Thundering herd: iPhone edition

  • Posted: 28 October 2011 04:46 PM #31

    Drew Bear - 28 October 2011 07:35 PM

    Notice that of the dozens of headlines covering this news, PED’s was the only one that mentioned profits.

    Why is it that every new product is referred to as an “XX Killer”, with “XX” being any Apple product?  Why do new products have to be “XX Killers”?  Why can’t they just be new products?  Why are the talking heads so interested in market share, when profits are the key to survival?  How can analysts recommend a stagnant (in relation to Apple) firm with an ISM of 100, while the market only gives AAPL a 16?

    Nobody ever questioned MSFT’s valuations, even now when the stock should be even lower than it is.

    If we knew the answers to these, and a million other contradictory things related to Apple/AAPL, we’d all be multi-billionaires.

    As much as people love Apple’s products, Apple, as a Company, irritates the “learned” MBAs of the world because Apple doesn’t do things as the MBAs were taught as the correct way to do them.

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    Posted: 28 October 2011 04:52 PM #32

    Gregg Thurman - 28 October 2011 07:46 PM

    ... As much as people love Apple’s products, Apple, as a Company, irritates the “learned” MBAs of the world because Apple doesn’t do things as the MBAs were taught as the correct way to do them.

    There are a few MBAs in this forum, AdamThompson, iLoveiPad and me, we didn’t get irritated, in fact, we enjoy the ride.

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    Posted: 28 October 2011 04:58 PM #33

    AT has an MBA?  I would never have guessed.  wink

    You and iPad?  I can see that.  smile

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    Posted: 28 October 2011 05:10 PM #34

    FalKirk - 28 October 2011 07:10 PM
    pats - 28 October 2011 06:57 PM

    Samsung no longer reports actual shipment numbers so I would take this analysis with a grain of salt.

    They reports say that “Samsung announced” these numbers. Apparently, they have reversed their policy implemented just last quarter of not revealing the ship and sales numbers.

    Actually I believe Strategic Analytics estimated Samsung shipments and then the world reported that number as a fact instead of an estimate.  I’m sure Samsung had a great qtr but that 27.8M number doesn’t match up with Samsung’s slide deck from the CC IMO.  Samsung’s handset revenue grew from 11.69 to 14.42 or 23.3% QoQ and handset’s units grew at low 20% QoQ.  If we look at last qtr’s 19.2M units used by Strategic Analytics and grow that by 24% QoQ we get 23.8M so where did the extra 4M units come from?  I would call this a material error.  Which then gets magnified as everyone uses the estimate like it was actually a reported number.

         
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    Posted: 28 October 2011 05:14 PM #35

    Ah, the power of “estimates.”

    None of it really matters to me.  YOY growth continues to be the end-all be-all in my estimation.  To compare Apple’s absolute # of units sold against handset vendors who have been outselling Apple since day one and can retool for Android 1.6 to be the basis for their “new” really-should-be-called-feature phones at will simply isn’t a valid comparison. 

    It’s like saying “PCs outsell Macs.”  OK, sure.

    iPhone growth sucked last quarter.  That is indisputable.  Where we go from there is what’s key.

    [ Edited: 28 October 2011 05:16 PM by Mav ]

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  • Posted: 28 October 2011 05:18 PM #36

    pats - 28 October 2011 08:10 PM

    Actually I believe Strategic Analytics estimated Samsung shipments and then the world reported that number as a fact instead of an estimate.  I’m sure Samsung had a great qtr but that 27.8M number doesn’t match up with Samsung’s slide deck from the CC IMO.  Samsung’s handset revenue grew from 11.69 to 14.42 or 23.3% QoQ and handset’s units grew at low 20% QoQ.  If we look at last qtr’s 19.2M units used by Strategic Analytics and grow that by 24% QoQ we get 23.8M so where did the extra 4M units come from?  I would call this a material error.  Which then gets magnified as everyone uses the estimate like it was actually a reported number.

    If you think about it, applying the higher units shipped number, and reported revenue, it means that Samsung’s handset ASP fell through the floor, and would account for the drastic decline in EPS.

    Gee, from very little handset profits, to significant handset losses in one year.  Market share is benefitting Samsung a ton, isn’t it?

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  • Posted: 28 October 2011 05:23 PM #37

    Mace - 28 October 2011 07:52 PM
    Gregg Thurman - 28 October 2011 07:46 PM

    ... As much as people love Apple’s products, Apple, as a Company, irritates the “learned” MBAs of the world because Apple doesn’t do things as the MBAs were taught as the correct way to do them.

    There are a few MBAs in this forum, AdamThompson, iLoveiPad and me, we didn’t get irritated, in fact, we enjoy the ride.

    Unless I’m mistaken, you don’t work for WS, the epicenter of conformist thinking.

