THE APPLE INVESTOR: Uh, What Earnings Miss?

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Photo: AP

AAPL Down In Strong Markets
Stocks pop sending the markets soaring as the dollar plunges and Germany and France continue to bicker over debt funding. Shares of AAPL are sliding into the red while the rest of technology is trading strong. Catalysts include upgrade cycle and conversion to the iPhone 4S and response to the free iPhone 3GS; update to the iPad in early 2012; continued growth of the Mac business line; mobile adoption in China and emerging markets; iCloud / iOS 5 rollout and adoption; the evolution of Apple TV; and platforms such as mobile advertising (iAd), books / publishing and social (Ping). Shares of Apple trade at 9.5x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).iPhone 4S Only Costs Pennies More To Make Than The iPhone 4 (iSuppli)
iSuppli published an iPhone 4S tear-down showing a bill of materials of $188 for the 16GB and in the process revealing some previously undisclosed suppliers (like a new wireless chip with a unique custom module from Avago Technologies). Despite its new dual-core A5 processor, its much-improved 8-megapixel camera, and a wireless chip that allows the device to use both CDMA and GSM networks, the new iPhone 4S only costs Apple around $0.49 more than the iPhone 4. Still a great margin business for Apple as carriers subsidise.

AT&T Has Activated More Than 1 Million iPhones In 5 Days (ZDNet)
Get ready for a gang-busters holiday quarter for the carriers. The number of iPhone 4Ss activated seems that much more crazy when taking into account last quarter AT&T activated a total of 2.7 million iPhones. On AT&T’s earnings call this week, the company noted that they had activated more than 1 million iPhone 4S’ as of Tuesday this week, making it AT&T’s most successful launch. Momentum is back!

Apple Remains Top Choice In The Enterprise In Terms Of Activations (AppleInsider)
Apple’s iPhone remains the top choice for corporations over Android, while the iPad represents nearly all of enterprise tablet adoption. The iPhone accounted for 61% of all enterprise smartphone activations in the third quarter of 2011, retaining the lion’s share despite Android’s growth to 39% of smartphones. Apple was down in the quarter as enterprise customers waiting for the next release of the iPhone.

Samsung Might Be King Smartphone Manufacturer For A Quarter (The Wall Street Journal)
Samsung might be the world’s top smartphone maker for at least one quarter, a testament to the power of Android. Smartphone shipments for the manufacturer are expected to be 20 million for calender third quarter. Apple’s sales for the same period were 17.1 million. In fairness, Samsung qualifies as shipments, Apple’s figures are unit sales. Either way, expect Apple to blow away Samsung this holiday quarter.

Android Boss Says Apple Not Losing Step Without Jobs Anytime Soon (All Things Digital)
When asked about Apple’s losing a step now that Steve Jobs is no longer running the show, Andy Rubin said he’s confident Apple’s path of innovation won’t wane anytime soon. “I don’t think anything like that,” Apple still has the same ingredients that have made it a success, though it will miss Steve’s leadership. “Now it is time for some of the other guys to step up.”

Daily Trader: What Earnings Miss? (Seeking Alpha)
Analysts have continued to get Apple earnings wrong. In their defence, however, Apple usually sandbags so how were they to think this would be any different. Here’s what we know for the holiday quarter:

  1. Apple guides light
  2. iPhone and iPad sales are not abating
  3. Plenty of smartphone market share out there to pick up
  4. Emerging markets (Brazil, Asia) clamor for Apple products
  5. Siri will reinvent how we communicate with devices
  6. There’s only one viable competitor (Google)

The Apple story remains in tact. Management never guided this debacle. Look for a monster holiday quarter.

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