Shaw Wu of American Technology Research
September 17, 2007
Contrary to fears with potential cannibalization from new iPods and backlash from an iPhone price cut, iPhone sales have regained momentum. For the September quarter, we are now forecasting 900,000 units (from 770,000 and guidance of 730,000).
While we are concerned with potential softness in US consumer spending, it appears that Apple is once again positioned to buck the trend with its compelling product line and strong international exposure (52% of revenue). We recommend buying Apple on pull-backs and see upside to our price target ($185) in 6-12 months."
July 31, 2007
Wu responds to speculation that Apple was either cutting production of the iPhone or its iPod media player:
There are occasional rumors on Apple, often unconfirmed. A lot of them end up being wrong or short-term."
If that
isn't calling the kettle black, we don't know what is.
As I understand it, iPhone production actually has been going up, since they obviously are going to ship a lot more than what they did in the first two days."
July 2, 2007
Our sources indicate that iPhone will likely become the fastest selling product in Apple's history and not to mention likely among the fastest (if not the fastest) in consumer electronics. We estimate sales of about 250,000 units in two days (up from our previous view of 50,000). The previous fastest seller was iPod nano, which sold about 1 million units in about 17 days meaning, about 59,000 units per day.
For the UI, we find the 'pinch in' and 'pinch out' to zoom in and out particularly innovative and we also like the simplicity of a single 'home' button to press in case one gets lost. And finally, we agree with Apple that it is the best iPod ever, but we believe the relatively small 4 GB and 8 GB storage capacities and shorter mixed usage battery life will limit cannibalization of stand-alone iPods.
In our extreme testing conditions (in which we were literally using the product non-stop given our excitement), we get battery life closer to 3 1/2 hours. We noticed web surfing uses up the most battery life. When we get to more normal use patterns, we envision charging the iPhone every 1-2 days, similar to other smart phones.
As we have mentioned in previous notes, there is a learning curve. We find the multi-touch interface radical and revolutionary, which reminds us of the original Apple mouse in 1984. Back then, the feedback was that it was a toy and why would anyone want to use a mouse and icons when text and a keyboard were better. We all know what happened to mice and icons since then.
For the June quarter, we are now modeling $5.3 billion in revenue and $0.73 EPS (from $5.22 billion and $0.70)."
June 1, 2007
Similar to previous WWDC events, we believe Jobs' keynote will most likely be Mac-centric. We anticipate the focus will be on Mac OS X Leopard, its next-generation operating system, and introduction of new Macs.
We view [LED-backlit displays and Santa Rosa] as a positive step as this further differentiates the high-end MacBook Pro with higher performance, enhanced graphics and video capability, superior displays, and better battery life versus the more mainstream MacBook.
We believe there is a fair likelihood that Apple will introduce a new subnotebook named 'MacBook mini,' which uses NAND flash as primary storage. We last talked about this groundbreaking product in early March and while our sources indicate that it could ship sooner rather than later, we believe it will more likely arrive in late 2007 or early 2008."
No
"MacBook mini" introduced at WWDC. Apple has not announced any new MacBook
products heading into the holiday season.
April 26, 2007
We believe Apple is in the midst of building a more serious effort in the subscription business where it could enter the 'rental' space with video games and music, TV, and movie content. We would not be surprised to see Apple compete with the likes of Netflix and Blockbuster in a bigger way."
April 17, 2007
Our sources indicate that Vodafone is most likely iPhone's carrier partner for Europe. We believe Vodafone's 200 million subscriber base (compared to 61 million for AT&T, its USA partner), broad country coverage, and investment in advanced technologies make it a strong fit for Apple.
We are hearing rebates of $50-150 that will be offered by AT&T to lower the price points for iPhone (currently $499 for 4 GB and $599 for 8 GB) and to entice customers to sign longer term voice and data contracts. From AT&T's perspective, a rebate is a great marketing tool and small sacrifice to make to entice a customer to sign up for 2-year voice and data cell phone plans that cost about $75-100 per month (before taxes and fees), meaning $1800-2400 in 'guaranteed' bi-annual revenue.
