iPhone Sales Propel Apple To Another Record Quarter

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Tim Cook demoing the Apple Watch at the company store in Palo Alto

What do you do for an encore after you’ve reported the biggest quarterly profit ever for any company anywhere on Earth? If you are Apple AAPL +1.2%, you keep selling iPhones at a brisk pace, especially in China, and investors are sure to cheer.
On Monday, Apple said its revenue in the second quarter surged to $58 billion, up from $45.6 billion a year earlier. Net income was $13.6 billion. Apple reported earnings per share of $2.33, up from $1.66 a year earlier.
The results topped already strong forecasts, which called for Apple to report $56 billion in revenue and profit of $2.15 a share.
Apple also said it would increase its capital return program to more than $200 billion by March 2017.
Shares were up more than 1% in after hours trading, after rising nearly 2% during regular trading.
Revenue in China grew a staggering 71 percent to $16.8 billion, driven by iPhone sales, making that country the company’s second biggest market after the United States. 

“We are thrilled by the continued strength of iPhone, Mac and the App Store, which drove our best March quarter results ever,” Tim Cook, Apple’s CEO said in a press release. “We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch.”
As in recent quarters, all eyes where on the iPhone, which in the first quarter, when the company sold 74.5 million units, accounted for nearly 70 percent of Apple’s revenue. In the second quarter, Apple sold 61 million iPhones, ahead of forecasts of about 56 million. Sales of iPhones in China topped those in the United States for the first time.
Revenue in China grew a staggering 71 percent to $16.8 billion, making it the company’s second biggest market after the United States. 
Sales of iPads and Macs came in below forecasts.
During a conference call with analysts, Cook did not give sales figures for the Apple Watch, which went on sale Friday. But he said that demand is currently exceeding supply. “We are working hard to remedy that,” Cook said. As a new product category, the Apple Watch is expected to take “time” to fully ramp up, he said, noting that gauging demand was difficult given that the watch is not currently available in stores. Cook said that he believed the company would be able to solve the supply-demand imbalance by late June, when it plans to begin selling the watch in additional countries.
Cook said customer response to the Apple Watch had been “overwhelmingly positive.” He also said that the number of apps available for the watch, which stands at approximately 2500, far exceeded the company’s expectations. Cook said the iPhone launched with 500 apps, which the company finally opened the device to developers, and the iPad with 1000 apps. He said the company had hoped the Apple Watch would top the iPad numbers by a bit.
“It’s hard to imagine it being better,” Cook said of the Apple Watch debut.

Cook admitted that the iPad is suffering from “cannibalization” from buyers of both iPhones and Macs. “We’ve never worried about that,” he said. “At some point it will stabilize.” He said that he believes that at some point in the future, iPad sales will begin to grow again.

Investors had been eager to hear updates on how Apple plans to use its giant pile of cash, which stood at $178 billion at the end of the first quarter. Apple has already spent more than $100 billion in dividends and stock buybacks, part of a plan to return $130 billion to shareholders by the end of this year. Apple it was increasing the program by $70 million. The company, which ended the quarter with a record $194 billion in cash, said it would update the cash return program again a year from now.

I WATCH FLOOP?

The Apple Watch, formerly known as the “iWatch,” made its debut last week. TV reporters were at Apple stores hoping to report on the assumed big crowds. But there weren’t any. It was a strange “launch” because people couldn’t get the watch, just place an order online.
What to do when there is no crowd? Interview the CEO, Tim Cook. He was all excited about the congratulatory phone calls he received from around the world. He didn’t say how many watches he sold on those calls.
Fox Business news reported this:

“After months of hype, the Apple fans did not come out for the Apple Watch launch Friday. In contrast to long lines for iPhone debuts, only a handful of people showed up to see the watch in New York City, Friday morning.” 
Most customers at the Apple store on Fifth Avenue told FOXBusiness.com that they were unaware that they were visiting during the Apple Watch debut. They were there for iPhones, they said.

For details on this gadget you can read many articles and reviews on the Internet. Therefore, I won’t bother you with that. The important question is, “Will people buy it?” (See my March article, Does The World Really Need An Apple Watch?)

