lowest. Japan percentage will drop as the yen falls. The Euro has been stable, as well as the Mainland Chinese RMB (renmingbi). So, fluctuations in that percentages are not due to currency, afaik. Attachments:
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Post by Mav on Jan 5, 2013 11:58:00 GMT -8
Nice!
Maybe I should look into operating inc YOY trending and see if anything useful can be derived.
Asia-Pacific sales "slowdown" worth tracking.
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Post by Tetrachloride on Jan 5, 2013 14:13:39 GMT -8
The Sandbag spreadsheet. Q1 assumptions of $ 55.789 B revenues and $ 14.45 EPS. (post updated with more accurate screenshot) The key numbers to watch are the "Sandbag ratios" of the blue and purple columns. This year has been moderate historically. Once again, its Q3 and Q4 which has the investor community concerned. If I had to guess, Oppy chose the $ 11.75 number with a certain amount of precision and caution. Adjustments to account for the 14th week last year are warranted under some circumstances. So, the calculations are not cast in concrete exactly. The YOY for EPS does not make sense. Do not be alarmed. The reason is that the gross margin is expected to be low. Another interesting pair of numbers are the EPS/Revenue for both guidance and actual columns. In all but 1 quarter, the actual ratio was higher than the guidance column. Sometimes a little, sometimes a lot. Attachments:
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Post by Red Shirted Ensign on Jan 5, 2013 15:08:41 GMT -8
C14, Great stuff.
I'm quite close to you and Prazan on most numbers. The kicker will be iPhone sales and iPad ( the mini factor....could be an absolute shocker)
Robert has a nice look at the effect of supply/demand balance on channel fill when Apple is rolling out a hot product in 100 countries. Playing with his analysis causes me to think my 52 million iPhone number may be light. If so, my $14.44 might be light.
Hmmmmm....
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Post by Mav on Jan 5, 2013 15:24:16 GMT -8
My bias if heavier than expected iPhone sales, lighter than expected iPad sales. If we get both nice iPhone _and_ iPad numbers, this will be one monster of a transition quarter.
Interestingly, there's at least four of us (Cl4, Ensign, prazan and myself) who are extremely close in revs/EPS numbers right now. I'm at $55.32B revs / $14.37 EPS (turns out I had OI&E right in my Excel spreadsheet all along).
Oh btw chas, where the heck are ya. Post some numbers, will ya?
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Post by Tetrachloride on Jan 5, 2013 15:31:55 GMT -8
tyvm. yes, the iPhone numbers of manufacturing weekly runs by Gregg and channel fill by Robert are highly intriguing.
I tried to see if I could discern a geographic pattern to break out iPhone sales, but its a cloud. What we need are "man-in-the-street" in Europe, Japan and China and deeper economic analysis of those regions.
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Post by Mav on Jan 5, 2013 15:35:37 GMT -8
That's the good stuff from Gregg we need more of. But there are two big questions. Is there demand, and is there supply? Elementary as all heck, of course, BUT (1) the smartphone market is in a period of transition/maturation, no doubt, and (2) this isn't the iPhone 4S, which was probably much easier to ramp than the redesigned iPhone 5. I'll be mulling this over carefully the next week or two.
I'd say iPhone by geography is basically impossible to calculate. Probably best to just trend sales by main geography as listed in the 10-Ks and stuff, if you even want to do that.
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