Apple Q1 iPod *revenue* has not left the building

Dan Frommer from alleyinsider.com posted a really ugly chart that makes it look as if the iPod is at the end of it's lifespan.

With all due respect, the numbers beg to differ. Mr Frommer uses iPods shipped as his metric of failure. Frankly "number of iPods shipped" has never been the number to look at, it's just not the right metric to measure a line of devices that include price points that range from $79.00 to $399.00. Under Mr. Frommers model, Apple could release a $1.00 iPod product, sell them to everyone in America and become wildly successful while still generating far less total revenue than they did last year.

Let's change perspective from "numbers of ipods shipped" to "Dollars of revenue generated", which I think we can all agree is a better measure.

If you account for the massive shift over the last year from selling shuffles at $79.99 to pushing the Nano/iPhone/iPod touch at $149.00-$499.00 you can begin to see why pure numbers shipped might not be as important as you would think it should be. It's a whole lot easier to sell x-millions of 79.99 than it is to sell half that at a price more than four times as high.

Instead, let's take a look at "revenue Generated" from iPods. Please keep in mind, this only includes iPod revenue, no iPhone revenue or sales, which would have added to the FY08 numbers, In effect, stripping out the most heavily promoted "iPod", the iPhone, because Apple also places that in a separate category in terms of revenue.



Taking a look at this chart, you can see that the revenue from iPods is still significant and while units shipped may be flattening, the revenue is still climbing quite a bit. In fact, iPods sold this last quarter generated a 17% revenue growth over last year's quarter.

Additionally, Apple has been successfully converting buyers of iPods to an ongoing revenue streams from the iTunes store, Apple store accessories purchases and also to computer buyers. Look at the revenue Apple generated from "other music" in the chart above, do you find it amazing that Apple is now generating more revenue from "other music" than it did from all iPod revenue only a couple years ago?

I think where Apple haters fail is that they think that once everyone has an iPod, they never need another one. iPods are like crack combined with fashion. You have to have at least one, and the first one can cost as little as $79.99, but you will have to get more as they wear out or "become uncool". The shuffle is not as cool as the nano or the touch. Last years models are not nearly as sexy-cool as today's. Girls need to replace last years neon green with one in blue, pink and red to match all their new outfits. Everyone needs cases and other accessories that all must pay a "compatible with iPod" tax to Apple in order to sport the claim.

iPod growth dead? Nope.

Let me know what you think.

-Don

All data for this post was gathered directly from Apple financial press releases.

By the way, as you may already know, I own Apple stock, and have for a very long time. - :-)

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Inflation and the Dharma Initiative

I'm not a reall fan of LOST, but I have watched a couple episodes. For some reason, this really reminds me of that show.

Enjoy!

The new economy.

I don't think this is too far from becoming true.

Broken iPhone

It had to happen.

I smashed my iPhone.

I don't believe in putting the iPhone in a case, I think that it diminishes the feel of the device. I simiply enjoy the sleek small feel of the phone au naturale. Adding a case, no matter how thin or small just makes the iPhone bulky and doesn't feel right.


More pictures and a video below


Of course, without a case, the iPhone is a slippery device. as hard to hold as it is beautiful. I've dropped it about a half dozen times, including once on a tile floor from about chest-pocket height. Recently, I picked it up after a short fall to the floor of my car and the screen was completely shattered. Even though the fall was only about a foot and the floor of the car in my Honda Element is reasonably soft, it was just one fall to many.

The amazing thing is that even though the screen shattered like safety glass, it's still usable. While I do have some hesitation about sliding my finger over broken glass, it's works just fine. Even the recessed area with the brass button (the home button) still works!









Thanks,

-Don

Time to buy Apple stock (AAPL)

Jan 23rd - I've left my original post below. But since the article is getting some traffic, I figured that the best thing to do would be to update the advice in the post that people were reading, so that you can take advantage of the situation developing.

AAPL is cheap. Flat out cheap.

The company is growing massively, expanding into multiple business lines on an ongoing basis. I was called crazy when I bought in when the stock was on the skids at a pre-split 8.61 a share. My broker actually talked me out of half of the order. He ended up costing me more than he could ever make back, so I dumped him.

