One of the next big talking points for Apple Inc. (NASDAQ:AAPL) is going to be the results from the company’s September quarter, which are due tonight. However, there’s always plenty of news surrounding the company, and Goldman Sachs analysts Bill Shope, Elizabeth Borbolla, Cristina Colon and Justin Price have offered their take on the various pieces of news.
iPhone 5S production increased, 5C production cut
Everyone’s commenting on the iPhone mix being skewed significantly to the more expensive iPhone 5S. This will undoubtedly raise Apple Inc. (NASDAQ:AAPL)’s average selling price for the handset. Earlier this month NPD Display Search and channel checks suggested that iPhone 5S production was being increased by approximately 75%, while iPhone 5C production was being cut by about 35%. According to NPD, the higher than expected price of the iPhone 5C and the timing of its launch in China were the main factors contributing to lower sales of the 5C. The handsets launched during Golden Week, which is when Chinese carriers offer “aggressive” subsidies for new handsets.
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The Goldman Sachs analysts note that this should be no surprise to anyone. Apple has been having difficulty keeping up with demand for the iPhone 5S because early supply of the handset has been especially constrained.
iPhone users report high satisfaction
J.D. Power and Associates reported in its tenth smartphone customer satisfaction survey that the iPhone held the top spot on both the Verizon and AT&T networks. This year was the first year the company broke down customer satisfaction according to carriers. Samsung edged out Apple Inc. (NASDAQ:AAPL) by a narrow margin on Sprint’s network, although on all carriers, the iPhone received the “among the best” designation. The survey covered 16,000 smartphone users starting in February.
Shope and the rest of his team notes that the survey indicates that even though the iPhone 5’s refresh cycle wasn’t as strong as previous iPhone models, it still remained the highest for customer satisfaction. They believe the two new iPhone models could help improve customer satisfaction even further.
More Apple executives depart
Earlier this month it was also reported that Apple Inc. (NASDAQ:AAPL) lost two executives. Former marketing executive Suzanne Lindbergh left the company to head up Jawbone’s new entertainment division, while former e-commerce head R.J. Pittman left to become eBay Inc (NASDAQ:EBAY) Marketplace’s chief product officer. Goldman’s report doesn’t include the departure of Mac engineering chief Doug Field, who left the company to go to Tesla motors Inc (NASDAQ:TSLA).
I would question whether these departures are part of a larger trend suggested earlier this year by tech industry insider John Gruber that Apple Inc. (NASDAQ:AAPL) could start bleeding talent. Goldman doesn’t think these departures will have much of an effect on Apple and note that the company did hire Burberry Group plc (LON:BRBY) (OTCMKTS:BURBY) CEO Angela Ahrendts to take over its retail division. They believe Apple will be able to continue attracting the talent it needs to succeed.
Implications of music downloads for Apple
They also note that this year music downloads are on track to post the first annual unit decline, according to Nielsen SoundScan. This is in contrast to previous years when declining CD sales were offset by strong music downloads. Downloads posted double-digit growth for years after Apple Inc. (NASDAQ:AAPL) launched iTunes. Some suggest that the industry is in the midst of another shift, while others say this is the result of a bigger mix of Android devices.
Apple launches iTunes Radio just in time
The Recording Industry Association of America estimates that streaming and subscription music services brought in more than $1 billion in revenue last year. This would be a 59% increase annually. According to the NPD Group, 54% of iPhone users buy music, while just 30% of Android users buy it.
The Goldman Sachs analysts suggest that this means the timing of Apple Inc. (NASDAQ:AAPL)’s iTunes Radio is good because it offers another source of music revenue since it’s possible that revenue from music downloads could fall. Last week Apple reported that the service has already reached 1 billion songs and 20 million listeners, and it has only been around for a few months.
Goldman analysts say music is not just one of Apple’s direct revenue sources but also a major source of stickiness for the iOS ecosystem.