New consumer confidence seen as boon to Apple
Bolstered by renewed optimism about the U.S. economy, consumers this spring are putting money aside to buy netbooks and Mac laptops, according to a report released Thursday by ChangeWave Research.
The ChangeWave survey of 3,231 high-end consumers was taken in April and showed a 2 point jump in plans to buy a laptop in the next three months — the first uptick in this number recorded by ChangeWave in 17 months.
Nearly of quarter — 23% — of those who planned to buy a laptop said they had their eye on a netbook. That's mostly good news for HP (HPQ), Asus and Acer — companies that sell loads bare-bones laptops in the $400 to $600 price range.
But when asked whose computer they planned to buy, a surprisingly high 29% specified Apple (AAPL) — a purveyor of high-end laptops — down a point from a February survey, but up a point from January.
"The economy is finally starting to move in Apple's direction," said ChangeWave research director Paul Carton in a conference call to discuss the results.
Joining him was RBC Capital analyst Mike Abramsky, who reversed his position on Apple last week and raised his price target dramatically, from $95 a share to $165.
"This tide will help lift Mac's growth," said Abramsky. "The Mac franchise is not dead — in fact, it's likely to rebound."
The challenge for Apple, he says, will be to address the shift toward the low end of the market, either by introducing new products or cutting prices, while preserving its "premium proposition" — the perception among Apple loyalists that while you pay more for a Mac, you get what you pay for.
Addressing the smartphone market, where Apple's share among ChangeWave members continues to grow, Abramsky predicts that Apple will introduce a "pro" version of the iPhone at its World Wide Developers Conference in June as well as a price cut on the current model.
Apple will not introduce a "nano" iPhone this year, he said, despite reports that a low-end phone was coming. But he added that "next year we know that's in the pipeline" mostly for pre-pay markets (low-cost or free) in Asia, Eastern Europe and Russia.
As for that $95-a-share target — and a $70 target that preceded it in January — he admits that it was a mistake. "We were wrong in that valuation call," he says.
He explained that he was worried in January about three things: slowing Mac sales, shrinking margins and Steve Jobs' health.
Mac sales did slow, but margins held up, and he's less worried about Steve Jobs today given "concrete signs" that Apple's CEO remains involved in planning future products.
Apple closed at $125.8 a share Thursday, up more than half a percentage point for the day.
Below the fold: a ChangeWave chart of consumer purchase plans for Macs going back to 2006 and a second chart comparing those numbers with actual Mac sales (as reported by Apple) to show how closely they track.
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Lawyer: Steve Jobs too weak to attend long town meeting
The Woodside, Calif., town council met Tuesday night to hear Steve Jobs explain why he should be permitted to demolish a 30-room mansion he bought in 1984 — but Apple's (AAPL) CEO didn't show up.
"I don't think he would be strong enough if we were here until 1 a.m., and I think there's a strong possibility of that," the lawyer representing Jobs told the council, according to the Palo Alto Daily News.
Jobs, who has been struggling with health issues following surgery for pancreatic cancer, is two-thirds of the way through a six-month medical leave and is said to be working on company business from home. Although Apple's official line — repeated at last week's quarterly earnings call — is that it looks forward to his return at the end of June, Jobs seems to be husbanding his strength.
Photo: Jonathan Haeber
As it turns out, his lawyer — Howard Ellman — was right that the meeting might run late. The session that started at 7:30 p.m. was still going strong three hours later, when the Daily News reporter filed his story.
Local residents were defending Jobs' right to tear down a building he doesn't like and replace it with a new house more to his taste.
Preservationists who had traveled from as far away as Florida and Virginia argued that Jobs hadn't tried hard enough find someone willing to restore or relocate the 84-year-old Santa Barbara-style Spanish colonial that they describe as an architectural treasure.
The meeting finally broke up shortly before midnight, according to Susan George, the Woodside town manager. The council will reconvene in two weeks — on May 12 — at which time it hopes to issue a tentative decision on whether to approve demolition.
"To me it didn't sound good," says Thalia Lubin, a local architect who hoped to see the building preserved.
See also:
Architectural photo posted courtesy of Jonathan Haeber
Those rumors about Apple and Twitter [video]
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Steve Jobs, Verizon, the iPhone and the iPad
Someone at Verizon (VZ) has been busy winding up the rumor mill this week, leaking stories to at least three news outlets about a pair of prototype wireless devices that Apple (AAPL) is reported to be shopping around.
In the past two days, news items in the New York Times, USA Today and BusinessWeek have all cited unnamed persons briefed on a new round of negotiations between Apple and Verizon — two companies whose failure to reach an agreement in 2005 famously resulted in the original iPhone going to AT&T (T).
