Apple Posts $818 Million Profit for 3rd Quarter 2007

[IJ Reilly]

Actually, you shouldn't think of trading as part of some linear process. Those lines drawn on the graphs are just drawn for aesthetic value. Every trade is a unique event. Especially in after hours trading where not everyone meets in the same forum to trade, you can expect less consistency in trades. In after-hours trading someone looking to sell found someone willing to buy at $150. When the opening bell rang, traders settled on $145 for the first trade. They're just distinct events.

Understood. But when I've looked at these numbers in the past, the last trade of after hours is usually the price the stock opens at the following day, or at least very nearly. I watched the bid/ask pretty closely during the last hour of after-hours trading and never saw anything close to $145, it was all in the range of $148-150. One of the many mysteries of the stock market, I guess!

 

[d21mike]

I think you raise many interesting issues. Unfortunately, the original question during the conference call was posed without any savvy or nuance. Asking whether the iPhone will support corporate email is simply an asinine question. Of course it supports corporate email because corporate email can use the same excellent protocols that we all use. If the analyst didn't have his head up his ass, he would have asked: do you have plans to add native Exchange client support, like ActiveSync or at least WebDAV based Outlook Web Access? That was what the analyst meant. The answer to the question asked by the analyst is that the iPhone already supports corporate email with IMAP over SSL including at least one IMAP push protocol. I would imagine the answer to the question about adding MS specific client support would probably have not been answered anyway. There's some support for Exchange in iCal, in AddressBook and in Mail on Mac OS X. The question is will Apple add more themselves; leave it to a third-party; or try to push adoption of the great open protocols already available to corporate IT; or all of the above?

My guess is that a lot of this will become clearer when Leopard is released since Leopard will bring iCal server based on the Darwin Calendar Server that bring much of what Exchange does (and more) to the platform (in the form of another Darwin open source project). The CalDAV protocol has many projects working on Exchange integration. All of this could be leveraged by any IT department that wanted to forgo tens of thousand of annual licensing fees each year. I'm anxious to see how this CalDAV stuff plays out. It's some exciting protocols collected together and rounded-out.

Thanks for the Leopard information and CalDAV. I have been strictly a Windows Person so not that familiar with the direction of Apples other products. However, I will be looking closely at this going forward.

 

[gnasher729]

As far as priorities. Not sure why you feel it should not be a high priority for Apple. The following Article estimates Blackberry users at about 8 million in April 2007 (I thought there was more). Apple expects 10 million uses by the end of 2008. Wouldn't it be a good idea to go after some of the Backberry Users.

Here are the numbers: 1,000 million mobile phone users. 8 million Blackberry users (no idea if this number is right). Getting 0.1 percent of the general population = 1 million iPhones. Getting 10 percent of Blackberry users = 800,000 iPhones. If Apple thinks it is easier to get 0.1 percent of the general population by improving the iPhone than 12.5 percent of Blackberry users, then Blackberry users are not the priority.

 

[d21mike]

Here are the numbers: 1,000 million mobile phone users. 8 million Blackberry users (no idea if this number is right). Getting 0.1 percent of the general population = 1 million iPhones. Getting 10 percent of Blackberry users = 800,000 iPhones. If Apple thinks it is easier to get 0.1 percent of the general population by improving the iPhone than 12.5 percent of Blackberry users, then Blackberry users are not the priority.

I don't know why this would have to be an either or question. Provide a business class email pda or provide comsumer only features. I would think they could do more then 1 thing at a time. My point was I would think getting a license for Active Sync and Blackberry Connect would then make it very easy to add the support. Don't you? From other posts it is my understanding that this has already been done many times on other pda phones.

I know there are a lot features that are being requested by the community. Other then a few hardware features (3G, GPS, etc) which I don't believe will be considered until well into 2008 we are talking about pretty easy to code software features. Right? Have not seen anything that could not be coded rather quickly (if Apple wanted too). And other then hardware and "cost" what is the big show stopper for new sales to the general community? Every iPod user I know would buy one if their contract was up and the cost was not 3 times what they normally spend for a phone. Plus most of them do not need a data plan for an extra $20 per month. However, the business community would not have a problem with either since they normally spend over $40 per month for a data plan and the cost of the phone is not a major problem.

 

[TPALTony]

So what do you think he meant by the statement "With very little help from the IT department, it will work"? Do you think that this means that IT departments are either opening up IMAP Ports or allowing POP3 access to Corporate Email? I.E. No additional support built into the iPhone.

As far as priorities. Not sure why you feel it should not be a high priority for Apple. The following Article estimates Blackberry users at about 8 million in April 2007 (I thought there was more). Apple expects 10 million uses by the end of 2008. Wouldn't it be a good idea to go after some of the Backberry Users. I really do not think that adding support for Exchange ActiveSync would be a hard thing to do (for iPhones or the MAC). My guess is that there is a nother reason it has not already be done for the MAC. Maybe more political then anything else. Do you really think that they could not have added support for the MAC over the last several years?

http://searchmobilecomputing.techtarget.com/originalContent/0,289142,sid40_gci1251971,00.html

I have a BlackBerry for work and an iPhone for my personal use. I much prefer the iPhone but there is a lot of work Apple has to do in order to make iPhone valid for corporate use. The MOST important one is wireless syncing of calendars (and to a lesser extent contacts), and better calendar / mail integration.

