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AAPL Rockets With Market
Stocks are rocking Wednesday as investors process Slovakia’s deal expand the euro zone rescue fund. Shares of AAPL are up big ahead of earnings next week, recovering from recent weakness. Catalysts include fiscal fourth quarter earnings release on Tuesday, October 18 at 5:00 pm ET; upgrade cycle and conversion to the iPhone 4S and response to the free iPhone 3GS; update to the iPad; continued growth of the Mac business line; mobile adoption in China and emerging markets; iCloud / iOS 5 rollout and adoption; the continued evolution of Apple TV; and platforms such as mobile advertising (iAd), books / publishing and social (Ping). Shares of Apple trade at 10.2x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).
Gene Munster Says His Fourth Quarter iPhone Estimate Of 25M Might Be Too Low (Barron’s)
Piper Jaffray analyst Gene Munster tells investors that the iPhone 3GS could be the springboard for iPhone 4S purchases, estimating that 18.8 million users of the older model, or about 68%, “are likely to upgrade to the iPhone 4S.” According to his proprietary survey, 94% of iPhone users say they intend to buy another iPhone as their next phone purchase, an “annuity” for Apple. As a result, his estimate of 25 million iPhone units to be shipped in calendar fourth quarter of this year may be too low.
The Real Reason Why There’s No iPhone 5 (Asymco)
It’s all coming together. Most iPhone 4 owners are still bound by the 2-year contracts they had to enter into when they bought the iPhone 4, so they’ll be less likely to now upgrade. So the 4S isn’t aimed at these folks. It’s aimed at the other three categories of iPhone 4S buyers:
- Pre-iPhone 4 iPhone users (~70 million of them)
- Non-smartphone users (1+ billion, who can now get a 3GS for free, if price is an issue)
- Non-iPhone smartphone users (Blackberry, Android, Nokia)
The release of the forthcoming iPhone 5, meanwhile, would likely be timed to appeal directly to the ~70 million iPhone 4 owners who will just then be starting to come off their two-year contracts. Sure, relative to expectations the iPhone 4S launch was a disappointment, but otherwise it appears to have been typically brilliant.
iPad Dominates Internet Traffic In The Tablet World (comScore)
Smartphones and tablets are driving an increasing amount of Internet traffic, according to the numbers from the latest comScore report. Including the iPad which accounts for 97% of all tablet Internet traffic. And the iPad drives a slightly higher share of mobile Internet traffic than the iPhone does, 46.8% versus 42.6%, respectively. Despite these Apple-centric numbers, the report mentions that Android is still the most popular smartphone platform, controlling 43.7%
Apple Has 5% Of Its Workforce Working On Chips (TechCrunch)
“Steve Jobs told me he has 1,000 engineers working on chips. Getting low power and smaller is the key to everything.” Apple started building its own chip design team in 2009 because Intel and AMD were still stuck in the PC era. But many figured it was a few hundred people at most, not 5% of Apple’s non-retail workforce. Jobs left Apple knowing that a string of post-PC products will be introduced in the years ahead. When he resigned he said, “I believe Apple’s brightest and most innovative days are ahead of it.” Now we get to see what he meant by that.
Studios Want To Get People To Start Buying DVDs Again, Offering Movies In The Cloud (Reuters)
In a move to encourage customers to buy movies rather than rent or stream, studios are planning to launch cloud-based services to compete with digital media rental outlets, like Apple’s iCloud-enhanced iTunes. The move is meant to encourage movie ownership of physical DVDs. Sony, Warner Bros. and Universal will rely on UltraViolet, a new digital rights authentication and cloud-based licensing system that allows users to stream or download a digital copy of the movie they purchased on disc, from the studios’ remote servers.
How Tim Cook Differentiated Himself From Steve Jobs At His First Product Launch
(The New York Times)
Tim Cook is a sales and operations guru. At the recent iPhone 4S launch, he let a trio of Apple senior vice presidents with stronger product credentials (Eddy Cue, Scott Forstall and Philip Schiller) show off Apple’s new toys. What he did was avoid seeming Steve-like. Van Baker, an analyst at Gartner said that “one of the things Tim did was to, in essence, put a stake in the ground and say I’m not Steve, don’t expect me to be Steve.”
The Seven Reasons Why Apple Should Not Pay A Dividend (Seeking Alpha)
Here are the reasons why a dividend is a bad idea:
- Small investors can’t reinvest
- The tax issue
- Apple employment is on the rise
- No future benefit issue
- It’s a growth stock / company
- Dividend money now goes straight to EPS
- Extra work / cost for the board
Apple should do what it does best. Focus on creating high quality products that the consumer loves and is willing to buy repeatedly. Keep growing, and ignore the whole dividend idea.
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