Spaceship Apple Comes Down To Earth

  • Posted: 19 October 2011 12:56 AM

    This is my first overview of the results and contains my mea culpa on the quarter:

    Spaceship Apple Comes Down To Earth

    [ Edited: 21 October 2011 07:30 PM by DawnTreader ]      
  • Posted: 19 October 2011 01:32 AM #1

    You are over-reacting, I think, to your own over-optimistic earlier call. 

    The spaceship Apple is intact and well.

    IMHO, all indications are they will do at least 60% revenue growth this year, and likely higher.

         
  • Posted: 19 October 2011 01:38 AM #2

    iphoned - 19 October 2011 04:32 AM

    You are over-reacting, I think, to your own over-optimistic earlier call. 

    The spaceship Apple is intact and well.

    IMHO, all indications are they will do at least 60% revenue growth this year, and likely higher.

    I’m not overreacting at all. I was looking to the September quarter to provide support for revenue growth estimates exceeding 50%. I didn’t find justification in the results. Apple will continue to do well. But the days of frenetic rates of revenue and earnings growth may have come to an end.

    For a $100+ billion enterprise to grow revenue at a 50% rate is remarkable in and of itself.

         
  • Posted: 19 October 2011 01:51 AM #3

    AT, the post wasn’t intended to be negative. As i said earlier, 50% revenue growth for a $100 billion+ enterprise is remarkable in and of itself and is probably unrivaled anywhere in the world.

    The point is and this was my mistake, although the eco-system is growing and continues to grow quickly, performance remains highly influenced by product refresh cycles. There’s nothing wrong with 50% revenue growth over the next 12 months.

         
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    Posted: 19 October 2011 01:56 AM #4

    Hey I will still take 55% growth next year.  Nothing to cry about.

    Now lets hope WS does not cut our p/e by 30% as a result.

    I still don’t understand while the iPad numbers were not more robust.  Maybe because people must decide to buy an iPhone vs an iPad and the iPhone comes first.

    We should see some stronger numbers with iPad 3 when first generation iPads start to be upgraded.

         
  • Posted: 19 October 2011 01:56 AM #5

    @DT

    >>I was looking to the September quarter to provide support for revenue growth estimates exceeding 50%.

    - September quarter sets up a favorable YOY comparison basis
    - They just had the most amazing product launch in history
    - I would fully expect their growth to accelerate as they are not yet constrained at the top by the market size while the larger installed base turbocharges from the bottom.
    - And don’t forget, according to TC - they got “unbelievable pipeline”

    As for being $100b enterprise that they are, they are puny when compared to the markets they play in.

         
  • Posted: 19 October 2011 02:01 AM #6

    >>I still don?t understand while the iPad numbers were not more robust.

    “More robust” compared to what? Someone analyst’s imagination?  Does166% YOY growth not speak for itself?

         
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    Posted: 19 October 2011 02:04 AM #7

    DawnTreader - 19 October 2011 03:56 AM

    This is my first overview of the results and contains my mea culpa on the quarter:

    Spaceship Apple Comes Down To Earth


    DT, everything about this points to the iphone being delayed. I made the mistake of thinking because there were no shortages anywhere that iphone production had maintained Q3 rates. I never stepped back to think that maybe it was less demand. People are cognizant about Apple refreshing its products and they were willing to wait. I have learned a valuable lesson here and I hope Apple has. This is a world where everyone wants the shiny new thing, not something that should be good enough. I also believe that Apple felt it could squeeze out a long refresh cycle which would be a boom to earnings. The sad part about this is that it was a software issue, not a hardware issue that caused this delay. IOS5 went back 8 times, what gives? Needless to say, those 5 million 4S phones would have helped Q4 dramatically.

    I am not going to be hard on Apple, they have been dealing with the SJ issue the best they can. I find a little comfort in the forward guidance. I would like to think this will keep the stock from dropping to far. Like most I will be waking up with a significant haircut, but I am not giving up on the company. With a market that appears to have some legs under it, I can see AAPL recapturing the low 400’s. What this has done is taken $500 off the table by the end of the year.  :cry:

    One thing for sure is that there were some warning signs that I discarded. The iphone CC also provided some false confidence. I have nobody to blame for my estimates but myself and rest assured I will be throwing stores at myself for a while, just hope I don’t hurt myself. I have always been conservative with my estimates, I don’t know what happened, but going forward I will never hold anything going into earnings.

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  • Posted: 19 October 2011 02:06 AM #8

    iphoned - 19 October 2011 04:56 AM

    @DT

    >>I was looking to the September quarter to provide support for revenue growth estimates exceeding 50%.

    - September quarter sets up a favorable YOY comparison basis
    - They just had the most amazing product launch in history
    - I would fully expect their growth to accelerate as they are not yet constrained at the top by the market size while the larger installed base turbocharges from the bottom.
    - And don’t forget, according to TC - they got “unbelievable pipeline”

    As for being $100b enterprise that they are, they are puny when compared to the markets they play in.