It's simply not a good option for someone to have to dock their iPhone in order to get an up to date calendar. Nor it is an option for them to get an email saying "hey can you do this time?" instead of just accepting a meeting request right from the phone and having it show up in their calendar on iPhone AND their desktop mail. Contact syncing with large corporate address books is also essential for this to work properly. iPhone currently has none of that. But, it could do with some software updates...

But it's true, in my opinion, to say that it's not (nor should it be) an Apple priority. Corporates don't sign off on 5-600 dollar email devices. A few top execs, yes, but for the masses, corporate guys buy a generation or two old BlackBerry for 50 bucks based on corporate deals. Individuals don't get a choice on this stuff.

However, interestingly enough, I've started to piece together my own theory on what Apple is going to do.

Consider .mac. It's done OK but it's not that flash or feature rich by their standards. At D5 Steve was asked about this and he said "You're right, and we will be making big changes in coming months" (I haven't quoted him correctly but that was his meaning I believe.)

Now, consider this. Macs can sync contacts, calendars and a whole bunch of stuff via .mac. You can hook up multiple macs to your .mac account and sync them. Hmmmm, doesn't iPhone run OS X? So exactly HOW HARD would it be for them to let your iPhone sync with .mac in exactly the same way? Easy, for them.

OK, I know what you're going to say, that's just mac users. But it is actually NOT that hard for them to make this available to windows users too.

There are two steps to getting content out of your 'doze machine (Outlook etc.) and onto your iPhone.

Step 1. Get the content from the app. They already do this for the iTunes sync via USB, so it's done already. It's two way too since you can add contacts on the phone and they appear on your desktop app when you connect. So, check, done.

Step 2. Get it to the phone. Today that's done via iTunes. To do it wirelessly all they need is a WINDOWS .mac sync agent. Hardly beyond the wit of a skilled apple engineering department, and it would drive .mac sales too.

Admittedly some things need more work. Notes, tasks (if they ever appear on iPhone), etc. But that's an extension of groundwork that is already done.

So that's my theory, that they're going to let you do this stuff wireless, by .mac, and that there'll be a windows sync agent (let us not forget, there is ALREADY a Windows iDisk client to let you get at a .mac iDisk, so there is precedent for .mac access from Windows.)

All of which is to my main point. If apple is going to invest time this stuff, they won't target corporate. It's too much work, with a lot of corporate IT policy and privacy rules etc etc to deal with. Plus, it's NOT a huge part of the iPhone market! They'll focus on making things better for consumers, who are the people buying the phones.

Just my 2c worth.

be well

t

 

[IJ Reilly]

If the thread highjackers don't mind a little bit of on topic discussion... AAPL hung tough yesterday during the big market bloodbath. Pretty impressive performance, considering.

 

[Rocketman]

I would rank the news accordingly:

1. MARGIN growth ASTOUNDING. Earnings growth is crack to wall street. AAPL is a BUY at any price.

2. Mac sales astounding, halo effect real.

3. iPod sales strong, no cannibalization.

4. iPhone sales 270,000 first 30 hours, last two days of quarter. So sales probably WERE about 500,000 for the (4 day) weekend. Sales by now probably ARE over a million and growing.

I wonder when their market cap will exceed IBM? Microsoft?

Rocketman

 

[Black Belt]

I wonder when their market cap will exceed IBM? Microsoft?

When they start having revenue of that caliber. For a dose of reality...

"...more than 60 million packages of Windows Vista have shipped in the past six months, selling at a rate of 10 million units per month and “eclipsing Apple’s entire installed base in 5 weeks of shipments."

Microsoft makes about 55 Million dollars in pure profit every 24 hours. At that rate it takes Microsoft about 2 weeks to do what Apple does in 3 months.

APPL has a crazy P/E of 46. That is nearly double Microsoft or Cisco. Google is the same way. Love that irrational exuberance over common sense. Must be that Stock Widget. Can we say Tech Crash II is a comin'? Enjoy!

 

[IJ Reilly]

APPL has a crazy P/E of 46. That is nearly double Microsoft or Cisco. Google is the same way. Love that irrational exuberance over common sense. Must be that Stock Widget. Can we say Tech Crash II is a comin'? Enjoy!

Try looking at a meaningful number for a growth company, such as forward PE, which is substantially lower. Trailing PE is all about history. Cisco and Microsoft's trailing PE is lower because they are not growing their EPS at anything like the rate we've seen from Apple, and are not expected to in the immediate future.

 

[Black Belt]

Try looking at a meaningful number for a growth company, such as forward PE, which is substantially lower. Trailing PE is all about history. Cisco and Microsoft's trailing PE is lower because they are not growing their EPS at anything like the rate we've seen from Apple, and are not expected to in the immediate future.

