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Apple Inc. specializes in design, manufacture, and marketing of electronic gadgets especially in the mobile communication industry such as personal computers, digital music players, media devices, sells various related software, peripherals, services, third-party digital content, networking solutions, and applications. Some of the company’s products include iPhone, iPad, iPod, Mac, Apple TV, iCloud, iOS operating system, including OS X. Having been incorporated in January 1977, the company has seen its portfolio grow, with some of its acquisition including WiFiSlam (a Silicon Valley startup) in March 2013, Locationary Inc. in July 2013, Hopstop.com Inc., Topsy Labs Inc., among others.

As of December 26, 2013, Apple’s shares on Nasdaq, trading under the symbol AAPL.O, stood at $563.90 USD. This signified a price change of $-3.77 (-0.66 percent) relative to the previous day’s closing. The volume of shares traded was 7,286,005 while the average volume number of shares traded translated to 11,285,333 shares. On the very day, the day’s high ($569.50) and the day’s low ($563.38) with EPS fixed at 39.75 and the PE (ttm) at 14.30. The historical earnings per share have been $6.43 USD, $13.87 USD, and $13.8 USD in the month of December 2011, 2012, and 2013 respectively.

Apple company profile presents unique proposition, with valuation ratios seen to diverge from those of both the industry and sector. For instance, the price earnings ratio, P/E Ratio (TTM) for the company is 14.23, not very close to that of the industry, 20.74, while that of the sector, 20.75 is almost the same as that of industry. P/E Low for the last 5 years has been 12.14, 12.26, and 11.50, for the company, industry, and sector respectively. On the same note, the P/E High over the last 5 years has been 20.09, 31.93, and 35.14 respectively. The company, industry, and sector beta stands at 0.84, 1.06, and 0.96 respectively.

Apple Inc.’s aggressive nature regarding marketing and selling of its digital content knows no boundary, as it will reach its target market whether through the iTunes Store, iBooks Store, App Store, and Mac App Store. Alternatively, it sells some of its beautiful and wonderful products through various channels such as its online stores, direct sales force, including value-added resellers, with great support from its Cupertino, California headquarters. The company also makes good revenue by selling third-party Mac, iPod, iPad, and iPhone compatible products and application software, printers, headphones, speakers and several other accessories via its retail and online stores.

The top executives of the company include Timothy Donald Cook, the CEO & company director; Jeffrey E. Williams, the Senior VP-operations,; Peter Oppenheimer, the Chief Financial Officer (CFO) & Senior VP); D. Bruce Sewell, the company Secretary, Senior VP & General Counsel; and Luca Maestri, VP & Corporate Controller. The US stocks experienced a rise on Monday 23, 2013, with both the Dow and S&P 500 climbing to all-time highs, courtesy of a distribution deal between Apple Inc. and China Mobile, which went successful to significantly boost the technology sector. Apple record a 3.8 percent rise to $570.09, which was its largest percentage gain over a three-month period. After the tech titan announced on Sunday 22, 2013 that it had signed a long-awaited deal with the China Company to sell its iPhone via the world’s largest network of cellular phone users, Apple will continue to get more billions of dollars in sales revenue.

iPhone 6 and 6 Plus in China’s Black Market

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iPhone 6 and 6 Plus sells like hot dogs in China’s Black Market

The third week of September, to be precise on Friday 19th, was a very important period in the tech world. As the Chinese e-commerce giant Alibaba (NYSE: BABA) was making its debut on the New York stock market, Apple Inc’s (NASDAQ: AAPL) iPhone 6 and 6 Plus were making their debuts in Apple stores. However, in China things were different as both the stock investors and smartphone consumers were blocked from enjoying these with the rest of the world.

On September 9th, Smartphone consumers in countries such as US, Australia, Hong Kong and Japan were elated to hear that iPhone 6 and 6 plus would be available in their respective countries on September 19th. And since the smart devices made their debuts, consumers have been queuing in large numbers at Apple shops. The consumers in China have to wait a while longer as their country is not even listed among the countries where iPhone 6 and 6 Plus are to be shipped this month.

