iPhone is a buy! AAPL?
As Arash hears everyday, the iPhone has changed my life. It's one of the rare tech products which actually exceed the hype! (and boy, there was some hype on the iPhone?!?!) the iPhone has "changed the game" and opened a new market for smart phones. The Wi-fi and browsing capability is truly amazing and Blackberry, Palm, or HTC will never be able to match the ease of use and the seemless interaction of the various software. E.g. My cuz sent me an MP3 in gmail, so I click on it and music starts playing in the iPod. Someone sent a youtube link, I click on it, and video starts up in the Youtube module. Awesome!
A couple of things pertaining to this club:
1) I've been reading all the posts (on the iPhone) but contributing less. Typing is, of course, much slower than a conventional keyboard. So if I want to post something, I have to turn on my computer which I seem to do with surprising infrequency since the iPhone seems to meet about 80-90% of my personal computing needs.
2) Does that mean AAPL is a good buy now at $130's? As much as I love the product, I don't know how they are making money. Apparently, just over half the 4million iPhones sold are registered with AT&T. That means the rest are unlocked and used on GSM networks all over the world. This means AAPL is losing some future profits based on their revenue sharing deal with AT&T. I actually see this trend accelerating as they introduce the iPhone in Europe and Asia, since unlike here in North America, the carriers do not sell many phones. Their inexperience in the mobile relationship game may affect their profits.
I personally think they should scrap the AT&T type deals (with BT, FT, DT, CM) and just sell the unlocked iPhones for $500-600. Ask any iPhone owner and they have all told me they would pay an extra $100 more for it, no questions... now that's a great product! But can AAPL maximize the profits?
posted by Junk Bonds @ 2/03/2008 11:29:00 AM
2 Comments:
The margins on selling devices, even good devices tend to depress over time unless you can continually innovate. Sales and margins on ipods have started to compress lately but they're not a one trick pony. I don't know much about laptops but their mac book air looks pretty cool. Can sales of Macs drive revenue higher? Just three months ago, they looked invincible.
As I said on email, I bought into AAPL last week purely on a trade (which I rarely do). I thought it was oversold and due for a bounce. The bounce didn't come so I cut my losses - mildly bruised but alive to fight another day. In the past I've often tried to give my decisions time to work themselves out but this generally leads to more losses. Unless a very strong case can be made for holding on to losing positions, its generally better to cut them.
So in a nutshell AAPL remains a hold, and the iPhone? Well I'll need to make some more cash now before I can buy one of those babies!
In addition to what Eddie mentioned (AT&T subscription) I have two other concerns about Apple.
1. I recently experienced first hand what I had heard before: their customer service is very bad. If you have problems with any of their products you cannot even reach someone on the phone.
2. Corporate Social Responsibility: they are at the “bottom” of the list of electronics manufacturers. Apple has refused to reduce the use of toxic materials in their products or to collect and properly dispose their obsolete products - a practice that many other companies like Dell or Toshiba have started for a couple or years.
I think these help the company to save money in the short term (which is currently reflected in their financial reports and the stock price) but will cost the company in the long term. Remember government regulations are getting tighter and the customers are getting more conscious. So Apple is not my first option for a long term investment. It can be an option for short term trade though…
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