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    Posted: 28 October 2011 05:28 PM #38

    Not all MBAs work for WS, so I thought.

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    Posted: 28 October 2011 05:44 PM #39

    Gregg Thurman - 28 October 2011 08:18 PM
    pats - 28 October 2011 08:10 PM

    Actually I believe Strategic Analytics estimated Samsung shipments and then the world reported that number as a fact instead of an estimate.  I’m sure Samsung had a great qtr but that 27.8M number doesn’t match up with Samsung’s slide deck from the CC IMO.  Samsung’s handset revenue grew from 11.69 to 14.42 or 23.3% QoQ and handset’s units grew at low 20% QoQ.  If we look at last qtr’s 19.2M units used by Strategic Analytics and grow that by 24% QoQ we get 23.8M so where did the extra 4M units come from?  I would call this a material error.  Which then gets magnified as everyone uses the estimate like it was actually a reported number.

    If you think about it, applying the higher units shipped number, and reported revenue, it means that Samsung’s handset ASP fell through the floor, and would account for the drastic decline in EPS.

    Gee, from very little handset profits, to significant handset losses in one year.  Market share is benefitting Samsung a ton, isn’t it?

    Not sure where you got your info on the ASP.  The slides from the CC said

    ? ASP : Slight increase QoQ - Despite enhanced price competition, ASP increased due to improved product
    mix amid strong smartphone sales ? Achieved record quarterly sales and operating profit,
    along with improved OP margin

    What was more significant was the decrease in semiconductor’s this is where shifts in Apple’s contracts will really hurt Samsung in the future.  One of the Semi blogs I follow had a recent article Apple is Giving Samsung Semiconductor A Splitting Headache

    Recently, Apple let it be known that it was shifting DRAM and NAND out of Samsung to Toshiba and Elpida. Here?s where it gets interesting. Apple, as recently discussed, has over 70% gross margins in its iPhone 4S so they can afford to pay a little more to certain suppliers that they seek to gain favor with at the expense of a ?Bad Supplier.? I contend that Apple is probably paying higher ASPs to Toshiba and Elpida in the short run to get more of their capacity and to penalize Samsung. Samsung is now looking at reduced demand and the prospect of selling out DRAM and NAND at a lower ASP to the gray market. Remember in down times, gray markets have ASPs substantially below contract price. A lot of bleeding is going on. (see Samsung Sees Weaker Earnings)

    From a long-term point of view, it is difficult for Samsung to plan for new fabs if they don?t know how much demand they can expect from Apple. And now, Apple is raising the competitive profile of Toshiba and Elpida at Samsung?s expense. If Samsung gets out of the Tablet and Phone market, then that will free Apple to expand into the 25% of the market (phones) that will be like green fields with 70%+ gross margins. And all this occurs by just paying Toshiba and Elpida a few extra cents per part.

         
  • Posted: 28 October 2011 06:00 PM #40

    pats - 28 October 2011 08:10 PM
    FalKirk - 28 October 2011 07:10 PM
    pats - 28 October 2011 06:57 PM

    Samsung no longer reports actual shipment numbers so I would take this analysis with a grain of salt.

    They reports say that “Samsung announced” these numbers. Apparently, they have reversed their policy implemented just last quarter of not revealing the ship and sales numbers.

    Actually I believe Strategic Analytics estimated Samsung shipments and then the world reported that number as a fact instead of an estimate

    I’ve got it exactly wrong and you’ve got it exactly right. I based my comments on PED’s column which definitely said “Samsung annonced”“. But apparently these were only estimates provided by others. Sorry, my bad.

    Jim Darlrymple penned a scathing rebuttal to the claim that Samsung made more smart phones than Apple. The title of the articale says it all:

    The bullshit Samsung smartphone numbers

         
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    Posted: 28 October 2011 06:30 PM #41

    I agree the Samsung shipped numbers used in all the articles are BS, but I don’t doubt they probably did sell more units than Apple. It doesn’t matter much. Profits matter more, so let’s take a closer look at those numbers.

    Sales in the telecommunications sector surged by 37% compared with the previous year, and operating profit more than doubled, achieving a record high 2.52 trillion won ($2.25 billion).

    http://www.cnn.com/2011/10/28/world/asia/south-korea-samsung/

    Although I have no doubt that smartphones are a big chunk of Samsung’s “telecommunications sector”, here’s a screenshot from their website that suggests other products also play a significant part. You could make a strong argument that Apple’s iPhone profits were at least 3x that of Samsung’s smartphone profits.

         
  • Posted: 28 October 2011 08:54 PM #42

    Drew Bear - 28 October 2011 09:30 PM

    I agree the Samsung shipped numbers used in all the articles are BS, but I don’t doubt they probably did sell more units than Apple. It doesn’t matter much. Profits matter more…

    The reason people are so high on market share is the Network Effect. Once a company gets a large percentage of the market, developers are drawn to make them more programs and the other platforms get starved for applications and pretty soon you have a virtuous spiral and everybody else is in a a death spiral.