China Black Market

China has a huge appetite for Apple products, and this has led to massive growth of a well organised underground market. The market consists of rogue vendors and private individual willing to risk to take advantage of the thirsty market.

While iPhone 6 and 6 Plus have not been officially launched in China, approximately 5 millions units have already been smuggled into the country. This is according to research agency Counterpoint Research. Nevertheless, the devices are prohibitively expensive.

Over the years, the government of China has promoted local products at the expense of their foreign rivals. Pending the approval of the new iPhone models in China, the black market has thrived with a number of Chinese consumers flocking Hong Kong, Japan and Australia to smuggle these smartphone to their country.

Chinese consumers had to wait for 3 months for iPhone 5 to officially start selling in China. During this whole time, the black market offered them a backdoor to acquire the device, albeit at a higher price.

The hype and buzz surrounding the debuts of iPhone in China has often rejuvenated the market. When the iPhone 5 eventually launched in China in December 2012, 47.8 million units were sold.

Currently, a new iPhone 6 handset fetches as much as $5,000 in mainland China, while in Hong Kong it retails at about $1,300.  The same phone is just about $700 on Apple’s Hong Kong website. On the other hand, the Hong Kong vendors sell iPhone 6 Plus at about $3,600, which is more than double the price of its sister.

Conclusion

China’s black market has demonstrated how far people in China, where Apple trails local tech companies and Samsung in market share, are willing to go to get hands on the new iPhone. Isn’t this good news for Apple? However, it is up to the company to speed up its engagement with the Chinese government to sanction the sale of iPhone 6 and 6 Plus in this market, and help its consumers from being exploited by the black market. Until then, the grey market will continue to expand.

Apple introduce new encryption iOS 8 Software

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The new iOS 8 software will be able to encrypt user’s data by default

There have been several cases where Android users have lost their private information through hacking and other illegal means but this will soon be a thing of the past. Google and Apple are set to introduce a new mobile operating system that will be able to protect users’ private information through default encryption. This will make it impossible for anyone to access user’s information including Apple Company itself. Therefore even incidences of users’ private information being given to law enforcing authorities without their consent will no longer be there.

All mobile devices running the new iOS 8 software will be encrypted by default thus assuring protection to user’s data. Google and Apple have offered the encryption for quite some time now although many of the Android users were not aware of it and therefore were not running it on their devices.

Mr. Tim Cook, Apple’s boss, through an online message said that the company’s main commitment is to provide their clients with the greatest user experience without compromising their privacy. The new software will assure users their privacy as they use their mobile devices.

Clarification

Mr. Cook also emphasized that the new iOS 8 software is meant to improve customers’ privacy only and Apple will not use its clients’ private information to disseminate any advertisement information to them from Google or any other partners. He said that Apple does not use information stored by clients on their iPhone or iCloud to advertise to them nor do they read any messages or emails stores on users’ devices. He also said that Apple has a specific function for business advertisement called iAd, which users can disable.

Google announced their support on the default encryption saying that the encryption had been offered by Android for the past three years although it was not on default mode. Since the new encryption will be by default, Android users will not be required to turn it on.

Apple and Google are now following the footsteps of Blackberry which has offered default data encryption for quite some time. The move by the two companies to launch the new iOS 8 software comes following the leakage of some nude photos of celebrities over the internet in earlier September. Among those affected was Jennifer Lawrence and the leakage was attributed to iCloud storage services offered by Apple.

Law Enforcing Authorities   

With the new iOS 8 software, most US companies will also be secured against their private information being handed over to law enforcing authorities without their consent. Various US firms in technology industry including Google, Facebook, Microsoft, Dropbox and Twitter have been fighting against their private information being handed over to law enforcing authorities thus threatening their privacy.

David Emm, a researcher at Kaspersky Lab, told BBC that default encryption is more about privacy rather than protection. He said that with automatic encryption, it will be difficult for users’ private information to be accessed by third parties. He also clarified that the protection will only apply to data on Apple or Android devices, but any information stored on iCloud could still be accessed by law enforcing authorities.

Could it be time to sell Apple Shares?

