Piper Jaffray Expects The iPhone 5S And 5C To Generate Earnings Growth In The March Quarter

Piper Jaffray Expects The iPhone 5S And 5C To Generate Earnings Growth In The March Quarter 

ene Munster, senior research analyst at Piper Jaffray, has a $655 price target for Apple AAPL +1.45%. He put out a note with his expectations for the next iPhone announcement along with thoughts on additional new products from Apple over the next year since there have been numerous reports that Apple will announce new iPhones on Tuesday, September 10. (Note that my family and I own Apple shares).

The iPhone 5.  (Image credit: Getty Images for Telecom via @daylife)

Munster expects an iPhone 5S and cheaper iPhone (I’d say mid-priced since along the lines of the iPad Mini Apple will probably lean to a higher price vs. lower one) to be announced in September, an iPad update in October, a TV announcement late in the year and a larger screen iPhone and iWatch in mid-2014.

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iPhone expectations

I would agree that it makes sense to announce a 5S and the rumored 5C phone together as for one reason you want to make sure they are positioned against each other as well as you can. That is easier to do at the same time vs. separate events.

Munster estimates that 70% of fiscal 2014 iPhone sales will come from upgrades of previous iPhones which provides some stability to revenue and earnings projections. He projects that the company should have flat EPS in the December quarter compared to a year ago at $13.82 vs. last years $13.81 and have a 15% increase in the March 2014 quarter to $11.57.  The average sell-side EPS is $13.38 for the December quarter and $10.49 in the March 2014 quarter.

The key to Apple’s results will be its gross margin with the Street having it stabilize around 36% over the next two years. If Apple can price the 5C well enough to generate decent margins but not cannibalize too many 5S’ then earnings will not just stabilize but have a chance to move higher.

Munster is expecting that the lower priced iPhone will only have a 15% gross margin and cannibalize 25% of typical iPhones vs. a prior expectation of 50%. While Apple may go as low as 15% gross margins I believe that is a fairly conservative number (as does Munster) but I do think that the cannibalization rate could be higher than his projected 25% (I would expect more in the range of 30% to 40%). The keys will be in which countries and what carriers offer it, how limited in functionality it is such as 3G but no 4G connectivity and other lower tech specs such as smaller screen, slower processor, camera and memory.

I’m not convinced a plastic case will be as big a turnoff as some seem to think. Apple doesn’t do cheap (meaning the 5C will still feel solid) and other smartphone vendors seem to be doing quite well with plastic phones.

To determine how many users will upgrade to the next phone Munster assumes after a two year contract that 80% to 90% stay with the iPhone family (feels like a reasonable assumption to me) and that they upgrade over the next year (I would assume a lower rate than the 100% conversion he uses). Based on 125 million iPhones sold in fiscal 2012 and using the mid-point retention rate he projects that there will be 106 million iPhones bought by existing users. With an overall iPhone estimate of 152 million Munster expects that 70% of the fiscal 2014’s iPhone sales are “in the bag”.

iPad and other new products

It probably works better to have a separate event to announce new iPads. It generates more buzz and the company can focus its resources on the iPhone and iPad to maximum effect by holding them on different dates. It also makes it easier on their manufacturing partners so that they are not having to ramp production of multiple products at the same time.

The wild cards are new product categories that Apple’s CEO Tim Cook has alluded to as I don’t think his pronouncements about new products are limited to iPhones and iPads. I expect a larger screen iPhone next year (and you have to assume that Apple is feverously working on it due to share loss). Since it is easier to change the internal workings of a phone vs. altering the total size of one the company is on a yearly cadence for upgrades but is slower than one would like when it comes to a new form factor.

Munster has speculated on a TV for few years and hedges he bet (70% odds) of a first half launch in 2014. With a price tag of $1,500 to $2,000 I would estimate that Apple’s share of the market will be fewer than the 10 million unit potential (or 9% market share) Munster foresees (but does not include in his financial projections).

A wearable device is the other product line that gets a lot of press. However, I’m not convinced a $150 device (typical pricing for these items currently) will have a huge uptake unless it either delivers some very interesting functionality beyond how many calories or Fuel Units I expend or becomes an visible accessory that people want to show off (similar to the white ear buds the iPod had). 

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Posted at 9:35 AM |  by Unknown

BlackBerry hits 88MPH, goes back to the future with NEW old 9720 mobe

Brainwave: Crank out a cheap QWERTY BB7 phone for Asia, Latin America

BlackBerry has announced a new phone for emerging markets: the BlackBerry 9720. It's not part of the shiny new BlackBerry OS 10 line-up of mobiles because it's powered by the ancient BlackBerry 7 OS, which last saw action in 2011.

