Friday, June 18, 2010

Apple News & Fundamentals: iPhone 4 Mania! (Weekly Update)


Apple CEO Steve Jobs introduced the iPhone 4

Apple News and Fundamentals: iPhone 4 Mania!

This was the week of the iPhone 4. The technology sector news was completely saturated and dominated by the iPhone 4's unprecedented volume of pre-orders. Yes, pre-orders, this smartphone isn't even in consumers' hands yet! The previous Apple star, iPad, got a little news and a new Mac mini was unveiled. Apple's stock hit an all-time closing high on Thursday and Friday of $271.87 and and $274.07, respectively. This topped the previous all-time closing high of $270.83 on April 23. Analysts scrambled to raise AAPL price targets, as was done with the launch and sales of the iPad. A technical review of the AAPL stock chart will be posted later this weekend.

Apple iPhone 4
There's hype, then there's Apple iPhone 4 hype plus mania! Pre-orders began that fateful day, Tuesday, June 15. The Apple and AT&T websites crashed. There were lines at Apple stores to pre-order the iPhone 4. The delivery date has been pushed back from the original date of July 2, up to July 12, and now to July 14. Apple announced 600,000 units were pre-ordered the first day. The iPhone 4 actually goes on sale Thursday, June 24 and what will happen then - chaos? hyper mania?

Worldwide Developers Conference 2010
The WWDC was June 7-11, and the big announcement by CEO Steve Jobs was the iPhone 4. Jobs' keynote address and iPhone 4 launch can be viewed here. Some other announcements were the iAd going live in July and the launch of the Safari 5 web browser. The conference website is here and all video sessions (100+) are posted here.

Market Capitalization
Apple Inc. achieved a milestone the week of May 24, 2010, passing Microsoft in market capitalization to become the largest technology company, and second overall largest company, in the USA.  AAPL's market cap is now $249.39 billion, compared to Microsoft's of $231.72 billion.  Exxon leads with $296.45 billion.  Microsoft still leads Apple in total net profits.

At the WWDC keynote address, CEO Steve Jobs gave some iPad numbers: a) 2 million sold, that's 1 every 3 seconds since April release, b) native apps 8,500 + 215,000 iPhone/iPod apps that work on iPad, c) app downloads 35 million or 17 per iPad, d) 5 million ebooks downloaded or 22% of the the market, and e) will be in 19 countries by the end of July.

The iPad email breach via AT&T is reviewed here. Apple announced on May 31 that 2 million iPads had been sold in less than 60 days.  Analysts stated the week of May 31 the iPad was sold out at many USA Apple stores.  The iPad is now outselling Macs.  The international launch was May 28 in 9 countries and the frenzy ensued.  Apple launched the iPad in the USA, the Big Day, on Saturday, April 3.  Reviews of the iPad have been favorable overall with 91% consumer satisfaction, and 1 in 5 USA consumers plan on buying an iPad.

The App Store keeps adding iPad apps and the iBook store the same. Estimated 2010 sales of iPad now range from 6 million units to 10+ million units and it now appears the high side, or even higher, unit sales estimates are valid. It has been suggested that iPad sales might cut into iPhone sales some, but I don't believe this will have a material effect.  However, recent data suggests the higher margin iPad is cutting into lower margin iPod sales.  So far, no one has come out with a "second tablet" to truly compete with the iPad, although there is a Chinese knockoff, a European competitor, and the Dell Streak will launched soon.

Samsung is now reportedly to begin volume shipments of the iPad panels, along with existing supplier LG. This revises estimates of monthly iPad sales at 1.2 million, up from the previous Apple report of 1 million per month.

iPhone 4 (continued)
The iPhone 4 was launched on June 7 by Steve Jobs at the Apple Worldwide Developers Conference. Pre orders began Tuesday, June 15 and release is June 24.  Price is $199 for 16GB and $299 for 32GB. The iPhone web page is here. The Apple Hype began on the iPhone 4 new features: video calling and chat, a dazzling retina display, multitasking, HD video, and even Netflix will be available in July!

The hands-on reviews especially mention the vivid, amazing, awesome, sharp display - it is unprecedented. In addition, a case can now be made the iPhone 4 will start taking the low end HD video market. There is 512MB RAM, which is double the iPad and previous iPhone 3G. The related iPhone OS 4, now the iOS 4, was announced on Thursday, April 8 by CEO Steve Jobs. The iPhone continues incredible sales and market share. AT&T is extending upgrade eligibility requirements to get the iPhone 4 out to customers.