    But it is APPLE, not Android, who taking advantage of the Network Effect. Almost all Apple phones run on a single operating system. Right now, developers need develop for only three phones (3GS, 4 and 4S) and all of their screen sizes (and much more) are exactly the same.

    And it’s not just Android’s phones that are fragmented. Google has a store, Nook has a Store, Amazon will soon have a store and all the Asian wanna be’s (some of them quite large) have a store - and none of them are compatible.

    And I can’t speak to the Amazon or the other Android store, but Google’s market place sucks. Android Advocates will deny it, but every objective observer has noted it. Apple’s store may be a walled garden but Android’s store is the wild, wild west.

    But perhaps the most important that Apple is enjoying the Network Effect while Android is not is because Apple developers are getting paid and paid well (two and a half billion at last count) and Android developers are not.

    Market share on a platform DOES matter because of the Network Effect. But when you split Android up into all of its competent parts, you realize that Android is not a single thing. It is merely a collection of different operating systems derived from a single source.

         
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    Posted: 28 October 2011 11:55 PM #43

    Mace - 28 October 2011 07:52 PM
    Gregg Thurman - 28 October 2011 07:46 PM

    ... As much as people love Apple’s products, Apple, as a Company, irritates the “learned” MBAs of the world because Apple doesn’t do things as the MBAs were taught as the correct way to do them.

    There are a few MBAs in this forum, AdamThompson, iLoveiPad and me, we didn’t get irritated, in fact, we enjoy the ride.

    Whatever, masters in bullshit, I have a doctorate in it (JD).

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    Posted: 29 October 2011 03:10 PM #44

    I’ve been following a couple of Google/Android focused podcasts & forums and find it amusing to see how self-delusional people can be. Maybe they’re doing it to play to their core audience, but I hope we as an Apple-centric forum never become like that. It’s one thing to distinguish between a subjective and objective observation; it’s an entirely different matter to claim that everything is subjective and spin is all that matters.

    The Android podcast I listened to this morning started out with the one guy who had actually been in London to see & touch the Galaxy Nexus with Android 4.0, saying that he was underwhelmed/disappointed. The other 3 guys (who have never touched the phone) proceed to spend the next 30 min. talking him back from that initial observation.

    The Galaxy Nexus (GN) is ostensibly the Android champion created to take on iPhone 4S with iOS 5. It’s the leader of the thundering herd. Although HTC & others will quickly one-up this phone in order to “kill” the 4S, there is little doubt that the GN is not that killer. But still they try to tout its superiority and ignore its shortcomings.

    ? 4.65” high-res PenTile display. This will probably look great to the majority of consumers, but over-saturated colors and pixelated text will be noticeable to keener eyes. Those of the MTV generation may prefer this display for video watching.

    ? 5MP camera. The same group who harped on the iPhone 4 camera’s lack of pixels now claim that it’s not all about the megapixels. They are correct, but at least acknowledge the hypocrisy in their previous stance. I’m sure this camera will be a huge improvement for those accustomed to the typically slow Android cameras. Just don’t try to claim that it’s better than the iPhone 4S camera.

    ? No microSD card slot. Not an issue for iPhone users who have 16/32/64 GB options, but it sounds like the GN will only be offered with 16 GB of storage. This is again one of those features normally touted as an advantage for previous Android phones. Its exclusion this time is clearly a disadvantage.

    ? Weight & size. Fit & finish. This is one of those subjective things. The GN is taller & wider than the 4S. It’s thinner along 90% of the length, but thicker at the top. It’s lighter and made of plastic. I think the majority of consumers making a side-by-side comparison of the GN and the 4S would come away with the impression that the GN is too big for a phone and feels flimsy. I don’t know if it’s quantifiable, but there is (IMO) a sweet-spot of thinness, size & heft that give the impression of quality. Go too far on either side and a phone feels light & flimsy or thick & bulky. Toy-like or tank-like.

    ? Android 4.0/ICS. Incremental improvements, but nothing that surpasses iOS 5 features. Nothing Siri-like to get excited about.

    All of the above could be minor compared to some still unresolved questions:

    ? battery life. 4G still drains batteries quickly. So do big screens.

    ? OS upgradability. The 19 month old Nexus One will not get Android 4.0. How many OS upgrades will the Galaxy Nexus receive before becoming obsolete?

    ? performance degradation. Almost all Android phones so far become sluggish & more buggy as they age. Is this a result of the messed up Android+TouchWiz/MotoBlur/Sense upgrades? Or is it because new apps are optimized for the most recent OS, which the old phones don’t have?

         
  • Posted: 29 October 2011 07:09 PM #45

    Drew Bear - 29 October 2011 06:10 PM

    I’ve been following a couple of Google/Android focused podcasts & forums and find it amusing to see how self-delusional people can be.

