Apple picker In recent months, speculations have been flying around us as to why Apple is only going down the road. Information is often unsubstantiated or difficult to verify. Nevertheless, they have a huge influence on the company's shares, which have fallen by practically 4% in the last 30 months.
Speculation
We will demonstrate this with the case of a recent speculation that claimed: “Display orders are falling = demand for iPhone 5 is falling.” The report originally came from Japan and appeared before Christmas. The author is an analyst who doesn't even deal with mobile phones, let alone iPhones. His field is the production of components. The information was later taken over by Nikkei and from it by the Wall Street Journal (hereafter WSJ). The media took the Nikkei as a credible source, the same as the WSJ, but no one verified the data.
The main problem is that the production of displays is not directly linked to the production of the phone. These are made in China, not Japan. The iPod touch, for example, uses the same display. It would only be connected in a just-in-time production environment, but that's not usually used on phones.
The most likely reason for the drop in orders is that each new product takes time to get into full production. They learn to handle the components, quality increases and the error rate decreases.
In the beginning, the maximum number of screens the factory could supply was needed to meet the demand, which is highest in the Christmas quarter. At the same time, they had to deal with production errors, as it was a new product and production always becomes more efficient over time. Logically, orders are then reduced, which is a standard process in the production of anything. However, no factory boasts data on caries, so the data cannot be compared.
An analyst who wants to publish to the world his radical claim that the demand for iPhones is falling by tens of percent should honestly verify and connect all the data. Not making claims based on an anonymous source somewhere in Japan.
I don't see sharp declines in the mobile market, even the troubled company RIM is gradually declining. Therefore, a drop of 50%, as suggested by some speculations, contradicts the history and principles of market functioning in the given sector.
Disbelief in the Apple story
But such a strong claim also has serious consequences. Apple has written about $40 billion off its value after speculating on displays. However, most reports directly from the company indicate that Apple is in for a record quarter. On the contrary, stock markets are showing disaster. The market is apparently very sensitive as the general sentiment has started to prevail that Apple is vulnerable. Similar information appeared before, but no one paid attention to it.
One of the reasons that cause high sensitivity is the ownership structure of Apple shares. Among the owners are a number of institutions that have different perceptions and goals than the average individual. Technology stocks in general have a very bad reputation. Looking back over the last decade, we have one bigger loser than the next: RIM, Nokia, Dell, HP and even Microsoft.
The public thinks that a technology company will reach a peak and only continue to decline. Currently, the prevailing mood is that Apple has already reached its peak. Something along the lines of: "I have a feeling that it won't get any better." The problem is also with the theory of disruption, when a disruptor changes the market, brings something revolutionary, but nothing more can be expected from it. But there are also serial disruptors: IBM in the 50s and 60s, later Sony. These firms become iconic, define an era and drive the economy. Markets obviously had a hard time classifying Apple into one of these two categories, whether it was just a short-term hit or a company capable of repeatedly changing the market and thereby defining an era. At least in technology.
Here comes the caution of investors in the technology industry, logically, given the past, they do not believe that the Apple story is sustainable. This puts the company under scrutiny and any report, even if it is unfounded, can cause a strong reaction.
Reality
Still, Apple is likely to have a successful quarter. It will grow faster than any company in the industry, faster than Google or Amazon. At the same time, record profits are expected. By comparison, a conservative estimate for iPhone sales is 48-54 million, up roughly 35% from 2011. The iPad is expected to grow from 15,4 million to 24 million last year. Still, the stock has been falling in recent months.
The final results for the fourth quarter will be announced today. They will not only show us device sales, but also reveal information that could confirm an accelerated innovation cycle and other speculations.
If I order something from the factory, I don't care how many % are defective, after all, the company has committed to supply me with the agreed number. Who discovers the defective pieces is also irrelevant.