In addition, Apple will likely participate in a revenue sharing agreement where part of the monthly fee charged to customers will go to Apple . Besides the hardware, Apple 's value added for the iPhone to AT&T is its marketing, customer service, and unique software and features, including visual voicemail and the most complete PC experience on a cell phone.
We view this incremental revenue from the carriers for Apple 's value-added as positive in that it will likely be very high margin, in the 80% range, similar to royalty and/or intellectual property (IP) revenue where there is little incremental cost. We believe this recurring revenue stream is high quality and adds an additional degree of stability and predictability to Apple 's financial results."
No
rebates were offered by AT&T for iPhone.
March 26, 2007
Regarding a possible delay in the Leopard release:
From our analysis, we believe that Mac OS X Leopard will ship on time in the 'Spring' timeframe, or Apple's June quarter. Our sources indicate that Apple's latest beta build has made noticeable improvements in stability and functionality from previous builds and that Apple is likely one or two upcoming builds away from reaching 'final candidate' stage to be released for manufacturing.
At some point, we believe Apple needs to 'publish' or enable these so-far undocumented features for wider beta testing. Many are hoping, including us, that it is virtual machine technology similar to that offered by Parallels, Inc. that allows seamless operation of Mac OS and Windows simultaneously. If so, we believe this would serve as a major catalyst for Mac sales."
Leopard
is delayed til October (Q4/07).
March 7, 2007
Regarding a new subnotebook form factor that will use NAND flash as primary storage:
Our sources indicate that Apple would like to introduce the product in the second half of 2007 to further capitalize on its strong MacBook growth, but timing will be dependent on NAND vendors' ability to drive down pricing further, making it economically attractive for Apple.
Today 1 GB of NAND flash costs around $5, meaning 32 GB costs $160, which compares to $22 for the same amount of HDD storage. Through 2007, NAND flash in notebook PCs will likely be limited to the high-end/ultra-portable market."
No
such Apple subnotebook using NAND flash has materialized heading into the 2007
holiday season.
Regarding the transition from HDD to NAND flash in the high end iPod Video players:
Our sources indicate that while Apple plans to migrate the rest of its iPod product line to NAND flash from HDDs (the current vPod is the only model remaining), fairly low price points and customer appetite for high storage capacities will likely prevent this from happening until late 2007-2008.
A widescreen video iPod won't likely ship until after iPhone ships in the June timeframe to not take away from iPhone's launch.
We see several additional catalysts in the quarters ahead, including Mac OS X Leopard, new movie and carrier partners, lower cost cell phones, and further extension of its core technology franchise into new business areas."
January 10, 2007
We believe [the iPhone] is the first of many cell phones from Apple, with Apple having the potential to revolutionize the space. While its $499 and $599 price points appear high, they are highly functional devices and best-in-class.
We believe Apple will likely follow its iPod strategy, which is to start out at the high-end and then trickle down to mid-range and low-end.
We are very impressed with iPhone and its minimalist touchscreen design. We had picked up from our supply chain sources a candy bar form factor, widescreen technology, and Bluetooth, however, we did not anticipate it to be just one device.
Regarding Cingular as the exclusive network for the iPhone:
It is the right move and a less risky strategy. Arguably, Apple has less control over the experience, but it will stick with its core competencies, which is making and marketing the best hardware and software, while Cingular will handle the service and billing."
January 8, 2007
Apple is plugging leaks better as protecting its secrecy remains a top priority for the company. We therefore believe there will likely be more surprises this year.
The very successful iPod video has not had a major update since August 2005 when it was first announced. Our analysis in the supply chain indicates that its successor has been under development for some time and recent data indicates shifting component order dynamics.
We believe iTV will be the first of many products that will place Apple in the home entertainment business in more direct competition with leading consumer electronics companies like Sony and Samsung. In our view, iTV is a logical extension of its iPod + iTunes and Mac franchises giving Apple a sizable head start in home entertainment with its FrontRow software, large TV content and growing movie library."
Wu believes Mac OS X 10.5 Leopard wil offer:
"...full-blown virtual machine capability that will allow seamless use of Mac and Windows at the same time."
Regarding a new large screen Apple monitor or TV:
We are not certain on timing but our analysis indicates that Apple is beyond prototype on large-screen technologies (for a larger monitor or possibly Apple-branded HDTV)."
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