iPod Touch, the Recession and the Apple Ecosystem

  • Posted: 25 January 2009 03:50 PM #16

    sponge, a few points on your observations:

    The PC market had a dismal quarter and for most OEMs growth was seen in netbooks only. The netbook phenomenon has slowed MSFT’s revenue growth because they run XP, not higher-priced Vista. Apple’s unit sales gains considering not only the economy but also consumer buying trends is impressive. Apple doesn’t play the low-end game. Pro minitowers are in need of a serious refresh and the migration to portables (over 70% of Mac unit sales) indicates Apple is positioned well for the market.

    There isn’t any global enterprise that should expect to maintain a torrid pace of unit sales growth in every single quarter and Apple appears to be managing its product transitions quite well

    iPhones and iPod touchs are specialty-use Macs. Increasingly they will be seen as handheld Macs in function and platform synergy. The December quarter is only quarter only in a dynamic and fast-changing technology market. I’m not worried.

         
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    Posted: 25 January 2009 04:52 PM #17

    omacvi - 25 January 2009 07:19 PM

    I have made a couple of observations on this subject.

    The recession is affecting the whole iPod and Mac eco system.
    For starters Apple sold only 9% more cpus compared to prior year quarter.  Vs. in 1st quarter 08 they increased cpus by 44% from 07.  So in light of all the iPhones, iPods, and more stores their rate of growth cpus sold decreased significantly.  I should point out that in 08 they benefited from Leopard which moved a lot of additional units that quarter.

    In regards to iPods their average price per unit dropped over 20% from 180 to 148 when comparing 1st quarter 08 to 09.
    This tells me that despite the iTouch they sold a lot more cheaper iPods. That fact alone cost Apple $1 Billion last quarter.  As the economy goes further south that number will accelerate along with a decrease in overall units.  I have no evidence but I suspect many of the iTouches sold were to existing iPod customers who upgraded.  So the impact on CPUs sold would decrease.

    If this pattern continues I think by 3rd quarter we might see a contraction in Apple growth.

    I think apple has build an ecosystem in a recession that might see a reduction in growth and possibly a contraction of as much as 10%.  This puts it in a much stronger position then those who are full of debt and see sales drop by over 30%.

    This may explain aapl’s relative strength for now, but if the market further declines it will take aapl with it despite its strong financial position.

    What pattern are you seeing that concerns you.  That Apple is not recession proof?  You are not going to see 40% growth in established businesses during a recession, most companies suffer much worse.  As far as Apple given the macro economic conditions they are doing phenomenal as a company. 

    According to Jason Schwarz at Seeking Alpha Apple’s revenues totaled $39,038 billion compared with $28,339 billion during full year 2007. This represents 38% revenue growth year over year. Profit growth rates are even better. Net income for full year 2008 came in at $7,054 billion compared to $4,722 billion in 2007 resulting in 49% year over year earnings growth. Apple ended the year with $28.1 billion in cash compared to $18.4 billion in cash last year for an amazing cash growth rate in 2008 of 53%! For the quarter, Apple grew earnings at 16% and grew revenue at 9%.

    Now if you are talking about Apple stock in 2008 I have to agree it sucked, but so did the rest of the market

    [ Edited: 25 January 2009 08:50 PM by Intruder ]      
  • Posted: 25 January 2009 06:35 PM #18

    pats - 25 January 2009 08:52 PM

    What pattern are you seeing that concerns you.  That Apple is not recession proof?  You are not going to see 40% growth in established businesses during a recession, most companies suffer much worse.  As far as Apple given the macro economic conditions they are doing phenomenal as a company.

    Even in times of strong economic growth, product transitions and a dynamic economy will create ebbs and flows for virtually all enterprises. Managing growth today can be as big a challenge as igniting growth. I have no real concerns about Apple’s short-term future and the non-GAAP earnings were sensational. Let’s not focus on individual product segments and focus more on the whole.

    When I listen to an orchestra I focus less on the individual sections and more on the manner in which the orchestra comes together to create its assembled sound. It’s the same way I view Apple, its product segments and the company’s prospects for the next few years.

         
  • Posted: 25 January 2009 10:37 PM #19

    DawnTreader - 25 January 2009 10:35 PM
    pats - 25 January 2009 08:52 PM

    What pattern are you seeing that concerns you.  That Apple is not recession proof?  You are not going to see 40% growth in established businesses during a recession, most companies suffer much worse.  As far as Apple given the macro economic conditions they are doing phenomenal as a company.

    Even in times of strong economic growth, product transitions and a dynamic economy will create ebbs and flows for virtually all enterprises. Managing growth today can be as big a challenge as igniting growth. I have no real concerns about Apple’s short-term future and the non-GAAP earnings were sensational. Let’s not focus on individual product segments and focus more on the whole.

    When I listen to an orchestra I focus less on the individual sections and more on the manner in which the orchestra comes together to create its assembled sound. It’s the same way I view Apple, its product segments and the company’s prospects for the next few years.

    Still…I agree in essence with the sponge.  The economy will slow Apples growth pushing the big spike that many of us were expecting into the future.  This creates more uncertainty and possibly an expectation that competitors will have a chance to catch up.  Fat chance as far as I’m concerned but the pundits will think otherwise.

    Signature

    I don’t mind being wrong…,I just hate being wrong so FAST!

