Fortune Tech: Technology blogs, news and analysis from Fortune Magazine » Apple 2.0

The Zooey Deschanel effect

2012-05-16T11:56:56Z

The iPhone's "buzz" got a bump after Apple started using celebrities in its Siri ads

Click to enlarge. Source: YouGov

Deschanel with iPhone

FORTUNE -- Some purists used the fact that Apple (AAPL) had replaced the always appealing but generally anonymous faces in its TV ads with a couple of Hollywood celebrities -- Zooey Deschanel and Samuel L. Jackson -- as evidence that the company had gone to hell without Steve Jobs at the helm. (See Siri takes a star turn.)

But a new YouGov BrandIndex survey suggests that Apple marketing may still know how to do its job.

According to a report issued Tuesday, the Siri ads featuring Deschanel and Jackson coincided with a boost for the iPhone brand among the all-important demographic of 18–34 year old Americans:

"Just as the new Siri campaign premiered on April 19th, iPhone's buzz score in the 18 – 34 demo was 16, several points below Android's 26 score. Five days later, iPhone's buzz score passed Android, 30 vs. 29... The iPhone's buzz score peaked on May 4th with a 51 score, while Android moved a couple of points down to 27."

Both men and women responded positively to the ads, according to YouGov, but men registered the strongest push.

YouGov BrandIndex's Buzz score was determined, as usual, by asking respondents: "If you've heard anything about the brand in the last two weeks, through advertising, news or word of mouth, was it positive or negative?"

Brands tested included Apple, Google's (GOOG) Android, BlackBerry (RIMM), Motorola (MOT), Nokia (NOK), HTC and Samsung.

Filed under: Apple 2.0

Apple bites Android: Customs halts U.S. sales of HTC phones

2012-05-16T11:12:18Z

Two models held for inspection after a December patent ruling in Apple's favor

Stopped at Customs: The HTC One X. Engadget photo.

FORTUNE -- In what is believed to be the first tangible effect of the two-year-old proxy war Apple (AAPL) has waged against Google (GOOG) though the makers of Android phones, U.S. Customs officials have delayed shipment of two of HTC newest models pending inspection.

The delay is indefinite, but may turn out to be brief.

In December Apple won a narrow victory over the Taiwanese manufacturer of smartphones and tablets when the International Trade Commission found that some earlier HTC phones had violated a single Apple patent provision covering the way smartphones make sense of unstructured data, such as e-mails. (See: Apple wins limited ruling in important Android patent case.)

The ITC delayed its mandatory exclusion order until May 19 to give HTC time to devise a workaround. In a statement issued Tuesday, HTC said it believed the new phones -- the HTC One X and HTC EVO 4G LTE -- are in compliance with the ruling, and that it is working with U.S. Customs officials to secure their release.

Nonetheless, HTC shares fell more than 6% in the Asian markets on the news.

HTC, you may recall, was the first maker of Android phones that Apple took to court. The suit was filed on March 2, 2010, and in an oft-quoted statement, Steve Jobs threw down the gauntlet:

"We can sit by and watch competitors steal our patented inventions, or we can do something about it. We've decided to do something about it. We think competition is healthy, but competitors should create their own original technology, not steal ours."

Filed under: Apple 2.0

Tim Cook meets John Boehner

2012-05-16T10:26:19Z

In Washington, D.C., Tuesday, May 15, 2012

Source: Speaker's Blog

FORTUNE --The photo was posted on the Speaker of the House's website with no details beyond the date. Until we find out what he and the CEO of Apple (AAPL) discussed, we'll leave it to our readers write their own captions.

Filed under: Apple 2.0

Google's Android profits: '40% of a little is a lot less'

2012-05-16T02:16:56Z

An eye-opening comparison of Android's income statement with Apple's

Source: Asymco.com

FORTUNE -- As part of an extended look at what he calls Google's (GOOG) "Android economics," Asymco's Horace Dediu on Monday published what may be the first independent estimate of the company's Android income statement.

As the chart at right shows, Android generates revenue for Google through three kinds of ad sales (Google's Search, AdSense and AdMob). After costs and revenue sharing are taken out, there is some profit left over for Google: roughly $2.75 per Android device per year, according to Dediu.

Is that a lot? To put his numbers in perspective, Dediu on Tuesday posted a chart comparing Apple's (AAPL) iPhone income for the first three months of 2011 with Google's estimated Android income for the full year.