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Right Time to Pull Back Apple Shares and bank profit

Apple is a steadfast enterprise and has reaped nearly $40 billion in the past twelve months, not to mention, on September 9 it unveiled fresh products including the large display iPhone 6 Plus, iPhone 6 Apple Pay, and Apple Watch. 55 analysts covering Apple rate it a buy, 10 rate it a hold, and 3 rate it a sell. Believably, the analysts with he hold or sell rating are correct and at that point I would be taking profits if I were a shareholder. Not that I don’t fancy sporting Apple products, at times that can well be frustrating; it is more a function of the facts I am going to detail below as they relate to the share price which stagnates at $101.66, pretty within $2 of its all time highs.

Waning Profit margin

The graph below illustrates the downtrend in Apple’s profit margin is a since 2012. Profit margin is the ratio of net income to revenues. For every $1 of revenues Apple retains roughly $.21, which is down from $.27 cents in 2012, an apparent 22% decrease.

High profit margins denote that a company has costs within reins. Multiple reasons could attest to Apple’s inflated cost based on the suppliers that Apple uses and the logistics that piece everything together. While the graph shows Apple’s a slight improvement of .64% in 2014 profit margin, it still clearly falls below 2012 levels; it is still too early to detect if the growth is meaningful or sustainable.

Falling Return on Assets

Aside the declining profit margin since 2012, as seen in the graph, Apple’s return on assets has taken a noose dive. Return on assets illustrates the efficiency of a company in using assets to create profit; it is the ratios of dollars earned to the dollars of assets a company controls. Apple earns less on its assets, falling down to a little over 18% in 2014 from over 31% in 2012. This trend of decrease implies profitability is deteriorating.

Diminishing Market Share

The past three years has seen Apple’s iOS market share for smartphones take a downtrend, while the key competitor rise steadily. The table below shows a comparison of smartphone’s market share between Apple iOS and Android.

Evidently the consumer is ditching Apple for Android and the gap is widening. Here are a few possibilities that could be behind the exodus:

  • Costly Apple products – there are a vast options of inexpensive Android smartphones in the market.
  • Apple’s rigid and closed ecosystem – Android is open and has multiple manufacturers.
  • Frustrating customer experience –examples, iOS is incompatible with Adobe Flash, Apple iPad lacks USB port or needs expensive proprietary connectors.
  • Apple’s customization possibilities are limited compared to Android

Apple’s Lousy Product Launch

I had detailed in a previous article why the Apple’s September product launch was uninspiring and lacking of zest. Instead of unleashing groundbreaking products, Apple sought to catch up with rivals or unveil “me-too” products. For example:

  • With the wide screen iPhone 6, Apple wanted to catch up with Samsung and other Android manufacturers
  • The Apple Watch was a “me-too” release as five other manufacturers had already announced and showcased smartwatches.
  • Apple Pay is another “me-too” unleashed late behind the Google Wallet and CurrentC.

Conclusion

To emphasize what came at the beginning of the article, Apple is a great company piling lots of cash. Based on iPhone pre-orders, current Apple consumers are definitely trading upwards for larger smartphones. However, the profit deterioration metrics, added to unstable market share and the lack of creative new products in respect to Apple’s current elevated share price predicts a notable pullback in the shares and investors taking profits.

iPhone 6 debuts alongside Apple Watch and Apple Pay

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Apple Watch and  iPhone 6 debuts bring mobile payment with them

Finally, Apple Inc. (NASDAQ: AAPL) has unveiled the iPhone 6, a larger handsets than its previous models. iPhone 6 is available in 4.7 inches (11.9cm) and 5.5 inches (14.0cm) models, a move that is directly aimed at preventing losing customers to the android platform that has seen its phone makers make such larger smartphone models. Also making their debut on the September 9th event are Apple Pay and the phenomenal Apple’s One More Thing, the iWatch. Here are the reviews of the three products unveiled by Apple yesterday:

iPhone 6 Features

Apple has conformed to its customers’ demand and finally it has delivered an iPhone with a larger than the traditional 4.5-inch screen. As a matter of fact, you’ll have a choice between the 4.7-inch iPhone 6 and the 5.5-inch iPhone 6 Plus. Physical appearance

  • iPhone 6 has a wafer-like metal design, curved lines and feels more like the iPod touch models.
  • Its body is larger, yet slimmer (6.9-millimeters thin), and has more rounded edges than its predecessors.
  • The company did not completely abandon Steve Job’s “fits into the palm” philosophy! The smaller model feels more massive but perfectly fits into the palm and allows you to navigate through the screen.  Even the 5.5-inch version can be controlled by one hand, thanks to iOS 8 capabilities.
  • Available in gold, silver and space gray colours.