    Out of curiosity, which podcast(s). Was it Twit? I tried to listen to that and I couldn’t stomach it.

    Drew Bear - 29 October 2011 06:10 PM

    Maybe they’re doing it to play to their core audience, but I hope we as an Apple-centric forum never become like that. It’s one thing to distinguish between a subjective and objective observation; it’s an entirely different matter to claim that everything is subjective and spin is all that matters.

    Well, I fear that I’ve lost my objectivity. If I were talking to reasonable people I’d be much less Apple militant. But with the fanatical people on both sides of the debate if you try to be reasonable or, heaven forbid, concede a point, it’s all over but the shouting.

    Drew Bear - 29 October 2011 06:10 PM

    The Android podcast I listened to this morning started out with the one guy who had actually been in London to see & touch the Galaxy Nexus with Android 4.0, saying that he was underwhelmed/disappointed. The other 3 guys (who have never touched the phone) proceed to spend the next 30 min. talking him back from that initial observation.

    The Galaxy S line is supposed to be one of the best phones out there. I know I’ve head about the Nexus, but I can’t quite recall the reviews. They so often conflict.

    Drew Bear - 29 October 2011 06:10 PM

    The Galaxy Nexus (GN) is ostensibly the Android champion created to take on iPhone 4S with iOS 5. It’s the leader of the thundering herd. Although HTC & others will quickly one-up this phone in order to “kill” the 4S, there is little doubt that the GN is not that killer. But still they try to tout its superiority and ignore its shortcomings.

    To me, what’s more important that the deficiencies of a specific phone is the deficiencies of the phones ecosystem. Phones come out at a frightening pace and that has to confuse the consumer.  And while Apple phones and Android phones each have their strengths (for example, I’d love to have turn by turn directions) we don’t speak in terms of which phone is best for whom but, instead, we talk about which phone is best for everybody. It’s all black and white with no room for a reasonable discussion.

    Drew Bear - 29 October 2011 06:10 PM

    ? No microSD card slot. Not an issue for iPhone users who have 16/32/64 GB options, but it sounds like the GN will only be offered with 16 GB of storage. This is again one of those features normally touted as an advantage for previous Android phones. Its exclusion this time is clearly a disadvantage.

    No SD card? I don’t care about that at all, isn’t it an article of faith among the Android Advocates that the SD slot is one of the key advantages of Android phones? I suppose that now that one of their phone doesn’t have it then it’s no longer imortant.

    Drew Bear - 29 October 2011 06:10 PM

    ? Weight & size. Fit & finish. This is one of those subjective things. The GN is taller & wider than the 4S. It’s thinner along 90% of the length, but thicker at the top. It’s lighter and made of plastic. I think the majority of consumers making a side-by-side comparison of the GN and the 4S would come away with the impression that the GN is too big for a phone and feels flimsy. I don’t know if it’s quantifiable, but there is (IMO) a sweet-spot of thinness, size & heft that give the impression of quality. Go too far on either side and a phone feels light & flimsy or thick & bulky. Toy-like or tank-like.

    ? Android 4.0/ICS. Incremental improvements, but nothing that surpasses iOS 5 features. Nothing Siri-like to get excited about.

    What do you mean nothing Siri-like! Don’t you know that Google’s voice recognition can do everything that Siri does! (Heavy sarcasm.)

    Drew Bear - 29 October 2011 06:10 PM

    All of the above could be minor compared to some still unresolved questions:

    ? battery life. 4G still drains batteries quickly. So do big screens.

    I don’t think that this gets discussed enough. No doubt, 4G phones are fast, but they eat up battery life.

    Drew Bear - 29 October 2011 06:10 PM

    ? OS upgradability. The 19 month old Nexus One will not get Android 4.0. How many OS upgrades will the Galaxy Nexus receive before becoming obsolete?

    The operating system on Android is a disgrace. Not only do older phones never get upgrades, but many brand new phones come out with a Previous OS. Simply incredible. Everybody’s touting 4.0, but only a handful of Android users have it or will ever have it.

    Drew Bear - 29 October 2011 06:10 PM

    ? performance degradation. Almost all Android phones so far become sluggish & more buggy as they age. Is this a result of the messed up Android+TouchWiz/MotoBlur/Sense upgrades? Or is it because new apps are optimized for the most recent OS, which the old phones don’t have?

    Don’t ever talk to me about the various skins that each manufacture puts on their phones. I’ve always wondered what percentage of Android owners don’t even know that they have an Android phone.

    Again, if we were being objective, we’d recognize that Android has many good points. But please don’t tell me that open is good and closed is evil or that Android is “winning” because it has more market share. Let’s wait and see who wins. And besides, is it likely that there will be a winner or is it more likely that the two systems with co-exist?