Because the Android chart is dwarfed to near invisibility by Apple's, Dediu posted the scaled up version copied below. To understand what's going on, you'll probably have to see the Asmyco charts at their proper scale. Click here.

As Dediu writes:

"As various members of the Android ecosystem are rewarded from the 40% revenue share of Android, it would be important to consider the scales involved in these illustrations when considering the influence Google exerts. It could be argued that Google's spreading of wealth from search creates strong incentives for participation in its ecosystem.

"However, there is little wealth created. 40% of a little is a lot less."

The 4 X scale charts below. If you look closely, you can see the Android chart we showed above at the center of the image below, near the bottom.

Source: Asymco.com

Filed under: Apple 2.0

Steve Jobs on camera: 'The publishers are actually going to withhold their books from Amazon'

2012-05-15T12:21:21Z

Telegraphing an alleged price-fixing conspiracy 2 years before the DOJ caught up to it

Jobs talking price-fixing at the iPad launch. Source: AllThingsD

FORTUNE -- Paid Content's Laura Hazard Owen, combing through documents newly unredacted in the states' (as opposed to the U.S. Department of Justice's) antitrust complaint against Apple (AAPL) and five book publishers, uncovered a gem: a blunt Steve Jobs e-mail that basically hands the attorneys general their price-fixing case.

In a note to a publishing executive nervous about sticking it to Amazon (AMZN), Jobs wrote:

As I see it, [Conspiring Publisher] has the following choices:

1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started, there will be no stopping it. Trust me, I've seen this happen with my own eyes.

Maybe I'm missing something, but I don't see any other alternatives. Do you?

Good stuff. But as several readers have pointed out, Jobs telegraphed all this in a brief on-camera exchange with the Wall Street Journal's Walt Mossberg at the launch of the original iPad in January 2010, more than two years before the government's antitrust lawyers caught up to the alleged conspiracy.

It's in the AllThingsD video here. You can skip Kara Swisher's irritating preamble and go straight to the Steve Jobs part, which starts at the 1:40 mark. Mossberg asks Jobs why customers would pay $14.99 for an iBook when they could get the same title from Amazon for $9.99.

"The prices will be the same," Jobs assures him. "The publishers are actually going to withhold their books from Amazon."

Which they did. Amazon was forced to abandon the $9.99 model and for two years -- until the DOJ filed its suit -- e-book prices were the same on the iPad, the Nook and the Kindle.

Amazon has now gone back to offering New York Times bestsellers for $9.99.

As we've suggested before (see here, here and here), it seems wrong that the government would give a pass to Amazon -- an e-book monopolist selling titles below cost -- and instead sue five publishers gasping for air in a shrinking market.

Adding insult to injury, Amazon has since started signing up authors for its own imprints, threatening to cut publishers off at the source. For a view of how the whole business looks from Publisher's Row, see Brad Stone's excellent "Amazon's Hit Man," in Bloomberg Businessweek.

Filed under: Apple 2.0

Another Apple analyst backs away from iTV's inevitability

2012-05-14T18:51:29Z

Pouring cold water on one of Silicon Valley's hottest rumors

FORTUNE -- Although there is no shortage of iTV speculation -- thanks to rumor sites like Taipei-based DigiTimes -- and plenty of Apple (AAPL) analysts ready to calculate to the penny how much an Apple-branded TV set would add to the company's bottom line, some experts have started to back away from what was once seen as an inevitablity.

In December, Richard Gardner, formerly of Citigroup, warned that "Apple has not even defined specs yet." In February, Barclays' Ben Reitzes suggested that Apple was focused more on lining up TV content partnerships than on the production of a TV set.

Now Pacific Crest's Andy Hargreaves has poured what may be the coldest water yet on the idea. In a note to clients issued Monday, he makes two points: (I quote)

Investment in Apple television makes little sense without a unique TV content offering. An Apple television could drive substantial profitability if it helped Apple capture service provider profits. However, we do not expect U.S. broadcast or cable networks to provide Apple content if it risks cannibalizing existing revenue, which makes a unique Apple service and an Apple television unlikely.
An Apple television would be a terrible use of retail space relative to iPhone, iPad or the Apple TV set-top box. A 46" Apple television would likely generate less than 1/200th the gross profit per cubic foot as an iPhone at retail, and less than 1/50th the gross profit per cubic foot of an iPad. We believe this is critical given the limited inventory space at many Apple and partner stores.

