Apple iPhone 5: Blowout or Beginning of The End?
What’s up with Apple and their new iPhone 5 megawonder, techno-gamechanging, utterly groundbreaking . . . cell phone?
It is sometimes useful to look at a company’s stock price to see what may be going on under the surface. Prices rose into the iPhone 5 product release, but results from the first weekend sales were “disappointing” relative to analyst expectations. While the consensus estimates for the first weekend sales were about 6 million phones, Apple actually sold about 5 million.
Nothing to sneeze at, Apple bulls will counter. But as everyone knows, stock prices are about expectations, not fundamentals. What matters in life is not the reality of our lives, but how we view that reality. But that’s too philosophical for this article.
With Apple stock topping out above $700 and now dipping back to just under $660, clearly the market is a bit leery. Apple attributed weaker than expected sales to supply issues, which certainly carries some truth. But there are a couple of other issues that may be plaguing the new Apple techno-miracle.
On the ground in China — and this is complete hearsay — the whisper is that the new design is somewhat disappointing in not distinguishing itself remarkably from its predecessor, the iPhone 4s. If a person standing a few feet away can’t tell if you’re holding the iPhone 5 or not, what’s the point of upgrading?
China is an important market for Apple, and say what you will, the Chinese love the “bling” factor in their electronic gadgets and consumer items. It’s not that functionality isn’t important, but this is a culture with newly acquired wealth where status cannot be underestimated.
So for the iPhone 5 to look pretty much like the iPhone 4s, some people on the fringe may pass on purchasing or upgrading. Of course, there are the hardcore fans who will buy the new release before burying their mother. But at the margin, for a product that needs blowout numbers to keep analysts happy, one has to wonder about the lingering effects of this subtle disappointment.
To add insult to injury, Apple had another fairly serious misstep with their map app. Map functionality is a high priority for many smartphone users who rely on its sophisticated navigation to get around. Apple dropped Google maps, a proven winner, with their own app that appears to be plagued with some serious bugs.
The logo for Apple Computer, now Apple Inc. The design of the logo started in 1977 designed by Rob Janoff with the rainbow color theme used until 1999. (Photo credit: Wikipedia)
Apple Maps disaster hurts iPhone 5 sales – BetaNews
Early results to BetaNews poll “Will iOS 6 maps keep you from buying iPhone 5?” are grim. . . the number saying they won’t buy iPhone 5 because of iOS 6 maps is 56 percent.
Mapgate, Mapocalypse or whatever else you would call it is a disaster for Apple. . .
BetaNews reader Julie Digs . . . ”. . . the map app . . . feature doesn’t have transit and walking directions at the ready (like the google app did). My train has already left by the time I wait to switch to the third party app to get my transit directions!”
[editor's note: The problem here is that many feel Apple compromised quality and user experience by not continuing to license rival Google maps until they had brought their own maps up to speed. Customers don't care whose map it is, they just want it to work well, and apparently many believe Apple's doesn't make the grade.]
. . . “It would’ve been great if Apple could’ve compromised and licensed the Google data like Navigon did” snworf suggests. “Apple could’ve licensed this temporarily into their Maps app and removed it when they had things further along”.
Dennis McClune puts Apple’s response in larger context: “The Corporate ethos will likely keep me from ever buying any Apple crap”.
Xuanlong goes farther:
Apple Maps will indeed keep me from buying anything from Apple. It’s not the maps themselves that are the problem, but the problem that they represent: that Apple doesn’t care about it’s customers. Putting profits before people is bad enough, but when a petty feud with Google comes before customers too, I think it really begs the question of what Apple’s priorities are. It certainly doesn’t seem to be pleasing their droves of loyal fans who they are so quick to screw over.
It seems there are other minor issues such as a vulnerability to scratches and dents to the case. But what can pose a more serious threat to Apple’s long-term goals are legal patent disputes with major rival Samsung.
Samsung Adds iPhone 5 to Patent Lawsuit as Tablet Sales Ban Is Lifted – Datamation
Apple and Samsung continue their legal wrangling in their ongoing global patent war. As promised, Samsung has formally added the iPhone 5 to an existing lawsuit that accuses Apple of violating eight of its patents. . .
However, there are always two sides to every story — that’s what makes a market. There is no shortage of Apple bulls on the street and in Apple store back-alleys.
iPhone 5 sales will blow past most analyst forecasts: Canaccord Add to … – Globe and Mail (blog)
Canaccord Genuity analyst T. Michael Walkley, with fresh sales data in hand, is hardly disappointed. His September “channel checks” indicated very strong sales of the iPhone 5 at key U.S. carriers AT&T, Verizon and Sprint. The checks indicated the device sold well in international markets, too.
. . . “Given these checks, combined with Apple’s plans for an aggressive iPhone 5 launch with 240 carriers in 100 countries by year end, we remain confident in our above-consensus December quarter iPhone estimates with sales of 40 million iPhone 5s and 50 million total iPhones,” Mr. Walkley said in a research note.
Furthermore, “we expect additional countries to launch the iPhone 5 in early January, including all three carriers in China, ahead of Chinese New Year in February. With our expectation the world’s largest carrier, China Mobile, will launch its first iPhone on its network that also supports its TD-SCDMA 3G technology, we anticipate very strong iPhone sales of 47.5 million during the March quarter.”
Despite what many say will just turn out to be minor glitches in the Apple juggernaut, Apple remains a cash generating machine the likes of which have never been seen before. How long the spectacular innovation can last with Steve Jobs gone is hotly debated, but if history is any guide, Apple will settle back down to earth over the next few years as the competition continues to hammer away.
But for stock investors today, this baby may still have legs.
Apple remains on course to sell between 100 million and 150 million iPhone units over the course of the next year. I project that this iPhone performance will tally $95 billion in revenue and $25 billion in fiscal 2013 profits for Apple. If iPad sales were to grow at a 50% clip, Apple may then post $50 billion in earnings. At that point, Apple would then carry a market capitalization of $750 billion, if it were to conservatively trade at a price-to-earnings multiple of 15; $750 billion in Apple earnings on top of 929 million shares outstanding breaks down to a rough $800 per share one-year price target.
For now, shareholders can take solace in the fact that the Apple Way remains a cash machine. At today’s $667, Apple now trades for 24 times trailing 2011 earnings. This stock remains relatively cheap, considering the fact that Apple is averaging 66% average annual net income growth over the past four years. For Q3 2012, Apple closed out its books with $117 billion in cash and investments to cover $51 billion in total liabilities on the balance sheet.