    50% revenue growth for a $100+ enterprise is a challenge to sustain. The iPod market outside of the holiday season has pretty much evaporated and even 20% Mac unit sales growth (impressive on its own) actually works against the 50% growth average. Essentially Apple will need to deliver 50% average revenue growth mostly from about 65% of its current revenue stream. That means continued strong gains well above that average will be needed from the iPhone and the iPad. It’s doable. But I won’t be expecting more. That alone is impressive.

         
  • Posted: 19 October 2011 02:13 AM #9

    Something bad did happen in Japan though.

    While units are up 48% revenue is down 26%.

    When asked, TC gave a completely mumbo-jumbo answer, after pretending not to understand the question at first.

    ****
    Keith F. Bachman - BMO Capital Markets U.S.

    Okay. And my follow-up is on Japan. In terms of the year-over-year and sequential changes, there was a bigger disparity on units versus revenues, CPU units versus total revenues in Japan. I was just wondering if you could speak to that if you could.

    Timothy D. Cook

    I’m sorry?

    ***

    ...after the question was repeated TC mumbled something that I have not idea what he meant, and it wasn’t even intelligible for the transcript write to capture :-(.

    Now THAT, is concerning.

         
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    Posted: 19 October 2011 02:14 AM #10

    iphoned - 19 October 2011 05:01 AM

    >>I still don?t understand while the iPad numbers were not more robust.

    “More robust” compared to what? Someone analyst’s imagination?  Does166% YOY growth not speak for itself?

    I wish you would use the forum instead of twitter.

    I expected more then 20% increase from prior quarter.  Last year we had 28% sequential growth.

    I think the 1% growth in overall retail explains the slowing US economy which is the home of the bulk of 357 stores.

    Revenue sequentially decreased by 5% in the US or Americas compared to 15% growth last year at this time.

    The Apple employee who said traffic had been down the last 3 months was right on the money with his observation.

    With 63% of sales from international sales, it is clear the US market has flatlined along with GDP growth.

         
  • Posted: 19 October 2011 02:25 AM #11

    The other weird thing in the earnings is that units are up in double digits sequentially, while revenue is nearly flat.

    In Americas, units are up 15% while revenue is down 5%.  In other geos (like Japan) the differences are even more dramatic.  Are people suddenly buying cheaper versions of the iPhone and iPad?  That seems odd.  What could account for this?  (I know they tested reduced-price iPhone in some geos, but not in the US, and it couldn’t possibly account for the disparity across all GEOs..)

    I find this baffling…does anyone have any plausible explanations?

         
  • Posted: 19 October 2011 02:30 AM #12

    @omacvi

    >>I expected more then 20% increase from prior quarter.  Last year we had 28% sequential growth.

    Last year’s comparison’s were just after launch so not perhaps as relevant.
    Also last quarter probably benefited from the iPad2 launch spike (just like this quarter will benefit from the iPhone4s launch spike).
    So all-in-all 20% sequential and 166% YOY growth seems quite remarkable.

    btw. what do you mean by: “I wish you would use the forum instead of twitter.”?

         
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    Posted: 19 October 2011 02:34 AM #13

    you don’t use the quote feature in the forum so hard to tell who is saying what.  It appears as if you are using twitter.

         
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    Posted: 19 October 2011 02:39 AM #14

    iphoned - 19 October 2011 05:25 AM

    The other weird thing in the earnings is that units are up in double digits sequentially, while revenue is nearly flat.

    In Americas, units are up 15% while revenue is down 5%.  In other geos (like Japan) the differences are even more dramatic.  Are people suddenly buying cheaper versions of the iPhone and iPad?  That seems odd.  What could account for this?  (I know they tested reduced-price iPhone in some geos, but not in the US, and it couldn’t possibly account for the disparity across all GEOs..)

    I find this baffling…does anyone have any plausible explanations?

    You may not realize it, but you are quoting Mac units and total revenue (i.e. revenue including iPhone, etc.).

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    Posted: 19 October 2011 02:40 AM #15

    Robert: Thank you for the post-mortem. I see what you’re doing here. Adjusting growth rates is important, and 50%+ will still be very impressive; we might even get more depending on how the smartphone and tablet markets play out in 2012.

    My take is simple:

    1) iPhone disappointment - not a problem at all.

    Here I agree with Adam and others that it is just a matter of product transition and pent up demand for the new model. 4S will more than make up for it this quarter. If anything, our collective expectation of iPhone 5 may have been the bigger mistake in hindsight. But, as we discussed elsewhere same form factor helps to jumpstart supply chain quickly, as is clearly the case with 4M in 3 days (I’m still wow’ed by that). The iPhone number, too, is what caused the decline in same-store sales as Tim Cook mentioned on the call. As move to Q1, retail will be back in growth mode!


    2) iPad disappointment - much bigger problem as I see it.

    I’m fully with Sponge on this one. Here there is NO product transition to speak of. The 11.12M unit number underwhelmed BOTH independents (avg 13.13M) and Wall St (11.39M). Supply issues seem to have been resolved. iPad’s market share is huge, and presumably getting rapid adoption in the enterprise market, much faster (so we’re told) than iPhone. So expectations were deservedly high. I have to be honest, I was extremely underwhelmed on iPad numbers: the only real “miss” for me in the quarter as far as Apple’s long-term health is concerned. I do realize that the holiday quarter can change all that. 20M would be nice, but seems so much harder to achieve now.