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Wednesday, October 5, 2011

Wall Street Says iPhone 4S Is A Disappointment In Name Only

Business Insider: The Apple Investor

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Wednesday, October 5, 2011

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AAPL Sideways As iPhone 4S Fails To Meet Sentiment
Markets are trading sideways on news that Italy was downgraded by Moody's and layoffs In September explode 126%, the worst since April 2009. Shares of AAPL were down hard on unfulfilled expectations for the new iPhone (see below) but are currently recovering. Catalysts include fiscal fourth quarter earnings release on Tuesday, October 18 at 5:00 pm ET; likely update of the iPad early next year; continued growth of the Mac business line; mobile adoption in China and other emerging markets; iCloud / iOS 5 rollout next week and adoption; the continued evolution and next generation of Apple TV; and new platforms such as mobile advertising (iAd), books / publishing and social (Ping). Shares of Apple trade at 9.3x Enterprise Value / Trailing Twelve Months Free Cash Flow (including long-term marketable securities).

Wall Street Reacts To The iPhone 4S, Disappointment In Name Only (Various)
Analysts weigh in:

Bernstein Research: Toni Sacconaghi believes the most intriguing part of Apple's announcement was that it did launch a low-priced iPhone SKU (the iPhone 3GS is free with a two-year contract) which could could add up to $4.50+ in annual EPS and launching on Sprint could add ~4 million units/$0.88 to FY12 estimates. Rating: Outperform. Price-Target: $510
Goldman Sachs: Bill Shope says the underlying hardware functionality improvements were quite substantial and that the market is underestimating the importance of Apple’s latest platform enhancements. He expects the shares to outperform in anticipation of a holiday season that should benefit from pent-up demand. Rating: Conviction List Buy.
Morgan Stanley: Katy Huberty believes the market tends to forget that software is what differentiates Apple from the competition. And that is the case again with iOS. Importantly, iPhone estimates look very conservative. Rating: Buy.
Piper Jaffray: Gene Munster believes Apple's decision to release an iPhone 4S, instead of a redesigned iPhone 5, will not have an impact on sales and to expect long lines. He still believes that the company will sell 25 million phones during the December quarter. Price-Target: $607
Bank of America Merrill Lynch: Scott Craig thinks investor focus should be more on the variety and the depth of software refinements, which should help Apple to extend its unified, technological leadership. Rating: Buy. Price-Target: $490
RBC Dominion Securities: Mike Abramsky says that with the still huge global iPhone opportunity, he remains constructive and views valuation as compelling. Catalysts include iCloud, iPhone 5, PC share gains, iPad 3, China. Rating: Outperform. Price-Target: $500.
Jefferies & Company: Peter Misek believes that the changes underneath the surface are sufficient to cause many current iPhone 3 and 3GS owners to upgrade and that the lower-priced 3GS will drive significant volumes in emerging and pre-paid markets. Rating: Buy. Price-Target: $500.
Citigroup: Richard Gardner says that while the iPhone 4S looks the same, it's impressive under the hood and it remains arguably the most compelling smartphone in the market. He remains comfortable with his estimate of 25 million iPhones during the holiday quarter and that that the lack of hardware redesign in the iPhone 4S could lead to better-than-expected gross margins. Rating: Buy / High Risk. Price-Target: $480.

Mostly positive, despite the negative perception yesterday.

The iPhone 4S Launch Round Up (Business Insider)
Everything you need to know in case you were more interested in watching the late market comeback yesterday.

iPhone 4S Specs (Business Insider): The design is exactly the same as the iPhone 4. It has an A5 Processor (like the iPad 2). The chip is 7x faster graphics than the current iPhone 4 chip. There's an 8 MP camera.
Free iPhone 3GS (Business Insider): Phone 3GS will soon be completely free after signing a two-year contract with your carrier. The device will come with 8GB of internal storage.
No More Antennagate (MacRumors): Apple has built significant antenna upgrades into the iPhone 4S with the ability to intelligently switch between two antennas to send and receive.
No Facebook, But It's Coming (TechCrunch): While Facebook didn't take the stage yesterday, look for the company to send out invites to their own mobile-themed event sometime very soon. Both their HTML5 mobile platform (Spartan) and the iPad app are ready.
Killer iOS 5 Features (Business Insider): The list includes a notification center, newsstand, Twitter integration, location aware to-do lists, wireless syncing, etc.
"Find My Friends" Tracking (TechCrunch): Parents can now track their kids. Thank goodness this wasn't around when I was growing up. It's a map-based app that’ll let you see where your friends and family members are. Creepy.
Siri Voice Control (Business Insider): Touted as your "new personal assistant," the voice-activated software will help you juggle calendars, texts, emails all through voice control. Some think Siri will suck.
Cards App (Business Insider): Apple announced "Cards," a new app to help you mail physical greeting cards to friends and family. Boring.
iPod Touch Update (Business Insider): The 8GB Touch is getting a price cut from $229 to $199. That line will come in black and white and will get updated to iOS 5.

You can watch the whole media event over again here.

Tim Cook Spills Some Impressive Stats (MacStories)
At yesterday's iPhone 4S launch, CEO Tim Cookdropped some pearls:

iPod sales have exceeded 300 million units, with 45 million of those iPods sold since June.
The iPhone 4 now accounts for over half of all iPhones sold.
iTunes has also seen significant growth with over 20 million songs available.
18 billion apps have been downloaded from the App Store and over 1 billion are downloaded monthly.
Over 500,000 apps are available on the App Store, with 140,000 for the iPad.
Apple has sold over 250 million iOS devices.
92% of Fortune 500 companies are testing and deploying the iPad.
Apple has announced it has paid $3 billion to developers so far.

How you like them apples?

Apple's New Leader's Defining Moment (Seeking Alpha)
Tim Cook's defining moment took place during his introductory speech. You could sense his excitement and enthusiasm as he showed the slides revealing 23% market share for the Mac and 5% market share for the iPhone. It captured the essence of Tim’s purpose at Apple. He is the operations guy. His legacy will be defined by his ability to take what Steve Jobs built and catapult these Apple products into the realm of critical mass.

Smartphone Market Share Statistics, Apple Inching Up This Year (eMarketer)
Relevant figures based on yesterday's iPhone launch:

The number of smartphone users in the U.S. will grow 49.6% to 90.1 million in 2011, up from just 60.2 million in 2010.
About 29% of U.S. smartphone users will use Apple devices this year, up from 28% in 2010. Google's share of the U.S. smartphone user market, however, is expected to reach 37% this year, up from 24% in 2010.
At least 38% of U.S. mobile phone users now use smartphones at least once per month, compared to just 26% in 2010. By 2012, more than 44% of the population will use smartphones at least once per month.

Who uses a smartphone just once a month. Read »

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