AAPL’s iSlate Predictions

03Jan10

Recently, there has been much speculation about Apple’s upcoming table PC or “iSlate” device.  Sales estimate ranges for the device have been greatly varied, with one ex-google executive offering a bold predication of first year sales in excess of 10M units link. On the financial sell side, analysts are slightly more grounded – with estimates coming in closer to 2M units in the first year link

First year sales performance of consumer technologies is incredibly varied.   Prices can be high as production ramps up and markets may simply not be  mature enough to support mass adoption.  The original iPod, without question  stood alone in the market place–a technological marvel.   However,  at the time digital music players represented a completely new market and naturally  consumers needed time to firstly build both an understanding and confidence in the benefits of digital music players and secondly determining the specific value proposition of Apple’s device.  Remarkably, Apple sold only 376,000 ipods in its first full year of availability (2002), it wasn’t until 2 years later (2004) that sales exceeded 2M units.

Contrast this with the iPhone, which entered a much more mature market, one in which the majority of consumers not only owned wireless phones but also had either hands on experience or knowledge of the benefits of so called Smart Phones.  The iPhone’s bundled applications, tight integration with itunes, and finally the underlying form factor remain unmatched to this day.  Consequently, it was easy for consumers to understand their specific benefits of the iPhone.   An aspect that also contributed to the success of the iPhone was that consumers in the wireless (North American) market enjoy the option of a heavily subsidized handset upgrade every 2-3 years, this subsidy effectively  eliminating the high price of early adoption.  The Apple iPhone reached 11.4M units in just its first full year of sales (2008).

With respect to the iSlate, tablets in some shape of form have been available for well over a decade, however mass market consumers are largely unfamiliar with tablet technologies.   Unquestionably, Apple will need to mobilize considerable resources in developing and building this entirely new market.  To their benefit, there do exist strong parallels between the iphone interface experience and the upcoming tablet.  Since tablets do not serve as replacements for general purpose computing applications,  the iSlate will likely include some variant of the iPhone OS rather than Apple’s OSX operating system.  What we likely end up with is a Supersized iPhone hybrid  device.  Too bulky to be a complete replacement for the iphone or ipod and not robust enough to replace a notebook or netbook, but potentially ideal for consuming itunes delivered digital content such as books, magazines, and videos.

Personally, I expect the device to be sold unsubsidized through traditional Apple Mac channels (Apple Store, Best Buy, etc) and not through traditional wireless channels since I don’t see the device providing much upside to carriers (since the device would be complimentary to existing wireless devices and not a direct replacement).  This implies pricing will be on the order of $800-$1000.    Given the price point, the iSlate will initially appeal to technology early adopters, ebook consumers, and of course Apple fans.  Consequently, I would predict first year sales of this rather niche iSlate to be in the range of 1.5M to 2.5M, with a bias towards the low end.  Certainly not enough to have a material short term impact on AAPL’s performance and share price.

For comparative interest, first and second year sales for devices collect from various internet sources.

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Tags: AAPL, Apple, forecast, islate

CSCO full ahead

30Sep09

While it’s been a very lucrative and exciting summer for virtual every market participant due to the markets’ broad rally, it’s been unusually quiet from an individual stock perspective. As we continue to watch the macro debates on inflationary vs deflationary risks, double dip vs ‘V’ shaped recovery, it makes sense to retrench into less speculative and more fundamental bets; especially when we consider most portfolios are in a desperate need of rebalancing as speculative energy and finance sector bets have paid off handsomely.

Long term, Cisco remains a safe long – however, I see short term and medium term upside for Cisco as the industry struggles through the demise and breakup of NT. Short term, both NT and the acquirer’s customers are increasingly concerned about which product lines will survive and be supported moving forward – the best mitigation here is simply to migrate over to Cisco (or other vendor). Medium term, NT business is in much worse shape than has been reveled – as NT has moved through bankruptcy many customers have stocked up on spares, equipment, and systems in order to mitigate the potential discontinuation of NT operations – driving a spike in 2008 revenues. These purchases have artificially inflated the perceived demand and strength of the NT portfolio and will ultimately be strong drag on any acquirers efforts to integrate and streamline the NT portfolio.

More speculatively, one stock I have am staying close to is DWI.TO (Dragonwave) – if they can manage to secure the wireless tower backhaul business with AT&T, the sky’s the limit. The industry is well aware the AT&T has struggled in addressing the technology and cost challenges associated with wireless backhaul and Dragonwave maybe a tactical solution. My gut feel is that Dragonwave will be taken out via acquisition by Ciena, Ericsson, Nokia, or Alcatel. Of course, this growth is good and ultimately supports Cisco who manages the backend – routing and data center components.

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Tags: CSCO DWI.TO DWI Cisco Dragonwave NT Nortel

AAPL Q2 Results are here

23Apr09

Not surprisingly the professionals missed the real highlights of AAPL’s Q2 – while everyone was expecting a strong Q on ipod and iphone sales, the surprising momentum of RIM a few weeks back, specifically in the consumer space made this event a certainty. I speculate that iphones, blackberrys, and netbooks are likely providing a short term ‘fix’ for consumer’s suffering from ‘consumption withdrawal’ during a period where most big ticket desires have been deferred until we start to see hints of a recovery. The surprisingly good news here is that AAPL appears to be strongly growing its global PC market share. Mac sales were down a mere 3% for the Q vs Gartner’s industry 6.5% Q2 decline. Gartner also indicates the quarter was dominated by cheap netbooks (above) a segment that AAPL does not even participate within – The mid to highend consumer markets AAPL does participate in are likely down 9-15% for the Q.

