Archive for February, 2008
DigiTimes reports that AU Optronics, a Taiwan display manufacturer, has downplayed a newspaper report that “claims the maker has received orders from handset, notebook, and GPS device makers for touch panels”. The significance of the story is that AUO manufactures thin integrated touch panels and its “production costs are 40% cheaper” than the sandwiched touch module + screen adopted in Apple’s current iPhone and has attracted interest from the likes of Nokia, Motorola, Dell, HP, and of course Apple.
Apple iPhone’s current supplier is the German touch panel specialist Balda who designs touch panel modules in Germany and manufactures them in China at an estimated cost of $27 per unit plus another $25 for the LCD. The iPhone touch screen ( touch module + LCD ) is its most expensive part right now which may explain Apple’s interest in shopping for a more competitively priced alternative.
MacDailyNews reports that UBS analysts believe “3G-enabled iPhones will be released by mid-year”. In a note to clients, UBS also mentions that current generation iPhones will be “ramped down earlier than expected to ‘clean’ inventories”. As I have reported earlier, Apple has more than one model planned to complete the iPhone product lineup.
If you’re a regular reader of this blog, you’re already aware of the particularly sluggish Shuffle sales this past holiday season. In an article I posted on Nov. 6, 2007, I alerted my readers to the disturbing downward trend in the sales of the Shuffle model as reported by Amazon’s regularly updated Best Sellers list. Since Apple does not provide sales guidance on its iPod line of players, nor does it break down quarterly iPod sales model by model, Amazon, as a leading online vendor, provides the best indicator of how well Apple products are faring each quarter.
In another piece I posted on Nov. 21, 2007, I wrote that my insider has confirmed that Shuffle replacement are on the way. I was expecting that the new replacement model would be introduced at Macworld ’08 in early January, just in time for seasonally slower first calendar quarter of the new year. There was good reason to believe the new model would be announced in January. While most iPods have demonstrated a 24 month product life cycle with minor updates arriving on alternating years, the Shuffle has shown an 18 month life cycle. The current generation Shuffle, originally introduced in Sept. 2006 and updated with color refreshes in January 2007 and again in Sept. 2007, is currently beyond its 18 month product lifetime and due to be replaced with a totally new model. Instead, almost a month later in early February, 1GB Shuffles got a whopping 38% price drop and a higher capacity 2GB model was added. What happened to the new model announcement?
In a surprising admission addressing the Goldman Sachs Investment Forum, Apple chief operating officer Tim Cook conceded that sales for the Shuffle model had lagged by 17 percent worldwide during the past holiday season. For a product lineup that usually sees double digit yearly growth, that is a significant drop in quarterly numbers. Faced with sluggish sales and an overabundant inventory of stale 1GB models, Apple had to quickly clear existing inventory by drastically slashing price and to introduce a 2GB model to recuperate some profit on thinner 1GB margins. I expect that the 1GB model will be discontinued after it sells out and Shuffle replacements in 2 and 4GB capacities will be unveiled in the third calendar quarter. I’ll have more on the upcoming Fall ’08 iPod lineup a little later.
Apple chief operating officer Tim Cook reiterated his company’s confidence in the projected number of iPhones shipments in 2008. Speaking at the Goldman Sachs Investment Symposium, Cook calmed investor nerves by restating that Apple is ‘on track’ to sell 10 million iPhones by the end of 2008. In recent days, Apple’s bold projection on total iPhone units shipped in ’08 had been disputed by Wall Street analysts. Citing softer demand and a higher incidence of unlocking for iPhones, several analysts had lowered their projected iPhone shipments in ’08 by a wide margin and had dropped their share target price as a result.
Apple has announced a media event covering the iPhone SDK ( Software Development Kit ) and “some exciting new enterprise features”. The event is to be held at Apple Building 4 Town Hall on March 6 at 10 AM. While Apple, at this rare Thursday event, will not unveil any new products, the hint at new business features probably means the company is ready to announce tighter integration of the iPhone with business including mobile versions of popular business apps developed by key partners.
CNET has an interesting article on the potential distribution model for iPhone apps including speculations on how many different versions of the SDK may be made available.
