Posted on Monday, 19th April 2010 by James Martin
Apple (AAPL)
Apple had its earnings call for the upcoming quarter yesterday, and seems to be very excited about the direction the company is moving. The iPod pioneer mentioned that there is strong potential for its quarter sales to be as high as $13.4 billion, which would top the $13 billion benchmark that most analysts had predicted. Apple also disclosed that last quarter was its best non-holiday quarter of all time. Although nobody knows exactly what they are, Apple alluded to a few developing factors that may further fuel its first quarter momentum. The company is generating a lot of market buzz. Should investors believe all of Apple’s hype?
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Stock Analysis
Apple experienced a considerable amount of success last quarter with its iPhone. The iconic technology company expanded its iPhone offering to international markets, which helped it double iPhone shipment demand. In addition, Apple benefited from an unexpected boom in iPad sales. The iPad was such a hit in the U.S. that Apple pushed back the product’s international release to May in order to satisfy domestic demand. Apple stated that there was “no obvious” indication that the iPad was cannibalizing sales from other units (i.e. iPhone, Macintosh computers, iPods, etc.). However, the company also noted that it did not have enough experience with the products together to know for certain.
Apple was tremendously pleased with the iPhone’s international release, but there was no iPad to compete with it. There is a very realistic possibility that if both the iPhone and iPad were both released internationally the iPhone numbers would have been severely hurt by the iPad. If the international iPhone and iPad releases were in sync, would the company’s overall profit margin been hurt? Apple obviously would not have made such a careless mistake, but the risk is still there. The iPad could become a cancer to the iPhone and many other Apple products. Some people view the iPad as Apple’s rising star, but how well will it get along with its other family members?
The potential for sibling rivalry between the iPhone and iPad may escalate very soon as rumor speculation increases about Apple releasing its new 4th generation iPhone. Overall, Apple seemed to downplay the iPad sales interference with its other products. It recognizes that cannibalization may be a problem, but quickly pointed out that it has yet to be reflected in the company’s sales numbers. The writing on the wall is that it is simply too early to tell. Although Apple appeared to be indifferent about the cannibalization concern, Apple did show a good deal of excitement about the “several more extraordinary products in the pipeline”. The iPod manufacturer did not disclose any further details about these upcoming products, but Apple is known for being a creative visionary. As a result, the expectations for Apple’s future products are high.
A lot of Apple’s hype is self promoted, but, for the most part, rightfully so. It had an incredible first quarter and is looking to build off that performance. There is a concern about the iPad cannibalizing sales from other Apple product offerings, but in the long run Apple will probably be better off with the iPad than without it. However, the potential iPad’s cannibalization impact and reach is yet to be determined, so stay tuned. Apple does its best to be a diversified company, but it is nearly impossible to avoid all product market overlap. Apple did not appear to be too wrapped up with the cannibalization issue, and there is a good chance that its new group of upcoming products will help hedge this problem. Unfortunately, the public will have to wait in suspense to see what these new products actually are, but based on Apple’s past success, most investors are probably hoping that the apple does not fall far from the tree.
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