It's the consequence of a mismatch between BlackBerry's swanky modern QNX-based operating system and the company's customers. BB OS 10 requires devices with 2GB of memory and a dual-core processor to run all its bells and whistles; the sort of hardware that sports a mid to high-end price tag.

However plenty of BlackBerry's punters can't afford that: those expecting low-cost handsets in emerging markets. While BlackBerry promised that BB OS 10 would be available across all price points in 2013, it hasn't been able to come up with the goods. Even the cheapest of the three BB OS 10 devices released to date -the Q5 - is still far too expensive to appeal to the $150 segment: it costs about £290 SIM-free in the UK (that's about $450 in the US).

Hence, the volte face. The 9720 will not be available in the West but in Asia and Latin America. It's a QWERTY handset with thumbpad and 2.8-inch screen similar to the low-cost Curve range, and sports a built-in FM radio. It has a 320 x 480 pixel display, an 800MHz processor with 512MB RAM, 5Mp camera and a 1,450mAh battery.

Its ancient OS has been tweaked to allow access to BlackBerry Messenger, FaceBook and Twitter. BlackBerry would rather not devote resources to its legacy OS, but has little other choice.

BB OS 10 turned out to be too much for BlackBerry's PlayBook, too. Having promised owners of the tablet a new version of the operating system, BB CEO Thorsten Heins announced the slab was being discontinued, in part owing to the poor performance of the OS.

The company, which has watched its market share nosedive in just five years, announced it was up for grabs yesterday. ®BlackBerry hits 88MPH, goes back to the future with NEW old 9720 mobe

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Posted at 9:32 AM |  by Unknown

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Microsoft takes a U-turn again, says Xbox One will work even without Kinect

• Anupam Saxena, August 13, 2013

  

  It looks like Microsoft is taking another U-turn by clarifying that its new Xbox One console will even work without plugging in the new Kinect sensor.
  
  In an interview with IGN, Microsoft's Marc Whitten, Chief Xbox One Platform Architect, responded to a question on whether the console would work even without the Kinect sensor plugged in, saying that it would indeed function but features that make use of the sensor won't work. He explained,"That said, like online, the console will still function if Kinect isn't plugged in, although you won't be able to use any feature or experience that explicitly uses the sensor."
  
  Previously, Microsoft had mentioned that the Xbox One will not function without the Kinect sensor, as noted by an IGN report. 
  
  Xbox's UK marketing director Harvey Eagle had said that "Kinect does require to be connected to Xbox One in all cases, yes."
  
  It's interesting to note that Microsoft includes Kinect in the standard Xbox One package, which implies it's not optional. The Xbox One costs $500, and one of the reasons given for the high price is the inclusion of the Kinect sensor. It's worth noting that PlayStation 4, Xbox One's competitor in the next-generation gaming console wars, does not include a bundled motion sensor, and is priced $100 cheaper than Microsoft' console. (Also see: PS4 priced $100 cheaper than Xbox One)
  
  Whitten also informed that users will get the ability to completely turn the sensor off in the console's settings. In this mode, the sensor will not collect any information but the console will support using the sensor for IR blasting. Also, if the user tries to access any feature that requires Kinect functionality, the console will prompt the user to turn it back on.
  
  Microsoft had also clarified earlier that a simple "Xbox off" voice command, will switch off Kinect while users enjoy the entertainment features of the console and the only command that the sensor will recognise that time would be "Xbox on". Users could even switch off this feature, if they wished to. 
  
  It's not the first time that Microsoft has retracted from its original stance with the Xbox One. In June, Microsoft took a U-turn by backing off plans for the Xbox One consoles to require constant Internet connections and put restrictions on playing second-hand disk games after wide spread outrage among the media and gaming community and the good response to PlayStation 4 pre bookings that does not have any such restrictions.http://gadgets.ndtv.com/games/news/microsoft-takes-a-u-turn-again-says-xbox-one-will-work-even-without-kinect-405334

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Posted at 9:31 AM |  by Unknown

microsoft is dead!!

             Is Microsoft going towards death??

sources claimed that the new interface of windows 8 and windows 8 OS mobile are badly exposed due to their less effectiveness and less ease of user interface.it was executed badly and now results are revealing due to Microsoft journey towards failure. Microsoft was under serious consequences  of market appreciation and sale of Samsung and apple which was touching to new glories.it is important now that will Microsoft survive or nor??.

the bloggers answered that it depends upon now approach of Microsoft. If Microsoft attracted the consumers and they gave them what they want then Microsoft will survive otherwise it will lead him to his death. The world's biggest IT tycoon now is fighting the war of his existence due to failure of policies. Market analysts claimed that nothing have been left for Microsoft in market. After badly rejected by customers and industry due to better policies of his rivals Microsoft can cause the wall street to crash if the same circumstances sustain in information technology market.

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Posted at 3:55 AM |  by Unknown