THE APPLE INVESTOR: Mac Sales Off To A Slow Start In The Quarter, Could Make It Up In June

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AAPL Off With Markets
Stocks fell sharply at the open today on worries the Greek debt crisis may escalate. Shares of Apple are down more than the markets, off 1%. Catalysts include second quarter results released in July; the next iPhone launch this fall (see below); smartphone push into China and emerging markets; iCloud rollout and adoption; the continued evolution and next generation of Apple TV; and new platforms such as books / publishing and social (Ping). Shares of Apple trade at 10.8x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).

iTunes Expensive To Maintain, Costs Apple An Estimated $1.3 Billion Annually (Asymco)
The costs associated with maintaining the iTunes Store and App Store have grown to more than $1.3 billion a year, according to Asymco. Apple estimates their digital store downloads have reached 15 billion songs, 130 million books and 14 billion apps. Asymco combined these numbers with average price of songs, books and apps purchased to come up to a monthly total income of $313 million versus $113 million in operating costs. This assumes the company reinvests most of the money (for things like building spaceship campuses).

Mac Sales Miss Expectations For April & May, But Stronger June Sales Expected (AppleInsider)
Recently released numbers from NPD showed Apple’s year-over-year Mac sales in the U.S. to be up by 15% in April and May, less than the 22% analysts are anticipating. Piper Jaffray analyst Gene Munster noted that the “slow start” to the quarter will likely be bumped up in June when sales are expected to be much stronger. Munster believes it’s possible Apple will meet expectations for 4.2 million Mac units, given overseas growth in the Mac, and the still-unreported June results. Munster is modelling a 3% decline in revenue, quarter-over-quarter versus the company’s own forecast for a roughly 7% decline.

Nearly Half Of Apple Developers Build For Android As Well (Fortune)
Gene Munster is a busy analyst. He surveyed developers at Apple’s WWDC last week and found some interesting results:

  • Only 7% are also developing apps for the Mac.
  • Nearly half or 47% write apps for Android, 36% for BlackBerry, 13% for Windows Phone 7 and 7% for WebOS.
  • Asked which platform had the highest potential for future growth, none mentioned the BlackBerry, WebOS or Symbian (not surprising considering it’s all but dead.)
  • 100% preferred iOS for ease of development and monetization.
  • Complaints include Apple’s “strict limitations” at 38% and the App Store approval process at 11%.

Clearly attendees are going to favour Apple in some fashion, but there is room for Android to step up.

iPhone 4 Still Top Selling Phone According To Channel Checks Says Analyst (Electronista)
The iPhone 4 is still the top-selling smartphone at AT&T and Verizon by a wide margin, according to Canaccord Genuity research analyst. Checks showed that the Apple phone was still “by far” the most popular in May and June. Perhaps those who considered switching from the iPhone to another platform might have been convinced to hold out for iOS 5. While that might be the case, the next 3 phones in line (other than iPhone 3GS) are probably Android-based and added together likely kill iPhone numbers.

Apple Losing Retail Strategy Mastermind (Various via iDygest)
Ron Johnson, the mastermind behind Apple’s retail strategy, is soon to leave the company to work for department store chain J.C. Penney. Johnson will assume this role November 1, 2011 and will join J.C. Penney’s board of directors on August 1. The stock of the retail giant soared on the news. As they say, once you’re lucky, twice you’re good. Johnson could already retire as one of the greatest minds in retail. But if he can turn around J.C. Penney as well as he’s built Apple’s retail empire, he’ll be even more of a legend.

Apple To Pay A Lot Of Money To Nokia Forever For Patent Use (Various via iDygest)
Nokia and Apple have finally settled all pending patent litigation between the two companies which has been going on for over two years now. Apple has provided Nokia with a one-time payment and will continue to pay Nokia royalties for use of their patents. There’s no question Apple lost the legal battle. It’s important because this patent fight was one of the biggest in an industry rife with patent litigation and shows that Nokia has one of the best patent portfolios in the industry.

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