New York Magazine Talks Apple and iPhones

  • Posted: 16 August 2009 10:50 PM

    Here’s a good article in New York Magazine to get things off to a good start for the week:

    http://nymag.com/news/businessfinance/bottomline/58343/

    Money quote:

    “It?s obvious to me, given the edge and the multiple applications that the iPhone has, that the only thing holding back Apple will be manufacturing capacity. That?s why I think this $160 stock will go to $200 shortly after the Chinese start buying.”

         
  • Posted: 17 August 2009 12:01 AM #1

    Thanks for posting this.  Yes, the author is a problem.  I’d be interested to hear AFBers acclaim/criticism of the major assertions contained in this piece.

    Two that I immediately question are 1) that the iPhone has been supply constrained, and to the extent that sales are half what they otherwise might have been, and 2) that Qualcomm will provide “the brains for almost all the next generation cell phones”.  The first seems implausible and the latter seems totally over the top.

         
  • Posted: 17 August 2009 12:41 AM #2

    Gee, I don’t know how you can argue that the 3GS isn’t supply constrained. I’ve been waiting over a month for mine from Rogers in Canada and all they’ll say is that orders will be filled in sequence—they can’t even give me even a wild estimate of a delivery date. The time frame of the graduated rollout across the world also shows that Apple can’t deliver the device as quickly as they’d like. But heck, don’t take my word for it, consider Tim Cook’s statements from the conference call. He clearly admitted they don’t know when supply will balance demand and he “didn’t even want to predict” when that would happen. He did know it would not balance in the short-term.

    If the statement about sales being half refers to the new sales prior to quarter-end and is comparing to what they’d have been if supply was a non-issue worldwide, then in fact I feel 50% is a very reasonable estimate. While it’s certainly not a great thing to not be able to fill orders, on the bright side I think we’re going get some exciting iPhone number this quarter as well.

         
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    Posted: 17 August 2009 01:09 AM #3

    Components of smartphone index: AAPL, RIMM, PALM, Qualcomm, Cisco, Ciena, Tellabs, ADC Telecom, Cypress Semiconductor, SanDisk, Tessera, Cree, ON Semiconductor, RF Micro and Skyworks Solutions.

    If $200 is the price target, it would be too late to jump in since AAPL has doubled since Mar and about 15%+ to $200 from here.  What take him so long to tell us?  Cool kids are already in for awhile.

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    Stay Hungry. Stay Foolish.  - Steve Jobs

         
  • Posted: 17 August 2009 01:33 AM #4

    cranium - 17 August 2009 03:41 AM

    Gee, I don’t know how you can argue that the 3GS isn’t supply constrained. I’ve been waiting over a month for mine from Rogers in Canada and all they’ll say is that orders will be filled in sequence—they can’t even give me even a wild estimate of a delivery date. The time frame of the graduated rollout across the world also shows that Apple can’t deliver the device as quickly as they’d like. But heck, don’t take my word for it, consider Tim Cook’s statements from the conference call. He clearly admitted they don’t know when supply will balance demand and he “didn’t even want to predict” when that would happen. He did know it would not balance in the short-term.

    If the statement about sales being half refers to the new sales prior to quarter-end and is comparing to what they’d have been if supply was a non-issue worldwide, then in fact I feel 50% is a very reasonable estimate. While it’s certainly not a great thing to not be able to fill orders, on the bright side I think we’re going get some exciting iPhone number this quarter as well.

    Cramer argues that another 5mm iPhones would have been sold last quarter if not for the fact that Apple could not make them fast enough.  The 3Gs supply problem did not exist until this quarter.

         
  • Posted: 17 August 2009 05:20 AM #5

    Tim Cook’s comments about the inability to predict when supply would meet demand were indeed unprecedented for him.  He’s had plenty of hit products over the years, including prior iPhone launches, and he’s always been able to say that he was confident supply would catch up to demand in the coming quarter. 

    To see this as a bad thing is ludicrous.  The “problem” is all due to an unprecedented worldwide demand.  At worst, its an opportunity cost of not making as much revenue as Apple could if it had predicted this amount of demand, but even that is ameliorated by the fact that most consumers will wait for an iPhone rather than buy an alternative that is immediately available. 

    The more interesting assertion in this article is that handheld computers like the iPhone and iPod Touch will be more lucrative than the combined impact of the personal computer and the Internet.  That’s the mother of all tech predictions, and I would be tempted to dismiss it as overheated, except that you’d have to kill me before you could take away my iPhone.

         
  • Posted: 17 August 2009 10:15 AM #6

    The on again/off again rumor/denial of rumor circling around the bulk sale of special iPhones to a Chinese telecom should be taken with a grain of salt, but the possibility is close enough to actual news to indicate that at some point some 1.5 million unique iPhones have/or will have to be manufactured. It’s possible that manufacturing process helps account for the slowdown or regular iPhones, and those Chinese units are sitting in a warehouse waiting for the ink to dry on the deal. Whatever accounts for it, a shortage increases demand; and demand creates hype and word of mouth, and expectation, and desire… possibly even lust.

         
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    Posted: 17 August 2009 10:44 AM #7

    capablanca - 17 August 2009 03:01 AM

    Thanks for posting this.  Yes, the author is a problem.  I’d be interested to hear AFBers acclaim/criticism of the major assertions contained in this piece.

    Two that I immediately question are 1) that the iPhone has been supply constrained, and to the extent that sales are half what they otherwise might have been, and 2) that Qualcomm will provide “the brains for almost all the next generation cell phones”.  The first seems implausible and the latter seems totally over the top.

    As far as #1 I don’t think it is that outlandish.  It appears Apple planned the rollout based on the existing manufacturing capacity and carrier preorders.  The fact that numerous carriers are unable to get sufficient resupply points to manufacturing as the constraint.  We don’t know what Apple is building but they are using the same guys and last year they could build about 150K per day so an extra 5M could probably been sold through the channel if Apple did a simultaneous world wide lauch.  The good new is that extra 5M is being spread across this quarter.
    As far as #2 goes Qualcomm owns key IP for both CDMA and WCDMA and so is paid royalties for every phone made. An old article by Vijay Nagarajan discusses this issue
      Here

    While it appears that the iPhone camp has a good IP position, it does not obviate the need for a Qualcomm license. The combined patent portfolio of Infineon and InterDigital will help bring down the net money flowing into Qualcomm?s coffers. However, it is unlikely that this number will become public knowledge. We will also not know what percentage distribution of this fee as paid by Apple or Infineon.

         
  • Posted: 17 August 2009 10:45 AM #8

    I don’t believe Apple would actually manufacture iPhones based on a possible deal.  Unless something has been signed and money has changed hands I can’t believe they would be foolish enough to put anything into production.  China deal will happen eventually but hopefully on Apple’s terms , if that means waiting then so be it.

         
  • Posted: 17 August 2009 12:08 PM #9

    Provided you have no direct competition (iPhone has none for now), production constrained is a nice place to be. No price pressure, no inventory, people will buy it later if they don’t buy now.

    You can view this as iPhone sales growing to plan. Maybe those plans should be revised upwards. I think any big ramp-up of volume will wait until (a) China and India channels are working and (b) further integration with PA Semi system-on-a-chip is in place. Until that time, Apple will prefer high margins to high volumes.