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Author: spirach2 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 203567  
Subject: I blew it-- Date: 1/23/2013 5:48 PM
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I had concluded that almost every piece of actual hard evidence pointed to a blowout quarter, while almost every piece of commentary pointed to a disaster in the making.

I thought AAPL would blow away expectations on all fronts, proving that the W-St analysts were clueless sheep, and that most of the stories we'd heard for the last few months were garbage.

I was wrong.
The W-St guys (in aggregate) had it just about right, and it looks like all the bashing we've heard lately had at least some substance.

That doesn't mean that Apple's washed up, but, unless Tim has some big news for us this afternoon, I no longer think it's obviously, screamingly cheap, and I'm no longer happy about buying in as I did.
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Author: rationalwalk Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190439 of 203567
Subject: Re: I blew it-- Date: 1/23/2013 6:19 PM
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The stock still seems cheap and nothing in the earnings report appears to justify a 10% decline. For some reason, I have mentally anchored on not wanting to pay more than 5-6 times earnings for the stock (excluding cash). This level would be around $400. But even at the current $460 after market quote, the stock is cheap at around 7x this year's likely earnings, excluding cash.

I'm pretty confident in Apple's ability to continue releasing great products that will have broad appeal over the next 3-5 years. Just avoiding screw ups and letting the brand momentum carry them should keep the party going for at least a couple of years and I don't expect the team Jobs hand picked to become imbeciles incapable of coming up with new products after that. I think this gets them through 2017-18 timeframe.

Beyond 2018, I have no idea, but owning the stock at $400 basically represents having a free option on any post 2018 upside since free cash flow likely over the next 3-5 years, plus the existing cash, will be all that's reflected in the stock price.

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Author: DutchMark Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190440 of 203567
Subject: Re: I blew it-- Date: 1/23/2013 6:21 PM
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That doesn't mean that Apple's washed up, but, unless Tim has some big news for us this afternoon, I no longer think it's obviously, screamingly cheap, and I'm no longer happy about buying in as I did.

I'm sure that all of us long-term holders are now regretting not selling at $700 too.

While revenue still grew 18%, earnings remained flat. That answers the margin question so extensively debated here. Gross margins went from 44.7% to 38.6%. That's 14% so margin contraction balanced the revenue growth pretty much.

So growth came to a screeching halt. Even sooner than I thought, and I've been one of the more pessimistic lot on this board. So all the talk about new product-lines were basically meaningless.

So now what? Sure, the PE is very low. But it's hard to see where substantial growth is going to come from now. And PE multiples become pretty meaningless if we're actually going to see a contraction.

That doesn't mean all is lost. I'm certainly not going to sell into the panic, I'm seeing a $55 plunge after-hours. China is only in the early phase of iOS adoption, so that could save them for the coming year or two. But after that it will be a struggle simply to keep earnings where they are today.

The good news? $180 of that $460 share-price consists of cash. I'm fairly confident Apple will earn the other $280 and then some during the next 10 years while paying me a nice dividend.

Any mention of the TV at all?

Mark

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Author: mauser96 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190441 of 203567
Subject: Re: I blew it-- Date: 1/23/2013 6:23 PM
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While I didn't think the quarter was going to be a blowout, it wasn't as good as I expected. Score one for the pessimists.
Growth going forward estimated at 5% to 10%, so this isn't the Apple of the past.

iPad mini, iMac, iPhone 5, iPhone 4/4S were all constrained last quarter; iMac may remain constrained in this quarter due to strong demand
Read more at http://macdailynews.com/2013/01/23/macdailynews-presents-liv...


Obviously Apple is having problems manufacturing enough product. That is the big story of this event. I thought this was supposed to be Cook's strong point. Better more demand than product available than vice versa , but it's hurting the business. They couldn't even make enough iPhone 4, a two generation old product.