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Tags: AAPL, Apple, Blackberry, RIM

More AAPL thoughts

17Apr09

Some more thoughts on AAPL as we come up on the Quarter. One area where I believe AAPL will look to capitalize in the near term is HD video capabilities. It has already been revealed that the summer iPhone 3.0 update will very likely include video recording and editing capabilities – essentially an iphone version of final cut. It has also been speculated that the next gen iphone will include both a much higher resolution digital camera as well as improved 3G performance. Why is this significant? In recent M&A activity,Cisco  announced acquisition of Flip for approximately $600M. Flip produces cheap ($100-$300) HD recorders in a cellphone or iphone type form factor,  generating annual revenue in the order of $200M. Put this valuation and application in the context of AAPL; The addition of HD into the iphone/itouch portfolio, a platform vastly superior to flip in terms of connectivity (wifi/3G enabled), display, multitouch- we see a opportunity that dwarfs that of Flip. One piece of the puzzle that does remain fuzzy is video content/publishing. Would AAPL open up itunes to user generated video and music type content? I would guess it is unlikely given that itunes is there primarily to drive revenue (app store, songs, videos etc) and the potential liability and optics issues surrounding copyright material – video content showing up as both for purchase and free via user contributed content would be confusing to consumers. A slightly better approach maybe through content sharing apps down-loadable via theappstore. I also love the HD video concept as it obviously builds additional momentum for Mac sales down the road — at which time we would look to new MACs include  the superbe FInal Cut video editing applicaiton to further support adoption.

Finally, the above speculation does not bode well for CSCO/Flip. The technology’s window is probably in the 6-12 month realm before AAPL and other cell manufactures introduce similar HD technology and render such standalone video devices obsolete. There is little CSCO will be able to do in such a short time frame to slow or prevent the inevitable; addition of Wifi and some type of content distribution platform won’t arrive until a likely upgraded ipod touch shows up on the shelf with vastly superior capabilities across the board. I hope this is CSCO last foray into the living room, and they sharpen their focus back on the Enterprise and Service Provider segments.

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Tags: 3G, AAPL, Apple, Cisco, CSCO, HD, video editing

Retail Assumptions

09Apr09

The WSJ provided a broad view of the retail sector this am – which of course key to the overall course of recovery out of this recession.

Retail is one of two sectors (the other being telecom) that while intriguing from a personal perspective, I avoid like the plague from an individual stock perspective. Individual returns are simply too dependent on management effectiveness vs. underlying macro, fiscal, technical, or product influences. After all t-shirts, soaps, jeans, and dial tones are indistinguishable save for a label and price tag. As an armchair analyst I simply don’t have the time and visibility to be sufficiently familiar with each and every management team out there, and unfortunately my consumption preferences and observations of other consumers within the sector has burned me all to often in the past.

Stars
COST Perennial favorite of mine, there is simply no one else in this segment
LTD BBW is expanding into Canada and again their closest competitor is DOA
LVMH Good mix of medium luxe products that just don’t seem to ever reach brand exhaustion

Losers
TGT WMT took aim here and for the most part succeeded. Too bad as I was looking forward to a cdn presence
COH Saturated and now acting as a discount retailer
LULU Because I’m a hater and got caught holding this back in the summer

click image for realtime update

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Tags: Costco Lululemon Louis Vitton Coach target retail stocks

anticipating AAPL

07Apr09

Apple reports Q2 on April 22.  Admittedly, RIMMs quarter was spectacular and their consumer strength was a blind spot for me — specifically the persistent negative press surrounding the BB Storm vis-a-vis the iphone, limited appeal of the somewhat retro pearl flip, and antiquated design of the curve 8300s, and of course a complete lack of any third party applications were all reasons I gravitated away from RIMM and towards AAPL.

At first blush ChangeWave support a trend to a RIMM consumer base — however I question their survey integrity as Palm simply could not have generated such significant brand awareness around their vaporware pre in the consumer space.  I suspect ChangeWave is somehow biased towards prosumer/techies and not joe consumer.  Perhaps more conclusively, the latest trend shows a return to a more traditional equilibrium between AAPL and RIMM in the smartphone space.

With respect to AAPL, the queues I am eagerly awaiting include the relative strength of macbook sales.  I am of course expecting strength here which is attributed to mass effect.  AAPL now represents upwards of 10% of the total PC base and closing on 20% of incremental base by volume -  unfamiliarity and uncertainty around AAPL products are rapidly eroding simpy due to their ubiquitous nature and consequently I expect share to continue to rise in the near term.  Secondly, I am looking to App/itunes  revenues, strength here provides insight into future subscription based revenue streams for AAPL and thirdparties alike

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Tags: AAPL, Apple, Blackberry, RIMM