Calculating the iPhone Installed Base and User Base, The LG G5, Thursday Q&A
Today's Above Avalon stories:
- Calculating the iPhone Installed Base and User Base
- The LG G5
- Thursday Q&A
We begin today's email by going over my calculations and methodology for obtaining iPhone installed base and iPhone user base estimates. After discussing the difference between the two (one is used for iPhone upgrade rates, the other for service adoption rates), we go over the key variables that are required for this exercise. We conclude by going through the calculations step by step ending with my estimates. Next, we discuss the LG G5, which was the most interesting smartphone introduced at Mobile World Congress this week. We conclude with Thursday Q&A and the following two questions from Above Avalon members:
- When you started analyzing Apple, did you think it would lead to being an auto industry analyst?
- Are we in a fitness bubble thanks to Fitbit and other fitness wearables?
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Tim Cook's Legacy (continued), The Apple Pencil Uprising, Longer Smartphone Life Cycles
Today's Above Avalon stories:
- Tim Cook's Legacy (continued)
- The Apple Pencil Uprising
- Longer Smartphone Life Cycles
We kick off today's email by discussing a few additional points from my "The Tim Cook Legacy" post from yesterday. In particular, we address the criticism that Cook is focusing on data privacy and security for marketing purposes. Next, we shift over to news that Apple will restore Apple Pencil functionality in the next beta of iOS 9.3. We discuss the background to this issue and why I suspect Apple changed course. We conclude by looking at new Kantar data that points to longer smartphone life cycles due to users not upgrading their devices as frequently. We go over the data and discuss a few theories as to what may be occurring at a more granular level.
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Tim Cook Q&A, Fitbit Earnings
Today's Above Avalon stories:
- Tim Cook Q&A
- Fitbit Earnings
We begin today's email by going over Tim Cook's interview with Fortune's Adam Lashinsky. We focus on three primary themes found in the Q&A: Apple's sales downturn, R&D and automobile contract manufacturing. We then take a deep-dive into Fitbit's 4Q15 earnings. Fitbit has implications on the broader wearables category given its market-leading position in the fitness and health space. The report contained a number of worrying signs for both Fitbit and the broader dedicated wearables category.
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Samsung (and Facebook) at Mobile World Congress, Bloomberg Profiles Apple's Chief Chipmaker, Apple Retail Employee Rewards Program
Today's Above Avalon stories:
- Samsung (and Facebook) at Mobile World Congress
- Bloomberg Profiles Apple's Chief Chipmaker
- Apple Retail Employee Rewards Program
We kick off today's email by looking at Samsung's keynote at Mobile World Congress. After going over the Galaxy S7 and S7 Edge, looking at ways the phones may impact the smartphone market, we discuss Mark Zuckerberg's appearance to discuss Facebook's VR partnership with Samsung. A number of things made me raise a few eyebrows. Next, we look at Bloomberg's big profile of Johny Srouji, Apple SVP for hardware technologies. There were a few future product observations from reading in between the lines. We conclude by discussing Apple launching a new retail program that rewards Apple Store employees for strong iPhone sales. At initial glance, such a program sounds incredibly worrying for Apple. We go over the likely motivation for such a program and if that worry is warranted.
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Tim and Jony in Vogue, Decoding Apple's Interest in Cars, Thursday Q&A
Today's Above Avalon stories:
- Tim and Jony in Vogue
- Decoding Apple's Interest in Cars
- Thursday Q&A
We begin today's email by discussing the Tim Cook and Jony Ive interview in Vogue. We go over why design matters so much to Apple and Jony's latest comments about Apple Watch and wearables. Jony (and Marc Newson) continue to make strong public statements concerning wearables and personal technology. We then take a deep-dive into one specific part of my "Standing on Tesla's Shoulders" post concerning the fundamental reason Apple is interested in the automobile industry and the way Apple will look to add chaos to the industry. We conclude with Thursday Q&A. This week's question: What do I think of Quartz's new iPhone app?
