It's been an interesting week watching Apple Inc. (NASDAQ: AAPL)'s stock. On Monday, a gaunt Steve Jobs announced the new iPhone 3G -- something that was completely expected due to months of rumors and talk from the tech world and the finance community as well.Jobs indeed announced the new iPhone that will run on higher-speed data networks. The tagline is this: Twice as fast. Half the price. So, Jobs announced the newest, fastest iPhone with all these new features while dropping the price to under $200.
Investors apparently could have cared less. Although speculation about Jobs' health immediately started circulating around the internet, Apple's share price briefly peaked about $185 during his' keynote speech (see red circle), then started going south the further he progressed into his iPhone demo. Then, on Tuesday, AAPL shares rose above $186 before starting a downward trend to just over $173 a share Thursday.
In many cases, the market goes hog wild anytime there is a major announcement from Apple, and these generally happen in January, June or September. Why wasn't the market caring about the newest, greatest iPhone that will undoubtedly sell like crazy when it's released in less than a month, pushed out to 70 countries this year, and given away for such an entry-level price? What's not to like? Another Apple home run in a series of dozens of them in a row. The market seems unimpressed, or perhaps it's waiting until sales actually occur in July before taking AAPL shares above the $200 mark.
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Reader Comments (Page 1 of 1)
6-13-2008 @ 1:36PM
Joshua Goldbard said...
That's not at all why the shares proved stagnant. It has to do with the way apple's revenue agreement changed. Previously they were on a revenue sharing agreement with AT&T wherein they received a set monthly stipend for every iPhone active on AT&T. This was EXTREMELY unusual for any carrier, and in the long run extremely costly to AT&T.
When the iPhones began to be unlocked AT&T was hemmoraging revenue, and when they negotiated iPhone 2 agreements, Apple and AT&T decided to go with a more traditional Handset-Subsidy agreement.
In reality, your 3G iPhone is FAR more expensive than the 2G. On a 2G iPhone, your retained upgrade eligibility (in other words if you broke it you could get a blackberry for 99.99). With the 3G iPhone you have to pay the unsubsidized price (unannounced, but likely in the 500 dollar range). The data plans are also increasing from a minimum of 20 to a minimum of 30.
The price of the iPhone didn't get lower, it's just smoke and mirrors. Apple has stated previously that this new agreement will limit profitability until the 2010 fiscal year.
-Josh
6-13-2008 @ 2:26PM
Beltway Greg said...
Here we go again. Josh, read your post, the "smoke and mirrors" are contained within it. Your use of the words "unannounced, but likely" suggests that you seem to know something that no one else on earth is privy. Secondly, don't break your phone dude. Get one of those rubber covers or better yet go down to the Harley store and purchase one of those wallets with the chain. All of your hommies at Radio Shack will quiver when you stride purposefully down the aisle towards the batteries.
And you Brian. Hmmmm. Let me see how did the stock do after the IPhone was released last year?
Pretty dull despite the best efforts of Beltway Greg
to get you to see the light. And, how did the investing public react to the release of the IPod?
What about when they opened those ruinous Apple Stores?
As I've written previously, Apple is not necessarily participating in revenue streams but creating them and therein lies the rub.
A couple of years ago Microsoft and Nicholas Negroponte, for you playing along at home, yes he is the brother of one John Negroponte all around Republican contra fix-it tron currently trying to save the State Dept. guy, decided to create a laptop that was solar powered for a cool $100 clams.
Imagine what would happen if folks in the third world could connect to the internet? Well guess what Steve & Co. went one better. We've given them a $199 laptop (the IPhone) that also sends and receives phone calls and will eventually do about a trillion other things once those MITs geeks get finished with their applications. (Understand the solar powered app. now?)
Do you hear me now? No probably not but check out the figures as to the amount of browsing that is being conducted in countries that have very little internet connectivity. I can't wait until some African nation orders 10,000 for their farmers or their government functionaries or police force.
Then you'll get it.
Beltway Greg
A Proud Independent Since 1980.
6-13-2008 @ 3:58PM
Brian said...
Josh -- this is old news. The standard subsidy arrangement between AT&T and Apple is going to crimp Apple's profits. Got it. Enough to crimp sales of a $199 miniature computer with a phone that works globally? Please. Customers just see a "lower priced iPhone" at $199 and will buy them at a record pace soon. That volume will make up for Apple's share of the subsidy. I doubt Apple had little choice but to take what AT&T offered as a partnership for the 3G iPhone. As we know by now, Apple calls the shots and if it isn't profitable to meet Cook's forecast and Jobs' wishes, boardrooms get torn up somewhere.
Greg -- you are right in that Apple is creating revenue streams, not sharing in them. That's what many of its products have done, and Apple does it better than anyone. The market, as usual, does not have a clue what is in Jobs' future plans, but your global wireless computer idea is probably a part of it. The problem is that the $199 price is subsidized. Can that compare with a flat $100 cost for the OLPC type of PC? One has a true cost of $500 (my guess) and one has a true cost of $100 once you take the subsidies away from the variable pool. So, I'm not sure the iPhone 3G will be the global connected tool of choice for third-world countries, but then again nobody knows except Steve Jobs. Maybe Phil Schiller. And, possibly, Tim Cook.
6-13-2008 @ 4:34PM
BILL said...
Is anyone considering that stockholders were frightened when they SAW and heard Mr. Jobs make his presentation? Is all of this just about the iphone and not about his health? Why run now when July 11th is coming and more people will see and want to buy the new iphone?
I guess it IS about his health. It IS about no one being groomed to fill the slot if he gets ill.
And shouldn't that be easy to fix with a truthful statement about his health? Should not someone now come forward and give us the facts?
I refused to sell Apple, watching it fall to 120 earlier this year. I stuck it out, but I ran at 184 earlier this week.. Sold every single share of it. Now I want to buy it back and only need to pick an appropriate time pending July 11th and any announcement the company is willing to make. Still a bargain at any price, perhaps, but getting a better sight on Mr. Jobs' health will surely help.
6-13-2008 @ 5:52PM
Kevin said...
Bill- do you honestly think Apple hasn't thought of a successor to Stevo? It seems a bit silly that a company the size of Apple wouldn't have thought of the "What might happen?" scenarios. Fact is, it's public knowledge that Steve has had and fought cancer. Any smart investor would know that Steve Jobs is not the only brain walking around Cupertino. Yes, he's a visionary. But good visionaries - if given the opportunity, can identify the talent that would need to replace them on the Apple throne.