Screen The smaller screen is larger than the previous models 4-inch screen. However, its 4.7 inches is still small considering the current large screen standards. The screen features include:

  • Retina HD display
  •  Has pixel density of 326p and 1080p for the 4.7-inch and 5.5-inch respectively.
  • The smaller iPhone has 1,334×750 pixels, while the larger, which by today’s standard is called the phablet has higher 1,334×750 pixels.

There are a lot more other features that I will review in my later, but now let us look into the other two products also unveiled yesterday. The iPhone 6 debuts in shops from September 19th.

The Apple Watch

The Apple Watch is Apple’s first product line since the demise of the legendary Apple founder Steve Jobs. The device could open another revenue front for the iPhone maker; however most of its functionalities are already offered by the iPhone. Perhaps Apple Watch’s selling point is its “digital crown” feature that allows users to magnify its contents or scroll through. To scroll or magnify contents, the user uses a dial on the watch’s side, and the same button acts as a home button when pressed inwards. Capabilities of the watch

  • Serve the functions of a heart rate monitor, thanks to its rear composition of LEDs and sensors.
  • It runs Siri, Apple’s voice control personal assistance service
  • It can display maps and issue notifications.
  • To prolong battery life, its apps can be processed on the iPhone
  • It comes with its own charging cable.
  • You can make contactless payment through Apple Pay services on the watch.

I’m still working on more about this watch. The watch will not be available for purchase until 2015.

Apple Pay

iPhone 6 and Apple Watch users will no longer have to use their credit cards for payments, thanks to the an NFC (near field communication) chip integrated in both the devices. To make payments, the either of the device is waved above an NFC reader at a shop’s till. While Apple has finally entered the contactless payments, analysts expected more. What’s the point of doing away with credit card wavering and replacing it iPhone or iWatch wavering? Many had expected a more sophisticated but easy to use payment system.

More to follow

There are a lot more about these two gadgets and the Apple Pay payments service that I would like us to delve into. However, let us save them for another day. The iPhone 6 debut alongside Apple Watch, or the iWatch as it is already  known, is likely to cause market jitters. Keep it here for every discovery around these Apple’s product lines.

Apple Payment Ecosystem on the Horizon

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Will Apple Launch a Payment Ecosystem on November 9 Event?

It is increasingly becoming evident that Apple Inc. (NASDAQ: AAPL) is going to venture into mobile payment ecosystem. The past few weeks has seen a number of sources claim that the much awaited iPhone 6 will have a mobile wallet or something of similar kind. So as investors and other stakeholders look forward to the September 9th event, the question they ask is will Apple unveil its payment ecosystem?

Apple has a glut of opportunities resulting from its massive credit card data. The data includes high user engagement metrics which positions the company strategically to venture into mobile payments. In fact, sometimes back Sanford Bernstein analysts suggested that the iPhone maker could pose a real challenge to eBay Inc’s (NASDAQ:EBAY) subsidiary PayPal.

Apple’s rumoured mobile Payment System

The rumours surrounding the possible launch of a payment system together with the new iPhone is based on a number of clues. They include:

Printed Circuit Board (PCB)

Experts have examined the leaked photos of the iPhone 6 PCB and have agreed that Near Field Communication Chip (NFC) is going to be used in iPhone 6. It is possible that the chip may also be used in the iWatch. NFC is combined with a host of other features including a larger RAM and a faster Wi-Fi component. These traits are in line with a  combination of patents associated with structures needed for a secure mobile payment ecosystem.

Apple recent Partnership deals

Bloomberg reported that Visa (NYSE:V), MasterCard (NYSE:MA) and American Express (NYSE:AXP) have entered an agreement with Apple an iPhone wallet deal that will be unveiled on September 9th.

