“The higher-than-expected price of Apple Inc’s new cheaper iPhone eased worries about gross margins, while arousing concerns the company was not being aggressive enough in its fight against Google Inc’s market-dominating Android operating system,” Eileen Anupa Soreng, Neha Alawadhi and Saqib Ahmed report for Reuters. “‘We worry that Apple’s inability/unwillingness to come out with a low-priced offering for emerging markets nearly ensures that the company will continue to be an overall share loser in the smartphone market until it choses to address the low end,’ Sanford C. Bernstein analysts said in a note. Still, Bernstein maintained its “outperform” rating on Apple’s stock, saying that it expected the new iPhones to have little impact on gross margins.”
Soreng, Alawadhi and Ahmed report, “‘Rather than offer attractive pricing for consumers, and move the iPhone 5c into a new and growing price segment, Apple retained a premium pricing strategy in targeting the $400-800 smartphone segment,’ Credit Suisse analyst Kulbinder Garcha said in a note. Garcha said that Apple’s share of the smartphone market, where it faces intense competition from Samsung Electronics Co Ltd, would likely fall to 15.5 percent this year and 13.1 next year from 18.1 percent last year.”
“Saying the 5C was “nobody’s low-margin phone”, Cowen and Company analyst Timothy Arcuri said Apple’s new relationships with Japan’s NTT DoCoMo Inc and China Mobile Ltd supported the view that 2014 Street estimates for Apple earnings looked too low. Arcuri said gross margins for the 5C appeared to be as high as the mid 50 percent area,” Soreng, Alawadhi and Ahmed report. “Lazard Capital Markets raised its share price target to $570 from $500, noting a ‘best in class user experience… With escalating investor focus on Apple’s diminishing product differentiation, slowing growth and margin compression, we think it’s time to revisit what makes Apple unique,’ Lazard analyst Edward Parker wrote in a note. ‘We propose that Apple is a ‘storage’ company, not only levered to data creation but instrumental in driving data creation in ways its competitors are not,’ he said.”
Read more in the full article here.
MacDailyNews Take: By SteveJack
Many analysts also called for Apple to invest their resources in creating a cheap netbook.
Those “analysts” didn’t understand Apple then and they don’t understand Apple now.
Apple does not exist in order to pile up meaningless market share. Apple exists to delight customers.
When you do that, you end up with the best customers – the cream of the crop – the type of discerning customer who will pay for apps and content, not constantly expect coupons, BOGOF deals, and other assorted freebies.
The also-rans of the world can have as many of those type of “customers” as they can amass and they can swim in their meaningless, bottom-of-the-barrel “market share” until they drown.
SteveJack is a long-time Macintosh user, former web designer, multimedia producer and a regular contributor to the MacDailyNews Opinion section.
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In a world where the middle to upper class is stagnant due to reduced wages, salaries, unemployment and distrust for their future, how can we expect year to year growth on a company dedicated to that sector?
We should be celebrating, all, including bloggers, analysts, and the public at large, that Apple is still making more more money than all other companies within their business sector. That they are still growing, even though at a slower pace, that their margins are in the upper range of all estimates, even though all others in the business are struggling, including Samsung. Whom even though sells lots of phones, mostly cheap ones in the third world, cannot match apple margins or profits.
I laugh every time I heard google talk about one billion activations. It means nothing. Google can only count on a quarter of those android activations for revenue. Why? Because feature phones, and cheap smartphones do not bring any revenue to anyone, except that particular hardware vendor. When Samsung count as a sale, google as another activation, a tablet being giving away with a television or some other gadget, neither gain a loyal customer. Most of those giving away items end up in a drawer. That’s why the metrics on usage are so askew against them.
And all those phones sold in China by no brand manufacturers come only with 2G data, used mostly to watch pirated movies and TV. Yes, most of those Chinese phones can pick up off the air channels. Just like our old rabbit ears.
But the 25% of Chinese that are earning enough to buy higher priced items don’t buy the cheap stuff that analysts and bloggers count as android dominance in that market. Apple is very happy to just sell to that 25% of that market. Which by the way it’s a larger segment than the whole US population.
So again, market share will be use to say how Apple is losing here and there. Really, it’s one company against the world! But the profits will be again in line with what’s been in the past. Only with Apple profits have become a non issue, market share is king. Basically for these guys nothing is good enough. It reflects their personal bias due to the fact that Apple has made them look like fools so many times.
My comments are not directed to those wanting to trade for quick profits, 10% here, 8% there. Yes it is more difficult to do that with any high priced stock. But that’s not specific to Apple. But when the market makers have so much control to how equities are priced, there is no way to value any corporation like it was done in the past. Fundamentals…out! Even technicals can’t be used today for trading any of the Wall Street influenced darlings or dogs.
I hope that Apple stock price drops so low one day that the board decides to take the company private. Yeah, let’s Apple just make great products that everyone wants, without having to listen to kooks like Icahn. Borrow 150 billion so he can make a killing when he dumps his shares. Typical parasite.