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The Strange Math of Apple's Alleged Massive iPhone 5 Order Cuts
zacharye writes "The Sunday evening Wall Street Journal article claiming that Apple had cut its iPhone 5 display orders drastically for the March quarter made quite a splash. The way WSJ wrote its piece seemed to support the original Nikkei claim about Apple cutting its iPhone 5 display orders in half from the originally planned order of 65 million units. This would be a massive adjustment. But Apple uses the same new display type for both iPhone 5 and the latest iPod touch. Neither WSJ nor Nikkei addressed this, however — both seemed to be referring to just iPhone 5 displays. The math just doesn't add up."
Someone is getting rich out of this
Watch those corners
If Apple had previously ordered 65MM 4" screens their total iPhone sales would be about 50MM iPhone 5's, 20MM 4/4S (plus 10MM iPod touch units). Quite frankly, that is impossible territory there for the December quarter, but filling the channel and a subsequent draw-down as they move more to a 6-month update cycle could possibly explain a "50% drop in screen orders."
Quite frankly, crap like this makes me want to get out of the stock market altogether. (Which is exactly what it is intended to do.)
why is BGR even trying to do math on something it has no numbers on?
did you forget to take your meds?
Stocks go up on profit. And profit does not grow only with revenue. You can also deduct spendings. That's how big businesses work. They spend enormously for marketing, branding, hire unnecessary amount of people, to build a brand. Once they think their product/service in saturation they start cost cutting. Because you need to give dividends to keep your stocks up and these dividends rely on profit.
Unfortunately most of the time these cost cuts are not based on R&D to invent a new method to decrease costs of production or increase the efficiency; which would take time and also uncertain. Remember high-earning managers don't like to wait (their time is money), and their stress level can't endure uncertainty of that level and they go the easiest way of cost-cutting; which is called mass lay off. They know human can increase their efficiency automatically when they are afraid of something, for this case losing their jobs (not steve). They know remaining workers will work twice to secure their places, instead of criticising the bad management etc. And exploit this fact every now and then.
Apple has serious competition now. Back when they were the only game in town they could do as they pleased.
But fat margins and high market share rarely last. And when margins and market share come down so does the stock.
A company whose primary product is a smart phone has the highest market capitalization in history? That smacks of Tulips. You know it can't last.
iPhones are so cheap? Are you insane?
iPhone 5 is what, around $200 with a 2-years contract in the USA? But these monthly fees are likely to be around $50 or more, so $200+(24x$50)=$1400 at the least.
iPod touch 5th generation is $300. That's less than a quarter of the cost. There's free wi-fi everywhere in NYC so iPod touch + VoIP = free calls.
And if people are too stupid to include their monthly fees in the cost of their iPhone, too bad. You can't fix stupid.
Get free satoshi (Bitcoin) and Dogecoins
$199 on contract in the US
Galaxy S3 is also $199 and $149 at some stores depending on where the sale it
wal mart has the iphone 5 at $119
for single people its $90 a month for the carrier bill. for most of us on family plans we pay a lot less. i went to the new mobile share plan with AT&T. 4 smart phones will run me in the $200 range for unlimited minutes and texts and 10GB of data. and that's before my in laws kick in their part of the bill
everyone has a cell phone these days. i don't know a single person doing the wifi for free calls thing
It's unlikely Apple completely blew the estimated sales for iPhone 5 in the March quarter by that much. The most likely explanation is that the rumor is just wrong. Next most likely is that the 5S is coming soon and gets a slightly tweeked screen. Maybe even just a slightly different part from the same supplier. Whoever leaked the info saw the partial cancellation, but isn't aware of the replacement order. And, remember, even if 5S isn't coming until the next quarter, Foxconn might have to start taking delivery of screens this quarter, in order to ramp up production and build launch inventory.
Most people thought Apple patented rounded rectangles. But in reality they have patented all roundings including rounded numbers. So that explains the difference.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
for single people its $90 a month for the carrier bill
Holy shit, that's a lot of money for cellphone service.
$199 down is putting it more realistically. The rest of the money comes out of the higher monthly cost of contracts. Getting a phone cheaper by signing up for a contract is no different than getting a loan... you pay it all back eventually, with interest.
iPhone 5 is what, around $200 with a 2-years contract in the USA? But these monthly fees are likely to be around $50 or more, so $200+(24x$50)=$1400 at the least.
iPod touch 5th generation is $300. That's less than a quarter of the cost. There's free wi-fi everywhere in NYC so iPod touch + VoIP = free calls.
And if people are too stupid to include their monthly fees in the cost of their iPhone, too bad. You can't fix stupid.
