Apple NewsFlow 2.0

Analysis: iPhone’s China “Disappointment” – Why Apple (AAPL) Need Not Worry

This article first appeared in MarketWatch.com.

After months of anticipation for the “official” iPhone release in China, the news last week was not so exciting: only 5,000 iPhones sold over the first weekend. Even the typically bullish, and usually correct, Gene Munster of Piper Jaffray called this “a disappointment” and lowered his China 2010 iPhone sales forecast from 1-2 million to 550,000.

 

What does this news really say about the prospects for iPhone growth in China and worldwide? Not much really, and here’s why:

 

1. Apple is already profiting in China from gray market iPhone sales. Forget “official” for the moment and check a few Apple message boards or forums. You’ll find posts from China techies who have owned unlocked gray market iPhones for years. Some have already sold their first generation iPhones and are now on to their second. In fact, the China Market Consulting Group estimates that 3.5 million Chinese already owned unlocked iPhones prior to last week’s launch.

 

This also disputes the contention that the high price of the entry-level iPhone 3GS in China (over $500 US) is a deterrent. In fact, gray market iPhones likely sold, and continue to sell, at prices close to or above the current official price.

 

2. Apple’s carrier limitations, for China and elsewhere, are temporary and will resolve themselves. China Unicom (NYSE:CHU), Apple’s wireless carrier there, and the Chinese authorities placed roadblocks in the way of smooth iPhone proliferation, among them disabling its WiFi capabilities as well as limiting the availability of certain apps. These decisions and other delays allowed the gray market to flourish with China Unicom the loser, but Apple still pocketing profits. In addition, most Chinese consumers prefer pay-as-you-go plans, not ongoing service contracts mandated by China Unicom’s iPhone.

 

China Unicom will eventually have to face market realities and offer pricing and plans in tune with their audience. Ultimately, its exclusive with Apple will expire and China Mobile (NYSE:CHL), the country’s largest carrier with 70% of the market and its most upscale market segments, will at some point offer the iPhone. In the meanwhile, the brand-conscious Chinese, for whom gray market shopping is a way of life, will still be able to buy one. If China Unicom sales remain tepid, expect some changes soon; Apple’s past actions show it moves quickly to adjust iPhone prices or polices to gain market share.

 

3. The iPhone is just getting started, with new models and technologies coming. Most of the above considerations will also vanish as new iPhone technologies and models are introduced. Last week’s most credible Apple rumor was anticipation of a “world iPhone” compatible with both GSM and CDMA systems. This clears the way for Verizon to offer the iPhone in the U.S., another huge sales potential for Apple. Knowing the pent-up iPhone demand for users unwilling to switch to AT&T here, imagine when similar roadblocks come down in other countries and you get a sense of how far the iPhone can go.

 

Plus there are only two iPhone models available now, the 3G (8GB only) and the 3GS in 16GB and 32GB capacities. This won’t be the case for long. Follow the iPod template and we could easily have as many as five iPhone models over the next two years.

 

Even more extraordinary is the fact that Apple has only 9% market share of the fast-growing worldwide smartphone market, but vastly more of its mindshare. That’s a lot of upside. So given this big picture, last week’s China “disappointment” was a short term blip in the long term growth prospects for one of the dominant technology products of the decade.

Full disclosure: Frank Cioffi is long AAPL stock.

Can One Site Aggregate ALL Apple User News?

Well, we're certainly going to give it a try.  (and you can help...more on that later)

Today we introduce Apple Enthusiast, designed to aggregate all the Apple user news in one, always-updating website. Combined with Apple Investor News, which aggregates all Apple [AAPL] business and financial news, we have the entire Apple universe covered.

Whether it’s user news about the Mac, iPods, iPhones or software, hardware, user tips, hacks, accessories, games, or the best deals for Apple-related products, we’ll have it here. Plus audio and video podcasts.

Like Apple Investor News, Apple Enthusiast sorts news headlines into useful and relevant categories spread over three main site pages, updated continually. Categories include Apple Mac + Mac OS, Apple iPod, Apple iPhone, Apple Rumors, Tips + Tricks, Apple Games, Apple in Living Room, Deals + Sales, Steve Jobs, Apple Developers and 12 other categories. Apple Enthusiast also aggregates video into some of the categories.