As it happens, I agree with Hargreaves (see here), although he goes on to say that Apple is more likely to be building an iPad mini. That one I'll believe when I see it.

Filed under: Apple 2.0

Anatomy of an iTV rumor

2012-05-15T23:54:42Z

The latest "confirmation" that Apple is building a TV set turns out to be another soufflé

Via Techmeme

FORTUNE -- It is perhaps a measure of how badly broken today's commercial TV viewing experience is -- the cookie-cutter sitcoms, the ridiculous reality shows, the ever-shifting channel line-ups, the relentless, merciless commercial breaks -- that the tech press is so desperate to believe even the slimmest rumor that Apple (AAPL) is getting ready to solve all that by building its own television set.

Take, for example, last week's report that Hon Hai chairman Terry Gou announced at a press conference in Shanghai that his Foxconn subsidiary was "making preparations for iTV."

By Friday the report had spawned dozens of headlines. A sample:

Gizmodo: Apple television set confirmed by Foxconn boss
The Mac Observer: Hon Hai exec says Apple television coming
Forbes: Foxconn gears up for Apple's iTV
MacNewsWorld: iTV: Not if but what

What none of these reporters mentioned (or apparently bothered to consider) is that Gou -- whose factories assemble 40% of the world's electronic devices -- is one of the industry's most secretive executives. He is privy to the future product plans of the most valuable electronics brands -- not just Apple, but also Sony (SNE), Microsoft (MSFT), Hewlett-Packard (HPQ) and the rest. He is trusted by his business partners because he never leaks their secrets.

Terry Gou. Photo via M.I.C. Gadget

Given how jealously Apple guards its own secrets, and how relentlessly it pursues those who spill them, what are the chances that Gou would say anything -- ever -- about an unannounced Apple product, real or imagined?

I'd say, nil.

So what was the source for this latest iTV story?

It was single item in China Daily -- an English-language newspaper based in Beijing. The dateline is Shanghai. The byline is Gao Changxin. The headline reads: "Foxconn plans renewed shift into distribution."

After 15 paragraphs about Gou's remarks at the groundbreaking for Hon Hai's new Shanghai headquarters and his company's plans to expand distribution in mainland China, the China Daily story tosses in -- almost as an afterthought -- this sentence:

"Gou said Foxconn is making preparations for iTV, Apple Inc's rumored upcoming high-definition television, although development or manufacturing has yet to begin."

Talk about burying the lead!

If Gou really said this, it would be -- for all the reasons stated above -- very big news.

So how is it that none of the other reporters covering the event heard it? Not Reuters' John Ruwitch. Not Bloomberg's Tim Culpin. Not the AP's Elaine Kurtenbach.

It is possible that the China Daily reporter misheard or misunderstood Gou's remarks? Or that his report was mistranslated? Or that a desk editor or rewrite person mangled it?

We've asked Gao Changxin to review his notes and tell us exactly what Gou said. ~~He has yet to respond to our several requests.~~ See Update 2 below.

For now, the Terry Gou iTV story remains what one of my editors at Time Magazine used to call "a soufflé." Kick it a few times and it collapses.

Meanwhile the tech press has moved on to the latest "confirmation" that Apple is getting into the TV-set business: A rumor that the company is about to buy Loewe, a German distributor of slim HDTVs and integrated, Apple-friendly audio equipment. A Loewe spokesperson told a German blog Sunday that there was "absolutely nothing to" the rumor, but that didn't stop the tech press from piling onto the story, or Loewe's stock from jumping 30% Monday morning on the Frankfurt exchange.

For our take on the whole iTV phenomenon, see Tell me again: Why do we think Apple will build a TV set?

Update: A Foxconn spokesperson contacted The Next Web with the following statement:

In remarks at a media briefing during the groundbreaking of Foxconn's new China headquarters in Shanghai on May 10, Terry Gou, Foxconn's Chief Executive Officer, made it very clear that he would neither confirm nor speculate about Foxconn's involvement in the production of any product for any customer because Foxconn's policy is not to comment on any customers or their products.

At no time did he confirm that Foxconn was in development or manufacturing stages for any product for any of its customers. He did say that Foxconn is always prepared to meet the manufacturing needs of customers should they determine that they wish to work with Foxconn in the production of any of their products. Any reports that Foxconn confirmed that it is preparing to produce a specific product for any customer are not accurate.

That nails it.