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Author: lukascranac Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190443 of 203567
Subject: Re: I blew it-- Date: 1/23/2013 6:38 PM
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apple missed the last two Qs. if anything that was hard evidence pointing to slowing growth.

the stock price fell on both earnings reports.

however I'd like to point out that it was after the first miss that the stock reached all time high as well.

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Author: PinkFloydRoadie Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190446 of 203567
Subject: Re: I blew it-- Date: 1/23/2013 7:05 PM
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The word I like to use is not "pessimist". It's "realist".

I don't like to be either optimistic or pessimistic.

I'm thinking what most people need here is a trading method that is unbiased and there are many such ways to do this. Trading on gut feeling and being blinded becuase they are part of the iCult is not my idea of sound trading principle. Sadly, too many people this that Apple can do no wrong.

My pathetic metaphor of referring to these hard core Apple owners to Jim Jones Koolaid drinkers is not that far fetched when you realize the only difference it that the drink is Apple juice instead of Koolaid and the cult leader is Apple instead of Jim Jones. I'm gonna drink the apple juice only after I have tested it for poison and see a trend change.

People, the signs are there about Apple. You just have to see them and take action.

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Author: commoncents33 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190465 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 3:02 AM
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apple missed the last two Qs. if anything that was hard evidence pointing to slowing growth.

the stock price fell on both earnings reports.

however I'd like to point out that it was after the first miss that the stock reached all time high as well.



Thanks...I was just starting to get over my self-recriminations regarding not lighting up on my position at $700....:)

But you're right: there was a solid data point that should have raised concern and caution. Maybe buying some put options as insurance would have made sense. It's a shame that learning lessons in investing have to be so darn expensive.

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Author: stevenjklein Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190512 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 2:22 PM
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So all the talk about new product-lines were basically meaningless…

The iPhone 5 was constrained all quarter. And Tim mentioned in the conference call that the iPhone 4 was also constrained.

They had no iMacs available for the entire month of november, and no 27-inch iMacs until December.

And the quarter was only 13 weeks long, while the year-ago quarter was 14 weeks long.

All of this makes me think that Apple needs to do a better job of managing inventory, and not announcing products until they have some to sell.

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Author: rationalwalk Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190520 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 3:05 PM
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All of this makes me think that Apple needs to do a better job of managing inventory, and not announcing products until they have some to sell.

Although the Mac lineup is not the most important product line, I thought that the rollout of the new iMacs was handled poorly. The new products were announced with several weeks of lead time before availability while the existing line of products were no longer available for sale. There could have been good reasons for doing this such as not having any inventory of the older products, etc. And the old lineup of iMacs was getting quite old indeed and maybe were not selling in volume.

I suspect that something in the supply chain went wrong in the late summer timeframe resulting in the delay. It is doubtful that Apple intended such a late launch of the new iMacs with a long delay between announcement and availability. Maybe they felt like announcing was needed to get on the radar of holiday shoppers even if ultimate shipment of product was deferred into fiscal Q2.

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Author: mauser96 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190524 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 3:44 PM
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<<<On iPad in particular, we have the mother of all opportunities here, because the Windows market is much, much larger than the Mac market is, and I think it is clear that it's already cannibalizing some and I think there's a tremendous amount of more opportunity there. As you know I've said ...that I believe the tablet market would be larger than the PC market at some point, I still believe that and you can see by the growth in tablets and the pressure on Pcs that those lines are beginning to converge. I think the other thing for us, maybe not for others, but for us if somebody who buys an iPad mini or an iPad and it's their first Apple product we had great experience through the years of knowing that when somebody buys their first Apple product, that a percentage of these people wind up buying another type of Apple product. And so, if you remember, what we had termed the halo effect for some time with the iPod with the Mac, we're very confident that that will happen and we're seeing some evidence of that on the iPad as well. And so, I see cannibalization as a huge opportunity.>>> from the conference call at Morningstar.
http://www.morningstar.com/earnings/earnings-call-transcript...

Re reduced margins-- the ASP for iPhone is almost unchanged but the ASP for iPad is down a whopping $101 per unit.