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Tim Cook's Message to Customers, Apple's Large Debt Sale, New Spotify Subscriber Data
Today's Above Avalon stories:
- Tim Cook's Message to Customers
- Apple's Large Debt Sale
- New Spotify Subscriber Data
We kick off today's email by discussing Tim Cook's message to Apple customers regarding security. The FBI wants Apple to "build a backdoor to the iPhone." This is the start of a long discussion that will play out over months and years. It's important not to miss the obvious reasons behind Cook's message. We then shift over to Apple's $12 billion debt sale. In addition to going over the deal, we compare this raise to previous Apple debt issuances in terms of quantity and investor attractiveness. The email concludes with a look at new Spotify subscriber data and two observations from recent trends.
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Eddy Cue and Craig Federighi Speak, Calculating the Apple User Base, Apple Developing Scripted Video Series
Today's Above Avalon stories:
- Eddy Cue and Craig Federighi Speak
- Calculating the Apple User Base
- Apple Developing Scripted Video Series
We begin today's email by discussing the Eddy Cue and Craig Federighi interview with John Gruber on his 'The Talk Show' podcast. We go over three observations from the interview including the much bigger topic of Apple's changing public relations strategy, the goal behind such a interview, and the effectiveness of Cue's comments about Apple services. Next, we focus on two data points (active installed base and the number of iCloud users) to reach estimates for the Apple user base in terms of total users and product mix. Along with a few interesting observations, these estimates form the basis for measuring Apple success in new ways other than hardware sales growth. We conclude by taking a deep-dive into reports that Apple is getting into original programming with a scripted Dr. Dre series. Such a move isn't about TV.
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Tesla Earnings, The iPhone Reality Distortion Field (additional thoughts), Thursday Q&A
Today's Above Avalon stories:
- Tesla Earnings
- The iPhone Reality Distortion Field (additional thoughts)
- Thursday Q&A
We kick off today's email by analyzing Tesla's 4Q15 earnings. Specifically, we discuss Tesla's results from the perspective of Apple. What can Apple management learn from Tesla's performance? It is becoming clear that Tesla's honeymoon period is over. We look at what Tesla is doing right and what Tesla is doing wrong, including why there are growing concerns surrounding the company. We then discuss the background to the "iPhone Reality Distortion Field" post, including the Apple product that got me to rethink the definition of success. At the end of the update, we go over Thursday Q&A and the following question: Is Apple bidding for sports programming rights in order to have better leverage against content providers?
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Disney's Frustration, Andy Rubin's Next "Android"
Today's Above Avalon stories:
- Disney's Frustration
- Andy Rubin's Next "Android"
We begin today's email by taking a deep-dive into Disney's 1Q16 earnings and CEO Bob Iger's latest comments about ESPN and the cable bundle. We are starting to get a better sense of ESPN's future. There is much value in tracking Disney's changing narrative for ESPN when thinking about Apple's TV plans. We then shift over to Wired's profile on former Android chief Andy Rubin and his new focus (Playground Global). In some ways, Rubin is taking Android's strategic weakness and using it to rethink a new computing paradigm. We discuss Rubin's goals with Playground Global and two takeaways related to Apple.
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Bringing Apple Services to Android, Apple Showing Interest in NFL Streaming Rights, Cracked iPhone Screen Upgrade Program
Today's Above Avalon stories:
- Bringing Apple Services to Android
- Apple Showing Interest in NFL Streaming Rights
- Cracked iPhone Screen Upgrade Program
We kick off today's email by circling back to one of Tim Cook's comments from his recent Apple Town Hall meeting. How realistic would it be for Apple to offer additional services on Android? With a renewed focus on the "Apple, the services company" narrative, we take a closer look at the scenario of Apple bringing additional services to Android. How would Apple's business model be impacted? We then shift over to news that Apple is showing interest in NFL streaming rights. We conclude by looking at the rationale behind Apple expanding its iPhone trade-in program to include cracked iPhone screens. There is more to the move than just pushing iPhone upgrades.