UPDATE 2: Gao sent us an audio recording of Gou's remarks with a pointer to the passage in question. I had someone who speaks Chinese listen to it. Here's his report: "Gou didn't specifically mention making TV for Apple but they are going to go into building TV business and how they will able to become one of the top players. He gave a example how cell phone changed from the big one to now the tiny handsets. The same thing will be happening to TV right now."

Filed under: Apple 2.0

Video: Is this what Apple's new maps will look like?

2012-05-12T14:14:17Z

After 5 years with Google's maps, Apple is reportedly set to unveil its own

Lower Manhattan via C3 Technologies. Click to see video.

FORTUNE -- Big news in iOS mapping this week.

Mark Gurman, 9to5Mac's teen blogging phenom, reported Friday that Apple (AAPL) is prepared to replace the iPhone and iPad's Map app -- built on Google's (GOOG) back-end mapping data -- with something entirely its own.

Its unveiling, according to AllThingsD's John Paczkowski, will be one of the highlights of the WWDC keynote on June 11.

"Here's the thing," Daring Fireball's John Gruber weighed in. "Apple's homegrown mapping data has to be great. Mapping is an essential phone feature. It's one of those handful of features that almost everyone with an iPhone uses, and often relies upon."

So what will the new maps look like?

The assumption is that Apple will be using the talent and technology it acquired when it snapped up three mapping companies in the space of three years: Placebase in 2009, Poly9 in 2010, and C3 Technologies in 2011.

That last acquisition -- a spinoff of Swedish jet- and automobile-maker SAAB -- is particularly intriguing, given what its military-derived technology can do. There are several demonstrations of C3's 3D-flythroughs on YouTube. We've linked to one in the image above (click it to view the video), and copied several more below the fold.

Of course, just because Apple can do something, doesn't mean it will. The company is famously conservative in such matters, rolling out new features only when it feels they are ready for prime time (Siri, perhaps, being the conspicuous exception).

As Gruber points out, this is a high-risk switch for Apple:

"Regressions will not be acceptable. The purported whiz-bang 3D view stuff might be great, but users are going to have pitchforks and torches in hand if practical stuff like driving and walking directions are less accurate than they were with Google's data."

Those whiz-bang 3D demos:

Hoover Dam:

Oslo:

London:

Filed under: Apple 2.0

Samsung: Dog ate my e-mail

2012-05-11T20:30:18Z

Apple accuses Samsung of taking a slash-and-burn approach to evidence preservation

Image: trancessive.com

FORTUNE -- Samsung's failure to produce evidence in a timely manner is emerging as a pivotal issue in the California federal court where Apple (AAPL) has sued the Korean smartphone manufacturer for allegedly infringing Apple's iPhone patents.

Last week, FOSS Patents' Florian Mueller reported that the judge in the case had ordered harsh "preclusive sanctions" against Samsung for what Mueller described as "a particularly inexcusable violation" of a court order to deliver source code.

As Mueller noted, "This is not the first time that Samsung is found guilty of non-compliance with a discovery order."

Now NetworkWorld's Yoni Heisler has taken a deeper look at Samsung's record of non-compliance. As he reported Friday:

"I pored over Apple's motion along with Samsung's subsequent motion in opposition and suffice it to say, Samsung likes to play fast and loose with its legal obligations. Specifically, Samsung has a policy whereby custodian emails are automatically deleted every two weeks, even in instances where the company is required by law to preserve any and all emails that might reasonably be pertinent to a foreseeable or ongoing lawsuit."

In its motion, Apple accused Samsung of destroying "vast quantities of relevant evidence in blatant disregard of its duty to preserve all such evidence," something it charges Samsung did in a similar case before the International Trade Commission.

It also cited other instances of wholesale document destruction:

In a lawsuit involving Samsung and Mosaid Tecnologies it was discovered that Samsung had an ongoing policy of automatically deleting emails from custodian computers every two weeks, even when they were required to keep e-mail evidence relevant to an ongoing legal dispute.
While being investigated by Korea's Fair Trade Commission (KFTC), Samsung allegedly obstructed justice by purposefully destroying a large amount of data during the course of a price fixing investigation.
According to a recent KFTC press release, the commission found that high level Samsung executives instructed company security personnel to physically block KFTC officials from entering the facility while "Samsung employees from the department subject to the investigation destroyed relevant data and replaced the computers of those employees who were subject to investigation."