What intrigues me most about AE us how different the newsflow is from AIN!  There's some overlap between the two sites, but not as much as I expected. This is testament to the extraordinary amount and diversity of Apple-related news. And to our filters.

You can help make us better by suggesting news sources or new categories. Just contact us here. Enjoy.

MacWorld 2008: What! No Flying Car?

There are two interesting news cycles converging right now, resulting in a sale on AAPL  stock if you’re a long-term investor.

First there’s the overall market and financial newsflow that’s getting increasingly negative and knocking down certain stock sectors for no reason. Sure, we may be heading into recession, but should Intel stock (INTC) really have lost 35 percent of its value in the last four weeks? Probably not. This type of prevailing negative market sentiment is always a good time for bargain hunting.

Then there’s the Apple newsflow. It seems a lot of media were expecting a MacWorld 2008 announcement to match the WHAM of last year’s iPhone announcement. Wednesday’s San Francisco Chronicle actually had an editorial chastising Apple for not “knocking it out of the park” this year at MacWorld. How naïve. iPhone is a game changer. One every five years is amazing enough. Even a few analysts who should know better had unreasonable MacWorld expectations; check the Apple Investor News “AAPL Analyst” single category view for proof.

Then there was the MacWorld announcement that Apple sold 4 million iPhones in its first 200 days, garnering close to 20 percent of the U.S. smartphone market in the process. And this is met with a 10 percent price decline in two days!  I agree with CNBC’s Jim Goldman that both the Intel and Apple declines were overdone and that Apple remains “a long-term island in a sea of short-term waves of uncertainty.”

Of course, it’s natural for such a well-loved company to get pounced on by many of the same media that put it on its pedestal. But a decline with no fundamental news as the cause tells me this is a buying opportunity, courtesy of two converging newsflows. 

London Analyst: 18 million 2008 iPhones Will Be Sold at $200 Average

Very early Tuesday morning (about 8:50am London time) I saw a very informative report and series of interviews about the European iPhone launch on CNBC Worldwide.

Per Lindberg, managing director of technology research at Dresdner Kleinwort, was interviewed. Here’s a direct quote:

“In our projection, we believe there will be about 18 million iPhones sold next year at an average selling price of about $200, and that means a very sizable portion of total handset revenues will move from other manufacturers to Apple. (It) will be in the vicinity of 5 percent that Apple will steal from incumbents.”

Lindberg went on to say the iPhone would be available in a “palette of models” by next year and that competitors’ products would, along with the iPhone, inject new interest into the smartphone category. He said the current 2.G iPhone is Apple simply “testing the market” and that the real sales growth will come with the 3G iPhone models, which he expects will be available in early 2008.

Aside from this interesting projection ($200 for an iPhone!), the CNBC Worldwide crew in Europe seems to uncover a level of detailed analysis in their interviews that U.S. television producers might find boring. I found it fascinating and informative.

Steve Jobs Makes The Right Move

Well, it's been an interesting 24 hours of newsflow since the announcement that the 8G iPhone will drop in price to $399.

Those who argued this was just a case of “early adopter blues” were incorrect. This was different, especially so given the extraordinary iPhone buildup.

Steve Jobs did the right thing by offering his half-explanation/half-apology to early iPhone purchasers. The $100 rebate-credit is appropriate given the circumstances.

Now the AAPL question still remains: How are iPhone sales doing? Is this a sign of strength or weakness? Some hints can be found in CNBC’s Jim Goldman’s great blog earlier today, which surveys analyst comments before the announcement of the rebate.

NewsFlow Check: Three Weeks Past iPhone Media Blitz

It’s been three weeks since the iPhone was released in the biggest media blitz for a single product ever. Let’s take a look back and a look forward at this historic media event. Historic even for Apple. First a look back....

• The actual tally of iPhone media stories is hard to fully gauge, but it sucked up much of the media landscape for the month surrounding the launch. As lines formed to buy the product, TV news jumped on the story. When reporters include other media as part of a story, you know the hype has gone into the stratosphere.

• A Google News search of iPhone headlines during launch week showed 17,126 news stories on iPhone (aggregated from Google’s 4500 media sources).

• AppleInvestorNews.com’s database of stories with iPhone in the headline almost tripled for launch week (actually 2.8 times) from the week before.