BusinessWeek provides the most detailed account of the two prototypes:
- A smaller, less expensive "calling device" described by a BusinessWeek source who has seen it as an "iPhone lite";
- A "media pad" that would let users listen to music, view photos, watch high-definition videos and place calls over a Wi-Fi connection.
This "media pad" sounds a lot like the tablet Apple has been rumored to be working on for at least 18 months — and for which Apple is reported to have snapped up large quantities of 9- to 10-inch touch-sensitive screens. BusinessWeek reports that it is smaller than Amazon's (AMZN) Kindle e-book reader, but with a larger touchscreen.
According to the BusinessWeek source who has seen it:
"We are talking about a device where people will say, 'Damn, why didn't we do this?' Apple is probably going to define the damn category."
Silicon Alley Insider's Henry Blodget suggests that Apple call it the iPad.
The nature of the "calling device" is a matter of some dispute. USA Today suggested that it would run on Verizon's CDMA network — a possibility dismissed Monday by Piper Jaffray's Gene Munster as "unlikely" given the hurdles involved in building and supporting a cellular technology that seems to be on its last legs. As Apple COO Tim Cook put it last week: "CDMA doesn’t really have a life to it after a certain point in time."
The timing of all this is also fuzzy. BusinessWeek's sources tell it that one of the devices could come out this summer — but they don't say which one. We'd put our money on the iPad, given that any Verizon iPhone — lite or not — would probably have to wait until after 2010, when the carrier's next-generation LTE (Long Term Evolution) cellular network comes on line and Apple's contract with AT&T expires.
Complicating matters are multiple reports that AT&T is trying to get Apple to extend its deal as the iPhone's exclusive U.S. carrier beyond 2010.
The whole thing sounds like a typical high-wire Cupertino negotiating session, in which Apple seduces potential partners with impossibly sexy gadgetry, pits one against the other, and ends up extracting the most favorable terms for itself.
It's no accident that one of BusinessWeek's sources — Verizon Wireless CEO Lowell McAdam — says that before Steve Jobs went on medical leave, McAdam was talking directly with the master dealmaker himself.
UPDATE: The Wall Street Journal Tuesday reported that Verizon is in discussions with Microsoft (MSFT) to carry a touchscreen device code-named "Pink" that would compete with Apple's iPhone by early next year. In a note posted after the report, Morgan Keegan's Tavis McCourt pointed out that Verizon already sells 14 different touch screen phones, six of them running Windows Mobile. "There appears to be nothing new here from a product perspective," he writes. "If we assume Microsoft was the source of the leak, this speaks volumes as to how threatened it is by iPhone."
See also: Rumor: An iPhone for Verizon in 2009
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On NBC's Press: Here, I talk with a panel about the latest issue of Fortune, the Fortune 500 list, and changes to the tech landscape. (AAPL) (MSFT) (INTC) (CSCO) (GOOG) (TIVO) (EBAY) (YHOO)
Inside Steve Jobs' tear-down mansion
Photo © Scott Haefner
On Tuesday a California city council will reconsider Steve Jobs' longstanding request for permission to tear down the empty 84-year-old mansion that stands on the site where he wants to build a smaller, modern house more to his exacting taste.
The 17,250-square-foot Spanish colonial, located in Woodside, Calif., one of the wealthiest small towns in America, was designed by George Washington Smith for Daniel C. Jackling, self-made millionaire (copper) and San Francisco society-page headliner who filled his home with expensive artwork and traveled the world by private railroad car and custom-built yacht.
Apple's (AAPL) CEO bought the 30-room hacienda in 1984, the year the Mac was released, and camped out there for the better part of a decade before moving to Palo Alto.
He found the sprawling mansion a cold and dreary place to live. He has called it "one of the biggest abominations of a house I've ever seen" and says it will cost more to restore than to replace. At one point he offered to give it to anyone willing to pay to have it moved.
Copper mailbox © Scott Haefner
Preservationists, led by Uphold Our Heritage's Friends of the Jackling House, blocked Jobs' first petition in a legal battle that went all the way to the California Supreme Court. They call the Santa Barbara-style manse an architectural treasure worthy of National Register nomination and bemoan the damage it has suffered in the 10 years it has stood — unoccupied and neglected — at the center of its 6-acre grounds.
"Rain drips through the roofs on to the Aeolian Pipe organ," wrote photographer Jonathan Haeber in 2008. "A classic pool table sits in a room with the pool balls still in the racks. The faint scent of skunk permeates the interior."
Below the fold: some rare glimpses inside the house that Jobs hates, in its current state of disrepair.