Apple has asked the judge to instruct the jury:

1. Samsung had a duty to preserve relevant evidence, failed to do so, and acted in bad faith in failing to meet its legal duty.

2. The jury may infer that documents Samsung failed to produce would have been advantageous to Apple's position.

3. If the jury finds Samsung liable for infringement, they may presume that the infringement was "intentional, willful, without regard to Apple's rights."

The case is scheduled to go to trial on July 30.

Filed under: Apple 2.0

Videos: The new iPad goes on sale in 30 more countries

2012-05-11T20:26:09Z

Apple's roll-out reaches deeper into Asia, Africa, Latin America and the Middle East

The queue in Taiwan. Source: CTS TV

FORTUNE -- The fastest roll-out yet of an iOS device picked up pace this week as Apple (AAPL) prepared to launch the new iPad in 23 countries Friday and seven more on Saturday.

The longest lines are likely to be in Brazil, where Apple and Foxconn have set up local assembly plants to avoid that country's steep import taxes. Saturday will take the new iPad into the oil-rich Middle East.

The full list of countries getting the new iPad this week, via MacRumors:

Friday: Argentina, Aruba, Bolivia, Botswana, Brazil, Cambodia, Chile, Costa Rica, Curacao, Ecuador, French Guiana, Guadeloupe, Jamaica, Kenya, Madagascar, Malta, Martinique, Mauritius, Morocco, Peru, Taiwan, Tunisia and Vietnam
Saturday: Bahrain, Egypt, Jordan, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates.

Conspicuously absent: Mainland China, where the device has been approved for sale but control of the iPad trademark is still being litigated.

The first video comes from Taiwan, where balloons seem to have outnumbered customers:

Vietnam (single sale):

Chile:

Press unveiling in Argentina:

More as they come in.

Filed under: Apple 2.0

The Paris Hilton of mobile phones makes a comeback

2012-05-11T02:52:04Z

The notion that the Apple has a "carrier subsidy problem" just won't die

FORTUNE -- In the summer of 2009 a Danish mobile phone analyst named John Strand issued a 105-page report entitled "The moment of truth: a portrait of the iPhone," that listed the "10 largest myths" about Apple's (AAPL) smartphone:

1) The iPhone drives data traffic into mobile operators networks
2) The iPhone helps operators attract new customers
3) The iPhone is good business for mobile operators
4) The iPhone is dominating the mobile services market
5) App store is a huge success that has revolutionised the services market
6) There is money to be made by developing applications for the iPhone
7) It is iPhone customers that are generating the majority of online mobile surfing traffic
8) The iPhone has a large market share
9) The iPhone was the first mobile phone with a touchscreen
10) The iPhone is a technologically advanced mobile phone

Many of Strand's ideas seem so laughably wrong today that it's hard to believe that they were ever taken seriously. But they were happily picked up by headline writers on both sides of the Atlantic, in part because Strand was always willing to dress up his heresies with eye-catching quotes. In his favorite, repeated at every opportunity, he called the iPhone "the Paris Hilton of mobile phones," as if it were a sexy but empty-headed flash-in-the-pan.

Fast forward to 2012, and Strand's Myth No. 3 -- the (mistaken) idea that carrying the iPhone is good business for mobile operators -- has been making a comeback.

It started in early April, when Walter Piecyk, an analyst at BTIG, downgraded Apple from buy to neutral and told Bloomberg TV "operators are trying to fight back against the impact that Apple is having on their business" -- a reference to the higher subsidies companies like AT&T (T), Verizon (VZ) and Sprint (S) pay Apple for the privilege of carrying the iPhone.

Soon the iPhone's subsidy was being blamed for everything from a CEO's multimillion dollar pay cut to the drop in Apple's share price that preceded the company's Q2 2012 blow-out earnings.

Now that Apple's share price has retreated to pre-earnings levels, the idea is back in the headlines.

"Okay, This Carrier Subsidy Problem May Be A Real Concern For Apple's Stock" wrote Business Insider's Henry Blodget Tuesday, picking up on a theme explored in the Wall Street Journal the day before.

I don't get it. If the iPhone is so bad for the phone companies, why are they falling over themselves trying to get Apple to let them carry it?

We put the question to Horace Dediu, who spent several years doing market analysis for Nokia (NOK) before launching his Asymco blog and conference business.

