Comments on: I Have Turned Bearish on Apple!

By: Christian Gross

Christian Gross — Fri, 25 Jul 2008 23:28:11 +0000

First would Apple sell out? Yeah of course it would. It emptied the channels quite a while ago. AND in Europe the iPhone 1.0 was a complete dud as people were waiting for 2.0. So there is pent up demand, and that I don’t doubt.

Though here are some issues:

1) Margins are decreasing. Of course you could argue increasing sales numbers, which is true. But this is Apple… A company trading at 31 PE.

2) I am thinking that sales for the next quarter will be good, but I wonder how much the iPhone will cannibalize the iPod.

3) 1,000,000 million iPhones world wide in a weekend… WooPeee do! Check the stats on how many cell phones Nokia sells in a quarter. There are annual sales of 1.14 billion handsets, and Nokia has 40%. In the last quarter they sold 122 million units. Assuming a quarter has 89 days that puts a daily churn rate of 1.2 million. Is Apple selling 1.2 million devices day after day after day…

My point is that there is quite a bit of euphoria regarding AAPL. And I admitted in previous blogs on how I invested in Apple and made a good chunk of change. Though I am not quite ready or wanting to jump back in. I am shying away due to the too high risk to reward ratio.

Right now one big problem is Apple’s lack of interest in saying once and for all the health of Steve Jobs. Before I was willing to ignore it. But now it is getting downright silly by Apple. And as many have said Steve Jobs is the brains behind Apple, that I will not deny. If anything did happen to Steve Jobs (and I seriously do not hope for that) then Apple would be left high and dry…

By: victor

victor — Fri, 25 Jul 2008 21:52:46 +0000

Jon,

Please Jon, Apple does NOT send iPhones to carriers on consignment. There are still lines at AT&T stores. You do realize that lawyers would be salivating if Apple announced sales that were faked.

If someone wants a smart phone they have to pay the premium for data. Virtually anyone with a decent job and a cell phone under contract can afford an extra dollar a day for a data plan.

By: Jon

Jon — Fri, 25 Jul 2008 20:24:17 +0000

It is true that iPhone 3G may be a costly proposition and the sales of it are fudged (Apple reports sales to AT&T and not directly to the customers and that says nothing as until AT&T moves this phones, there is no proof that the demand is as high as Apple preaches).

However, one has to look at entire Apple picture as it is more than just iPhone. You got mac, itunes, software and entertainment products that are increasingly getting higher market share. Even sites like that track crowd sentiment project that the public is bullish on AAPL.

By: victor

victor — Thu, 24 Jul 2008 22:51:37 +0000

Boy are you wrong. 3g iPhone sold out in Europe. Lines in the US. One million sold in three days If you want data on your cell–e-mail, search the web, you must pay extra—doesn’t matter which smart phone you own. Many will gladly pay a dollar a day for the capability. . Subscription accounting is generating billions in cash and deferring income over 24 months for AAPL Sure if you are a poor student you probably should NOT evebn own a cell phone and your wheels should be an old Buick or Taurus if you can afford the insurance. Who are those idiots driving BMWs, Lexis and Acuras? They must be really stupid—not.

Further the iPhone is in fact a MAC. Just imagine what the App Store and iPhone v3 will be capable of doing 1n 12 months. The iPhone has legs. Short term AAPL is a computer company whose high margin laptops are in great demand while new products are to be introduced over the next few months. Please to not project your own personal feelings to attempt to analyze the impact of the iPhone on APPL. I won’t bet against SJ, If AAPL goes to 140 it won’t be because of the iPhone

JMHO

By: Christian Gross

Christian Gross — Thu, 24 Jul 2008 21:35:10 +0000

AAPL trading at 159…. Glad I sold out at 184… I am waiting for 140 to break.