Amazingly, hardly any reporter asked that question. But it is critical.

I recently participated in an informal survey of a revolutionary tennis racquet that a group of players got to try out. There was a multi-page survey afterwards. Of course, no one wants to offend the sponsor. So the commentaries were positive.

The missing question was:  “Would you buy the racquet at $…..?”
I asked the players informally. Not one of the players said he would buy it in spite of the positive reviews they gave.
That’s the type of missing questioning that caused the huge failure of the introduction of the Ford Edsel. If you remember that one, you are revealing your age. The marketing research was immense, with paid focus groups, surveys, etc. Obviously, when you are paid by the company to sit in a focus group for part of a day, you will want to reciprocate by being positive.
The marketing research itself cost Ford a fortune. Based on the positive results, the firm decided to invest a record amount to introduce this new line of cars. The flop was immense. The car was soon sent to the marketing junk pile of history.
The hype around the Apple Watch reminds me of these failures. Here is my abbreviated opinion:
1. Buyers will quickly get tired of charging the watch every 8 hours or so. Imagine the hassle if your current watch stopped before the end of a work day!

2. It is compatible only with the iPhone 5 & 6. That’s about 38% of iPhone users, or around 5% of the world’s smartphone users. (The math: 85% of smartphones world-wide use Android.) The other 95% won’t be able to use many of the features of “the watch.” Is it smart to have a consumer product that only 5% of consumers can use? That works for high-priced items such as Rolex, Patek Phillipe, etc. But for a $399 watch?

3. The price is too high.

4. Is it a luxury item or is it a gadget? The price says, “Neither.” So who is the targeted customer? Watches have become more like jewelry. $399 for something that will be obsolete in a year is probably too much.

 This launch could well be the end to the perception that Apple can do no wrong. That perception was based on the successes of Steve Jobs. The Apple Watch is the first really new product from his successor. Investors will wonder, “Is this flop a sign of things to come?”

Actually, if you consider the new versions of existing iPhones under the new CEO, you can come up with more flops. The larger screen iPhones were about three years behind the competition. The sales surge of iPhone 6 was nothing but a catch-up from iPhone fans who were yearning for a larger screen.
I think the watch will flop. Of course, I could be wrong. Apple will hope so. But hope is not a good forecasting tool. Above I have only outlined the faults that I think are critical. Reviewers, much smarter about technology than I, have much longer lists. I only look at it as the average user would.
Interestingly, on the day of the Apple Watch launch, Samsung launched its Galaxy S6. It has great reviews. It could put a major dent into the sales forecasts of the iPhone.
Of course, Apple AAPL -0.51% stock price is a different thing. The stock has been boosted by the largest stock buybacks done by any company in history, about $200 billion. That reduces the number of shares, which increases the earnings per share and makes the stock price go up. It’s called “financial engineering.”
The capitalization of Apple in the market is the largest in the world, more than twice as large is the second largest. Consider that it’s basically a company that thrives primarily on the sales of one product, a cell phone. Companies that make thousands of products, like jet engines, helicopters, airplanes, battleships, the appliances in our homes, and so on are worth a lot less in the stock market.
If I were a shareholder of Apple, that would make me nervous. I would wonder how long such a stock market price can endure. Every mobile phone company in the world is now a big competitor. The iPhone has only about 15% of the market globally. The phone is very much overpriced compared to the competition. Eventually, the ecosystem will fade when people realize that they can get more for less with another phone.

If I were running Apple, I would put a much greater marketing effort into the great Apple laptop computers. These are excellent and beat anything made to run on Windows. They just need to offer some attractive discounts. Apple’s U.S. market share in this category is 13.4%, and gaining on the PC’s. Apple’s operating system is superior. So far it grows without the marketing hoopla. Much more could be done.

When the watch fades, the bulls will talk about the Apple Pay, although it can be used on less than 3% of all retail terminals in the U.S. Samsung now has Loop Pay, which is compatible with almost all retail checkout terminals. Will Apple Pay go the way of the Dodo bird? I think so!