"An iPhone subsidy costs about $400," Dediu replied. "An iPhone customer will spend about $2,400 for service over the life of that phone. Every dollar of subsidy is worth six dollars of revenue. In addition, iPhone customers are more loyal, spend more and tend to stick with the carrier. What's the question again?"

John Strand, by the way, is still around, trash-talking the iPhone at every opportunity. Here he is (below the fold) at Mobile World Congress in Barcelona a few years ago using the Paris Hilton line again and making his oft-repeated claim that in all the years he's been covering the mobile business, he's never made a mistake:

Filed under: Apple 2.0

For every $1 Google spends lobbying, Apple spends 10¢

2012-05-10T12:00:28Z

Is that really why Apple has become, per Politico, a "punching bag" for lawmakers?

Click to enlarge. Source: Politico

FORTUNE -- I might feel differently about Apple's D.C. Lobbying Effort Has Yet to Ripen, the 1,450-word piece posted on Politico Wednesday, if I hadn't just listened to Take the Money and Run for Office, This America Life's brilliant hour-long expose of how Washington, D.C., influence peddling really works.

By the end of the radio piece (available as a podcast), it's clear to listeners that companies like Google (GOOG), Microsoft (MSFT) and Hewlett-Packard (HPQ) -- which together spent $8.4 million lobbying in just the first three months of 2012 -- don't chase lawmakers down the halls of power trying to buy their influence.

It's the other way around. The senators and congressmen chase after the lobbyists. Sent to Washington to make laws (or prevent them from being made) our elected officials have been reduced to full-time money-grubbers, alternatively begging and strong-arming political action committees (PACs) to meet fundraising quotas that get steeper every year.

So I take with a grain of salt Politico's contention that Apple's (AAPL) "hostility" to the process "may have brought extra attention."

For example, the piece describes as a "stinging preliminary finding" the ruling two weeks ago by a judge at the International Trade Commission that Apple may have violated one of four Motorola (MOT) patents related to Wi-Fi in the iPad and iPhone. Anyone following the iPhone patent wars knows that there are dozens of issues like that one before the ITC, and that Apple has won more than its share.

And while I have no doubt that both parties eye with lust Apple's $110 billion war chest of cash and marketable securities, the fact that it's not being spent on them is not the reason the company has become, in Politico's terms, "a punching bag for lawmakers who understand the power of using a marquee name to reinforce their arguments about American companies dodging taxes, hiring overseas and mistreating foreign workers."

Case in point: The shot Sen. Tom Coburn took at Apple on NBC's Morning Joe last week, declaring himself "livid" about the New York Times' report about the lengths to which Apple (like every other major American high-tech firm) goes to avoid paying taxes.

Coburn talks big about "closing loopholes," but he's all in favor of the so-called "repatriation holiday" that would allow Apple to bring home billions of dollars of overseas profits without paying the current 35% federal tax on foreign earnings. (See "Livid" about tax loopholes.)

If he thinks some of those iPhone profits are going to end up in his reelection fund, he's sadly mistaken.

As one source familiar with Apple's D.C. operations told Politico, "They don't have a massive table of consultants and law firms. It is more low key, but it is also respectful." The piece details several instances in which Apple quietly dropped apps or changed developer policies after they drew Washington's attention.

And as GigaOm's Erica Ogg points out, Steve Jobs was plenty savvy about how to wield influence in the nation's capital:

"He just went straight to the top. Sending the president [an iPad 2] before it was available to the public is a pretty decent way of making friends."

Filed under: Apple 2.0

How Apple gets to $2,000

2012-05-09T10:50:41Z

Andy Zaky has a plan

Click to enlarge. Source: Andy Zaky

FORTUNE -- Most Apple (AAPL) analysts will offer estimates that look a few quarters or even a year in advance.

Andy Zaky is not like most analysts.

For one thing, his estimates over the past four years have been considerably more accurate than your average Wall Street analyst (see, for example, here).

For another, he's not afraid to stick his neck out -- way out -- both in his published pieces (including more than a dozen for Fortune.com) and in his closely followed posts on Bullish Cross, his subscription-only blog.

Now he has put together an Apple forecast that looks not a few quarters, but a few years into the future.

The chart above shows Apple's past and future quarterly trailing earnings per share (TTM) according to Zaky, with most recent quarter ($41.04) at the center in dark blue. (For an explanation of TTM, see here.)

At Tuesday's close, Apple was trading at just under 14 times its current TTM (14 x 41.04 = $574.56).