The last few months have been high flying for AAPL. Admittedly, I really should have taken some off the table, but I'm not that kind of investor. I favor long term, slow reactions and have been up much higher than the market on average as a result.

AAPL is now at 140.00 a share... Down from 204.00 a share at it's high.

They beat this last quarter, they projected guidance that was less than the street's lofty expectations and got hammered for it.

You can read the transcript of the earnings report here. I think that after reading it, you'll come to the same conclusion that I have. This stock is a screaming buy.

I felt this stock was a buy at 200 or I would have sold it. I still feel that it's a buy.

Buy it now ar at any point while it's in this low period and you will make money. Just don't panic and get scared out.

- Don

Original article below:

Today, the "jobs" number came out... It's sucked. But in a funny way, that's a good thing. It means that we are indeed headed for, or possibly in a recession.

Why is that a good thing? It means that it's probable that the FED will get off their asses and start cuttng rates to help the economy like they should.

But it's especially a good thing because it's sending AAPL down to a level where it's not just possible to make some money by Macworld, but probable due to the "Jobs" effect of Macworld.

Buy AAPL now (or close to it) while the stock is at 188-191.00 a share and you will likely hit over 200 by Macworld, if you don't do anything else, just buy now and put in a sell order for 200 - an easy 5% in a week with little risk. If you play options you'll likely make much more. Sell at that time and walk away with the profits. Of course, you could do like I do and hold past Macworld for really long term gains. My first Apple buy was at a split adjusted 8.60 a share.

If you decide to hold, you will have to have the stomach for a rocky ride for the next year, but you'll likely make some serious money.

Many analysts are projecting high prices for Apple and I don't disagree, but remember that this year will suck for the consumer and that means there will be plenty of opportunities to grab this stock at a discount again - Though I hope not at this much of a discount.

Best of luck!

-Don

UPDATE!

This stock hit into the 179.00 mark as the whole market was slammed - especially tech. I still believe in this stock and where it's going and I plan on keeping my long term holdings. The next week will be ugly. Again... if you can watch and time it, this is a great opportunity to play one of the great tech names at the perfect time.

-Don


UPDATE 2!

Simply put, the last few days have been exceptionally hard on the market. Apple has not escaped this rough patch. It dipped as low as 168 before bouncing up for a day. With only a weekend and a day between now and Macworld, I'm thinking that there is not much chance to get in a bit lower than we are.

Good luck!

-Don



UPDATE 3!

Wow... I apologize if anyone took my advice here. I flat out apologize. I've been right on many, many calls in the past, and the evidence all pointed towards a great win here for this stock at this time. But that was not, absolutely not, teh way that this cookie crumbled. The market, whatever issues factored into the product releases at Macworld and the fact that we are apparently going headlong into a recession all added up to one very bad pick at exactly this poorly times moment.

I do still own and plan on continuing to own, my AAPL stock. But understand that if you do because of me, you may be a bit pissed at me.

I guess that all I have to say is that earnings are coming very soon and this all may bounce back, but be careful, very, very careful.

Good luck!

-Don



UPDATE 4 - Jan 22

Nope... worst call I've made so far.

That said. I'm up 1500% in AAPL and have made this call right four years running. I had to be wrong once. I'll post a more detailed post about this and my take on the overall market soon. I'm going to put my head in the sand for a day or so.

Still long AAPL...

Good luck!

-Don

Improve your credit score

I'm moving this post over from a blog that I started a couple years ago. This post was from January 2006. When I wrote this, there was no housing crisis, and I was suggesting that people should be improving their credit scores so that they could refinance easier. Now that there is a very real housing crisis, this seems a bit more prescient than I thought it was at the time...

Time warp on, have fun reading:

Last post I mentioned the need to clean up your financial past to better prepare for a re-finance in the future. I'd like to pipe in now to make that list I promised. Keep in mind, there will be a test and the results will likely be held against you. ;-)

1. As I said before, The first, most important thing to do in *every* financial situation is pay your bills on time. People who loan money like to deal with someone who is predictable and stable. Think about it, Would you loan someone money who "occasionally" let his bills slip or "sometimes" was a bit late on paying the bills because of (insert you last lame excuse for a late pay here) - Probably not. Payment history counts for around 35% of your credit score!

If you have past due bills now... Pay them and stay current. You will need to show a history, and you can expect to have to explain every incident of late pay that is found, so the fewer the better.