What Mobile Payments means for Apple

While Google Inc’s (NASDAQ: GOOGL, GOOG) android has dominated the Smartphone market, the iPhone still commands the lead in the U.S. market. If Apple is introducing mobile payment service as expected, it is going to sweep the U.S. market by storm. This is according to Creative Strategies LLC’s analyst Ben Bajarin. He was responding to Bloomberg about Apple’s rumoured venture.

There are other players who have tried to introduce mobile payment system, though none has really seen the light.  However, Apple is known for its ingenuity and I’m certain that if its mobile wallet will take off, setting grounds for more players to join.

Apple has about 800 million global iTunes accounts, and it banks on this if indeed it is going to create its own payment ecosystem. PayPal has just over 152 million registered accounts but processed $180 billion worth of payments in 2013 generating $6.6 billion in revenues. If Apple will be turn a good number of its iTunes account holders to the ecosystem’s customers, the system is likely to pick up quickly. While this will not be easy, its rumoured partnerships with plastic card companies will help it in this quest.

Conclusion

It seems Apple has heeded to the mounting pressure on it to monetize its data by venturing into the payment market. In the past few weeks, there has been piling clues that September 9 may see iPhone users get a new payment ecosystem. Though it is not clear how exactly the iPhone maker is planning to do this, investing in mobile payment could be a real game changer.

12-inch iPad, 5.5-inch iPhone and the iWatch

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12.9-inch ipad joins large display iPhone and iWatch in Apple’s pipeline

Just a couple months after Apple Inc. (NASDAQ: AAPL) signed a deal with International Business Machines (NASDAQ: IBM), now Apple is set to produce a 12.9-inch iPad, its largest ever tablet. The move is part of the general plan to rescue the declining sales of Apple’s second revenue generator.

iPad sales have been declining for two straight quarters and the iPhone-maker, courtesy of the partnership with IBM, is now targeting enterprise customers. It appears that the larger tablet would be a perfect replacement for laptops that these enterprises have been using. The current iPad are sized 9.7″ and 7.9″.

As reported by Bloomberg, the production of the 12-inch iPad will begin early next year.

Apple’s product pipeline is already busy with the company expected to release iPhones with larger display at Sep. 9 iPhone event. Also there are unconfirmed reports that the company may also unveil its first wearable.

The Wearable device

Re/code’s John Paczkowski is reporting that on September 9, at the iPhone 6 unveiling event, Apple will also unveil its new wearable. However, he does not name the wearable.

Paczkowski is well known to be privy to Apple affairs. His track record speaks for itself and anything he says regarding the company’s pipeline is taken seriously. He is the one who hinted the Sep. 9 iPhone event date.

While he avoided using the term “iWatch”, all the hints points towards it. He says in the report that the wearable will “make good use” of HealthKit and HomeKit platforms. iWatch features have often been associated with these two platforms that have been recently launched. So it is pretty obvious that the wearable device is an iWatch.

The iWatch

Earlier reports indicated that 3-5 million units of iWatch will be produced per month at the onset. The device will be available in multiple models including one with sapphire cover glass and at least 10 sensors for monitoring health and fitness parameters. Nevertheless, all the models are expected to have a flexible OLED display.

The iPhone 6

iPhone 6 has been tipped to be the game changer for Apple. The tech giant is expected to reclaim part of its market share lost to Samsung when it launches this next generation of iPhones.  It is expected that other than the larger display, iPhone 6 will have a powerful A8 processor.

In the previous quarter, Apple registered strong revenue growth in China, a country where a 5.5 inches iPhone model would definitely do well. Apple saw its revenue jump 28% year over year in this country, with iPad sales leading the growth with 51%. iPhone sales were 48% higher than the previous year, thanks to the tech giant’s partnership with China Mobile.

While China is key to Apple’s growth, I don’t know what the future might hold for this market after Beijing reprimanded its mobile carriers to stop subsidizing foreign brands. Nevertheless, iPhones with larger screens will attract huge demand and perhaps register a recording breaking sales growth.

