As the iPhone Goes, So Goes Services
Writing for Seeking Alpha, Michael Wiggins De Oliveira expressed his sentiment that Apple’s services business doesn’t get enough respect by investors.
Apple (AAPL) has taken a fair amount of criticism lately for the way that it handled its MacBook Pro redesign. Well known iOS developer Marco Arment snubbed Apple’s latest MacBook Pro when he crowned the 2015 model as the best laptop ever made. Although, his written criticism was fairly benign compared to his verbal criticism. I don’t disagree with Marco but that’s because I’m not a heavy MacBook Pro user so I’m not going to say he’s right or wrong. What I will say is that I recognize the underlying currents behind the redesign and I’m not so sure it’s all Jony Ive’s doing. Or at least, not the design group’s alone.
Moving Data vs Pounds
I formed my world view on how to classify technology while I was working at NASA’s rocket test facility at Stennis Space Center. The best minds at NASA argued that technology is all about either moving things (pounds) or data (information). And moving data is the more consequential of the two. This core belief led me to invest in Bitcoin.
Why Volume Won't Save Tesla
One of my favorite television shows of all time is Arrested Development. It’s a comedy about the dysfunctional Bluth family that runs a housing business. In one episode, when faced with imminent bankruptcy the company president comes up with a plan to keep them afloat. They will build a fake model home in order to announce a big new development project that doesn’t exist. When investors start to give them their deposits they’ll be able to use that money to get their current creditors off their backs.
This is essentially what Tesla did this week. I’m sure a lot of Tesla fans are scratching their heads on why Tesla would start taking deposits on a truck and new roadster when they have their hands full with the Model 3. That’s because it’s all a show for Wall Street to prevent the stock price from collapsing. Just like the Bluth family’s fake model home, Elon Musk needed to bring in some investor cash and prop up investor hopes.
Science and Technology Are a Means to Profit
I was listening to an interview with former automotive executive Bob Lutz this week talking about his views on the future of the automotive industry. I agree with most of what he thinks. Driving will one day be illegal and driving automobiles will be like horses today. A hobby for rich people. The concept of the automobile brand will fade away and smaller automotive companies that don’t add anything of value outside of their brand will too.
Innovation Also Involves Solving Problems
I just finished reading some comparisons of Google’s Pixel Buds compared to Apple’s AirPods, and I can’t help but think that this is a continuation of a theme lately. Apple is leaps and bounds ahead of everyone else when it comes to tech innovation, whether you’re contemplating the AirPods and their proprietary new W1 chip, the iPad Pro’s 120ghz screen and magical Apple Pencil, or the fact that someone finally made FaceID work. Even if you look at Samsung’s turf, displays, the iPhone X now has a better display than any Samsung phone ever. And this is an Apple-designed display which Samsung had nothing to do with the designing, only screwing it together. Because they didn’t design it, you’ll never see this screen in any Android phone.
Yes, You Can Get Some Real Work Done on an iPad
Chris Matyszczyk over at CNET wrote about Microsoft’s Satya Nadella joking with a couple of journalists to “get a real computer”.
When the Apple Watch first debuted in early 2015, I was struck with the genius of including the crown on the side to handle scrolling and zoom tasks. It didn’t block your view or get your screen smudged. I used it so much that I would instinctively reach for it on my iPhone at times. If you’re scrolling through a bunch of data on a narrow screen, it seems easier to use a small dial than long swipes on the glass.
SG&A Is Tesla's Real Problem
The real problem with Tesla (TSLA) isn’t even spoken about very much in the press. It isn’t that Tesla can’t build enough of the Model 3s, it’s that Tesla can’t afford to. And if Elon Musk says that the Model 3 gross margins are great, be very worried. Because if Elon Musk goes out of his way to emphatically state something, it typically means that the complete opposite is true.
Bashing iPhone Users Only Makes Sense In One Scenario
Samsung this week seems to have resumed their old practice of poking fun of iPhone users. They had retreated from that somewhat over the past two years but now with a new CEO at the helm it seems that their old favorite subject is back in vogue.
Power to the People
When Apple didn’t do their typical wide-scale distribution of review units for the iPhone X to the usual tech outlets I raised an eyebrow but didn’t think too much about it until today. Now I see that the iPhone X is literally available for pickup at every Apple store within a 250 mile radius of my house. If I wanted one, which I don’t, it would be fairly easy to go get one. However, I find the easy availability of the new iPhone all the more curious because it means that Apple didn’t limit review units due to supply constraints.
I Want Wider Not Taller
I’ve made two assertions financially about the iPhone that were confirmed in Apple’s Q1 guidance this week. First, that the iPhone X isn’t less profitable than the iPhone 8. Apple forecast gross margins of 38-38.5% which are higher than Q4 and on par with Q1 of 2017. So any downtick in iPhone 8 unit sales are being offset by the higher margin iPhone X. Second, I said that this dual-stage launch may be Apple’s most successful ever. Apple forecasted record revenues for Q1 of $84-$87 million. That means that both the iPhone 8 is selling quite well and the production bottlenecks for the iPhone X were way overblown.
Every year when Apple releases their new iPhone, there’s a huge rush of buyers trying to get their orders in literally within seconds. This is to ensure that they’ll be a part of the first wave that will ship on launch day. Although, I always wonder how many of these launch day sales actually go to real iPhone fans versus enterprising resellers. I’m sure the majority of the units go to end users, but I wouldn’t be surprised if over 10% of the units go to scalpers. Which means that millions more will get up on Day 1 of iPhone pre-order day only to find that the stock was all snapped up while they slept.
Manufacturing and distribution analysis since 1993.
Perezonomics is available in Apple News