“There should be more good numbers [for Apple Inc.] Tuesday, with analysts expecting Apple will report a profit jump of 36.8%. Apple will report net income of $645.6 million for the quarter ending in June, or 72 cents per share, up from $472.0 million, or 54 cents per share, for the year-ago period, according to the consensus analyst estimate published by Thomson Financial. Sales should be strong too: Analysts expect Apple will report sales of $5.3 billion, up from $4.4 billion during the year-ago period,” Brian Caulfield reports for Forbes.
“But those strong numbers won’t necessarily translate into good news for Apple shareholders. That’s because confidence in Jobs is so high that some expected him to do the impossible: help AT&T sign up as many as 500,000 iPhone subscribers in less than two days,” Caulfield reports. That’s “the tricky thing about Apple. Expectations are so high that even hard-boiled Wall Street types are now ascribing magical powers to Steve Jobs. Yet the ability to stir up that kind of excitement, among consumers, at least, is the propellant in Apple’s rocket.”
“As a result, here’s how to tell when the Apple craze is about to end: Watch how much profit it can wring out of every dollar of sales. Analysts expect Apple will report gross margins of 32.74% Tuesday, up from 30.32% during the year-ago period” Caulfield reports. “As long as Apple’s margins are high, the demand for Apple products is real, and Jobs should continue his run. But once Apple’s ability to command top dollar starts to slip, get set for the end of the magic act.”
Full article here.
Don’t hold your breath for Apple’s margins to slip.
deduced from the Bloomberg article
http://www.bloomberg.com/apps/news?pid=20601087&sid=aThQtTOyB79A&refer=home
> Then: Problems in activations reportedly affected only 2%.
> Now: Problems in activations reportedly affected only 10,000
>
> 2% of 500,000 = 10,000
>
> 500,000 sales
>
> Just reading between the lines
>
> Cheers! Chris
Nicely deduced, Chris!
“As long as Apple’s margins are high, the demand for Apple products is real, and Jobs should continue his run. But once Apple’s ability to command top dollar starts to slip, get set for the end of the magic act.”
Uhhh… he does realize Apple’s commanded top dollar for thirty years now, right?
“…confidence in Jobs is so high that some expected him to do the impossible: help AT&T sign up as many as 500,000 iPhone subscribers in less than two days,”
Was this the original expectation? Was AT&T’s subscriber base ever the yard stick for measuring the success of iPhone sales?
Remember that game you played in grade school where you’d whisper something into someone’s ear, and they’d whisper to the next, and so on … ?
PS: Ever notice that with other companies, success is good business acumen, but with Apple, it’s magic and RFD?
When Apple’s profits start to fall, then you know that Steve Jobs’ magic is fading.
There. Now can I be an analyst?
Hey, guys, don’t ever take anything I (or any contemporary journalist) might say seriously! I have a fixed number of column inches to crank out for Forbes every week, so this potential “issue” is as good as any to cogitate about.
I once wrote an article about the moon falling out of the sky and into a field of lettuce, asking if the resulting conglomeration would be a Caesar Salad.
That didn’t go over so well, so I’m back to writing about Steve J.
A guy’s gotta make a buck, right?
The “magic” isn’t about the stock price, or the profit level, or the income per share.
it’s about the products.
The other stuff is an outcome of the magic, not the magic itself.
The last two headlines will hit the street as “Apples Magic is Fading” and “Safari Crashes iPhone”
People, think more carefully about your headlines.
@justified ‘Ever notice that with other companies, success is good business acumen, but with Apple, it’s magic and RFD?’
This is so true, but I have to say, with SJ at the helm and all that he has achieved, not once, but four or five times over, we all have the right to wonder whether he is not more than just a CEO.
Magician is the wrong word of course, because there is no deception involved.
Genius maybe better?
Demi-God maybe would do it too!.
From now on – whenever I see a new article on any mac website I’m going to scan for one keyword ‘Analyst’ – if it’s in the article, I’ll give it a pass…
…are around 29%, and everyone should expect them to come back into line with that figure. The current expectation is based on our long-running iPod lineup, which has decent amounts of margin built-in at this time.