If Apple is still trading at 14 times earnings in fiscal Q4 2015, it will, according to Zaky, have topped $2,000 (14 x $145.96 = $2043.44).

"I'm fairly confident about these numbers," Zaky writes. "Here's what I think will guide that:

Q1 2013 = 55 million iPhones shipped
Q1 2014 = 80 million iPhones shipped
Q1 2015 = 110 million iPhones shipped

"2014 is the golden age of Apple and the peak growth year," Zaky concludes. "After 2015, growth will stall and Apple will become a mature company -- at least for this era."

To enter another golden age, Zaky says, Apple has to do something spectacular. He's lobbying for nanomedicine and a cure for the type of cancer that killed Steve Jobs.

Curing cancer seems to me like a stretch, even for Apple.

Filed under: Apple 2.0

The N.Y. Times' tax-avoidance story didn't stick to Apple

2012-05-09T17:13:00Z

Compared with GE, says YouGov, Apple's public image is made of Teflon

Click to enlarge.

FORTUNE -- When the New York Times claimed incorrectly last year that General Electric (GE) paid zero federal taxes in 2010 on worldwide profits of $14.2 billion, the company's reputation took a steep and prolonged hit, as measured by YouGov's BrandIndex Reputation score.

Not so Apple (AAPL).

When the same paper ran a front-page story last week detailing -- again incorrectly, according to Forbes -- the lengths to which Apple has gone to avoid paying taxes, the company's consumer reputation barely budged.

In fact, based on responses to the question "Would you be proud or embarrassed to work for this brand?" Apple's reputation score actually went up modestly a few days after the Times story broke, according to a YouGov report issued Tuesday.

The market research firm concluded that Apple's public reputation is "virtually Teflon" -- at least in terms of tax avoidance.

Filed under: Apple 2.0

Apple: Samsung owes us 'billions' in damages

2012-05-08T15:11:25Z

Claiming every trial delay is costing them money, Cupertino turns up the rhetorical heat

FORTUNE -- In a motion filed in California federal court Monday, Apple (AAPL) accused Samsung of not only stealing its intellectual property, but using courtroom delaying tactics to steal more of the iPhone's market share.

FOSS Patent's Florian Mueller has the money quote:

"While the parties have been readying the case for trial Samsung has vaulted into first place in worldwide sales of smartphones, with massive sales of its copycat products (link provided). Samsung's infringement of Apple's intellectual property has already resulted in damages that reach billions of dollars. [...] It is critical to Apple to start trial on July 30, to put an end to Samsung's continuing infringement."

Filed under: Apple 2.0

How is AMZN worth 13 AAPLs?

2012-05-08T11:10:35Z

There seems to be a growing disconnect in Wall Street's valuations

Click to enlarge. Source: Jeffrey Forsberg

FORTUNE -- I know that comparisons, as Shakespeare's Dogberry put it, are supposed to be odorous, but this one is beginning to stink.

How can Apple (AAPL), with $110 billion in the bank, annual sales of $140 billion and earnings that nearly double every year, be valued so much lower than Amazon (AMZN), which has $6 billion in the bank, sales of $50 billion and earnings that fell 35% last quarter?

This is a question that reader Jeff Forsberg has been asking for nearly a year. On Friday he sent the chart above, an updated version of the coiled spring visual metaphor he introduced last June, when Amazon's price-to-earnings ratio was 81 and Apple's was 16.

A year later, it's only grown worse.

As of Friday, Amazon was selling for 184 times earnings and Apple for 13.8, a 13-to-1 gap that grew even wider in Monday's trading.

"This is getting hard to understand," Forsberg writes. "It's almost as if Wall Street is pricing Amazon on the basis of Apple's earnings performance. There's more upside with Apple's median price target than Amazon's, and yet Apple's P/E's is compressed to a level that strains credibility. By comparison, there's hardly any coil left in Amazon's spring. What gives?"

What indeed?

Filed under: Apple 2.0

Nielsen: In the U.S., white men carry the dumbest phones

2012-05-07T15:01:05Z

Among ethnic groups, Asian Americans are the most likely to pack a smartphone

Click to enlarge.

FORTUNE -- The move from so-called feature phones to smartphones continues apace.

As of March 2012, 50.4% of U.S. mobile subscribers owned smartphones, up from 47.8% in December 2011, according to a Nielsen survey released Monday. Google's (GOOG) Android was the most popular smartphone operating system (48.5%), while Apple (AAPL) was the No. 1 manufacturer (32%).

