Linked List: January 24, 2013

Thursday, 24 January 2013

And speaking of my friends appearing on Mule Radio podcasts, Jim Coudal is on the latest episode of Glenn Fleishman’s The New Disruptors.

‘Running Down the Street, Screaming at People’ ★

Speaking of Kottke, he’s the guest on the latest episode of Dave Wiskus and Lex Friedman’s Unprofessional.

McWorld ★

Jeb Boniakowski, writing at The Awl, has an amazing idea:

I figure if a bunch of nerds on Facebook can get Betty White onto “Saturday Night Live,” together we can make my McDream a McReality. I would like to introduce you to a concept I call “McWorld.”

The details of how I imagine McWorld have changed over the years, but there are a few constants:

McWorld is a giant McDonald’s flagship store.

McWorld serves food from all the different McDonald’s menus from around the world.

McWorld is located in Times Square.

Via Kottke, who is totally sold on the idea.

Louie Mantia on App Icons ★

Louie Mantia:

Instead of focusing on what your app does, focus on what your app is. This will help your personal brand show through, which will be more unique and more recognizable.

Apple CFO Jerry Seinfeld Addresses the Shareholders ★

Who better to give the last word on Apple’s quarter?

84 Percent of AT&T Smartphones Last Quarter Were iPhones ★

Dark times for Apple.

The Law of Large Numbers ★

Also worth a re-link, this year-ago piece by James B. Stewart in the NYT:

If Apple’s share price grew even 20 percent a year for the next decade, which is far below its current blistering pace, its $500 billion market capitalization would be more than $3 trillion by 2022. That is bigger than the 2011 gross domestic product of France or Brazil.

Put another way, to increase its revenue by 20 percent, Apple has to generate additional sales of more than $9 billion in its next fourth quarter. A company with only $1 billion in sales has to come up with just another $200 million.

Update: Yes, yes, what Stewart is talking about is not the “Law of Large Numbers”. But terminology aside, his piece is looking prescient.

‘When They Should Have Gone for Market Share, They Went for Profits.’ ★

Worth a re-link, regarding the iPad Mini and Apple’s profit margins.

‘Apple’s Profit vs. Amazon’s Promise’ ★

Mark Gimein, writing for The Market Now:

Since 2003, the first year in which Amazon earned a profit, through the end of 2011, Amazon has reported a total of $5 billion in earnings. Amazon has not yet reported results for this year; it lost money in the last quarter, but is expected to turn a profit for the year.

Think of it this way: if Bezos had started the company himself, still owned all of it, and had taken out every penny in profit, his bank balance would be less than one-quarter of what his shares are worth. Or think of it another way: Apple’s profit for the last quarter alone is well over twice Amazon’s profit over its entire entire existence.

Apple’s Stock Price Has Always Been Irrational ★

From a year-old piece by Abdel Ibrahim at The TechBlock:

The stock market sell-off of 2007-2009 bears out this cautionary approach. During that period, Apple released its original iPhone, followed by the iPhone 3G, the iPod touch, the MacBook Air, and a variety of updates to their Mac line. They were seeing record earnings quarter after quarter, not missing a single beat, yet the stock dropped from roughly $202 to $78 in that period. Why? Because stocks react to people, not analysts.

In hindsight, everyone should be able to agree that this was crazy.

Via email, here’s the take from DF reader Gregory Ley:

As Apple grew like crazy the past 10 years it never traded like a “growth stock”. Always had low valuations (infamously low P/E ratios relative to peers, especially Amazon). Now that growth is somewhat slowing (profit-wise, at least… not revenue or units — those are still growing +20% year over year) the stock is “falling back to earth” except it was never overvalued to begin with. That’s the best explanation I can come up with. AAPL, the stock, has almost become disassociated with Apple, the company. The same craziness that seems to overvalue Amazon also undervalues Apple.

Apple’s Implicit Earnings Forecast for Next Quarter: A Drop ★

Smart analysis by Mark Rogowsky at Forbes:

A lot of people are confused and think Apple didn’t provide EPS guidance. They most certainly did, but it requires math. Fortunately, I’ve done the math for you. If you take all the numbers above and assume the share count stays constant (it actually fell by amount 1 million shares over the past quarter), you get a range between $9.25 and $10.50 per share.

Add it all up and you get higher expenses, much lower gross margin and not enough revenue to keep earnings per share from falling from last year’s $12.30.

So the predictions that the just-reported holiday quarter would be Apple’s first year-over-year earnings drop since 2003 were wrong, but next quarter — at least by Apple’s guidance, which they now claim is what they really expect, not sandbagged — the range of Apple’s revenue guidance works out to $9.something billion in net income. Even at the high end of that range, close to $10 billion, that would be a significant drop from the year ago Q2 2012’s $11.6B.

Rogowsky’s explanation for the drop is compelling:

Clearly, iPad is significantly more seasonal, but it’s also becoming a much less expensive product thanks to the popular Mini. If you compare to last year, iPad unit sales are up 50% in the holiday quarter. If you take them down sequentially by the 20% seen last year, you’d lose about 4.5 million units at $469 — a revenue shortfall of about $2 billion between the quarters. But if you also take down the average price another $25, you lose another $4.5 billion in revenue (over 18 million iPads).

Update: David Barnard points out that Rogowsky’s math doesn’t add up there: $25 times 18 million units comes to $450 million, not $4.5 billion. “Sammy the Walrus IV” argues it’s simply about margins: last year Apple’s margin for Q2 was 47 percent; their forecast for Q2 this year is 38 percent.

The Apple Paradox ★

Benedict Evans:

As an investor, therefore, are you buying a company with high growth and continued high profits, slowing growth and the same high profits, or the same growth and (due to cheaper products) lower profit? It really isn’t clear. More cynically, this is a catch 22: high numbers mean saturation (bad), and low numbers mean slowing growth (bad).

Finally, Apple has got to the point where all news is bad news.

The paradoxical demands of investors: they want Apple to add a new lower-cost iPhone and think the iPad Mini is too expensive, but, they don’t want Apple’s profit margins to drop. Can’t have it both ways.

‘Go for Broke, Use Up Everything You Have, and We’ll Deal With It Later’ ★

Speaking of Mad Men, season six starts with a two-hour movie April 7.

Microsoft Has a Heart ★

“Child of the ’90s” — a nostalgic, fun ad from Microsoft for IE.

Via email, one DF reader compared it to Don Draper’s epic “Carousel” pitch on Mad Men. I wouldn’t go that far — this isn’t that good — but in that pitch Draper describes nostalgia as “delicate, but potent”, and I think that does apply here. (Maybe I’m one decade too old for this to really hit home, though.)

Tim Cook on Apple’s Quarter ★

Excellent, as usual: Macworld’s consolidated transcript of Tim Cook’s statements during the analyst conference call.

‘Apple’s Semi-Soft Quarter in Charts’ ★

Dan Frommer charts Apple’s quarterly numbers.