Posts Tagged ‘Apple’

Apple (AAPL) reports after the bell today.

Everyone expects a miss.  Lots of people have already significantly cut iPhone and rev estimates.  The stock has already fallen about 10% (correction territory) in just the last two weeks… so a lot of negativity is already priced in.

On the other hand, what’s NOT priced in are two biggies:

(1)  Apple is going to talk about what it’s going to do with its MASSIVE repatriated cash horde.

I think this is going to be stunning… since I believe it may be the LARGEST cash repatriation EVER for a corporation.

All kinds of stock-positive things will be discussed… like significantly raising the dividend… or massively increasing buy backs… and so on.

So this will be a positive.

(2)  The market is so totally fixated on iPhone that it sometimes forgets that Apple has other massive businesses, too… like services… like Mac… like iPad… and so on.  And like the rest of tech this quarter, I think those will surprise to the upside as well.

So, my thoughts are these:

The bad news about iPhone is already mostly priced in, which I think minimizes or eliminates the downside.

The good news about repatriated cash usage and all the other Apple businesses are NOT priced in.

So I tend to think they’ll be more of an upside surprise than not.  Which is counter to the way everyone’s going into this earnings call.  As a contrarian, that’s scary but what I like as an investor.


I remember the first Gulf War back in 1991.  The entire world was freaked out, including — especially — the financial markets.

Yet, the day we attacked, the Dow had one of its best days ever.

I remember hearing the phrase, “flight to quality.”  That is, when the going gets scary, the smart move to safe and trustworthy investments.

On that January 18th day back in 1991, it was IBM that people flocked to… IBM being, back then, the most important tech company on the planet.

Over the last few days, it’s been AAPL.

I think this puts a lot of the nitpicking criticisms of AAPL in appropriate perspective:  When the going is tough, the tough don’t hesitate to flock to Apple.

Lots of downgrades for Apple over the last few weeks.  The stock was spooked from a $180 level just two weeks ago to around $166 today.

It has nothing to do with the holiday quarter that Apple is going to report on tomorrow after the market’s close… that, people believe, will come in at record levels.

No, it has to do with how the iPhone X is selling this quarter.  Channel checks with suppliers indicate Apple is slashing its expectations of iPhone X sales this quarter… by as much as half

… which certainly seems like a huge let down given that the iPhone X is supposed to be the flagship product and the first iPhone to crack the $1,000 price barrier.

But… come on, people… did you really think a $1,000 iPhone X should sell in consumer numbers?  It’s not supposed to be a volume leader… rather, it’s supposed to be something exclusive and, quite frankly, unattainable for many.

That’s the whole point… to have a high-end iPhone entrant that (1) makes the device/technology more desirable, and (2) contributes in some way to an even higher overall iPhone family “ASP” or Average Selling Price (which is already the highest in the industry).

My guess is — since there are no negative reports on the iPhone 8 — that it’s not only selling well, but making up for any short-fall from the iPhone X… after all, if they’re not buying an iPhone X, they’re buying one of the other not-so-cheap models.

Additionally, don’t be surprised if some of Apple’s “smaller” businesses — like cloud & other services — make meaningful contributions, too.  Even the analysts that have raised flags on the iPhone X agree that last quarter should be pretty spectacular for the company.

And, finally, I always have to throw in the irrationality of the market:  Apple, one of the most stellar tech companies in the world according to any measure (even growth), has a P/E of 14.2 forward earnings… while the average company in the S&P 500 has 18.6.  If you’re looking at tech leaders, Google has a forward P/E of 28… and Amazon has — wait for it — 168.  Go figure.

AAPL has been beaten down so much by negative sentiment in the last few weeks that I think we might have a nice setup for a pop after earnings tomorrow.

At least, that’s what the contrarian in me thinks.

Long-time marketing/sales/tech guy Bill Campbell passed yesterday.