You need to compare what you would pay otherwise for the service contract, rather than taking the entire cost of the monthly service. If you're actually in an area where it's feasible to go without an actual phone service, good for you. If you're not, then there's an inherent cost in having a cell phone, which needs to be considered. It's the difference in cost that's the issue.
Case in point, if you're already paying that $50/mo for another phone, and don't plan on switching to another carrier any time soon, then that service contract doesn't need to be considered beyond "what will it cost me to break the contract if a better deal comes along?" And even then, it's really more of a question of "how much do I stand to save if I cancel and go with this other plan, amortized over the period of the contract" than it is an actual base consideration. In that case, the relative cost of the phone is actually $200.
What I don't understand, however, is why people need to spend large amounts of money on the latest and greatest phone in the first place. When the phone is so expensive you need to sign your soul away for a prolonged contract in order to subsidize it, perhaps you should be considering alternative options. Smart phones do not have to be that expensive, and there's no reason you *need* the newest and greatest phone. You can get a Galaxy S2 for $300 at retail, and it's got plenty of grunt for just about everything you could throw at it. It's not the S3, but you really don't sacrifice much, and it's a significantly less expensive option, especially when you consider the obligations of the contract. For me, the freedom to go wherever I want is more important, and I am quite happy with my less expensive Android phone.
Stocks go up on profit. And profit does not grow only with revenue. You can also deduct spendings. That's how big businesses work. They spend enormously for marketing, branding, hire unnecessary amount of people, to build a brand.
Not sure if you're talking about Apple or competition. Apple spends way less on marketing, offers no incentives, than, say, Samsung, which has has virtually bought their market share dollar-for-sale. http://www.asymco.com/2012/12/05/the-mystery-of-samsung-electronics-sga/
E pluribus unum
Which doesn't really make all that much sense. What has Apple actually done to cause such a stock drop?
It's not what they've done, it's what they haven't done, and what others have done.
Investors have this perception of Apple as an innovator, creating new markets where none existed, and this perception is built into the stock's valuation. With the iPhone 5, Apple released not a new innovative product, but yet another incremental iteration of the iPhone. Then they did it again with the iPad mini and iPad 4. All the while, you have headlines like Android surpassing iPhone market share, Samsung selling more Galaxy phones than iPhone. The iPad mini was perhaps the worst of the bunch, where Apple was perceived as following Google's lead into smaller tablets, especially when Steve Jobs was quoted as saying they would never do such a thing. Right or wrong, this perception is not good for the narrative that Apple is a leader and can magically create markets where none existed before.
Perhaps the decline has everything to do with the Jobs RDF wearing off. Perhaps it has everything to do with Apple's first mover advantage in smartphones wearing off. Maybe it's just the competition heating up, or a combination of these and other factors. But what's clear is that Apple is no longer in a position to dominate the smartphone and tablet markets on their own, which is a real problem for them, since their massive profits are *largely* derived from iPhone sales.
I don't think it's a coincidence that AAPL hit an all time high the day the iPhone 5 was released, and has been in a steep decline since then.
Try living in the Western half of the US, having T-Mobile, and going on a road trip.
http://www.t-mobile.com/coverage/pcc.aspx/
There are two types of people in the world: Those who crave closure
Yeah right. Might want to get some facts.
http://www.asymco.com/2012/10/26/apples-growth-scorecard-for-third-quarter-2012/
There's a whole lot of revenue AND earnings numbers that are greater than 100%.
There's been less of it lately, so Apple CLEARLY deserves a PE of 11.5. (Dripping in sarcasm there)
There are two types of people in the world: Those who crave closure
I've said before that the world's love affair with Apple is slowly eroding, and so it seems iPhone 5 orders are not quite what Apple was expecting. 2013 is going to be a very tough year for Apple and coming out with cheap iPhone mini's or doing minor revamps of existing products are not going to cut it. Unless Apple does something truly innovative with iOS and iPhone in general, this slow erosion of their market will pick up speed.
Cutting back screen orders because they want to introduce a new product does not make any sense, why place an order so large in the first place? Is Apple so completely out of touch they don't even have a firm release cycle for future products when they ship a new product? Like they didn't know the 5S release cycle when they shipped the iPhone 5? I would be dumping Apple stock if this is their emerging trend, release a product with ridiculous expectations on sales, cross their fingers, and when the sales don't reach their inflated estimates dump the product and rush a new version to market???
Nothing about this speaks of a company that is being run properly.
I haven't thought of anything clever to put here, but then again most of you haven't either.
I'd love to experience the genius of Google's latest Nexus phone, if only they had enough sense to manage their stock and have one for me to buy.
The best thing about a boolean is even if you are wrong, you are only off by a bit.