No surprises there.

It's when the data are broken down by sex and ethnicity that things get interesting. According to Nielsen:

67.3% of Asian Americans use a smartphone as their primary mobile handset, more than any other ethnic group.
Almost three out of five Hispanic mobile subscribers use smartphones
54.4% African-Americans own smartphones
More than half (50.9%) of female mobile subscribers carry smartphones, compared with 50.1% for men.
More than two out of three 25-34 year olds use smartphones.

Which leaves, I guess, older white men carrying around the bulk of the remaining dumb phones.

For more on the survey, click here.

Filed under: Apple 2.0

Apple's roller-coaster ride on the Fortune 500 list

2012-05-07T16:10:28Z

From Jobs to Sculley to Spindler to Amelio to Jobs (again) and Cook

Click to enlarge. Source: Fabio Zambelli from Fortune data

FORTUNE -- It's been seven months since Fabio Zambelli retired SetteB.IT, the Italian-language blog with which he'd been covering Apple (AAPL) for more than five years. But he's still tracking the company's progress. When Fortune released its annual listing of America's 500 largest companies over the weekend -- a list that showed Apple rising from 35 in 2011 to an all-time-high of 17 in 2012 -- Zambelli commemorated the event with the graphic reproduced above. You can see the original on his Twitter account. You can read Fortune's Apple write-up here.

Filed under: Apple 2.0

The market values Apple's earnings growth at $0.00

2012-05-07T14:35:40Z

The only thing that seems to matter to Wall Street is how much cash it has in the bank

Click to enlarge. Source: Asymco.com

FORTUNE -- It's been a year since Asymco's Horace Dediu -- mystified by the apparent decoupling of Apple's (AAPL) share price from its earnings growth -- first spotted the correlation between the company's valuation and its holdings in cash and marketable securities.

"As far as the market is concerned," he wrote at the time, "Apple's future is irrelevant. Its value is defined as a constant multiple of cash."

Dediu took another look at that correlation Monday, and the result is the chart reproduced here.

As you can see, the stock rallied briefly this spring, but has since returned to the trend line that it's followed since 2008.

"This correlation between cash and price is abnormal," Dediu writes. "It should not be happening. Share prices for growing companies should be tracking its future potential, not its assets. I'm only presenting this data to highlight this abnormality. There is no fundamental basis for this happening. In fact, there is a basis for this not happening."

Apple is a $530 billion company that grows like a start-up, but as Dediu demonstrated in a series of eye-opening charts Monday, the value of its shares have been compressed to the level of, say, a well-regulated utility.

Consolidated Edison (ED), for example, has a higher price-to-earnings ratio than Apple.

"Given this disconnect from the income statement," Dediu concludes, "the pricing by balance sheet multiple seems to be a symptom of something deeper. Reasons vary with the seasons, but the company is not perceived to have sustainable growth."

Filed under: Apple 2.0

Why Warren Buffett wouldn't invest in Apple or Google

2012-05-06T16:18:16Z

The Oracle of Omaha has a second rule: Don't buy companies you don't understand

Buffett with University of Nebraska cheerleaders Saturday. Photo: Lane Hickenbottom/Reuters

FORTUNE -- Some 18,300 people -- more than attended Barack Obama's massive campaign kickoff Saturday -- showed up for Berkshire Hathaway's (BRK-A) annual shareholder's meeting in Omaha yesterday. And judging from the New York Times' live blog, it was a lot of fun. There were cartoons and comedic skits and celebrity appearances, including Bono, Bill Gates and Debbie ("Buffett Rule") Bosanek, his now-famous secretary.

But what made the headlines Sunday were Warren Buffett's remarks about Apple (AAPL) and Google (GOOG):

"I would not be at all surprised to see them be worth a lot more money 10 years from now but I would not buy either one of them."
"I sure as hell wouldn't short them either."
"We couldn't predict what would happen to Apple 10 years ago and we can't predict what will happen to it 10 years from now."
"The chances of being way wrong in IBM (IBM) are probably less, at least for us, than the chances of being way wrong in Google or Apple."
"I just don't know how to value them."

That last remark, as Reuters points out, echoes Item No. 5 (out of 6) in Berkshire Hathaway's Criteria for Acquisition:

(5) Simple businesses (if there's lots of technology, we won't understand it)

Good rule.

Filed under: Apple 2.0