Yes, but if 10 of the million delivered displays are defective, I have to count on that and order a million+10 thousand next time. to cover the defective pieces and be on a million. And if the average number of defective pieces subsequently decreases from 10 to 1, I have to reduce the order by 9. to be back on the million pieces I need. That's a very rough idea of how it was with canceled orders.
This is nonsense, if I want a million screens, I want a million screens, no joke no min. Possibly a few tens or hundreds of extra pieces (as a guarantee). That's why in factories they have and in most cases there is some kind of exit control, where you throw away the rubbish straight away. I understand that you need to test every 30 or 50 pieces of display, but then it's another matter how to deal with it and the % of defective pieces that I get even after the inspection.
That's how it generally works. Unfortunately, Apple is a bit of a specific case. Because he doesn't want to order a few million from regular production. But he needs to maximize production at any price. To meet the demand. He invested several billion USD in the factories of the aforementioned Sharp. It generally invests in its suppliers' factories to achieve the greatest possible production.
In an effort to maximize production, there are initially more defective products than usual. Plus other losses are added directly at the phone collection point.
The relations between Apple and its suppliers are not entirely clear, as its investments directly in the factories are huge, but that's for a longer story :)
Well, I feel that Apple doesn't want a million displays, but a million devices on the market, which probably divided them. If I want to sell a thousand rolls and I also bake them, a tenth of them will end up as waste for some reason, then I will only get 900 to the customers and I can make excuses as I want, but I simply did not keep the final number and I bear the responsibility for that.
This is really bullshit, just like in the article. I don't really run a business like that. The company orders 1 mega functional piece and receives this number from the supplier. If the supplier has a scrap percentage, that is his problem. He has to make more of them to deliver what is ordered. If someone lowers the order, it's because they don't need the pieces. Shortcuts could lead to either sales restrictions (big eyes, sales) or a change of supplier or preparation of a product that does not use the display.
as I wrote below, Apple operates differently. He finances the production machines himself in the suppliers' factories, and when he maximizes production at all costs, it's not like ordering 100 sheets of glass from a factory that makes thousands.
So I guess I don't understand, he orders parts from the manufacturer, doesn't he? ... if the company partly belongs to Apple, then parts are made without an order and only according to the production program ... in the media it is written everywhere about the reduction of orders, i.e. the classic relationship between the customer (apple) and the parts manufacturer. If it is about reducing the production program, then I don't understand the hysteria
I also think that Apple was already at the top and is on the way down. The most important problem is the neglect of professional users. They completely canceled the Xserve, the Mac Pro has not been updated since 2010 except for the processor change, the current iMac is problematic because they cannot produce it in the necessary quantities, and currently even the 21" takes 2 to 3 weeks. I don't understand why they didn't have new motherboards made for Ivy Bridge processors and they could have introduced the new iMac and Mac Pro with the same design already in the summer of 2012.
iOS devices are just toys, and in a few years their sales may start to decline. I already think that many people buy them just out of inertia. The competition in smartphones and tablets is constantly improving.
you are right that the competition is improving a lot. Apple needs to step up this year, I think the main problem now is on the iOS side where an update is needed.
I have never reviewed Apple's professional devices here, as they represent a small % for the company. Maybe that's why they cough on them. Anyway, it's a shame.
I use the iPad not only as a toy. I consider a device with Androids as a toy where you can't trust it, i.e. work with it. I do not agree with you and I think that these "toys" will be increasingly used as work tools in the future, either on a table with a larger diagonal or in the hand.
Friends, let's try another quite different view. Conservative investors, institutions, speculators move on the stock market... Let's say that: smart and experienced speculators have already sold out, conservatives with the intention of dividends are holding on and are not afraid, sharper movements down or up (in the current range) are technical - automatic foreclosures, etc. Everyone according to their nature and abilities. I am attaching a chart on which Fibonacci is drawn (here we can clearly see the mysterious 30% :-) and a red trendline (2012 shot up in the weekly chart). Summary: 1. as an Apple user I can reflect on this 2. as a trader I take AAPL's behavior as completely standard.