Correct
prediction 
Maynard J. Um of UBS Investment Research
November 5, 2008
Although we continue to believe Apple will be able to grow at a premium to the overall market and increase share gains going forward, we do not believe the company will be immune to the broader economic slowdown, which we believe is reflected in our 11% Mac unit growth expectation."
Regarding a possibility that iPhone unit build orders may fall from 9 million in the prior quarter to 6.7 - 7.3 million:
Recent supply chain cuts have proven accurate (at least directionally). Hence, we believe recent data points may suggest unit volumes weaker than our current estimate of 5 million [for the current quarter]."
Regarding Apple's "Selling, General & Administrative" expenses of $20 per handset:
We find it surprising that Apple is able to achieve this level of cost discipline at such an early stage in the iPhone lifecycle (RIMM and PALM experienced materially higher SG&A costs early in their product cycles of $25-$40 per handset)."
If Apple were inclined to further penetrate the high-end enterprise market in the future, SG&A would likely rise:
...due to the 24/7 support requirements that most large enterprises require."
Regarding an iPhone price cut in the near future:
Operators may not necessarily pass on the cost-savings given already aggressive subsidies and pricing."
Um maintains a price target of $115 and a Neutral rating on AAPL.
October 22, 2008
We are downgrading Apple to Neutral from Buy and lowering our price target to $115 from $125. Our downgrade is primarily based on two reasons: 1) macro uncertainty and the impact to consumer spending and 2) sustainability concerns over a surprisingly high iPhone ASP and margin.
With limited visibility and a lack of visible catalysts near-term, we believe it prudent to step to the sidelines at this time. We note that there should be downside support given the company’s $27/share in net cash (which investors will eventually want to see better returns on), but do not see any near-term upside in light of uncertainty. Although our adjusted pro forma EPS (what we previously referred to as “peer-adjusted” EPS) reflects 18.8% growth year over year, we believe the potential macro risk warrants a discount to growth."
Ben Reitzes of UBS Investment Research
February 28, 2008
Nicolas Gaudois of UBS says Infineon will supply some components for the 3G iPhone coming mid-2008:
We believe this is one of the HSDPA solutions design wins management referred to as being due to ramp up [in the second quarter of 2008]. Consistent with these checks, our Apple analyst Ben Reitzes believes that 3G iPhones will be released by mid-year."
January 9, 2008
Even with prospects for a slowing economy, we believe Mac demand can keep going strong given new products. The key question into Apple’s earnings is whether Best Buy and new Mac products can help drive upside while iPod demand seems more seasonal."
December 17, 2007
Re the ultra-portable Mac:
We just completed surveys of well over 30 stores and Mac demand seems to be outpacing prior expectations. Even with prospects for a slowing economy, we believe Mac demand can keep going strong with new products that we have detected in the supply chain.
We believe Apple has been working on ultra-portables for quite awhile and that calendar 2008 could be the year this category finally explodes. We would not be surprised to see a very compelling ultra-portable device announced at Macworld and ship in [the first half of] calendar 2008. In fact, we believe there could be multiple products of this type in Apple's product pipeline over the next few years with possibly another to be announced by the end of 2008.
Regarding features in the ultra-portable, we believe Apple would be looking at integrating the 'touch' capability from its iPhone into the ultra-portable device with Leopard obviously as the OS. We believe Apple would only enter this market if its devices could be priced in the $1,500 range.
Re a lower-priced iPhone:
Our checks continue to indicate solid demand in the US following the $200 price cut with significant interest into the holidays. Should Apple introduce another lower-priced iPhone in the $200-$250 range, we believe we could see another significant pop in unit sales not unlike what happened to the iPod when the mini was announced in 2004.
Perhaps at Macworld or shortly thereafter, we expect Apple to announce a lower-cost (or 'nano-like' option) along with a 3G option potentially coming later in 2008.
Re Apple TV:
In terms of new products, we believe Apple is working on improvements for Apple TV, perhaps adapting the concept a bit with the focus on advanced and increased networked storage for the home, accessible by your Mac or PC or TV. We also believe it is possible at some point for Apple to enter the HDTV flatscreen business, with built- in Apple TV’s and hard drives, but that may be a 2009 or 2010 event."
Re movie rentals on iTunes:
Many studios have been reluctant to offer movies through Apple's service because of pressure from retailers like Wal-Mart and Target over fears that DVD prices will be undercut. A movie rental service, however, would sidestep the issue and could relieve the pressure studios are feeling. If so, we could see new iTunes partner announcements as early as Macworld Expo in January.
September 12, 2007
Over the last week we have had a chance to observe the impact of the Apple iPhone price cut and assess new iPods, surveying of dozens of Apple and AT&T stores. Our retail checks continue to indicate robust demand for Apple’s Mac products and a significant pick up in demand for iPods and iPhones following the announcements on September 5.
As a result [of the $200 iPhone price cut], Apple and AT&T will have more customers than previously expected sign up for cellular service, resulting in higher payments to Apple from AT&T (we estimate up to $10 per month). It is important to note that Apple will immediately recognize payments from AT&T (a reflection of the iPhone installed base), while deferring revenue from the device itself.