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Tim Cook's Town Hall Meeting, iPhone 7 Design vs. Aging "S" Cycle
Today's Above Avalon stories:
- Tim Cook's Town Hall Meeting
- iPhone 7 Design vs. Aging "S" Cycle
We begin today's email by taking a deep-dive into Tim Cook's Town Hall meeting at Apple HQ following Apple's 1Q16 earnings. We focus on nine of Cook's claims including Apple Watch, iPad and Apple TV sales, in addition to iPhone's future and Apple services on Android. We then switch over to reports that the iPhone 7 may not see much of an external design change. Instead of assuming the lack of much external change is a negative in regards to iPhone upgrades and sales, it is important to think about the iPhone 7 in relation to the aging "S" cycle. There is increasing evidence of a revised iPhone development strategy taking shape.
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The iPhone Is Stifling GoPro, User Apathy Toward Apple Software Quality, Thursday Q&A
Today's Above Avalon stories:
- The iPhone Is Stifling GoPro
- User Apathy Toward Apple Software Quality
- Thursday Q&A
We kick off today's email by discussing GoPro's 4Q15 earnings report and conference call. The company appears to be doubling down on its current strategy despite evidence showing that the iPhone is GoPro's ultimate problem. We then switch over to deteriorating Apple software quality and why Walt Mossberg's latest piece stood out to me. The most important topic concerning Apple software has more to do with user apathy. We conclude with Thursday Q&A and two questions from members: "Are there any implications for Apple related to Xerox being split into two companies?" and "Should Apple replace Citizens Financial Group and handle the financing associated with the iPhone Upgrade Program?"
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Amazon Brick-and-Mortar "Bookstores," Judging Apple Share Buyback Success
Today's Above Avalon email includes the following stories:
- Amazon Brick-and-Mortar "Bookstores"
- Judging Apple Share Buyback Success
We begin today's email by going over one of the more intriguing stories to hit the tech space in a while: Amazon is looking to open 300-400 "bookstores." We take a deep-dive into the rumor and discuss why Amazon would open hundreds of brick-and-mortar locations and how it would impact Apple and the broader retail and consumer tech space. We then switch over to Apple's share buyback program to judge how successful management has been with share repurchases. After going over management's buyback history, including average prices paid for shares since 2012, we discuss how success is measured with buybacks and if management has been making the right decisions.
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Apple's Broken Narrative (Additional Perspective), Apple Looking to Sell Refurbished iPhones in India
Today's Above Avalon stories:
- Apple's Broken Narrative (Additional Perspective)
- Apple Looking to Sell Refurbished iPhones in India
We kick off today's email by going over additional commentary related to yesterday's "Apple's Broken Narrative" post. Specifically, we address management's reaction to slowing iPhone sales, the need to change Apple's narrative, and the topic of Wall Street losing confidence in management. We then switch to news indicating Apple is interested in selling refurbished iPhones from China in India. There are a few major implications from this strategy including how it may work from Apple's perspective and if this can serve as a model for selling the iPhone in other emerging markets.
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Apple's Record Stock Buyback in 1Q16, Apple Building Secret AR/VR Team
Today's Above Avalon stories:
- Apple's Record Stock Buyback in 1Q16
- Apple Building Secret AR/VR Team
We begin today's email by examining Apple's share buyback activity in 1Q16. Upon closer examination, management did not repurchase any shares during December. While some have taken this fact and concluded management may have slowed down buyback due to weaker iPhone sales, there are a few reasons why I'm skeptical of that line of thinking. We discuss how management is buying back shares like there is no tomorrow. We then shift over to the FT's report on Apple building an AR/VR team numbering in the hundreds. How should we think about this development? What would be Apple's goals by assembling such a team? We focus on these questions and how AR/VR would fit within Apple's big picture.
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