The company has been reinventing itself to claim its market dominance in the smartphone market. While this is not easy given Google Inc.’s (NASDAQ: GOOG, GOOGL) Android dominance, Apple can yet again distinguish itself as the number one brand for the affluent.

Conclusion

Apple’s pipeline is the major reason why the stock has rallied to trade over $100. After a successful quarter, Apple is not resting on its laurels. The company has studied the market and is working on product lines to continue driving this growth. The 12-inch iPad, the 5.5-inch iPhone 6 and the iWatch might all be game changers in their respective markets.

AAPL Records a new 52-Week High

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After recording a new high, how long can AAPLE hold on at over $100?

Apple Inc. (NASDAQ: AAPL) today has recorded its new 52-week high of $101. 09. Thanks to the hype of the iPhone 6’s eminent launch, and other products in the pipeline, AAPL has had a bullish run and is expected to topple the Sept. 19, 2012 split-adjusted record of $100.30.

The bullish run has seen Apple trade over 53,450 shares over the last three months and gaining about 40.1%  from August last year to date. Generally, since January last year the stock has gained 27.3%, yet analysts are still declaring AAPL a buy, just like last time. Will the stock hold on trading at over $100, or is it headed for another precipitous fall?

AAPL 2012’s abrupt fall and the current Rally

In 2012, Apple’s run was built around the then eminent release of iPhone 5, like it is happening again with iPhone 6. However, iPhone 5that was competing with the Samsung debutant Galaxy S3.The Samsung flagship had been released in May that year, and it was the first Google Inc.’s (NASDAQ: GOOGL) android phone made to counter iPhone’s dominance. S3 had set the bar so high that iPhone 5 fall shot and performed miserably. The Steve Jobs’ factor was also still in play, as many investors thought that the company was hollow without his hit products ideas.

The current situation is very different. Smartphone users are not only waiting for the release of the Steve Jobs’ phenomenal “…one last thing”, but the Smartphone that will address areas where Apple has not been getting it right. The phone expected to have larger display made from Sapphire Glass. What’s more, there are other products in the pipeline that are scheduled for release. These products include the iWatch and iPad Air.

Besides Apple’s pipeline, the other factors that have helped the price rally include:

Stock buyback plan: The iPhone maker has been buying back its stock since June 2013. Its CEO, Tim Cook announced in early February that they had bout back shares worth $14 billion in less than two weeks. In April the company added $30 billion to the plan and also raised its dividends. Its board raised the purchased plan budget from the $60 billion a year earlier to $90.

Expansion in emerging markets: Apple saw its iPhone sales shoot up 55% year over year in the Brazil, Russia, India and China (BRIC countries) during its just ended quarter. Its partnership with China Mobile was to thank for this. However, there are emerging reports in China that Beijing has ordered the three government back Telco’s, China Mobile included, to sever links foreign mobile manufacturers to help the local companies. This might affect iPhone prices, as the carrier had subsidized the smartphones. This might be a huge blow to not only Apple, but also its close rival Samsung.

Partnership with IBM: Apples partnership with International Business Machines (NASDAQ: IBM) caught many by surprise but it has been held with high regards. The partnership is expended to rescue iPad’s floundering sales. The tablet, Apple’s second most valuable product, has continued to perform a miserably. However, the upcoming iPad Air 2 that has  Microsoft (NASDAQ: MSFT) Office is expected to have a long term adoption among business enterprises courtesy of the partnership

Conclusion

This is not the first time Apple has topped $100 a share.  Its record high came in September 2012 and after which the stock dipped to below $400 while analysts expected it to run past $1000 mark. Many analysts believe the current situation is different, but is rally different?

Cheap iPhones could be growth drivers

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The World Need Cheap iPhones, Will Apple Listen?

On July 22, Apple Inc. (NASDAQ: AAPL) released its quarterly earnings report displaying a strong performance. With iPad, Apple’s second most important product, sales dwindling, much of this strong performance was down to the iPhone.

In the quarter the company shipped close to 35 million iPhones, which is 12.7% increase compared to a year earlier. Nevertheless, the iPhone revenue growth was slightly lower, standing at 9%. In the quarter, the iPhone had a mix of cheap lower-end (iPhone 5C and 4C) and premium handsets. So while the increased sales was driven by the high-end 5S, the blend of lower-end models played a great deal in helping the company gain traction in the emerging markets.