Apple Stores: The big chill
Is there an Apple Store near you? Count yourself lucky, because the days of Apple's (AAPL) aggressive expansion into the branded retail space are over — at least for now.
After opening more than 250 company-owned stores in eight years — an average of nearly 8 per quarter and a total of 46 in 2008 alone — Apple in the last quarter opened just one.
The building slowdown is one of several moves that Apple has made in response to what COO Tim Cook this week called a "horrendous economy."
Although Apple's revenues grew more than 8% year over year in its second fiscal quarter, the average take per store took a 17% hit, falling to $5.9 million from $7.1 million in 2008.
So Apple has been cutting back. According to its latest SEC 10-Q filing, the company has slashed the ranks of its retail employees — from the equivalent of 15,600 full-time workers at the end of its December quarter to 14,000 in March, a net loss of 1,600 jobs.
It has also been closing stores — temporarily, for renovations — at a stepped up pace. IFOAppleStore, the definitive source for news of Apple Store openings, has been reporting round after round of retrofits. The latest cycle calls for stores to be temporarily closed in Tigard, Ore., Woodland, Mich., and White Plains, N.Y.
As its SEC filing notes, Apple-owned stores requires a "substantial investment in fixed assets and related infrastructure, operating lease commitments, personnel, and other operating expenses. … The Company would incur substantial costs if it were to close multiple retail stores."
That doesn't necessarily mean Apple plans to shutter a lot of stores, but it could signal a major reassessment of its retail strategy.
"I believe Apple is at a dangerous crossroads with retail and must make very careful decisions here," writes a retail management expert who posts on Investor Village's AAPL Sanity board under the handle nontekkie. Although he believes Apple is doing the right thing, he also sounds a warning:
"And as sales drop, expenses must be cut. So Apple faces the conundrum of cutting payroll and risking the service part of their reputation because they have sent the sales portion of their product to Best Buy, Wal Mart, AT&T, etc etc. The product gains wider distribution, the customer gains convenience, but Apple risks running stores in the red or losing their service strength.
"Apple retail stores… are not meant to saturate a market, they need to be a destination." (link)
During Wednesday's conference call, CFO Peter Oppenheimer said the company was still on track to open 25 stores in fiscal 2009. But he added that about half of those stores are overseas. If he's counting the 6 U.S. stores that have opened since Sept. 27, 2008, Apple could be planning to open as few as 6 new domestic branches before the end of fiscal 2009.
To get a feel for what it means to Apple's customers for the company to open a new store in their city — and what a loss it would be for them if Apple's expansion were to slow or stop –Â check these out:
- Apple’s Munich opening is mobbed — in fullscreen panorama
- ‘Absolutely mental’: Apple launches first Irish store
- Video: High fives and hype at Boston’s new Apple Store
UPDATE: MacWorld's Dan Moran shed some light on the full-time equivalent numbers in an article posted Monday. Among other things, he tracks the number of Apple retail employees going back to Q1 2006. Here's his chart:
Bottom line: Apple may not have laid off 10% of its retail workforce, as Moran initially reported, but it has definitely cut back the hours they work.
How the App Store got to 1 billion downloads
The App Store odometer that's been running on Apple's (AAPL) home page for nearly two weeks rolled over into 10-digits Thursday afternoon shortly before 5 p.m. ET (2 p.m. PT).
To hit a billion downloads in 9 months and 12 days is certainly a milestone worth trumpeting, and Apple's executives did their share of horn-blowing during Wednesday's quarterly conference call.
"We are within hours of reaching our 1 billionth download," said CFO Peter Oppenheimer. (It turned out to be nearly 24 hours, but who's counting?). "[It's] an astounding number given the short nine-month history of the App Store."
One of the factors feeding that growth, and in turn being fed by it, is the size of the App Store's installed base. COO Tim Cook put it at 37 million — a fact, by the way, that gives analysts a fresh handle on the number of iPod touches in circulation. (Because Apple has reported sales of 21.17 million iPhones over the past 7 quarters, we now know that it has also sold at least 15.83 million iPod touches.)
The other factor is the quality and sheer quantity of applications in the store — more than 35,000 according to Apple (and 37,462 according to 148Apps, which keeps an independent running count). Developers clearly find a lot to like in this platform: a big installed base, a comfortable development environment, and a friction-free payment system whereby Apple handles all the back-office drudgery for a 30/70 revenue split.
How long can this breakneck growth continue? Although the rate at which new apps are being added to the store has started to slow, the rate of downloads is still accelerating — as evidenced by the slopes of the curves in the fever charts below.
