About
Capital Market Laboratories
Ophir Gottlieb is the CEO & Co-founder of Capital Market Laboratories. Mr Gottlieb’s mathematics, measure theory and machine learning background stems from his graduate work at Stanford University. He is a former option market maker on the NYSE and CBOE exchange floors and has been cited by dozens of various financial media including Reuters, Bloomberg, The NY Times and the Wall St. Journal.
+ FOLLOW THIS TUMBLRWhy Apple’s Small iPhone is Such a Big Deal
Fundamentals
Our purpose is to provide institutional research to all investors and break the information monopoly held by the top .1%. Thanks for standing with us.
PREFACE
The headlines will have you believe Apple is dead. It’s innovation is dead. It’s just “a phone company.” Those same headlines called the iPhone a luxury bauble with appeal to only a few techno-geeks – that’s from Bloomberg in 2007.
In fact, the iPhone was first assumed to be a side hardware business designed to “Defend the iPod” market.
Apple is ahead of us, not behind us. They play chess while the rest are playing checkers. In fact, here’s the incredible rise in investment in research and development the firm is making:
But this move we’re going to discuss was made with such precision, such competitive brutality, such foresight, that it serves as a reminder that the largest firm in the world is nowhere near done growing. Here we go:
iPHONE SE
First, the smartphone market in and of itself is growing:
We’re looking at a rise from 1.8 billion units to 2.6 billion units within four years. That’s 44% growth, hardly a dead market, yet hardly ever reported. But here’s the real story:
Today Apple will announce a product called an iPhone SE, which up until now has been just a prototype. Here’s what it looks like:
The starting price has been set at $399, the lowest price ever for an iPhone. Here are the specs in one image:
Basically an iPhone 6s in a smaller package and a huge price discount.
Analysts have dismissed it as a lower priced iPhone that may in fact compete with the other, more expensive iPhones. That’s OK – practice insanity if they must. But, it turns out that this 4 inch iPhone with a metal casing and rip roaring A9 chip speed device is world changing for Apple, and here’s why:
INDIA
What you won’t hear: India’s smartphone market is tremendously large. Here’s the growth via Statista
That’s 204 million smartphone users in India in 2016. By 2017, India will be larger than the United States. OK, so why do we care about India, or better yet, why don’t we ever hear about India and iPhones?
The iPhone SE was not built on a wing and a prayer. It was calculated, almost frighteningly so. Here was Apple’s share of the Indian smartphone market as of January:
Apple has essentially no footprint in India, because the country prevents outside companies from selling products there without a tremendous penalty based on a national law that protects home grown manufacturers.
CHESS NOT CHECKERS
A tectonic shift began last year with a visit by Apple’s CEO Tim Cook and a private meeting with India’s Prime Minister. Up until then Apple had been totally shut down in the world’s second largest smartphone market. Suddenly, the earth shook:
Shortly after the meeting we got this news: India has singled out “cutting-edge technology” as a segment that can side-step the 30% local producer rule and Apple has been singled out as “cutting-edge technology.” What a coincidence.
A meeting. A law change. Preferential treatment. Now, welcome to 200 million new potential Apple iPhone customers. Chess, not checkers.
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AHEAD, NOT BEHIND
Apple is ahead of us, not behind us. Remember that 2% market share we looked at in India. Here’s news that broke two weeks ago:
Apple’s 2% market share in India just rose 130% in a matter of months to 4.6%, and remember, the new iPhone has not been released yet.
You see, that secret handshake is working already. Price is an issue in India and the iPhone SE will come in at about a 30% discount to the normal iPhone.
We already have a 130% rise in smartphone share in a matter of months on a handshake, and today (or in the near future) the real weapon will be released. iPhone 6 holds nearly 20% of the market share in China, and that market has two powerful home grown competitors. Apple is going to dominate India – a market that is larger than the United States and this prototype iPhone SE is the world changing conduit.
At 20% market share, Apple is looking at 40-50 million units in India alone, in time.
