Thursday, January 22, 2009

Apple Earnings Highlights

Well, I was fairly close on my predictions for Mac units while iPods were stronger and iPhones were weaker. The star of Apple's report though is their gross margins. They hit an absolute home run with GM's of 34.7% versus 30-31% guidance. This was in a quarter where there were significant price cuts on the iPod Touch and the entire notebook line was revamped with increased features. It was quite a performance.

The two most important product highlights from the call were the comments on the possibility of a stripped down iPhone and a netbook. I had believed that Jobs had already squashed any possibility of such a device during the last call but that didnt stop speculation on the gadget sides. This time, Cook removed all doubt. Apple wont play in the voice only side of the handset business. He also stated commented on that Apple's entire approach was different from the rest of the industry as they see the iPhone as a software platform. I think this confirms the fact that Apple will do everything in their power to keep application development for the iPhone a single step process. This precludes multiple screen sizes and different input methods. We may see multiple versions of the iPhone but they'll all be based of the same basic hardware. First though, Apple needs to cut prices on the current iPhone. The December quarter saw a slowdown in sales which means the seasonally slow March quarter will see sales fall even more steeply. A price cut to $99 would reignite sales and allow Apple to clear out inventory ahead of the iPhone 3.0.

As for Netbooks, I think Apple has given sufficient hints to expect such a device later this year. Like the iPhone, once Apple acknowledges having ideas on the device, it is likely fairly far along in the development process.

Tuesday, January 20, 2009

Tidbit on Android and Netbooks

The former head of Android development at Google mentions that companies are working on Android based netbooks.

A Crucial Call

Tomorrow's Apple earnings call is likely to be the most important of the tech earnings season. Apple shares have been battered due to the ongoing worries about the health of Jobs as well as fears about the extent of the impact of the economic downturn on Apple's upscale products. The guidance that Apple gave back in October was widely panned as being outrageously conservative but analysts consensus projections on revenues are now within the range given by Apple. While there is no doubt that the steep dropoff in consumer spending has hit Apple, I believe that the various data points from the quarter indicate that the analysts have become too bearish with regards to Apple's earnings.

I am using a combination of NPD and Gartner numbers for the Macs/iPod's and the Net Applications OS share data for the iPhone numbers.

Unit Numbers
2.57m Macs
20.4m iPods
iPhones Sell-in 5m
iPhones Sell-through 5.5m

Financial Numbers
Revenue $10.45 billion
GM 33%
GAAP Earnings $1.49

These numbers would likely be enough to provide a nice jump in shareprice, but guidance will be a huge factor. The odds are that Apple will provide extremely conservative guidance. There isnt much to provide a boost to shipments as MacWorld was a non-event, however I expect to see a product update on the desktop side in the next few weeks or so. Apple also needs to cut prices on the iPhone to reignite demand ahead of an expected update this summer. The timing of such an event will be a large determinant on the course of the current quarter.

Friday, January 16, 2009

Another Apps Store Milestone

This is just an incredible accomplishment. Apple has hit a half billion downloads in the space of six months. The Apps store has transformed the iPhone from a best of breed single handset to a best of breed mobile platform....with all of that means in terms of the development of a value chain and switching costs for consumers. I dont believe that even the most optimistic forecasts foresaw these kinds of numbers this quickly.

Thursday, January 8, 2009

Snapdragon and Android Confirmed

I expected an announcement in six months but Qualcomm decided to deliver a nice CES surprise.

This is just a demo of Android running on the chip rather than a full scale netbook implementation but it definitely looks like they are heading in that direction. It looks like the x86/Windows combination is about to get some competition in their fastest growing market. I fully expect Apple to enter this market as well, though whether it will be based on an Intel chip or an internally developed ARM chip is an open question.

One thing is for sure, this is very good news for consumers. The one mortal lock in this is that Snapdragon/Android based devices should have a significant cost savings over x86/Windows.

Sunday, January 4, 2009

Android + Snapdragon: A Perfect Match

The big gadget story of last week was the news that the guys over at VentureBeat had managed to port Android onto the Asus EEE. I believe that all signs point to the fact that this is precisely the direction that Google plans on taking Android. They have never been shy about their goal of dethroning Microsoft from the top of the tech hierarchy and netbooks provide an opportunity to do precisely that. They are exactly the type of always connected machines that can fulfil Google's visions of cloud computing. Google has also explicitly stated that they see Android eventually going far beyond its current home in smartphones and powering all sorts of new devices.

This is where Qualcomm and their ARM based Snapdragon chipset come into the story. Qualcomm has been quite public about their efforts to take on Intel's Atom chip directly in the netbook space. The problem for Qualcomm is simple, while the power consumption, size, and cost dynamics are all huge positives for Snapdragon, the fact that it will mostly be running obscure Linux variations means that consumers wont take a second look at Snapdragon enabled netbooks. The current sales numbers already show this with Windows netbooks far outselling Linux based versions.

This is why the pairing of Snapdragon and Android will work so well for both companies. Android on an Intel chip provides little in the way of positive differentiation versus the Softie/Intel combination. Similarly, Qualcomm needs an OS that is guaranteed to have a wide range of applications available and a brand that consumers will recognise. Google gets a hardware architecture that emphasizes substantially longer battery life than x86, lower cost, smaller form factors, and always on connectivity. That is exactly the recipe that is needed to give cloud computing a chance against Windows.

It also helps that these two companies have a bit of a history with Qualcomm being the first chipset manufacturer to support the handset version of Android. The T-Mobile G1 is running on a Qualcomm MSM7200a. I believe that we will see an announcement expanding this relationship into the netbook space within the next six months or so.

An interesting tidbit that might show that this effort is further along than most suspect....Net Applications has reported that a third of the visitors from had obscured the OS they were using. According to Net App, they would have had to go out of their way to make this kind of change. Perhaps an expanded version of the Android OS is being hidden?

Wednesday, December 31, 2008

An Apple Rumor That Makes Sense.

No, not the ever present commentary about Jobs's health, this is a new iPhone rumor that seems more plausible than the shrunken Nano's that has been bandied about. iPhone Alley is claiming that a new iPhone is being worked on that is in the form of the iPod Touch and may or may not include 3G. A cost reduced version of the current iPhone that still includes the current screen size would make sense. The key would be to reduce the cost of the data plan as well as the upfront price. If AT&T is willing to sell a $99 EDGE version of the handset that only requires a $25 a month data plan, that would significantly reduce the barriers of entry to owning the iPhone.