But all this could change in the next quarter. The new software development kit (SDK) and the new operating system — iPhone OS 3.0 — coming this summer could launch a new generation of more powerful apps. And if the rumors are true and the company has a new family of App Store-ready portable devices in the works, the flow of new applications could accelerate once again.
Apple may not be "years" ahead of Google (GOOG), Microsoft (MSFT), Nokia (NOK) and Research in Motion (RIMM), as Cook and Oppenheimer claimed at least four times Wednesday. But it is certainly many many months.
UPDATE: Apple issued a press release Friday and announced the grand prize winner of its one billion app countdown contest: Connor Mulcahey, 13, of Weston, CT.
Apple's Q2: Analyzing the analysts
No analyst we know of correctly predicted Apple's (AAPL) second fiscal quarter results for 2009, in which the company proved that computer makers don't have to slash prices or build "junky" $400 netbooks to weather an economic storm. But some analysts did better than others.
Who did best?
Let's look at the numbers. The table below represents the estimates of all the Wall Street analysts whose numbers we could get our hands on, as well as those of three of the most prominent blogger analysts. (We could have included lots more bloggers; everybody these days seems to have an Apple earnings spreadsheet in their hard drive.)
In our chart, the actual results and the most accurate estimates are highlighted in green. The worst estimates are highlighted in red. There were several ties.
The professionals and the bloggers scored roughly the same — which in itself tells you something. As usual, the bloggers were more bullish than the pros, but this quarter Apple's actual results in most categories blew past even the most optimistic of the bulls.
It will pain some readers to hear this, given his bottom-of-the-barrel target for Apple's shares ($95), but the blue ribbon goes once again to Mike Abramsky of RBC Capital, usually considered a Research in Motion (RIMM) bull and an Apple bear. He scored two greens and no reds this quarter. (Last quarter, when his price target was $70, he beat the field with three greens.) [UPDATE: CNBC's Jim Goldman reports that Abramsky reversed himself after that earnings report and has now slapped a $165 per share target on Apple.]
Tied for second place are Piper Jaffray's Gene Munster and Financial Alchemist's Turley Muller, with two greens and one red apiece. Muller gets the edge in our book because he hit so close and Munster missed so badly — and inexplicably — on Apple's earnings per share.
Yair Reiner gets special mention for having nailed that surprising high iPhone unit sales number (3.8 million).
In the department of strange bedfellows, Andy Zaky of Bullish Cross — who never tires of berating the professional analysts for misunderstanding Apple, and has often singled out Morgan Stanley's Kathryn Huberty for special opprobrium — ended up tied with Huberty in the iPod division, missing the actual number by nearly 500,000 units, but coming closer than anyone else in our chart.
And we can't close without pointing out that among very worst predictions for the quarter were those offered by Apple COO Peter Oppenheimer, whose guidance numbers missed actual revenue by $360 million and EPS by $0.33 to $0.43 a share. Talk about conservative guidance!
For those readers who submitted estimates that I didn't include here, you know who you are. Feel free to reiterate them in the comments.
Apple's detailed earnings results are available in its press release. An audio webcast of the earnings call with analysts is available here and Seeking Alpha has published a transcript.
Barron's Eric Savitz has published a round-up of analyst reactions to the earnings report — including Abramsky's upgrade — here.
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5 key quotes from Apple's earnings call
Acting CEO Tim Cook handled the bulk of the questions from analysts in Apple's (AAPL)Â second-quarter earnings call Wednesday, and he seized the opportunity — in Steve Jobs' absence — to wave the company's flag.
Five key quotes (checked against Seeking Alpha's transcript):
On Apple's shrinking market share: "I care about US share, of course I do. However, I think cycles come and cycles go. And what we’re about is making the best computers in the world, not making the most. … And we believe that if we do that over the long-term that we will gain share."
On netbooks: "For us, it’s about doing great products. And when I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, very small screens, and just not a consumer experience, and not something that we would put the Mac brand on quite frankly. And so, it’s not a space as it exists today that we are interested in, nor do we believe that customers in the long term would be interested in."
On leaving AT&T for Verizon: "We view AT&T as a very good partner. … We’re very happy with the relationship that we have and do not have a plan to change it. From a technology point of view as you know, Verizon is on CDMA and we chose from the beginning of the iPhone to focus on one phone for the whole of the world and when you do that, you really go down the GSM route, because CDMA is – doesn’t really have a life to it after a point in time."
On China: "We now have of the four BRIC countries, Brazil, Russia, India, and China, we have three of those up. We would like to be in China within the next year and are currently working on that. But I have got nothing specific to announce today on this."
On the Palm pre and Apple's intellectual property: "We think competition is great, we think it makes all of us better, as long as other companies invent their own stuff."
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