By: victor

victor — Mon, 30 Jun 2008 14:09:25 +0000

If your logic is correct then we would not see carriers in seventy countries willing to subsidize the new 3G iPhone. Further if I jailbreak an iPhone I still have to pay a carrier. For a poor student the extra cash for data may be a deal breaker–but for every poor student there is a cell phone user who wants the best handheld platform on the planet. Subscription accounting means that iPhone sales are booked daily over 24 months for each iPhone sold. Subsidization will result in accelerated cash accumulation vs revenue sharing. Finally play with an iTouch and then tell us that the iPod has hit a dead end and is doomed to extinction. AAPL may well be over priced but not because of a hit to earnings from the iPhone.

By: Christian Gross

Christian Gross — Thu, 19 Jun 2008 22:35:29 +0000

BTW folks I already cashed out my Apple position with the hedge for a net 40%~ gain. That’s good enough for me and frees up some money for my next investment.

Over the weekend I did some simulations. Yes Apple is going to break 200, probably even 220. HOWEVER, there is a dark underside. Apple is going to break 150 in the near term. It is at that point I might buy in again.

Addressing the point that Apple has not been as long in the game as Nokia is completely moot. Apple has a second chance with the iPhone 3G and quite frankly it is pretty bland.

People are saying that Apple’s price was due to Steve Job’s health. Well, sure that’s an excuse to take profits. Let’s say that the iPhone was such a compelling argument I don’t know if I would take money off the table.

I feel from reading your comments you are actually not seeing the competition.

Surf to the website http://www.mobilezone.ch/

and in particular

http://www.mobilezone.ch/ElKat_exp_1/

On the front page I get a Nokia 6500 slide which has a 3.2 MB pixel camera for the big ZIP and it does not require me to sign a horribly expensive contract.

Keep flipping through the pages and look at the specs and costs. APPLE has to do quite a bit more to actually get customers.

I feel Americans miss the fact that outside of the US cellular phones are a cut throat competition. Apple is entering a business that is constantly innovating.

The Nokia N95 costs about 399 to 499. I suspect the Apple will cost about 249. But look at what you get with the N95, 5 MB camera, Video recording, 8GB of memory, etc, etc, etc,…

In the range of the Apple iPhone price category you get a 5MB pixel camera. Sorry but the iPhone 3G is a TOY compared to the available phones.

One of the features that the youth love these days is to make a video using the “handy” cell phone and then upload it to youtube, or clipfish. Can the iPhone make videos? Oh yeah pictures that you can share… That’s so 2005!

Or what about watching TV? Can I do that?

http://www.swisscom.ch/res/tv/unterwegs/index.htm?languageId=en

Not from what I saw…

Or how about turn by turn navigation? Nope can’t do that either! Maybe in the future with some other package…

I mean for crying out loud Steve is talking about SMS, and all European phones have MMS… SMS and MMS is ASSUMED…

I want to show you the difference…

Surf to http://www.apple.com/iphone/features/homescreen.html

Then surf to…

http://www.nokia.ch/

At Apple I get SMS, a CALCULATOR, stocks and weather… Ooohhhh [NOT!]

At Nokia I get…

Email made easy, Navigation, Watching the Euro 2008 LIVE, Music Express, etc… I don’t see hints at SMS, or calculator because IT IS ASSUMED!

What Steve Jobs has done with the iPhone is attempt to redefine what constitutes an smart phone. Nice idea and nice try. BUT as people here say, “Nice phone took one year to get the iPhone to late 2006 year specs.”

Following are a couple of links by notable magazines that say

http://www.stern.de/computer-technik/telefon/:iPhone-3G-Was-Apple-Handy/624111.html

BTW as a reference did you know that iPhones sold out in Germany… Why? They sold it for 1 Euro with a simple contract.

What does this prove? Sure the iPhone can sell, but can Apple handle such discounting? I think not and that means the 36 PE is WAY overpriced!
Will the iPhone sell? Maybe… I am not holding my breath though.

By: sreil08

sreil08 — Thu, 19 Jun 2008 19:46:21 +0000

The new lower price is highly attractive, I already have tons of friends who want to buy the 3G just to replace there existing iPhone. The bearishness of AAPL appears to be a temporary glitch as AAPL recovers. I like to check the sentiment trend on http://www.predictwallstreet.com/forecast.aspx?symbol=aapl (you have to make a prediction first to see the graph) and to compare it with the quote. Today, the sentiment is again is moving up and the price is rising. In the past, prices were rising fast when there were multiple days of bullish sentiments. I am curious what the sentiment and price will be tomorrow.

