Author: Horace Dediu

Apple continues to trade at a discount to growth

Apple’s latest earnings showed growth of nearly 90% (following a nearly 50% growth the previous quarter.)

Normally, growth like this is rewarded with a significant P/E ratio of 30 to 40.  Apple enjoyed P/E of 50 as recently as 2007.  However Apple’s P/E ratio dropped to about 22 after earnings.

Although higher than during the worst of the recession, this low P/E either reflects continuing pessimism in the overall sustainability of the economy or a continuing discounting of Apple’s potential growth.

Excluding the nearly $45/share cash and looking at a forward twelve months earnings of 15, the forward P/E is an almost embarrassing 14.

It’s possible that after a few quarters of above 50% growth Apple’s P/E and hence its valuation will return to more normal (PEG ~1.0) levels.  A P/E of 30 at today’s trailing 12 months earnings would put the stock above $350/share.

Non-US iPhone sales approaching 70% of volumes

[AT&T] activated 2.7 million iPhones during the quarter…Apple [announced] yesterday that it had sold 8.75 million iPhones overall during the quarter

via AT&T Activates 2.7 Million iPhones in Q1 2010 as Growth Slows – Mac Rumors.

About 31% of the units sold in Q1 were activated on the AT&T network.  The iPhone is reaching a more balanced global distribution but still has a long way to go.

Pro analysts 51% worse than amateurs in predicting Apple's financials

via Deagol’s AAPL Model: Apple beats up everyone.

Average errors:

11.6%  Professionals

7.7%  Amateurs

—–  —————————————

51.4%  Pros error increase % on amateurs

Note: Apple beat every estimate from every analyst, amateur or professional.  More when we do the numbers.

Tim Cook "shocked" by initial demand for the iPad

On the company’s earnings call, Apple COO Tim Cook says the company is “shocked” by initial demand for the iPad. He also added, “I’m personally addicted to mine and couldn’t live without it.”

via Apple Blows Out Earnings Thanks To Huge iPhone Sales – Yahoo! Finance.

Speaking of iPad, the iPad is almost impossible to obtain in Boston area.  By reservation only.

On Apple's Two Monopolies

I argue that Apple now has not one but two monopolies:

I)    A nearly-total monopoly on computer (and pocket computer) systems designed with good taste.
II)  A total monopoly on the Microsoft-free, hassle-free personal computer.

Imagine that every car maker save for Toyota insisted on using the infamous East German Trabant as a standard of quality – yet blindly imitated random elements of Toyota’s visual design.  How long would it take for the whiners to appear on the scene and start making noises about monopolistic tyranny?  How long would it take for Toyota to start living up to these accusations in earnest?  And why should it not do so?  What is to be gained from corporate sainthood? …

Of course, Apple’s competitors cannot actually copy the secret of its greatness, because Apple is a fundamentally different type of organism.  Rather than a brainless government-by-committee, it is an extension of one man’s will, projected with the aid of a small group of trusted lieutenants: no focus groups in sight.  For the Apple-imitators to turn into genuine “Apples” would be as fantastic and unlikely as it would be for a slime mold to spontaneously become a true multicellular animal, equipped with a central nervous system.  It is also unclear that, from their own perspective, they should want to grow brains – for a creature with that kind of centralized point of failure is decidedly no longer immortal.

via Loper OS » Non-Apple’s Mistake.

I’ve always thought that Apple had only non-consumption to compete with.  The non-consumption of hassle-free technology.

RIM chief competing for "Most out of touch CEO" award

RIM’s co-chief Mike Lazaridis downplayed many of Apple’s efforts today in a keynote at the TD Newcrest technology conference in Toronto. The executive was concerned that there wasn’t necessarily a market for tablets like the iPad and that any devices would have to be put in the context of computers and smartphones. Many companies ask new hires to choose either a new smartphone or a new notebook, and if the tablet is simply a substitute for a notebook it may not have an easy answer, Lazaridis said.

He added that smartphones are getting more powerful and more computer like, and by extension would reduce the need for a tablet.

The company leader also dismissed the importance of touchscreen phones. While it’s important to give customers what they want, touch-only phones like the iPhone aren’t that popular, Lazaridis argued. He claimed that most of the people buying touchscreen phones are going back to phones with hardware QWERTY keyboards, like those that made RIM “famous.”

He pointed out that it was the experience and not the features that determined a phone’s success, and that the most popular BlackBerry was actually the starter Curve 8520. It not only lacks touch but 3G and a high-resolution screen.

via RIM chief: no market for tablets, touch-only phones | Electronista.

Jobs must be thinking: with enemies like these, who needs friends.

Sony Ericsson and RIM reach market share parity

[Sony Ericsson] said it shipped 10.5 million units in the quarter, a 28 percent decrease compared with the same three months in 2009. It was down from the 14.6 million units shipped in the fourth quarter.

via Mobile phone maker Sony Ericsson posts Q1 profit – Yahoo! News.

A few weeks ago RIM said it shipped 10.5 million devices.

With Apple claiming 85 million installed base of iPhones and iPod touches vs. 75 million last quarter, it’s safe to assume at least 10 million Apple smart devices shipped in Q1.

By units at least, SEMC, RIM and Apple are neck and neck.

On Toys

Don’t be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that’s a good sign. That’s probably why everyone else has been overlooking the idea. The first microcomputers were dismissed as toys. And the first planes, and the first cars. At this point, when someone comes to us with something that users like but that we could envision forum trolls dismissing as a toy, it makes us especially likely to invest.

via Organic Startup Ideas.