Not a lot of people outside Silicon Valley knew him… but everyone inside did.  Among his many business feats, he somehow managed to play significant roles at arguably the two most important — and competitive — technology companies in the world, Apple and Google… at the same time!  If ever there was a testament to how good Bill was — or how much influence he had in Silicon Valley — that’s it.

As significant, Bill was very active in the Sacred Heart community (where my daughter goes to school)… not just donating (which he did a LOT of), but participating, too… indeed, he coached a generation of “powder puff” girl football players.  Sadly my daughter will have missed the coaching-experience-of-a-lifetime by just a year.

I always chuckle when I think how I met Bill.  It was at a big Macworld party.  At the urinal.  Just two guys having a simple chat.  No stranger to a locker room, Bill was absolutely a guy’s guy.

I met with Bill in (ahem) a more professional environment when he took over the Claris division of Apple.  My T/Maker business partner Heidi Roizen and I pitched Bill on making our award-winning word processor, WriteNow For Macintosh, the upgrade to MacWrite.  At one point during the conversation Bill took us on a tour of Claris’ new headquarters… mostly empty because the spin-out was brand new… and mostly there were just IT and facilities folks walking around.  What impressed me about Bill was he knew everyone by name… essentially the “little” people… and true to his coaching reputation, high-fived several of them as we walked by.

He just seemed like someone you wanted to play for… err, I mean, work for.

Nothing came of the conversations, but we stayed in touch.  Bill asked me to serve on the board of Great Plains Software (eventually acquired by Microsoft) and, unfortunately, I was in the process of taking a company public and felt I couldn’t short-change my shareholders, things were so incredibly, incredibly hectic.  On top of that Laurie’s dad was in the process of passing away.  Reluctantly, and hesitantly, I explained all of this to him… and to my great relief he couldn’t have been more gracious — and supportive — in his understanding… it was easy to see why he was a true elder statesman.

Our paths would cross from time to time.  Ironically, about 25 years after my Claris meeting, I was cleaning out my basement and found an old WriteNow t-shirt… to which I proudly wore to the next sporting event at Sacred Heart.  As luck would have it, I ran into Bill… and without skipping a beat, he pointed at my t-shirt and laughed, saying something like, “it’s still going strong after all these years!”  Goodness knows he’s had a lot more important things on his mind between then and now… but it brought such a smile to my face that he remembered.

Here’s to someone who went strong for 75 years.  Rest in peace, Coach.

Everyone has already heard that Apple is going to split their stock 7-for-1 on June 2.

People say that it really makes no difference, that it’s purely optical… other than it making some investors feel more affordable.

Well, psychologically speaking, isn’t that a big deal?

But there is also another terrific reason to split a stock… and it surprises me that no one ever discusses it.

Generally speaking, a small beat may or may not drive a stock’s price up… but a small miss is generally a disaster.  Which means a stock with a high price is much more likely to be negatively influenced by a small miss than a stock with a more reasonable price.

Here’s an example:

On April 16th, Google traded at $556.54.  They announced net earnings of $6.27 per share… vs. analysts expectations of $6.44 per share.

Looks like they missed by 17 cents and the stock was down more than $20 the next day… and has slipped even more in the weeks following… a shame for such a stellar quarter.

Had Google split its stock 10-to-1… such that the April 16th share price was $55.65… such that net earnings were $0.63 vs. an expectation of $0.64… because of rounding the miss would have only been one cent … certainly something that feels a lot less.

(There’s that word again — feels — lest we not forget that emotion is a huge factor in short term stock performance.)

Better, without being buried under more ominous headlines, the positive aspects of GOOG’s quarter — of which there were many — may have had more of a chance of being appreciated.

So, I’m very happy Apple is splitting its stock…

… EXCEPT… 7-to-1?  That’s the silliest ratio in the world… 10-to-1 would make TONS more sense… as well as allow for easy comparisons with previous years — we all can divide exactly by 10 in our heads… but I don’t know anyone that can divide 7 consistently in any kind of exact way.