Bwhahahahahahahah! Fantasy numbers are more meaningful. Riiiiiiight. I rest my case. Projecting growth rate based on past performance is a mathematical absurdity. You could never come close to taking into account market forces, competition, nature, share dilution, etc - way too many variables to have meaning. That is the same rationale that caused the Dot.Bomb. Basically for Apple to make sense at 150 at industry PE standards for tech, which is VERY optimistic, they would probably have to average about $7.50 a share within 5 years. They are at $3. It ain't happening.

 

[Rocketman]

Bwhahahahahahahah! Fantasy numbers are more meaningful. Riiiiiiight. I rest my case. Projecting growth rate based on past performance is a mathematical absurdity. You could never come close to taking into account market forces, competition, nature, share dilution, etc - way too many variables to have meaning. That is the same rationale that caused the Dot.Bomb. Basically for Apple to make sense at 150 at industry PE standards for tech, which is VERY optimistic, they would probably have to average about $7.50 a share within 5 years. They are at $3. It ain't happening.

Your moderating expectations feelings do have value. But stocks are valued based on objective criterion, and traded in a less than fully rational market. P/E ratios have a multiplier based on "expected growth rates". Apple has a high expected earnings growth rate. Now if that reverses or even moderates, then the tail will indeed wag the dog and the price will drop disproportionately, just as it is rising disproportionately now.

But in the mean time Apple is in a secular growth phase and is also increasing market share in its segments (computer, phone, mp3). Further, it is increasing MARGINS, which is something which is widely rewarded on Wall Street. For the moment it is possibly more comparable to Starbucks than Microsoft. MS has a much lower unit cost of delivery than a hardware company or a coffee company. One would think the recent success of Vista deployments would reflect in a share price considering the near 85% gross margins on those sales and the very wide distribution, but perhaps those deployments were already factored in to the share price in the last year or so as "predictable".

Apple is a company and stock which is viewed skeptically, as it should be and as such it is only when a product actually delivers on its promise of sales and margins wall street recognizes it. That has been the case with iPhone and Mac sales figures.

I am about 100 feet from an iPod vending machine right now. I wonder when it will be populated with iPhones too?

Rocketman

 

[IJ Reilly]

Thank you Rocketman. Apparently some people have a tough time with the concept of growing earnings. They should be investing in steel or tractors, or other companies with very low trailing PEs, and forward PEs to match, and good reasons for both.

Forward PEs aren't "fantasy numbers." They're consensus estimates of future earnings. In Apple's case, they've been blowing past these estimates on the order of 20-30% every quarter. Now, if they stop performing this way, then indeed the stock will fall accordingly. But as of now, the markets are believing that Apple's growth rate will continue, if not accelerate. Nobody really knows if these expectations are justified, but you are surely not not going to find any evidence for or against in trailing PE, a number that only tells you what has happened and nothing about what will happen.

 

[macidiot]

Bwhahahahahahahah! Fantasy numbers are more meaningful. Riiiiiiight. I rest my case. Projecting growth rate based on past performance is a mathematical absurdity. You could never come close to taking into account market forces, competition, nature, share dilution, etc - way too many variables to have meaning. That is the same rationale that caused the Dot.Bomb. Basically for Apple to make sense at 150 at industry PE standards for tech, which is VERY optimistic, they would probably have to average about $7.50 a share within 5 years. They are at $3. It ain't happening.

As anyone who has studied finance will tell you, you can forecast earnings. Now there are a lot of variables like you say, and some companies are more difficult to forecast than others.

However, the larger and more mature a company it is, the easier it is. And guess what, it is mostly based on past performance. Wrigley has been making Doublemint gum forever. An analyst can look and easily determine overall market growth, overall market share and come up with a fairly accurate estimate of sales.

Now, as anyone with a background in finance will tell you, forecasting 1 quarter out with accuracy is fairly easy. One year, also not difficult. Two years, also possible. But pretty much anything past that is just guessing.

What you seem to fail to have is an understanding of finance, financial markets, and Apple. I'm not going to get into the details of explaining how wrong your assessment is, it would take quite a bit of time.

However, I will say this. Apple earned 92 cents last quarter. Apple can easily earn over 1.00/share this quarter. That would give Apple a trailing earnings (ttm) of close to $4. I project Apple to earn another dollar the following quarter. Giving Apple trailing earnings of about 4.50. Next year, $5-$5.50 is easy.

Let's see: $5/share earnings, 5 year average growth rate of 139%, forward growth rate in excess of 25%(more like 35%), stellar management, stellar balance sheet. The market should trade Apple at a premium. Oh wait, it does. You think Apple should trade with the p/e that Gateway has? Or Microsoft? Are you kidding? Those companies are stagnant compared to Apple.

150 is expensive compared to other companies. And it certainly isn't cheap, even for Apple. However, Apple gets a premium based on the above things. And at $5/share earnings, a p/e of 30 is well below Apple's 5 year historical average. Consider that Apple could earn $6/share next year. Using a modest, for Apple, 20% growth rate the following year, Apple earnings are at $7.20 in 2.5 years. So how is 7.50 "ain't happening?"

 

[IJ Reilly]

Another tidbit to add is Apple's cash balance, which I believe is around $12 billion now. You could lop this number right off the top of current market cap and arrive at a more accurate, or at least telling, trailing PE.