Apple Thoughts - News & Reviews on all things Apple

"Bernstein Research's Toni Sacconaghi issued a 13-page report last week in which he estimated that the iPhone's gross profit margins were an astounding 57.8%. Those margins tower above Apple's competitors with RIM estimated to have 43% profit margins, Nokia 33%, Motorola 32%, and HTC 31.7%."

And while it may decline in the future per The Street, Saconaghi thinks it will increase since prices have increased since Q3 2009 to Q1 2010, from $588.00 USD to $638.00 USD, and demand doesn't seem to be subsiding. He also sets a target stock price of $250.00 USD. Well, let's see what June brings.

"Though Apple carries just 5 percent of the total worldwide home PC market, the Mac commanded 10.5 percent of the market's dollar share during the holiday buying season."

So having a strict pricing structure appears to make sense. If you split the markets, in the US the market share is around 10 percent while the dollar share is about 20 percent, compared to Europe where Apple has 6.4 percent marke share but a 14.2 percent dollar share. Along with this news is that the educational market is also coming back after a decline. Last quarter Apple had 20 percent market share and a 40 percent dollar share of that market.

"According to research firm Gartner, Apple shipped 182,000 machines in the fourth quarter of 2009, earning the company a 5.5 percent total market share in France. Apple's emergence in fifth place came as a result of 43.5 percent year-over-year growth in the market."

Not only are they succeeding in France, but all over Western Europe with increased shipments during the fourth quarter of 2009. Worldwide, profits for Apple increased 50% on sales of 3.36 million Macs, which was the best quarter ever for Apple.

"Warner Music revealed on Tuesday something we've all long suspected: music sales have witnessed a growth slump on iTunes since the record labels pushed Apple to implement a variable or tiered pricing model."

Price goes up, demand goes down, not sure why they thought it would be any different with music than other goods in the mostly free market economy they operate under. Warner saw a 50% decline in revenue for their quarter ending in December 2009 so perhaps they will rethink their pricing. I have my doubts based on how they have done things in the past. I'm interested to see how this will work in the e-book field over the next year though.

"Apple took advantage of a rebounding PC market this past holiday shopping season, with the Mac maker's U.S. sales rising 31 percent year-over-year to 1.5 million units. That was good enough to keep its share of the domestic pie above 7 percent, despite an influx of budget netbook PCs that flooded the market."

Check out the Toshiba growth rate, a whopping 71.5%! HP isn't bad with 45.1% and Apple in at 3rd on the growth rate with 31.0%. Even with the growth their market share puts them in 5th place overall. The article is a good read for background on how the industry as a whole performed.

"Holiday spending has seen sales of Apple's Magic Mouse soar. According to a report by NPD and covered today by AppleInsider, last month saw a twofold increase in Apple's share of domestic mice sales. By the end of November, Apple had captured 10 percent of the market."

Image Credit: SlashGear

However, that doesn't mean the author is a fan of the Magic Mouse. How do I know? This partial quote, describing his user experience, pretty much sums up his feelings: "transforming my hand into a deformed claw of knotted knuckles and cramp." Makes you want to go out and buy one doesn't it? I still have the Mighty Mouse, Bluetooth version, and haven't decided if I want to get this one. I still may, based on a few minutes in an Apple Store when I played around with it and it does everything I needed it to do. One thing is for certain, it certainly seems to be popular and you can't dispute that it does have a great form factor.

"Apple has achieved almost 10 percent of the entire French mobile phone market in 2009, according to leading French newspaper, Le Figaro."

The article from Le Figaro states that Apple has sold between 1.8 million and 2 million iPhones in 2009. This nice number gives the iPhone about 8.5% market share in the French mobile phone market. This translates to about 20% of the value of the same market. Making it available on so many carriers certainly has it's advantages, right Apple?

"U.S.-based AT&T isn't the only wireless carrier to see its network come under heavy strain due to the popularity of the iPhone. Meanwhile, Apple's official provider for the handset in China this week reportedly reached the 300,000 unit sales mark."