The Q1 results for iPhone were outstanding and pump the profits into Apple Inc. Apple's share of global mobile Web browsing is at 67% from the iPhone and iPod Touch.  Business customers are now 40% of iPhone sales per AT&T, which indicates AAPL is cutting into RIM Blackberry market share.  Another battle is with the Google Android 2.2.  Speculation is for a possible 3 million iPhone sales monthly, but this would require an additional USA carrier besides AT&T.  The iPhone is now beginning to dominate the Japanese smartphone market. Morgan Stanley on June 17 estimates a 100 million iPhone installed customer base by the end of 2011, compared to 30 million at the end of 2009.  

It's all about the apps for iPhone and iPad.  Actually, it's all about mobile computing and Apple is right on the leading edge with the App Store.  There are now countless apps for the iPhone (215,000+ and counting?) and an ever increasing number for iPad, plus the iBook store.

CEO Steve Jobs introduced the new personalized, mobile advertising system, iAd on April 8.  At the 2010 WWDC it was announced the iAd platform will go live in July. This will compete directly, and replace, Google's advertising platform. Apple is going into the mobile advertising business and will design and sell the mobile ads. While iPad and iPhone sales will positively impact Q2 earnings, the iAd platform may well have a significant impact in future quarters as this revenue stream comes online. Currently, the iPhone developers agreement excludes Google access, so we'll see how this is resolved.

E Retailing
comScore reported the week of May 24 that Apple was the second most visited e retailer in the USA, behind #1 Amazon.  Wal Mart, Target, and Netflix are #3, #4, #5.

Smartphone Wars
It seems everyone is suing everyone else now over smartphone patents!  Mobile computing  is  the future and smartphone sales are surging worldwide.  The stakes are high and the lawsuits, to hopefully at least obtain royalties, should continue indefinitely.  HTC, maker of Google Android phones, counter sued Apple this past week over patents.

Here's a good review of Apple entering internet search, even as CEO Steve Jobs denies it. The article, "Of Course Apple Is Going To Do Search", can be read here.  Google announced the week of May 31 that the App Store apps are now included in Google search.

iOS Restrictive Developers Agreement
The iOS developers agreement applies especially to the new iOS 4 and most importantly to the iPhone 4 and iPad. Apple restricted this agreement, which promptly excluded Adobe Flash and Google. Later Apple loosened the agreement some by providing for Apple's written permission for exceptions. More information is here. Probably Apple is backing off some restrictions as the FTC reviews Apple for restrictive trade practices. This could end up a very interesting story if Apple continues to block Adobe and Google while meanwhile being investigated by the FTC.

iOS Market Share
The iPhone OS was #1 and had 58.8% of the mobile web consumption in North America for May 2010 per Quantcast.

Apple is big in the consumer music market and released iTunes 9.2 on June 16.

Video Games
Yes, Apple is big and getting bigger in video games on desktops, laptops, iPad, and iPhone. Sheesh...

Quarterly Earnings & Analysts' Estimates
Q1 earnings were released on April 20 and AAPL beat on revenues, EPS, and outlook.  Numerous analysts raised price targets to $300+ within 48 hours.  With the Apple announcement on May 31 that 2 million iPads had been sold, the analysts again revised the iPad sales estimates and AAPL price targets.  With the announcement that 600,00 iPhone 4's were pre-ordered on June 15, analysts raised the price targets yet again. Every week one or more analysts raise the AAPL price target, all in the $300+ range and now approaching or exceeding $350.  Q2 will include all iPad sales year to date, apparently some iPhone 4 sales,  and should be another stellar quarter.  In Q3 the iPhone 4 sales will have full impact. More than 50% of Apples sales are outside the USA.  In June, Apple has now sold 100 million devices since inception.

Apple is not just a brand, it is apparently a lifestyle and a consumer statement. A couple got married in the New York City Apple store earlier in 2010. A camper showed up a week before the June 24 launch and sale of the iPhone 4 at the Dallas Apple Store. Last, but no least, it was reported on June 18 that an iPad app was being developed for church Daily Missals. Apple was the #9 USA web brand, based on unique audience/visitors, in May 2010 per Nielsen. 

CNBC: American Titans
CNBC has done a feature on Apple, Inc., "Gadgets Galore", the week of May 10 in their American Titans series.  Click here for the commentary and analysis in this CNBC feature.

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