Thundering herd: iPhone edition

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    Posted: 29 October 2011 07:18 PM #46

    FalKirk, I’ve been playing that drum for a long while now.  For Apple to win, Android does not have to lose, to use an old analogy that may be imprecise given Steve’s comments to go thermonuclear on Android (well, if need be, based on Apple’s ACTUAL actions so far).

    Android 4.0, somewhat untested.  Standard-speed dual-core chips.  BIG, HIGH-RES screen with tons more pixels to move around.  Galaxy Nexus has a lot of performance challenges to overcome right off the bat, never mind battery life and the strange bit about the “flagship” Android phone not getting the fastest dual-core chips reserved for…Samsung’s own flagship?  O_o

    Seriously, a 4.65” screen is getting stupid.  Keep trying to aspire to the Dell Streak’s example…

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    Posted: 30 October 2011 03:40 PM #47

    FalKirk - 29 October 2011 10:09 PM
    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.

    It was the Android Central podcast. Their audience are mostly Android fans, so it can be annoying at times. I use the +30 sec. button on the Downcast app a lot.

    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.

    The Galaxy S2 is probably currently the best Android phone. The Droid Razr looks good spec-wise, but it won’t get Android 4.0 until next year. The Galaxy Nexus has 4.0, but Android fans are undoubtedly taken aback by the 5 MP, “only” 1.2 GHz processor and lack of microSD slot.

    Everyone seems to forget that none of the previous Nexus phones have sold very well. I’m wondering if Samsung intentionally sub-spec’d the Nexus so that people would continue to buy the SGS2 and wait for ICS.

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

    It’s been interesting to watch Laporte these past few weeks as he reluctantly admits that he’s being drawn back into the iOS world with the 4S. He flat out says that Apple has completely surpassed Google’s voice features. Siri and the camera are huge for him. His two co-hosts on the Google show have nothing to lure him back to the ‘droid fold. Likewise with Thurrott on the Microsoft Windows Phone front. The Nokia World announcements were major disappointments that they tried to play down.

    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.

    So true. Notice the headlines about the 4S battery issues. I’m convinced these are real enough, but they strangely affect maybe 25% of all 4S owners. Of course 25% of 4S owners will soon be more than 100% of all Android 4G phone owners, so you can argue that Apple deserves the headlines. Still, Apple will get this “issue” fixed within a few weeks, while Android users will suffer crappy battery life indefinitely.

    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.

    It’s insane that even the Droid Razr will not get 4.0 this year. ICS is really going to cut off a huge swatch of the Android installed base. The ecosystem is already fragmented and forked enough as it is, but this will be a major reset. Even the numbering difference is stark: 2.3.5 vs 4.0. In 2012 there will be a mega split between devices running 4.x and those stuck on 2.x.

    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?

    Yes, the two systems will co-exist, along with Windows Phone, Blackberry, QNX, Bada, OPhone, etc. Horace has a comprehensive list somewhere.

    People who like to declare a “winner” based on unit market share should study the PC hardware market. HP sells the most units, yet they came very close to parting with their PC unit because of low profit margins. Also take a look at the cell phone market where Nokia sells the most units, but is struggling to turn any profit.

         
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    Posted: 30 October 2011 06:50 PM #48

    From an investor’s perspective, I want to know whether the supernormal profit that Apple is extracting from iPhone is sustainable given the growing market share of Androids.  If investors sense that it could drop to what Apple can get for Mac, they would begin to lighten and AAPL would decline.

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    Posted: 30 October 2011 06:56 PM #49

    Mace, I’m sure you already have your own ideas about this.

    Here’s the facts from last quarter:  “blended” iPhone ASP was $643.  About $11 lower than last quarter, but well within expected levels.  The 3GS was price-dropped to $49 at the time.

    I find US unlocked iPhone prices to be a pretty good, if limited indicator.  Note also Sprint supposedly paying very high subsidies for the iPhone.  Who knows what “40% higher than Android phones” means, but it could mean that the ASP for iPhone on Sprint is well over $700.