We will face some pricing pressures moving forward, as every line eventually does, and this is when the numbers will come back to our traditional 29% range.
To suggest tanking because of this is an idiot.
I think justified did a little too much LDS…
Losing Magic…I don’t think so. Check this out!
http://www.macnn.com/articles/07/07/24/apple.to.hit.1t.cap/
RFD?
Rural Free Delivery? Like Mayberry RFD
any share holder that sees stock value rise like Apple will clearly be gutted whatever sj announces today.
yeah …nothing worth reading here…
This guy makes an excellent point. He’s not saying that Apple isn’t going to do well. He’s saying that expectations are so high, and that those expectations are already reflected in the stock price, that Apple will have a hard time meeting those expectations.
here’s the email I sent to the guy:
First, activations do not equal sales. My phone was not activated until nearly 9PM Saturday night and only because I’d finally decided not to port my existing number and just sign up as a brand new customer. Was that counted? It definitely wouldn’t have been had I not decided to take the course I did. So, there’s a hole in the “disappointing sales” figures. How many people actually had that issue? How many phones were bought as gifts and not activated during those two days? How many people bought theirs Sunday morning before supply finally vanished? Do you guys do any actual research or just all copy the same test?
And second, thestreet.com has lost plenty of credibility in their quest to promote Spring and Verizon and knock everyone else. They also haven’t exactly offered any substantial reporting on Apple that doesn’t scream “hidden agenda” in it. Something isn’t right over there – like the story about how the “total cost” of the iPhone was actually $17,000. You’re joking right? You actually took their reporting seriously?
Lastly, many of you and your brethren in the reporting field are getting very, very lazy and only presenting people with regurgitated, incorrect information or just plain making things up and passing it off as legit. Don’t be lazy! The people that read your articles make monetary decisions on them! You’re playing with people’s lives here at times and I think you should be more careful in what you just throw together in your word documents! You should edit this report to state what it actually means – 146,000 reported activations, not total sales. Besides, there was only 30 hours left in the quarter when the phone was on sale, how, by any stretch of the imagination is this a failure or cause such a dip in investor confidence?
Thank you for your time.
What do you guys think? I make an ass of myself?
@justified ‘Ever notice that with other companies, success is good business acumen, but with Apple, it’s magic and RFD?’
Yeah, I’m so sick of Steve’s Rural Free Delivery.
@ Macromancer
D’oh! Beat me to it! ;P
@ Georgy Porgy
That’s a really old article, from April 2, I’m surprised it keeps coming up this week. But the guy makes some good points.
That’s not going to happen in my lifetime…
So I guess I;ll just keep on take out the profits and rolling them back in to Apple…
Thanks for the good stuff STEVE and keep on tracking !
@ shawn
I thought the report said something to the effect of “new iPhone activations”, which made me wonder if it only counted new AT&T customers. If that was the case than many (like myself) would not have been included in that number either.
Anyway, it feels like a setup. I think Apple’s numbers are going to be a lot more impressive when we finally get the real report.
Let’s see…would I rather sell 20 Billion @ 32% margins or 50 Billion @ 28% margins…let me think. Okay, I choose 50.
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Gotta love the press though.
Thsi correlation is BS – just look at the margins Microsoft makes on Windows or Office. Does that mean that their demand is not slipping?
@ Where’s Anthony?,
You’re right: “it’s about the products. The other stuff is an outcome of the magic, not the magic itself.”
The reason so much of American business today is in trouble is many of them believe it’s magic or marketing genius that makes the difference. They call Apple’s loyal customer base a cult in order to avoid dealing with the reality that customers appreciate a company that puts out quality products and services.
We’re just beginning to see Apple’s quality advantage overtake the crapware vendors the same way that foreign car makers overtook the big 3 car makers in the 70s, and for the same reason: customers are realizing that there is a better alternative.