• Most reviews from influential media agreed the iPhone is a breakthrough product that sets a new standard for smartphones. Most said it is elegant to use, hold and look at. Most don’t like AT&T’s slow EDGE network, and some don’t like the non-user replaceable battery. Some quibble about the keyboard, mail program and AT&T call reception too. But my assessment is that most reviews have just about, well almost, equaled the hype. This is extraordinary. Apple can enchant the press, but they can’t really control them. If the product didn’t shine, the reviews would have said so.

• The iPhone blanketed network TV on launch week with coverage on every network morning show and evening newscast. Jay Leno joked about it and David Letterman's Friday Top 10 List was “Top Ten Things Overheard In Line To Buy The iPhone.”

• According to the iPhone Buzz Index at Blackfriars' Marketing, iPhone media coverage peaked at 22,000 stories on July 8.

Now that the blitz is behind us, let’s look forward. Because in some ways, media coverage over the next month can be more telling than that of the launch itself, and may have more of an impact on the long term, sustained success of this product.

Will there be a media backlash? Will the follow-through product reviews be as glowing as the initial ones? Will there be a correction in AAPL’s lofty stock price after earnings on July 25? And what are the first iPhone owners, who’ve now lived with their product for weeks, telling their friends? Some initial observations:

• It’s interesting that Friday morning’s (July 20) Google News “last day” tally of stories with the word “iPhone” is at 17,600, not too far from Blackfriars' reported peak of 22,000. That’s a full three weeks after launch.

• The content of media coverage speaks to a highly successful launch, with initial sales estimates, and therefore future projections, beyond even Apple’s initial sales goals.

• The media historically likes the chance to knock something down after raising it on a pedestal, but the media landscape has been mostly devoid of negative stories. Oh sure, there have been a few articles on the iPhone’s expensive and cumbersome battery replacement scenario and a few stray stories on how it could be virus-prone. But largely the general media and financial media are discussing rising sales projections and the next iPhone models. Today analyst Gene Munster of Piper Jaffray (who was the first analyst to really understand what was going on at Apple, even before iPod became a cultural phenomenon) upped his price target to $205 and projected a staggering 45 million iPhones could be sold in 2009.

Apple took a PR risk orchestrating such an enormous media frenzy. The iPhone marketing machine was riding the good will of the iPod’s cultural impact. If the product was not as well received as it has been, Apple might have squandered much of its golden image. The risk paid off.

Apple is in rare air right now, even for Apple.

It’s been three weeks since the iPhone was released in the biggest media blitz for a single product ever. Let’s take a look back and a look forward at this historic media event. Historic even for Apple. First a look back....

• The actual tally of iPhone media stories is hard to fully gauge, but it sucked up much of the media landscape for the month surrounding the launch. As lines formed to buy the product, TV news jumped on the story. When reporters include other media as part of a story, you know the hype has gone into the stratosphere.

• A Google News search of iPhone headlines during launch week showed 17,126 news stories on iPhone (aggregated from Google’s 4500 media sources).

• AppleInvestorNews.com’s database of stories with iPhone in the headline almost tripled for launch week (actually 2.8 times) from the week before.

• Most reviews from influential media agreed the iPhone is a breakthrough product that sets a new standard for smartphones. Most said it is elegant to use, hold and look at. Most don’t like AT&T’s slow EDGE network, and some don’t like the non-user replaceable battery. Some quibble about the keyboard, mail program and AT&T call reception too. But my assessment is that most reviews have just about, well almost, equaled the hype. This is extraordinary. Apple can enchant the press, but they can’t really control them. If the product didn’t shine, the reviews would have said so.

• The iPhone blanketed network TV on launch week with coverage on every network morning show and evening newscast. Jay Leno joked about it and David Letterman's Friday Top 10 List was “Top Ten Things Overheard In Line To Buy The iPhone.”

• According to the iPhone Buzz Index at Blackfriars' Marketing, iPhone media coverage peaked at 22,000 stories on July 8.

Now that the blitz is behind us, let’s look forward. Because in some ways, media coverage over the next month can be more telling than that of the launch itself, and may have more of an impact on the long term, sustained success of this product.

Will there be a media backlash? Will the follow-through product reviews be as glowing as the initial ones? Will there be a correction in AAPL’s lofty stock price after earnings on July 25? And what are the first iPhone owners, who’ve now lived with their product for weeks, telling their friends? Some initial observations:

• It’s interesting that Friday morning’s (July 20) Google News “last day” tally of stories with the word “iPhone” is at 17,600, not too far from Blackfriars' reported peak of 22,000. That’s a full three weeks after launch.