    [ Edited: 30 October 2011 06:59 PM by Mav ]

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    Posted: 31 October 2011 04:09 PM #50

    Meanwhile, iPhone unit sales will double Q over Q.

    Another Smartphone Miss - Stiff HTC Volume Warning

    Last week I discussed the worrisome cluster of bad smartphone news from Triquint, Radio Shack, Verizon, etc.

    This week, the dark parade continues as HTC guides 4Q11 smartphone volumes to 13-14 M units ? below the 3Q11 level of 13.3 M units.

    It?s a puzzlingly weak number considering how strong Christmas quarters tend to normally be compared to autumn quarters.

    http://www.forbes.com/sites/terokuittinen/2011/10/31/another-smartphone-miss-stiff-htc-volume-warning/?partner=yahootix

    ...there clearly is a possibility that the mid-market and high-end smartphone markets may have been stuffed too full of product in the run-up to the Christmas season. Now Apple is cleaning up at the high-end, while the price aggression of Samsung, Nokia, ZTE and Huawei is pulling mid-range consumers down to sub-$200 non-subsidized price points.

    This could mean an ugly 4Q11 for Samsung, HTC, LG and Sony Ericsson…

    The $375 unsubsidized iPhone 3GS may pull down the overall ASP for iPhones, but I’m guessing it will still be in the $600 range (+/- $25). All the other smartphone makers are already in the sub-$300 ASP range heading lower. Basically it means they have to sell at least twice as many units to garner the same revenue and anywhere from 3-5 times as many units to rake in the same profits as Apple does with the iPhone.

    Android is so beating iPhone.

         
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    Posted: 31 October 2011 05:20 PM #51

    Mav - 30 October 2011 09:56 PM

    Mace, I’m sure you already have your own ideas about this.

    Here’s the facts from last quarter:  “blended” iPhone ASP was $643.  About $11 lower than last quarter, but well within expected levels.  The 3GS was price-dropped to $49 at the time.

    I find US unlocked iPhone prices to be a pretty good, if limited indicator.  Note also Sprint supposedly paying very high subsidies for the iPhone.  Who knows what “40% higher than Android phones” means, but it could mean that the ASP for iPhone on Sprint is well over $700.

    Mav I believe $6 of the reduced ASP was due to the revenue deferral due to iCloud.

         
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    Posted: 31 October 2011 05:26 PM #52

    Mace - 30 October 2011 09:50 PM

    From an investor’s perspective, I want to know whether the supernormal profit that Apple is extracting from iPhone is sustainable given the growing market share of Androids.  If investors sense that it could drop to what Apple can get for Mac, they would begin to lighten and AAPL would decline.

    The amazing fact is Apple’s iPhone margins have remained stable since the price reduction when they reduced the retail cost and accepted the full subsidy.  The table has been set, and the recent deals, Sprint as an example, so Apple’s negotiating position is still extremely strong.  So can it continue forever, I doubt it, but the new deals in 2011 point toward the same margins so at least in 2012, I’m comfortable with the numbers.

         
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    Posted: 31 October 2011 05:45 PM #53

    pats - 31 October 2011 08:26 PM
    Mace - 30 October 2011 09:50 PM

    From an investor’s perspective, I want to know whether the supernormal profit that Apple is extracting from iPhone is sustainable given the growing market share of Androids.  If investors sense that it could drop to what Apple can get for Mac, they would begin to lighten and AAPL would decline.

    The amazing fact is Apple’s iPhone margins have remained stable since the price reduction when they reduced the retail cost and accepted the full subsidy.  The table has been set, and the recent deals, Sprint as an example, so Apple’s negotiating position is still extremely strong.  So can it continue forever, I doubt it, but the new deals in 2011 point toward the same margins so at least in 2012, I’m comfortable with the numbers.

    These are things we need to pay attention to as investors.