Tweets and news are breaking in real time. Here’s one:
GOING FOR THE JUGULAR
Hearing the discord from critics surrounding Apple’s smartphone share in India at 2% was like listening to someone who was arguing about a news story they saw on the 6 o'clock news when we had already seen the follow up story on the 10 o'clock news. It was maddening and a little sad.
Now, speaking about Apple at 4.6% market share (130% higher) is still listening to yesterday’s news. There’s more to this than just iPhone sales. There’s a competitive spirit that Tim Cook has that is so brutal, so cutthroat, that it makes very clear why Steve Jobs chose him as successor to the CEO.
FACEBOOK AND GOOGLE
India is Facebook’s (FB) second largest market and if the iPhone becomes the smartphone of choice, as it has everywhere else in the world, Facebook will face a stringent challenge as Apple soon unveils its own new social media network and ad blocking to outside apps.
In its latest earnings call, Mark Zuckerberg explicitly noted the risk of ad blocker apps to the Facebook (FB) business since 96% of its revenue comes from ads.
Facebook is on alert because of this iPhone SE. Alphabet/Google (GOOG, GOOGL) faces the identical threat from Apple’s ad blocking software and social media patent as iPhone SE proliferates – recall that 80% of Google’s revenue comes from advertising.
For those that don’t know, CML Pro broke the news of Apple’s filing with the US Patent and Trademark Office for a new social media, loosely called ‘Social Groups.’ We won’t go over the entire dossier in this article, but the critical part: every iPhone owner is automatically included in the social network.
This idea, this prototype, this iPhone SE is not just a small phone because Apple had nowhere else to go. It was planned, calculated to frightening precision with a goal in mind, a goal larger than anyone in the press could see. But they will now.
And just so we know that this isn’t pure speculation, try this:
Drexel Hamilton is famously known for monitoring Apple suppliers in Taiwan. News just came out that “Apple Suppliers Had a 'Very Good’ January” (Source: WSJ).
[the company’s “Apple Monitor” supplier group] posted its strongest January since 2008.
Let’s read that again: “the strongest January since 2008.” That little gem of data has been held back as a secret as well.
As of right now, only one company stands as a real threat to Apple, and that’s Amazon. The full research dossier on the breathtaking path Amazon (AMZN) is on is available in CML Pro.
We further discuss the role that Netflix (NFLX) plays in the Apple TV saga in our Pro dossier: “Apple’s Genius: Kill Cable and Then Take the Entire Business.”
WHY THIS MATTERS
Friends, this is how the greatest transfer in wealth we have ever experienced has moved money to the top 0.1% from everybody else. It’s just access to information, that’s all.
To find the real information behind Apple, like patent applications, it takes due diligence, not headline clickbait stories. And, then, to go beyond it, to find the 'next Apple’ or the 'next Google’ we have to get ahead of the curve. This is what CML Pro does. Our research sits side-by-side with Goldman Sachs, Morgan Stanley and the rest on professional terminals, but we are the anti-institution and break the information advantage the top .1% have.
Each company in our 'Top Picks’ is the single winner in an exploding thematic shift like artificial intelligence, Internet of Things, the cloud, drones, biotech and more. In fact, here are just two of the trends that will radically affect the future that we are ahead of:
The Internet of Things (IoT) market will be measured in trillions of dollars as of next year. CML Pro has named the top two companies that will benefit. Then there’s cyber security:
Market correction or not, recession or not, the growth in this area is a near certainty, even if projections come down, this is happening. CML Pro has named the single best cyber security stock to benefit from this theme.
These are just two of the themes we have identified and this is just one of the fantastic reports CML Pro members get along with all the visual tools, the precious few thematic top picks for 2016, research dossiers and alerts. For a limited time we are offering CML Pro at a 90% discount for $10/mo. with a lifetime guaranteed rate. Join Us: Get the most advanced premium research delivered to your inbox along with access to visual tools and data that until now has only been made available to the top 1%.
The author is long Apple shares.
Thanks for reading, friends.
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