• The content of media coverage speaks to a highly successful launch, with initial sales estimates, and therefore future projections, beyond even Apple’s initial sales goals.

• The media historically likes the chance to knock something down after raising it on a pedestal, but the media landscape has been mostly devoid of negative stories. Oh sure, there have been a few articles on the iPhone’s expensive and cumbersome battery replacement scenario and a few stray stories on how it could be virus-prone. But largely the general media and financial media are discussing rising sales projections and the next iPhone models. Today analyst Gene Munster of Piper Jaffray (who was the first analyst to really understand what was going on at Apple, even before iPod became a cultural phenomenon) upped his price target to $205 and projected a staggering 45 million iPhones could be sold in 2009.

Apple took a PR risk orchestrating such an enormous media frenzy. The iPhone marketing machine was riding the good will of the iPod’s cultural impact. If the product was not as well received as it has been, Apple might have squandered much of its golden image. The risk paid off.

Apple is in rare air right now, even for Apple.

An Apple-Only Financial News Site – Contrarian Indicator?

Last week my company launched the first-ever Apple-only financial news site, on the same week AAPL shares hit record highs.

I was chatting with USA Today investing columnist Matt Krantz and he jokingly wondered if the emergence of my site was a contrarian indicator. That is, that the stock would soon tank. This was on Tuesday with the price just above $110 (it was in the 60s a year ago). This week the stock breached $120!

Investors and traders often look at unusually high media interest as the sign a stock has topped out. For the last few months, the iPhone media coverage has been huge, even by Apple press coverage standards.

We’re bound to have a pullback soon, but regardless of the anticipation surrounding the iPhone, a closer look at the Apple newsflow tells me that most media don’t fully understand how much the longer-term Apple story is about the Mac, which is slowly and steadily growing market share.

Most media are iPod-focused and now, iPhone crazed. But the Mac alone could dramatically grow the company. UBS Investment Research analyst Ben Reitzes said last week that his projections showed a 94 percent increase in Apple laptop sales in April, as seen in an AppleInsider article. Wow.

This is probably part of what led Georges Yared, CIO of Yared Investment Research, to predict boldly last week, in a blog post at BloggingStocks.com, that Apple could someday be bigger than IBM. Double-wow.

As a longtime investor and media observer of Apple, I say AAPL still has a long way to go -- if you have a long-term horizon. But don’t let the media hype on iPhone obscure the Mac and Mac OS X story. A small increase in Mac market share has huge implications for Apple.

So where will AAPL be at year’s end? And why? And what else is the Apple newsflow telling us, or hiding from us? More to come…

(Disclosure: the author personally owns shares in AAPL.)

Welcome News Enthusiasts: AAPL and Apple!

Welcome. My name is Frank Cioffi. This blog is an adjunct to AppleInvestorNews.com and the soon-to-be-launched AppleEnthusiast.com.

I’m a former television news producer and technology marketing veteran. I’m a news nut and a media enthusiast. How communication flows has always intrigued me. Obviously the last 10 years has been a blast for me as I’ve watched the web redefine communication.

This blog is an exploration of how news flows and how we perceive news. More specifically it’s an exploration of how the enthusiast consumes news on the web. That’s become more challenging as the number of niche news sites, blogs and other vertical information sources grows exponentially.

This story begins with my enthusiasm for Apple, Inc. I’ve owned a Mac since it’s introduction in 1984 and, like many others, I’m excited by all things Apple. When I started investing and trading in Apple (AAPL), my browser bookmarks of Apple-specific news sites grew to over 40. It was hard to keep up. Typical web information overload.

I got an RSS newsreader, and that helped. But I needed more. The aggregated headlines from the search engines’ news sections helped too; but I soon wanted more than a single list of undifferentiated headlines.

I wanted my news sorted into categories relevant to my specific interest in Apple investing. I also wanted to try to fully capture the Apple information overload, while still relaying the nuances of its unique newsflow.

That’s how AppleInvestorNews.com was born. It’s a news portal for enthusiasts, specifically the Apple investor. And it’s a work in progress. In a few months we’ll introduce a niche news portal for the Apple user.

I invite you to take a look. More later.

(Our launch press release is here.)