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  • Posted: 01 November 2011 08:07 AM #54

    Mace - 30 October 2011 09:50 PM

    From an investor’s perspective, I want to know whether the supernormal profit that Apple is extracting from iPhone is sustainable given the growing market share of Androids.  If investors sense that it could drop to what Apple can get for Mac, they would begin to lighten and AAPL would decline.

    I know this may sound naive (and I’m sure it IS naive) but I sometimes wonder if Android has cost Apple a single phone sale or a single dollar. We’re so used to thinking that if one company is outgrowing another than they must be stealing market share (and, presumably profits) from someone else. But that’s just not true int the rapidly expanding smart phone market. The share that the smart phones are stealing is coming from “dumb” and “feature” phones. For a long while, iPhones were market constrained. I think you could argue that they are STILL market constrained. They’re not in every country or on every carrier that they could be.

    Honestly, does Android matter? If Android didn’t exist, would Microsoft, RIM, Nokia, etc. have that market share? Because Apple sales just couldn’t have grown much faster than they did.

         
  • Posted: 01 November 2011 08:42 AM #55

    I just now opened a letter from AT&T. It said:

    Dear John

    You’ve been such a great customer, you deserve something special from us.

    That why I’m offering you a FREE Android Samrtphone when you activate an additional line of service with a new two-year wireless voice agreement and a minimum $15/mo data plan. You’re going to love the LG Phoenix - it lets you connect wirelessly to headsets so you can talk hands-free.

    etc, etc, etc.

    Is it any surprise that Android has market share? The only question that should matter to Apple is what phone those Android owners buy as their second phone.

         
  • Posted: 01 November 2011 12:19 PM #56

    Mace - 30 October 2011 09:50 PM

    From an investor’s perspective, I want to know whether the supernormal profit that Apple is extracting from iPhone is sustainable given the growing market share of Androids.  If investors sense that it could drop to what Apple can get for Mac, they would begin to lighten and AAPL would decline.

    Mace,

    My sense is that Siri will remain the key iPhone market differentiator for at least the next 2 years. So you likely can rest easy until at least late 2013.  See below for recent comments to this effect by former Siri board member Gary Morgenthaler:

    http://mashable.com/2011/10/28/apple-google-smartphone-war/

    Alan

         
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    Posted: 01 November 2011 02:11 PM #57

    FalKirk - 01 November 2011 11:07 AM

    I know this may sound naive (and I’m sure it IS naive) but I sometimes wonder if Android has cost Apple a single phone sale or a single dollar. We’re so used to thinking that if one company is outgrowing another than they must be stealing market share (and, presumably profits) from someone else. But that’s just not true int the rapidly expanding smart phone market. The share that the smart phones are stealing is coming from “dumb” and “feature” phones. For a long while, iPhones were market constrained. I think you could argue that they are STILL market constrained. They’re not in every country or on every carrier that they could be.

    Honestly, does Android matter? If Android didn’t exist, would Microsoft, RIM, Nokia, etc. have that market share? Because Apple sales just couldn’t have grown much faster than they did.

    I think Android does impact iPhone sales, just not to the extent most pundits think. For the first 6 months or so of each new iPhone iteration sales have been supply constrained. During this period, Android has no practical effect because Apple is selling every iPhone they can make.

    It’s during the period when supply has surpassed demand where the Android phones make an impact. Last quarter is a prime example. iPhone 4 was still selling well, but there were dozens of new high-end Android phones that attracted some consumers away from the “old” iPhone. Blackberry & Windows Phone devices aren’t really able to do that.

    There is no way to measure the actual impact to iPhone sales. Could Apple have sold 18 million iPhones last quarter if Android did not exist? Might as well ask where the $1,000 AFB party would’ve been held if AAPL was valued anything like AMZN. Some of life’s unanswerable questions.