By: Undertrader

Undertrader — Mon, 16 Jun 2008 00:00:33 +0000

I just had a couple more comments on this:

1) Apple is concerned about battery life, so they haven’t added video recording, etc….however, if you look at the software for Jailbroken iPhones, you can see there’s already apps to make the iPhone do way more than those other phones. Video recording, voice messages, Slingbox playback and TomTom (or was it Garmin?) came out and said they do indeed have software working on the iPhone. So, the features of the shipping phone may be limited, to keep battery life high, but they aren’t the true features of the phone and once the app store is open, the functionality will go through the roof, way An more than all other phones combined.

2) The mistake people are making when counting iPod sales is they aren’t including the iPhone as an iPod sale. The iPhone IS the new iPod. An iPod with an insane amount of new features. iPod sales aren’t even really that down. Even with ‘lower’ iPod sales, Apple still massively dominates the sales for media players and add that now DVD’s are shipping with iPod ready versions of the movies and I think iPods will become popular for video playback.

3) Spore. Super Monkey Ball. Etc. The iPhone will become the latest in the handheld gaming market. Will it bypass the GBA? No. Will it pass the PSP, definitely. It has all of the features of the PSP plus a couple dozen and it’s a better CPU and better graphics. The iPhone and iPod Touch will become the #2 portable gaming platform and, unlike other gaming platforms, you store the games on your massive computer hard drive, not cards that are easily lost or CD’s that are scratched, and the games, from the sound of it, are $10 rather than $50-60.

Invest in peace…

By: Nitin Gupta

Nitin Gupta — Sun, 15 Jun 2008 01:53:46 +0000

Christian,
I wouldn’t be bearish on Apple because of the reasons you posted on your blog. While its true that over a 2 yr contract, the iPhone is an expensive proposition but many many people are more than willing to pay.
Apple has everything to gain and nothing to lose even with their ‘half the price…’ strategy:

1. AT&T is the one subsidizing the iPhone in US, so no Apple isn’t reducing the price….the difference is instead of sharing revenues with AT&T over 2 yrs, they are being paid upfront.

http://www.reuters.com/article/internetNews/idUSN1039620620080611

2. With the App Store they have slowly built a recurring revenue model….or in other words, sell the razor and hook the consumer to keep paying for blades for as long as they use it. They just couldn’t do this with iPods only.

3. No matter how many comments about iPhone cannabalizing iPod sales…any reasonable analysis would conclude that sooner or later iPod sales have to slow…heck…most people already own 2 iPods…how many more can people buy to grow sales!!
In fact Apple is way ahead in their thinking about this, and with iPhones they have a chance to keep their iTunes business robust, despite slowing iPod sales in the future. Add App Store sales.

4. All comparisons with Nokia phones having all the features of iPhone 2 are moot at this point….how many years has Apple been in the mobile phone business v/s Nokia ?! 1. And how fast have they been able to match or exceed the features.

5. European sales might have been slow because of iPhone 1 not having 3G and as we all know how much people in Europe and Asia are used to using faster networks…so no problems with iPhone 2 about this.

6. Nouveau riche people in China, India don’t spend money taking pricey vacations but they spend top dollar accessorizing, and mobile phones rank at the top. My cousins in India keep upgrading to new models within every 2 yrs. and no other mobile phone in the market has more WOW and IT factor than iPhone. And I know they are waiting to get their hands on one. My conservative estimate is that Apple would sell over a million iPhones in India itself within a yr. after launch.

7. iPhone sales keep adding to halo effect for contiuing Mac sales…no price reductions there.

The drop in share price over the last few days is only due to media scrutiny over Steve Jobs’ health. So some people might have gone flat and booked their profits…nothing wrong with that.
But again…for all the reasons above, I see no reason for a bearish sentiment.