         
  • Posted: 26 January 2009 01:19 AM #20

    BillH - 26 January 2009 02:37 AM

    Still…I agree in essence with the sponge.  The economy will slow Apples growth pushing the big spike that many of us were expecting into the future.  This creates more uncertainty and possibly an expectation that competitors will have a chance to catch up.  Fat chance as far as I’m concerned but the pundits will think otherwise.

    Under pressure of 90-day public reporting, I don’t see a competitor that will ramp up product development in this environment. The utilization of assets to play “catch up” will, in the short-term, only further erode the profit picture. I don’t see competitors increasing R&D relative to revenue at this time.

    Dell reports next month and I don’t expect those results to be pretty. I expect them to report the channel is awash in goods with dimming prospects for an increase in retail orders in the first six months of the year.

         
  • Posted: 26 January 2009 08:35 PM #21

    RE: ASP of iPod this quarter. As opposed to just attributing that to more sales of the cheaper iPods, don’t forget about the large price decreases for the Touch as well as the increased foreign sales coupled with the strength of the US dollar. I don’t have the numbers to state anything definitively, but these are definitely factors. The Amazon numbers during the holidays, and the power of the app store, and even what I’ve seen with my own eyes (Touches everywhere), makes me feel confident that the Touch will continue to see tremendous growth.

    Regarding other versions of the Touch, what are we envisioning? What does an Touch “Nano” mean? Just a smaller version but otherwise the same? I keep having trouble imagining this working well with the inventory in the App Store. I have the same issue with “iPhone Nano”, I’ve yearned for a larger iPHone, not a smaller one (my eyes are getting older, and larger would me less futzing to expand the parts of the page I want to read). I figured an iPHone Nano would be something perhaps with no App Store but with just some Apple custom apps but smaller, cheaper, and with better battery life. Again, training wheels for an eventually purchase further up the product line.  I definitely can envision bigger versions, it’s the smaller ones I’m having trouble with. What do the smart people here see these ‘Nano’ versions looking like?

         
  • Posted: 26 January 2009 09:01 PM #22

    I’m not one of the “smart people here”, but my assumption is that a $149 Touch would not be a smaller form factor, but would have less memory than the $200+ Touch model.  Perhaps in June Apple bumps up the specs of the $200+ model (backside camera?  frontside camera?  GPS?) and lowers the entry level Touch to $149. 

    This would be a bold move by Apple, which dearly loves to protect its margins, but the time is ripe for Apple to build a lead in the pocket computer market that would be so dominant it would be like Windows in the 90s. 

    Then it upsells these folks into the Full Apple Ecosystem, one credit card purchase at a time!

         
  • Posted: 26 January 2009 09:13 PM #23

    Sounds smart to me.

         
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    Posted: 27 January 2009 02:44 PM #24

    I’d like to see a more inexpensive iPod Touch and iPhone.  But Apple’s gap is in the netbooks realm.  I foresee a larger iPod touch.  Longer battery life AND larger screensize.  Apple is going to have to admit they were wrong in leaving this market to the PC makers.

         
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    Posted: 28 January 2009 10:03 AM #25

    Tetrachloride - 27 January 2009 06:44 PM

    I’d like to see a more inexpensive iPod Touch and iPhone.  But Apple’s gap is in the netbooks realm.  I foresee a larger iPod touch.  Longer battery life AND larger screensize.  Apple is going to have to admit they were wrong in leaving this market to the PC makers.

    I would love to see some margin information on the Netbooks.  It sounds great for the consumer to get a laptop for 300-500$ but as an investor, it looks like a low margin business.  Basic you sell and don’t support which does not build customer loyalty which is a key part of Apple’s strategy.  I don’t own a netbook, but in my mind it is not that different than what a Ipod touch/iphone does functionally.  The compromise is screen/keyboard size vs portability.  All that said I would love to see a larger form-factor touch or a smaller macbook in the 500-800$ range.

         
  • Posted: 28 January 2009 10:26 AM #26

    I bought a netbook a few months ago, and I agree with Apple, its a very unsatisfying experience.  The screen is too small, the keys are too cramped.  It does an ok job if you just want a second computer to browse the Internet, but the small screen makes even that limited functionality only ok, not good.  I’m guessing that a lot of people who are buying netbooks are disappointed.  They thought they were getting about 80% of the value of a full priced laptop for about 50% of the price, but instead they are getting only about 20% of the value. 

    Apple could take this small-form (but larger than pocket-size) computer market by storm if it introduces a large Touch.  A 9 inch screen would be good for browsing if it was a touchscreen using the Touch’s excellent interface.  You wouldn’t have to worry about the cramped keyboard, because there would be no keys.  It would be a much better Internet experience than the current Touch because of the far larger screen.  It would be an excellent eBook reader.  You could price it at $500 and it would make perfect sense for somebody to own a pocket-size iPhone/Touch, the 9 inch Touch for moving around the house or on the plane,  and a Macbook for full fledged computing.

    I’m fully expecting a 9 inch Touch this June.  The Apple Ecosystem, ever expanding, ever extracting more money from my family.

         
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    Posted: 06 February 2009 12:36 PM #27

    Nice article on the netbook vs the Iphone from a web usage point of view
    Here

    Unlike iPhone, Netbooks Having Minimal Impact on Internet Usage

    The question is, how well have the sales been going and have the netbooks proved to be the wonderful mobile internet appliance they are claimed to be. As luck would have it, we can dig through the Net Apps data looking for clues.