I asked someone in Apple finance what was the story with 7-to-1 and got a, “I have no idea, either!” glance.

Ugh.  I wonder if it’s too late for Apple to fix this?  While I love that AAPL is splitting, it really is absolutely, positively the most silly split ratio ever.

I haven’t had my socks knocked off in a while.

But, I just read a piece from Nat Brown, the founder of the original xBox project at Microsoft… discussing what could torpedo all the game platforms.

Apple TV can.


Like everyone else, I thought of Apple TV as being the coolest looking TV ever… something that would have mind-blowing sound… something that would play iTunes movies and music really well… something that could take a reasonable-sized chunk of the TV sales away traditional vendors like Sony and Panasonic.

I think that’s what everybody else has been thinking, too.  At least, that’s the way all the reports read up to this point.

But — DUH — that’s NOT what Apple TV will be about… it will really be an app platform.

And that changes everything.

The iPhone wasn’t just another cell phone… it was a platform for a zillion developers to turn the cell phone into a brand new experience that disrupted the entire global cell phone industry.

The iPad wasn’t just another tablet computer… it was a platform for another zillion developers (including iPhone developers) to turn the tablet computer into a brand new experience that disrupted the entire global computer industry.

Which means Apple TV (iTV?) won’t be just another cool-looking TV…

… it will be a platform for yet another zillion developers (including iPhone and iPad developers) to turn the proverbial “boob tube” into a brand new experience that will completely and utterly disrupt global TV manufacturers, broadcast media conglomerates, advertising, gaming console, and cable companies alike.  (Did I leave anyone out?  I probably did.)

Wow.  Now that’s a cool thing.

What do I mean by brand new experience?  Who knows, that’s the point!  Who would have ever thunk the clumsy little clam shell cell phone and clunky tablet computer would be doing what they are today?

Bottomline:  Will Apple disrupt yet another massive market?  Yep, there’s going to be an app for that, too.

Steve Jobs passed away this afternoon.

What can you say about a guy that will be remembered in history books for the rest of time?

What I’ve always said about Steve:

He is the only person I know that is everything anyone has ever said about him… all the insanely great, over-the-top stuff… and all the “mercurial” comments, too.

I remember the first time I ever heard Steve speak… he gave a talk at the Stanford Business School… and — honest to God — I was so fired up after listening to him that I was — physically — buzzing… I immediately parked myself in the library and for the next hour or so wrote down everything I could remember about his talk and everything I was thinking and feeling.  I wanted to capture the way I was feeling forever.

To this day, I have never been affect more by a speech in my entire life… it was my first exposure to true, pure, unadulterated charisma.

It wouldn’t be the last, though.

I, somehow, was placed in the second row — dead center stage — sitting exactly behind Ross Perot and Steve’s then recently acknowledged daughter Lisa — during the NeXT Computer unveiling in 1988.  (Thanks, Dan’l!)

Steve killed that day, too.  As he did throughout his entire career, Steve knew how to turn on the magic like no one else.

Years before the NeXT introduction, I came to work with Steve at my old company, T/Maker.

We published a software product of his… and wanted to know what he thought of a tentative name, WriteNow.  He — amazingly — loved the name… which, apparently, was quite a shocker because everyone at NeXT said Steve was going to hate anything we came up with.

Our jubilation turned to horror, though:  That name was taken by not one but two other companies.

We told Steve we couldn’t use the name and he said, “tough, it’s perfect, get it.”

I spent the next three months of my life convincing and cajoling and pleading and negotiating.  And in the end, even though we had no legs to stand on, we got the name… just like Steve knew we would.

During those days Steve was definitely a study in contrasts.  He could be extraordinarily tight-fisted… then turn around and pay designer Paul Rand $100K — a fortune back then — for the NeXT logo… its claim to fame, of course, the small, soft “e” — emphasizing “education” — sitting next to the other three big, stark, cap letters.