O2 finally eased the burden, which started this past summer, after investing $48 million USD in their network and adding 200 mobile stations in and around London, which is where the network crashed. But in China it is all good for the iPhone as they have sold over 300,000 units since it was introduced a couple months ago. No word on how the network is handling the increase in iPhones, but since they have most of the internet censored I doubt they have much of a burden on their network.

"It's big in Korea, it's probably big in China's grey market, and the iPhone continues to be big in Japan. According to a report [JP] released by Tokyo-based research company Impress R&D, the iPhone has captured a whopping 46.1% of the domestic smartphone market."

Launched in Japan in the summer of 2008, the 3G has just under 25% of the market, while the 3GS hit 21.5%. They now have a user base of 3 million which is 10% of the global userbase according to the article. SoftBank Mobile has been pretty aggressive with their advertising, something that isn't happening for the Blackberry or Android. Pretty impressive though, almost hitting 1/2 of a market that you didn't exist in a little over a year ago, especially in a place like Japan that is known for being ahead of the curve when it comes to wireless technology.

"iPhone sales in South Korea appear to be off the charts, with local carrier KT claiming "some 90,000 new iPhone subscribers," so far. These figures include the 53,000 iPhones pre-ordered prior to launch, and is prompting the carrier to ensure it ties a deal for the next-gen iPhone. The device went on sale in the country on November 28."

Apple has secured about 5% of the market since debut, and the company expects to sell about 700,000 iPhones by the end of 2010. In comparison, Samsung has 50% of the market and LG has just over 22%. In a related story, the company wants to expand the line and has asked Apple for even more iPhones.

"The iPhone has joined the iPod in their ‘halo effect' promoting Apple's Mac. Mac global sales in September rose 16.4 percent, far ahead of a 2.3 percent year-over-year sales increase for PCs, one analyst told investors Tuesday."

This has been talked about before, how one item that is perceived as high quality can generate sales in associated items from the same company, and according to Needham and Co. analyst Charlie Wolf “We believe that the halo effect emanating from the iPhone should be even stronger than that surrounding the iPod.” Wolf also stated Apple made the right move in not lowering prices, because they sell a "differentiated product in a sea of commodities" and it would have hurt rather than helped the bottom line. The sales growth figures of 9.8% in the US, 38.7% in Europe and 27.1% in Asia seem to lend support to this. You can see how this is happening in the PC market. Gartner's latest forecast, says that while PC sales are going to be up about 2.8%, the market value of the sales is down 10.7% from last year. 

"It is no secret that the worldwide economy isn't in the best of shape. While I'm sure we could argue for days on end what got us all into this mess (I, for one, blame someone other than myself) there are some bright spots."

According to a list by A.T. Kearney, Apple is a global champion. The company compiled a list based on the largest 2,500 companies worldwide from 2004 to 2008, measuring their sales and value growth, to come up with the rankings. Based on their criteria, the top five companies in order are Nintendo, Google, Apple, Doosan Heavy Industries and Hyundai Heavy Industries.  

"Apple's fiscal results are out and they are, as expected, quite good. The company reported profits of $9.87 billion compared to $7.9 billion in the year ago quarter."

Apple also sold 3.05 million Macs which was a 17% increase from last year. On the iPod front, down 8% at 10.2 million sold while the iPhone sales hit 7.4 million, which was a 7% increase from the same time last year. Pretty hefty profit especially in these economic times, and Steve Jobs said they had a "great lineup" for the holidays and some "new products in the pipeline for 2010." Hmmm, let the rumors begin! More info can be found on the Apple investor site, or from their press release.

"As vacancies increase and retail sales throughout the U.S. remain a shadow of the decade's boom, Apple Inc.'s stores are defying the recession."

In a year when many retailers are doing good to just break even, Apple increases their traffic 22% over the same period from last year, noting that during the quarter ending June 27th they had 38.6 million visitors. This translated into an increase in sales of 2.5%, or in US dollars that meant $3 billion coming through the doors. The Fifth Avenue store alone generated $35,000.00 USD per square foot, which bested all the other stores along Fifth Avenue. One thing seems to be certain, Apple knows how to do retail.

"Canada may have the highest proportional number of Mac users in the world after recent gains by Apple, according to an IDC study of computer sales in the country during the spring."