         
  • Posted: 01 November 2011 09:27 PM #58

    Drew Bear - 01 November 2011 05:11 PM
    FalKirk - 01 November 2011 11:07 AM

    I know this may sound naive (and I’m sure it IS naive) but I sometimes wonder if Android has cost Apple a single phone sale or a single dollar. We’re so used to thinking that if one company is outgrowing another than they must be stealing market share (and, presumably profits) from someone else. But that’s just not true int the rapidly expanding smart phone market. The share that the smart phones are stealing is coming from “dumb” and “feature” phones. For a long while, iPhones were market constrained. I think you could argue that they are STILL market constrained. They’re not in every country or on every carrier that they could be.

    Honestly, does Android matter? If Android didn’t exist, would Microsoft, RIM, Nokia, etc. have that market share? Because Apple sales just couldn’t have grown much faster than they did.

    For the first 6 months or so of each new iPhone iteration sales have been supply constrained. During this period, Android has no practical effect because Apple is selling every iPhone they can make.

    It’s during the period when supply has surpassed demand where the Android phones make an impact. Last quarter is a prime example. iPhone 4 was still selling well, but there were dozens of new high-end Android phones that attracted some consumers away from the “old” iPhone. Blackberry & Windows Phone devices aren’t really able to do that.

    Great observation.

         
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    Posted: 01 November 2011 10:00 PM #59

    Hannibal - 01 November 2011 03:19 PM
    Mace - 30 October 2011 09:50 PM

    From an investor’s perspective, I want to know whether the supernormal profit that Apple is extracting from iPhone is sustainable given the growing market share of Androids.  If investors sense that it could drop to what Apple can get for Mac, they would begin to lighten and AAPL would decline.

    Mace,

    My sense is that Siri will remain the key iPhone market differentiator for at least the next 2 years. So you likely can rest easy until at least late 2013.  See below for recent comments to this effect by former Siri board member Gary Morgenthaler:

    http://mashable.com/2011/10/28/apple-google-smartphone-war/

    Alan

    Thanks, I thot I can rest easy for 3-5 years :-D.


    FalKirk - Not talking about the past or present, talking about some time in the future.

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  • Posted: 02 November 2011 02:25 AM #60

    Mace - 02 November 2011 01:00 AM

    FalKirk - Not talking about the past or present, talking about some time in the future.

    OK, let’s take a look at that. Obviously, the future is uncertain, so this is pure speculation.

    Head-to-Head: When the iPhone goes head-to-head with Android on a carrier, the iPhone most often wins. And Apple is expanding into more carriers and into more countries every day.

    Profit: The iPhone is bringing in huge amounts of money. This is not just about who is “winning” the smart phone wars. This is about what Apple can do with all of that money. And the short answer is, “A lot”.

    iOS: It’s not about the phones, it’s about the operating system. Apple has an almost unimaginable advantage in that they dominate both the iPod Touch and the iPad markets. Every iOS device sold, whether it be the Touch or the iPhone or the iPad, adds to the Apple ecosystem.

    Patents: While it appears possible that the several patent issues may cripple Android, they are just too speculative to consider at this time.

    Google and Motorola: Google made a huge strategic mistake in buying Motorola. Either they don’t favor their own company - which is a waste - or they do - which makes all other Android manufactures second class citizens of the Android empire. Every Android manufacturer is preparing an exit strategy.

    Two and a half tests:

    - The key to Android is not their sales, it is their retention. We should start to get some answers to that question in the upcoming holiday quarter. Most of the initial Android contracts are coming up for renewal. Will those people stick with Android or will they abandon it. The Answer is key to determining the future of the smart phone market.

    - We’ll know more about the tablet market at the end of the holiday season. The question isn’t whether the Amazon tablet sells well - I’m sure it will. The question is whether it takes sales from the iPad.

    - The third test is the market’s reaction to Windows Tablet 8. Since it is not expected to arrive before the summer or the fall of 2012, it is a non-factor at this time.

    Conclusion: There is never a final answer in the market. But the answers to several crucial questions should start emerge this holiday quarter.