One bright spot-- Apple TV sales are up 60% YOY. Maybe it doesn't have to be a hobby.

I am disturbed by the continuing inability of Apple to deliver adequate supply of their products.This problem even extends to old models like the 4 and 4S. Apple said that will be fixed in this quarter but that is a lot of missed profits. The fault for not making enough product can be laid right on management. Either they are designing the products with inadequate attention to ease of manufacture,or they can't tune the manufacturing and supply chain. The new iMac might be a good example. Apple expects supply constraints to extend through this quarter. Why didn't Cook fix this before announcing? He could have kept selling the old model.
In the conference call Apple said that capital expenditures include buying machinery for suppliers. Maybe it's too soon but this doesn't seem to be helping supply constraints.
If Apple can't get this problem under control delivery of great products won't be enough because others will have plenty of time to copy them.

It is probably inevitable that margins will come down. The way to fix that impact on profit is to make more iStuff. But Apple is having problems doing that. Which sounds easier that coming up with insanely good new ideas.

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Author: mauser96 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190526 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 3:58 PM
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http://www.thestreet.com/story/11801187/1/apple-loses-if-it-...

If...Apple loses, the company will have beat itself because there's no competition in sight up to the task.

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Author: stevenjklein Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190556 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 9:43 PM
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I suspect that something in the supply chain went wrong in the late summer timeframe…

I agree that seems likely. But if that's what happened, why didnt they just keep making the older models a bit longer?

The phrase "osborne effect" comes to mind.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190559 of 203567
Subject: Re: I blew it-- Date: 1/24/2013 10:47 PM
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I agree that seems likely. But if that's what happened, why didnt they just keep making the older models a bit longer?

Nobody wants to get stuck with 100,000 units of last year's model in the pipeline, so they guess how many they'll need until the new model is ready and then shut down the production lines to retool, source the new parts, etc.

Since they were out of anything to sell for weeks, clearly something happened. Either the new lines took longer to get going, a key part was harder to manufacture in quantity than early test runs indicated, or people started buying more quickly (the opposite of Osbourned) than anticipated. Since nobody asked, and Cook was not forthcoming, I suspect we'll never know.

I have to say it's a bit surprising, given that Cook was in charge of all of this while Jobs was over in dreamland coming up with new stuff; you would think Tim would have had a better handle of it.

That said, let's remember that 1) Apple values secrecy, so it can't just order up 20,000 units of something in secret to be ready to ship two weeks after the product announcement. (And make no mistake, it's the secrecy and "launch" that plays into much of the Apple cache and provides the worldwide bonanza of publicity.)

and 2) the products are rolled out much more quickly in many more markets and in an ever more bewildering assortment of functions (depending on cell carrier technology, for one) abetted by Apple's increasingly complex product line(s). When all they sold was the basic iPhone it was one thing. Now there are 4s, 4Ss, 5s, in Verizon, AT&T, & Sprint configurations, in three memory sizes each, in colors, all in production at the same time...

And iPads big and small, also in various memory configurations and in 4G or not - and with different needs for different countries. They may only have a half dozen products, but they have dozens upon dozens of different models, launch dates to hit in different geographies, and, well, you get the idea.

I don't know if they're doing as reasonable well as might be expected. I just don't know how complicated this is all getting from a production and logistics aspect. Given the number of products Apple refreshed or launched last Fall, they may have bitten off more than they could handle.

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Author: Manlobbi Big red star, 1000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 190561 of 203567
Subject: Re: I blew it-- Date: 1/25/2013 12:21 AM
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I have to say it's a bit surprising, given that Cook was in charge of all of this while Jobs was over in dreamland coming up with new stuff; you would think Tim would have had a better handle of it.

Logically if Cook could spend 100% of his time on his previous
role before becoming the CEO, he might be spending say 70% of
his time on that role now given the other responsibilities
consuming his energy. This contrasts a kind of intuitive feeling
that because he is now in a more important position his
previous role will be executed especially well, rather than
hindered.

- Manlobbi

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