The study says Apple broke the double digit barrier for the first time by hitting 10% of all non-server computer shipments between March and June of this year. The leaders in this category are HP with 22.1% and Dell with 20.7%. In the portables category, Apple also increased sales by roughly 24% from the same time last year. Acer is the big leader in this area with 21.4% of the market share, mainly due to the sales of their Mini Notebooks. Even with these highpoints, the overall market in Canada for PC sales is down 14.06% from a year ago.

"Faced with heat from iTunes and other digital downloads, the nearly-three-decade-old music CD is slowly melting away."

The report from NPD Group details just how much iTunes has turned on the heat. iTunes has captured 25% of the total market for music sales in the US (Wal-Mart has 14%), but in the digital arena has almost 70% of the market. The next closest in digital sales? Amazon with 8%. Digital sales are only 35% of the overall market so far, up from 20% in 2007, but they expect by 2010 that digital sales will nearly equal the amount of physical sales, ie CDs.

"Apple's decision to cut prices across its MacBook lineup is about to be validated, according to an analyst's estimate.After several months of declining Mac sales compared against 2008 numbers, Apple looks to be back on track with its June Mac shipments, says Piper Jaffray analyst Gene Munster. His firm initially estimated that Apple would sell 2.2 million Macs during its third quarter of 2009, which ended in June. Munster now says he's "increasingly confident" in that report because Apple is having trouble keeping its new 13-inch MacBook Pro in stock."

Looks like this is only on the faster 2.53 GHz 13 inch, which according to the Apple site shows a 7 to 10 day ship date, while the slower 2.26 GHz MacBook Pro 13 inch still shows as shipping within 24 hours. According to Munster some of the brick and mortar stores are also showing shortages in the same models. If you were planning on getting one of these online, sounds like you need to do some pre-planning. Or if you planned on just dropping by your local Apple store, best to call ahead!

"Apple, which will launch its new iPhone 3G S handset in eight countries on Friday, is expected to sell half a million of the devices before the weekend is over and sales of the $99 iPhone 3G model are tallied into the mix."

The prediction is by Piper Jaffray analyst Gene Munster, which would be about twice what the original iPhone did during it's launch weekend but only about 1/2 of what the 3G handset sold in it's opening weekend. Since the change is less "dramatic" than the change from 2G to 3G, and it is only going to be sold in 8 countries versus 21 countries for the 3G, Munster doesn't believe it will surpass the original 3G. But he does note in the chart above that in a full quarter the 3G S will hit a couple million more units than the 3G sold.

Who knows what will happen, but I'd be surprised if it didn't surpass the 500K weekend sales figure. The addition of video has to draw people out don't you think? Or do you think he is right in his estimate?

"NPD has released initial sales figures for the month of April, and Piper Jaffray analyst Gene Munster sees the year-over-year sales declines as generally good. According to his analysis, the declines should meet or beat Wall Street's expectations for Apple's third fiscal quarter."

In keeping with the financial news this morning, even though there were declines, it isn't anything that took anyone by surprise. The overall Mac sales numbers, US only, were pretty much flat for the "year-over-year" for April coming in at about a 1.8% decrease. The laptops were down 3.5%, but the desktop sales were up about 11%, based on the "line refresh", and the analysts say Apple will still sell about two million or so Macs. Sounds like a nice number during these times, but it will still mean a decline of anywhere from 8 to 16 % from last years numbers. Piper Jaffray doesn't seem too concerned though, they say it all falls within the Wall Street estimates. They must be confident, they predict a target share price of $180.00 USD for Apple.

"Apple saw its share of global smartphone market more than double on a year-over-year basis during the first quarter of the year but still has much work to do before catching BlackBerry maker Research in Motion and market leader Nokia."

Doubling their sales and market share in years time isn't too bad, but 10.8% isn't the highest market share Apple has seen in the smartphone category. Back in 3rd quarter 2008 they had 13% market share on sales of 4.7 million. Still, this is nothing to sneeze at, although it is expected that the next quarter of this year won't be quite as stellar. Why is that? The expected announcement of a new iPhone of course!