Posts Tagged ‘iPad’

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What have Apple and the Duchess of Cambridge not got in common? Answer: Apple still needs a new baby. It’s the point that the markets don’t seem to get about the company. Its shares have been falling faster than a guillotine on the head of the last King of France, but the markets have been way too quick to write the company off. Yesterday saw good news from Apple as profits beat expectations and shares rose; but still the real story is being forgotten.

The company’s latest set of results were out yesterday. Profits fell to $7 billion in the latest quarter, from $9 billion in the same quarter last year. To put the numbers in perspective, profits from the equivalent quarter in 2011 were pretty much the same, but in for 2010 were only $3 billion, and just $1billion in 2009. In other words, they have risen sevenfold in four years, which some might say is impressive.

It was a similar story with sales, but if anything a tad better. Sales rose 1 per cent on the same quarter in 2012, and have risen by more than 400 per cent over the last four years.

But the markets don’t care about all that. What they care about is whether the company did better than expected, and on this occasion it did. It was down to the iPhone. It sold no less than 31.2 million units of the old girl in the quarter (compared with 26 million this time last year), a record for that particular three month period, in fact.

Sales of the iPad were down, and so were sales of the Mac, although in the case of the latter, the fall was not as great as that seen by the overall PC market.

Apple’s problem is that it is now operating in mature, or at least mature(ish), markets. When smart phones or tablets become commodities, margins will fall – it’s simple economics.

The company’s boss Tim Cook said: “I don’t subscribe to the common view that the higher-end smartphone market has hit its peak.” He added: “We saw very strong sales in many of the emerging markets.” And indeed sales into India, Turkey and the Philippines rose substantially. (As an aside, note that bit about sales to the Philippines rising. It is a different story altogether but worth mentioning at this point that at the moment the Philippines is one of the hottest markets in the world, from an investor’s point of view.)

But the real point is that Apple has proven itself to be the master of disruptive technology. It did it with the iPod, iPhone and iPad. When it comes to established markets it is just another player. Okay, it’s one with very pretty products, and maybe an important player, but Apple has no inalienable reason to outsell, say, Samsung in its key markets.

Apple’s big test lies ahead. The key for the company lies not with tweaking existing products, but disrupting markets with new products, such as smart watches or TV players.

Mr Cook also said: “Our focus is always on new products and services,” and “We are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014.”

So how about that? – laser focused, no less. Let’s hope that the new products are not laser discs.

© Investment & Business News 2013

Hiatus. Sometimes we enter a kind of interim stage. And when that happens, it is human nature to see this as somehow significant. In truth it is as significant as a stopped clock telling us the time.

Google is in at the moment. Sure, its tax affairs are not in with politicians, and the holier than thou media. But this has nothing to do with Google being evil, or amoral, and it has everything to do with globalisation and technology, which makes it hard for governments to act unilaterally.

And with Apple’s share price having fallen sharply over the last year – from $702 in September to $450 at the time of writing – and with Google’s having risen – from $647 in November to $867 at the time of writing – their fortunes have been in stark contrast.

Apple’s market cap is now $423 billion; Google’s $288 billion. The gap appears to be closing.

Google has its glasses, its driverless cars, its new Motorola phone – talk has it that the phone will know when you are driving, know when it in your pocket. There is no talk of it being able to tell you whether someone of the opposite sex fancies you however – which may be a major oversight by Google.

Apple has… well, there will be a new iPhone and iPad, but there’s not much happening.

It appears that the number of Android Apps is set to overtake the number of Apple apps too. So far 50 billion apps have been downloaded for the Apple products; 48 billion for Androids. Apple reckons it is seeing around 2 billion downloads a month. Google says it is seeing around 2.5 billion a month. Analysts reckon total downloads for the Google family will surpass Apple downloads this year.

Apple’s shares are trading at a pe ratio of just 10.76. Google shares at 26. No wondering – let the facts speak for themselves.

Poor old Apple! It is hard to see how it can make do with a mere 2 billion downloads a month

Google is an exciting company, and it may well see its extraordinary growth rate continue for some time. But the markets may be writing off Apple far too soon.

Apple is not good at hiatus moments. Apple went from almost bust to becoming the world’s biggest company by market cap via disruptive technology. With its iPod, iPhone and iPad Apple invented a market place, or at the very least (in the case of the iPod) turned a niche market with a specialist following into a mass market.

Right now, the state of technology is such that we are in an in-between stage. We are awaiting the next phase in the evolution of technology. In nature evolution does not work at a steady pace, it often works in fits and starts, it is like that in business too.

To write off Apple now, at this in-between stage, is simply absurd. Its smart watch or TV player may or may not change the world, but until we know more, we cannot say whether Apple has lost its innovative edge.

As for downloads being a miserly 2 billion a month, don’t analysts have iPhones? Don’t they know that Apple tries to impose some form of quality control on its apps? Don’t they know that in the Apple market the onus is on quality over quantity? Apps downloads may be fewer, but are existing Apple apps used more or less than Android apps, do you think?

© Investment & Business News 2013