Wal-Mart Stores’ days as the single largest music retailer in the US are numbered, so says a new report by the NPD Group. Within the past few weeks, iTMS has overtaken Best Buy and Target to become the second largest music retailer in the US and Wal-Mart is likely next. Russ Crupnick, the NPD Group’s president of Music, says while CD sales were down about 20% last year, digital sales grew by about 50% and that means “Apple will in all likelihood catch Wal-Mart this year”.
Crupnick also mentions that stats are stacked against traditional music vendors which “devote less and less floor space” to CDs which in turn results in fewer sales. According to the NPD Group, “nearly half of all U.S. teens (48 percent) did not purchase a CD last year” and that is up 10% from a year ago. Apparently, teens who lack a credit card also prefer to use Apple iTMS gift certificates which they can readily purchase at many retail locations.
I should mention that while iTMS’ thriving business is very positive news, most analysts agree that Apple’s main revenue growth over the next ten years will come from rising Mac sales due to increasing desktop market peneteration and the iPhone business.
Bruce Everiss, writing for SeekingAlpha, has compiled an interesting comparison of the upcoming portable gaming consoles from 5 different companies. Everiss writes that following the evolution of portable consoles is far more interesting than the traditional home consoles because “they are undergoing rapid technical change, there are more companies involved and everything happens at a more rapid pace”. He goes on to predict the features of a second generation Sony PSP, the future of next gen Nintendo DS replacement, Microsoft’s strategy for integrating their Zune player with the XBOX console, Apple’s ambitions for iPhone and iPod touch with gaming features, and Nokia’s chances with the new generation nGage platform.
Apple has announced updates to its laptop lineup this morning featuring latest generation Intel Core 2 Duo Penryn processors, 2GB of RAM, NVIDIA graphics processors, and Multi-Touch trackpad previously only featured on MacBook Air. MacBooks get faster processors ( 2.1 or 2.4 GHz ), larger HDDs ( 120GB or 160GB ), and more RAM ( 2 to 4 GB ). MacBook prices start at just $1,099. MacBook Pros get faster CPUs ( up to a 2.6 GHz ), larger HDD ( up to 300GB ), more RAM ( up to 4 GB ), and Multi-Touch trackpad starting at $1999.
The new 2GB iPod Shuffles have also gone on sale in the US Apple Store listing a delivery of 7-10 days ( $69 ).
A number of analysts are highlighting weaker than expected iPod and iPhone sales numbers. Toni Sacconaghi of Bernstein Research calls Apple’s 10 million iPhone sales target as “optimistic” without “significant price cuts or new model introductions”. Sacconaghi expects Apple to sell about 7.9 million units, far short of Apple’s own announced target. The Bernstein Research analysts also calls attention to cutbacks in first calendar quarter iPhone production as further evidence that Apple will likely miss its sales target. Sacconaghi says “higher than expected” iPhone unlocking has also cost Apple hundreds of millions in lost revenue. BMO Capital Markets analyst Keith Bachman is also skeptical on Apple’s target of 10 million units and cuts his target price from $160 to $140 per share.
Piper Jaffray analyst Gene Munster writes in a note to clients that initial analysis of the March quarter iPod NPD data point to a 6% year-over-year decline in iPod sales. While Wall Street expects Apple to sell about 10.8 million iPods in the March quarter, the data suggest 9.5-10.3 million units for the quarter. Munster reiterated his belief that Apple plans to make the iPod into wireless mobile units “capable of running mobile applications”.
Morgan Stanley is more positive on Apple by saying “new product announcements and margin expansion will drive AAPL shares higher in 2008″. Morgan Stanley points to strong Mac shipments, favorable component pricing, and expansion outside US as “positive influence on revenue growth”. The firms also predicts that Apple is slowly “preparing for meaningful product launches.”
Please read an update to this story here.
Apple is expected to update its laptop lineup this morning. Upgrades are due for both MacBooks and MacBook Pros and likely include faster processors, higher capacity hard drives and more installed RAM. MacBook Pros may also see higher screen resolutions and thinner profile. Updates coming up as soon as Apple store goes back online.