2. Unless you are an heiress, you probably don't need fifty credit cards running around. However, DO NOT close accounts just prior to looking for a house. If you have open cards with no or low balance on them, leave them for now. Your credit score is based partially on the ratio of open credit versus balances. Closing cards with no balances on them will tip this ratio against you.

The more appropriate approach would be to make sure that your cards have no more than 25% of the available balance used and that (as mentioned above) all payments have been made on time. Of course, there might be those clever individuals out there thinking... "Aha, I can just go out an open a few more cards now so that I can get a better ratio!" Well... Not really. This will also look bad on a report. Just pay down the ones you have, it's far easier in the end.

3. Don't make any major purchases. This includes Cars, Home Theater setups, Tweaked out computer systems or anything that you (or the bank) might consider a big purchase. The bank will look at any large purchase as a liability. Even if you purchase the car with cash out of pocket, this will look bad for you. Remember that the mortgage company will be looking at your cash reserves and will wonder why a large chunk left your possession just prior to the purchase.

4. Don't switch jobs. Remember, be predictable and stable. People who are predictable and stable stay in their jobs for a long time and have certainly been in their most recent job for the last two years or more. A stable person would not even think of looking to take on the responsibility of a mortgage payment unless they had a history of predictable income they could count on ;-)

5. Get a copy of your credit report. They are pretty cheap and will give you great insight into what surprises your lender will be finding. You will have far more power being able to say with a clear conscience "Yes, I've cleaned that nasty collection of unpaid adult video rentals right off my credit score, here is the letter of resolution." Keep in mind that this usually will cost a few bucks to do. The advanced knowledge and ability to clean up problems will be worth the cost. Besides, you are doing all of this months before you are planning to buy, right?

If you do have errors on your credit report, you can have them removed. This will take a bit of effort on your part however, and might take some time as well. So the sooner you get started the better. There is a great article located at about.com that can help you clean up errors if you find any on your report.

6. Don't apply for any other credit. This should be obvious from a couple of the above points, but I'll reiterate it again for fun. No credit cards, no car loans, no furniture rental agreements, no TV payment plans or store credit cards. Nothing. Nada. Nix. Every enquiry into your credit will cost you 5-10 points off your score. Every open card will count against you. Every payment you are responsible for will lower your available ability to pay your new loan payment.

7. Keep the money that you plan on using for a down payment in your account for more than a month. The bank will want to know that you have had this money for a while. Some may want to know where it came from.

8. Get to know your Debt to Income ratio. The simple math used to determine what you can afford according to most banks is as follows: you can probably afford 28% of your total gross income (from all verifiable sources) as a house payment. They also assume that you must pay out no more than 36% of your total for ALL of your bills combined, including your house payment. This is considered a debt to income ratio of 28/36.

The trick is to manage your debt to a level that closely resembles this. If you have way to many cards that have balances or car payments that are too big, find a way to pay them off or reduce them if possible. The bank will be considering minimum payments, so don't feel that you have to pay things "off" if you don't want to. But you should expect to encounter problems if your math does not quite equal their vision of where you should be.

9. Get in good with your landlord (if you rent) - especially if you have made any late payments in the past. It's likely the mortgage company will contact your landlord to ask for your payment history. The last thing you want is to show that you have had trouble paying rent.

10. If you are self employed, get ready for a rough ride. Ditto if you own your own company or have a larger than 5% stake in a public company. People that manage their own destinies are just plain unpredictable and thus can't be counted on, Right? Well... Not really. We know better. But the banks don't, they will use that against you until your eyes are bleeding.

Here is the rub. For most self employed people, the goal is to show as little profit as possible to eliminate the yearly tax bill. This results in a lower than usual income, and thus... A lower than acceptable debt to income ratio. Simple, but there are ways around it. Get statements of future income from your clients prepared, this will provide proof of this years income without having to provide even an inkling of the deductibles you plan on taking. Prepare to show the last two years tax returns, this is the equivalent of the requirements "normal" people have of showing the last two pay stubs. Most importantly, start focusing on your debt to income ratio immediately. If you don't pay your self a salary, now is a good time to start.


Well... That's all I have for now. If you feel that I've left anything out... Please feel free to make a comment.

p.s. Happy New Year!