When I say cheap lower-end handsets, you might be tempted to think that they are indeed cheap. But how cheap is $500 for a low-end iPhone?

China Market: Samsung Loses its Market Leadership

Chinese smartphone maker Xiomi is now the leading vendor in China with over 12.5% stake tightly followed by Lenovo with also over 12%. The two Chinese companies have both overtaken Samsung, which is currently ranked 5th in the market with 9.8 % stake down from 18.5%.

In emerging markets, price is far much important than the brand reputation or its technology.  Lower-priced handset models continue to dominate the market at the expense of pricy ones. This explains why Samsung is no longer the market leader in China.

While in the last quarter iPhone sales were tremendous in China, Apple brand is specifically for the affluent. Since the local smartphone vendors give their customers a perfect blend of price and tech knowledge to win the home market, Apple has been reduced to a niche mobile phone dealer.  But China is a booming Smartphone market Apple cannot afford to ignore.

Why Apple needs cheap iPhones

The late Steve Jobs, Apple co-founder and Tim Cook’s predecessor, instilled “obsession with quality” into the DNA of this company. To Apple, there is nothing like average product but the best one. For a long time now, the company has been creating premium products and getting the best out of its customers’ wallets.  But how long can it keep doing this?

During the reign of Jobs, Google Inc. (NASDAQ: GOOG) had hardly set foot in the Smartphone market. Nobody knew Android would become world’s leading mobile platform. To remind myself how the situation was then, I watched a December 2009 CNBC documentary dubbed “Inside the Mind of Google”.  The narrator Maria Bartiromo says:

“…but it will still be a struggle for Google Android to challenge the  “800-lb gorilla of mobile phones, Apple!”

But isn’t this statement quite similar to Bill Gates’ alleged comment “640-K ought to be enough for anybody”?

Now Google Android has dominated the Smartphone market, thanks to price differentiation offered by Android phone makers. With a gross margin of between 49% and 58%, iPhone could still be sold at cheaper price without causing any harm to the company’s profitability. What’s more cheaper iPhones would attract more buyers fending off competition.

Bottom Line

It is obvious that price is a critical driver in the shift of balance in the battle to control the smartphone market. But since even Apple’s lower-end handset is not all that cheap, price does not favour Apple. And this is why it needs to work on cutting down the prices of its mid-tier iPhones.

iPhone 6 Release Date Uncertainities

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iPhone 6 Rumours and the September Apple Event

Technology news site Re/code has reported that Apple Inc. (NASDAQ: AAPL) will launch its iPhone 6, rumoured to be with larger screens, on Tuesday September 9. The report further suggests that the smartphones could be available on the market by Friday, September 19. The site claims its sources are people close to Apple hierarchy, and the reports have widely been accepted with little or no doubts.

Apple has already declined to comment on this report, but the September launch date is consistent with its strategy for the previous launches of its flagship smartphones. The announcements often come in between early and mid of the said month, and a few weeks later the product is often on sale.

While these may be just rumours, the Re/code’s reporter John Paczkowski has proven track record on divulging Apple launch dates, and therefore it cannot be ignored.

October iPhone 6 Release Date Rumours

MacRumors last week reported that iPhone 6 release will be delayed until October 14th. However, the report also concurs that the iphone maker could launch the phone in September.

The October report has been received with a nagging thought, however. October is a rather busy week for Apple. It releases its Q4 earnings report then and it has other products in the pipeline to release too that are likely to be launched in the same month. Apple has for a long time been known to separate its product launches, to give each product its shining moment. Therefore, it would be imaginary to believe the company would cram all these activities in just October.  Other products in the pipeline and which are also highly anticipated include the iWatch and a new iPad model.

Uncertainties Surround iPhone 6 phablet version

Apple is being expected to concurrently release two versions of iPhone 6, the 5.5-inch premium phablet and the typical sized handset with 4.7-inch display. However, it is emerging that the company is experiencing problems with its suggested Sapphire Glass, which it intended to use for its new larger version of iPhone 6.  Reports suggest that the phablet could be delayed to as far as 2015.