And that was worth $100K??

Didn’t matter… as always, image — branding — was everything.

I got in one drag-down, knock-down argument with Steve… so I can say with absolute first-hand knowledge that he could pull strings in you that you didn’t even know you had.

When he finally realized he was barking up the wrong tree, he, somehow, masterfully, nimbly, simply changed the entire cadence of the conversation, making it somehow feel like he wasn’t the biggest jerk in the world, but rather, that we arrived in a good spot and were better off having “discussed the issues.”

Later I came to understand this was just Steve’s way… he would push hard, many times unreasonably, just to see if there was anything else he could learn… and, secretly, even perversely, to see how you would respond.

To this day I haven’t really reconciled how I felt about the episode.  It was incredibly frustrating… but also incredibly thrilling.

Two things, though, became incredibly clear:  (1) you simply could not be anything but at the top of your game around him, because (2) Steve was probably the most difficult person in the world to work with.

No doubt, he did get incredibly great things out of people.

But, unfortunately, that always came at a great price.

When brute force failed, Steve could, reluctantly, switch gears.

Steve had pummeled us in contract negotiations at T/Maker… basically got 98% of everything he wanted… except for one, tiny little thing.  Go figure, that one, tiny little thing reared its ugly head.  Instead of graciously accepting the contractual language, he pulled the, “look, I know what the contract says, but in my heart, this is what I meant for that paragraph to say…”.

Heidi Roizen, my dear friend and partner at T/Maker, and I have laughed about that one for years… he really would — unabashedly — try absolutely every trick in the book to get what he wanted.

One of the best back-handed compliments I have ever received was from Heidi.  We were in the throes of a user interface debate — I think, seriously, arguing about the placement of a single pixel in a small icon — when she wheeled toward me and said, “geez, Royal, you and Steve are the only two guys I know that have infinite energy to argue about the most meaningless things.”

I know she didn’t mean that as a compliment — but I took it as one — and I suspect Steve would have taken it as such, too… his attention to detail was, of course, legendary.

Doesn’t mean he always got it right…

… I’m still upset with him for pushing a round mouse on the world for not one but two versions of the iMac (a mouse is a navigation device, so it’s imperative that you know north-south orientation without looking)…

… or actually thinking cursor keys didn’t have their place in a graphical interface…

… or, as a young chairman of a young computer company, actually calling the employees in the division that produced 99% of his revenues “bozos”…

… but, it did mean he never gave up trying to get it right.

People have always compared Steve to Bill Gates.  As a competitor, I have always said Steve was, by far, more dangerous.  Bill used logic and reason and always did the strategically smart business move — even if it was vicious and ruthless.  But Steve let emotion and ego and, well, craziness guide him… which made him unpredictable… which is far more dangerous.

Crazy like a fox, eh?

I always felt a bit sorry for Steve in those days… for all he had achieved — and even at that early stage, he had achieved a lot — it still felt like he was missing something… I didn’t really see him have any good friends.  Seemed he was very much a victim of his own circumstance.

Of late I’ve heard stories of him vacationing alone in Hawaii… which made me sad… but, more often than not, I’ve heard things that sounded, well, incredibly normal… and those things always put a smile on my face.  I think what was missing from the Steve I knew so many years ago was family… and I am happy he found that later in life.

When Steve was kicked out of Apple, I remember him saying, “I still have 4 or 5 great products in me.”  I always thought that was bravado talking, that he was already wealthy, already guaranteed a spot in the tech hall of fame, and that, ultimately, his grinding, my-way-or-the-highway approach would continue to be his undoing.

But Steve fooled everyone… he got better with age.  Probably his most inspiring lesson of all.

From what I know, Steve’s illness should have taken him years ago.

Only Steve could dictate to death itself.

Steve, not sure I can say this about anyone else… but the world will really be a different place without you.