You're an idiot. Their stock is near an all time low when you actually look at the right metric, PE which stands for price (per share) relative to earning (per share). It's a clear measure of what investors are willing to pay for earnings. And in spite of greater (earning and revenue) growth than any other large cap company in the last 10 years, somehow Apple's earnings are the least valuable.
There are two types of people in the world: Those who crave closure
I work for the T and the majority of my day is handling manager escalations from irate customers, the majority being Iphone The S3 can be had for $99 dollars at Radio Shack, and Walmart had it for several weeks at at .92 cents/
Also a refurbed Iphone 5 is $149 and a refurbed S3 on our site is at $29. Huge difference.
So, you can still get an S3 cheaper than an Iphone 5. And the Walmart price is $127 on the phone, and the huge lure is you can finance it and pay Walmart and Apple even more money.
As for the Mobile Share plan, your math is a bit off. Four smart phones with ten gigs of data has a base cost of $240 dollars. With Tax that will run you up to $280.
I personally use T-Mobile because I get free wifi calling in the US and Outside of the US and it does not use my plan minutes, unlimited data that only slows down at 10 gigs, and unlimited international text, for 95 a month, things I could not do with my own employer. That and I like to keep personal items apart from work.
I use a Galaxy S2 skyrocket that has been doing all the things the iphone 5 for the last year, and has a much larger screen, and i have 80 gigs of memory in it, and the only cost I paid was 30 dollars for the sd card.
The Revolution Will Not Be Televised
"In the US more than 50% of people have smartphones....who else is left to buy an iphone 5? not the people in developing markets who can't afford them"
It would really be nice if there were somewhere else on the planet where people could afford to buy stuff besides the 4% of the world's population in the U.S.
Yes, you are correct. But what I believe the poster was trying to say is that while Apple would be profitable, in the sense they make more money then they spend, they would not be as profitable, in the sense that they do not make as much total profits.
No company would be AS profitable if you took away their two most profitable products. It's just a truism, and not worth saying. The point that Apple would still be profitable without them is worth saying. And proves that your accusation of not being diversified enough is false.
Without iPhone/iPad, Apple is back to where they were in 2007. Mac hasn't grown much since then
In 2007 they sold 7.2 million Macs.
In 2012 they sold 18.2 million.
they've all but killed their enterprise efforts, and iPod is no longer what is once was.
Their "enterprise efforts" never counted for very much. So no loss there. And the iPod is mostly sold as part of the iPhone these days. It's silly to imagine "without iPhone" for now and contrast "with iPod" for then.
There's now talk of a less expensive iPhone coming out. This is what the original poster you replied to is referencing as margins coming down.
A cheaper iPhone does not imply margins coming down. You can have exactly the same margins on a car and a paperclip.
There is nothing new about Apple offering cheaper alternatives. With the iPod market, they offered Mini, Nano and Shuffle. And at no time did that ever indicate they were struggling in the MP3 player market. Quite the contrary, no one ever beat Apple on MP3 players.
And of course they also offered a cheaper Mac. The Mac Mini.
In all these cases, note that they weren't made cheaper by reducing margins. They were made cheaper by making a cheaper to manufacture device with fewer features.
The MP3 player market is dead. The tablet and smartphone markets have competitors that have rapidly caught up to (and it the case of smartphones, bypassed) Apple.
Modern supply chain systems make extensive use of EDI and ERP systems. When you are Apple, and you really want to make sure you have sufficient capacity to supply your product, you tool up two suppliers to supply the full volume of your sales. As such, the EDI system says that in 6 months you will ship 32 million units x 2 suppliers = 65 million units.
At the 3 month mark, both suppliers are fully tooled up. As such, you cut the 3 month advance planning order to 16 million units x 2 suppliers = 32 million units. This should be close to actual sales. This is done, because the automated ERP systems will actually build 65 million phones, unless someone tells them to stop.
Crazy numbers like this happen all the time in some industries. 6 month = 2 million units/month. 3 month = 1 million/month. 1 month = 1.5 million/month. 2 week = 0.5 million/week. 1 day = 0.2 million/day. The numbers can be all over the place. Sometimes, the suppliers have no idea how many parts will be shipping the next day.
Stocks go up on profit. And profit does not grow only with revenue. You can also deduct spendings. That's how big businesses work. They spend enormously for marketing, branding, hire unnecessary amount of people, to build a brand.
Profit share in the phone industry: Apple 75%, Samsung 24%, everyone else who cares.
Product design team: Apple 16 people, Samsung 1000+ people.
Marketing spend 2009-2012: Apple approx 2.6 billion dollars. Samsung Electronics division alone approx THIRTY THREE BILLION DOLLARS.
They cost more only when you don't match hardware. The average laptop sold is specd below the average Apple laptop sold. That means the average laptop cost should be below the average Apple laptop sold.
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