If this is true, it could spell doom for the iphone maker as the main attraction for the new iphone would be larger screens, as the company seeks to poach some of Samsung’s (OTC:SSNLF) customers who have preferred the Galaxy series  over the iphone. Nevertheless, Apple has been silent over the matter and it would be premature to arrive at conclusion. The iphone 6 release date is still a matter open to speculation as no precise release schedule has been put in place.

Expected iPhone 6 Features

Here are the expected new features of the iPhone 6, other than the 4.7″ or 5.5″ display:

  • Sapphire cover glass
  • Optical image stabilization
  • An NFC radio
  • Wirelesss charging
  • Cat-6 LTE (theoretical max speeds of 300Mbps)

The price of this new iPhone model is expected to be high, but Apple still expected to do very well with its release as its customer thirst for new iPhone override the need for lower prices. The company is said to be negotiating for $100 price hike to offset the increased costs of production of the bigger device.

The company has ordered production of 70 million and 80 million units combined of the new iPhones, and analysts have predicted that iPhone 6 will outsell all the previous iPhone models.

Mac Sales Growth Key to Apple’s Diversification

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Dwindling iPad Sales may pave way for Mac to be second in command

Last week Apple Inc. (NASDAQ: AAPL) revealed its third quarter earnings showing a strong revenue growth, thanks to increasing demand of iPhones in China. The surprise of the quarter was the 13% Mac sales annual growth.

When Steve Jobs and Steve Wozniak co-founded Apple, Mac was its only product. The product has since been outwitted by other revolutionary products from the company, including the iPhone, iPad and iPod. But due to declining sales of iPod, now Mac sales only trails that of iPhone and it is merely 6% shy that of iPad. So as it is turning out, Mac is continuingly becoming an important player in Apple’s ecosystem as far as product diversification is concerned.

Mac Sales are Growing amid a Declining PC Market

The Q3 2014 earnings report indicated that the iPhone continues to dominate as the company’s main product. The company sold at least 35 million iPhones, 13 million iPads, 4.4 million Macs and 2.9 million iPods.

However, it is the Mac that drew much attention owing to the fact that it registered a 13% growth in sales in a PC market that is in a steady decline. Much of the growth was witnessed in China where the Mac managed a whooping 39% growth, at a time when the China’s PC market declined by 10%.

In the first quarter, after Microsoft (NASDAQ:MSFT) announced that it will stop supporting Windows XP, there was unexpected ramp in PC sales. It is obvious that people were replacing their Window PCs. The announcement reduced the predicted decline rate of the PC market by over 5%, as the then the market only saw a 2% decline. But even then Mac managed to generate yet another market share growth. In fact, over the past 8 years, Mac has registered growth in each an every quarter, registering about 18% increase in sales.

Reason behind Mac’s Success

  • Apple has an unmatched ecosystem and makes incredible computers. iPhone and iPad users are the force behind the success of Mac, as the more people buy these Apple’s top two most popular products, the more people are inclined to acquire Macs. Powerful integration of the two products with Mac is the greatest allure. Like when OS X Yosemite will be launched, iPhone and iPad owners will be able to start activities on their mobile devices and continue doing them in their Mac, thanks to the new attribute dubbed “Continuity”.
  • In the recent past, Apple cut down the prices of Mac. In fact, it is this affordability that has made Mac to register incredible growth in the company’s third quarter. Mac has further been refreshed with relative affordability. The most powerful 15″ retina Pro model now goes for $2499.

Future Prospects of Mac

Apple relies heavily on iPhone as its primary product, and God forbid should anything happen to this product, the company may tumble. You saw how Samsung innovative product Galaxy S3 did to iPhone. Therefore, Apple needs another product that may cushion it from the market shocks. Though underestimated, Mac could be that product.

PCs are long-term investment that people don’t change as fast as they change their smartphones. This is why the PC market is struggling. Mac has endured a rough market terrain to deliver growth in 32 out of the previous 33 quarters.  And with the demand of iPad dwindling, Mac is almost catching up and it may be soon Apple’s number 2, trailing only the iPhone.