Other opportunities that are still not fully reflected in our model include: ultraportable devices, additional movie partners for a pay-per-view service, gaming opportunities and additional phone models. We expect Apple to make an announcement on its European iPhone carriers shortly and our contacts in the supply chain point toward a new iPhone model to be released before March of next year.
As a result, we are now projecting higher payments from AT&T given more subscribers, which offsets the lower prices of the iPhone. To reflect the new iPod line and higher iPhone payments, we are raising our fiscal 2008 earnings-per-share estimate to $4.47 from $4.35, now based on 33% revenue growth to $31.65 billion from $30.51 billion and an operating margin of 16.3%.
We are initiating a free cash flow per share estimate for fiscal 2009 of $8.20, which could turn out to be conservative if Apple continues to benefit from a negative cash conversion cycle. Our new 12-month price target is $182 based on our view that Apple’s valuation can reflect a 4.5% free cash flow yield in a year’s time now based on fiscal 2009 estimates."
August 21, 2007
Our checks and discussions with Apple and AT&T store representatives continue to indicate relatively solid demand for the iPhone despite a significant moderation in excitement and hype from the June 29th launch.
AT&T stores we spoke with indicated that sales of the iPhone remain relatively solid through mid-August. While demand has slowed from the initial launch as expected, the weighted average of iPhones sold per store per day in our survey was about 5.
Factoring in hundreds of thousands of iPhones sold through Apple stores and online via Apple.com, we still believe that our unit estimate is conservative. While Apple has not provided any information into expanded distribution of the iPhone beyond Apple and AT&T stores, we continue to believe Apple may expand distribution to include other retailers over time (Best Buy would make sense).
We believe that there is no technical barrier that prohibits Apple to sell the iPhone in China despite there being no iTunes store in the region (a user can use iTunes and activate the phone with an internet connection). We believe new models for the iPhone will emerge next year, which could help sales incorporating a sleeker design at more attractive price points."
Regarding higher capacity iPod nanos and a flash based widescreen video iPod with multi-touch technology:
We believe this is an important launch in that it should re-stimulate iPod sales into the holiday season. In addition, we believe many consumers have been waiting for this upgrade to take place, especially in the video iPod products, as it has been about two years since that line has had a major upgrade."
March 13, 2007
We expect new touchscreen video iPods, more phones and possibly even TVs in the future. With regard to the iPhone, we expect Apple to have a full line of phones from $150 to $600 available for purchase at multiple retailers in several geographies within three years, just like it did for iPods."
February 23, 2007
"We believe Apple is likely to hold another event by April or May to launch Leopard and/or other new Mac products (models with larger displays at least). We continue to believe Leopard may include several key features not previously previewed revolving around the digital home and telephony, driving demand for new products such as Apple TV and the iPhone.
At the Apple store we visited, representatives were wearing T-shirts with the 'Go Beyond Vista' slogan from Apple’s new marketing campaign which we believe highlights how Apple is actively looking to combat the new features of Vista and continue to drive switchers to the Mac platform. Our checks suggest that Mac sales may not be as bad as some feared going into 2Q as demand appears to be holding up into the launch of Leopard.
We would not be surprised to see a new device this calendar year, featuring touch screen functionality. While the PC market is rather mature with growth expected to be 12% in 2007 (driven by growth in emerging markets), the portable segment continues to show strong growth with 28% growth expected.
We believe Apple could expand this market significantly if it chose to enter it over the next 2 years. We believe Apple could see much better growth and drive this category if it stripped down features, optimized the device for media playing and web surfing and used its engineering and scale to drive prices down toward the $500-$600 level.
Since it began shipping on November 3, checks for the iPod shuffle have been extremely positive, with Apple (and non-Apple) store representatives stating demand has been very solid. While we are not expecting any upside to our iPod estimates in fiscal 2Q 2007, we believe the company will continue to benefit from sales of recently introduced products, albeit with significant seasonality.
While retail store representatives did not confirm or deny expanded relationships, it is important to point out that Best Buy is a major Cingular reseller. We believe that relationship could eventually provide a window for the iPhone to be available through Best Buy at some point."
Apple
announces that Leopard will be delayed til October.
January 10, 2007
"We believe the iPhone is a 'stunner' - far exceeding our expectations in terms of features, design and capabilities. We are particularly excited about the iPhone's potential to boost revenue and earnings with not only hardware, but also services and accessories.
Given continued momentum in sales of core products, combined with the new products announced today, we are raising our estimates through Fiscal 2008. We believe Apple is not done innovating and expect the company to release new products throughout the year including new Macs and iPods, additional content partners and possibly even ultra-portable devices that should stimulate revenue re-acceleration throughout the year.
Note that our estimates now call for iPod/iPhone unit sales of 54.6m (was 54.1m), including 850,000 iPhone units. As mentioned above, our estimates reflect an approximate 40% cannibalization rate of iPods to be conservative.
We cut our operating margin estimate based on the view that the mix shift toward fully featured smartphones could result in lower margins as Apple ramps sales."
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