I wonder, what happens when all the money managers heavily invested in the stock see the iPhone market-share decline, similar to the plunge in the iPad share, and they want to sell. Where will the buyers come from? Oh, I forgot: Apple will do more big “buybacks” to accommodate them. And they will borrow the money to do that.
One analyst who was on TV with me said he buys the stock because Apple buys it back. Is that a new form of investing?
And that’s how the game is played.
courtesy of forbes 

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Full EACC list of shame

Cabinet Secretaries implicated in corruption
Lands Ministry CS Charity Ngilu:
EACC claims Ngilu colluded with Evason Waitiki who is owner of a disputed 930-acre piece of land in Likoni by inflating the actual price of the land by KES 110 000 000 to be purchased by government for settlement of over 10 000 squatters. Ngilu allegedly targeted to get a kickback of KES 65 000 000 from the sale of the land while a remaining KES 45 000 000 was to be shared among other interested parties in the transaction. She is also linked to allegations of fraudulent land ownership along Statehouse road. The EACC’s investigation in the matter is ongoing.
Transport Ministry CS Michael Kamau:
Kamau is allegedly involved in various roads tender award manipulation cases, for example, he allegedly inflated the Standard Gauge Railway consultancy fees involving billions of Kenya shillings.
Agriculture Ministry CS Felix Koskei:
Koskei is allegedly linked to seceretly allocating permits to some sugar importers without observing open tendering and against the COMESA rule as required by the law. He is also linked to allegations of conflict of interest and abuse of office, intimidation and bribery demands from parastatal heads.
Energy Ministry CS Davis Chirchir:
Chirchir is alleged to be perpetrating corruption in the ministry’s tenders and procurement process. He is implicated in an attempt to influence award of a Kenya Pipeline Company tender worth USD 500 million to SINOPEC firm instead of ZAKHEM. EACC claims the tender was meant to corruptly yield USD 15 million which was to be shared between Chirchir and Nairobi Senator Mike Sonko.
Labor Ministry CS Kazungu Kambi:
Kambi is allegedly linked in corruption deals at NSSF where he strongly supported the NSSF Tassia II project despite clear indications that the Board of Trustees did not approve the project’s revised cost estimate of KES 5 053 billion from KES 3 304 billion as required by the procurement laws.
Principal Secretary Transport Nduva Muli:
Muli is allegedly linked to irregular disposal of Kenya Railways properties in Nairobi and other cities in the country in addition to influencing procurement process. He is also allegedly involved in irregular award of SGR tender to a Chinese company.
Principal Secretary Water James Teko
Principal Secretary Mining Patrick Omutia
Governors implicated in corruption
Nairobi County Governor Evans Kidero
Narok County Governor Samuel Tunai
Machakos County Governor Alfred Mutua
Homa Bay County Governor Hezron Awiti
Turkana County Governor Josephat Nanok
Mombasa County Governor Hassan Joho
Kilifi County Governor Amason Kingi
Isiolo County Governor Godana Doyo
Migori County Governor Okoth Obado
Bomet County Governor Isaac Ruto
Garissa County Governor Nadhif Jama
Marsabit County Governor Yatani Kanacho
Meru County Governor Peter Munya
Other County Officials implicated in corruption
Nairobi County Secretary Lilian Ndegwa
Trans-Nzoia County Secretary Sifuna Wakofula
Trans-Nzoia County Assembly Speaker David Sifuna
Makueni County Assembly Speaker Stephen Mutunga
Makueni County Secretary Rael Muthoka
Former Kiambu County Assembly Speaker Nick Ndichu
Machakos County Secretary Francis Mwaka
Kisumu County Assembly Speaker Anne Atieno
Elgeyo Marakwet County Assembly Speaker Albert Kochei
Isiolo County Secretary Ibrahim Wako
Embu County Secretary Laura Kariuki
Mandera County Secretary Okash Adan
Wajir County Secretary Abdullahi Sheikh
Senators implicated in corruption
Machakos County Senator Johnstone Muthama
Siaya Senator James Orengo
MPs implicated in corruption
Ganze MP Peter Shehe
Lamu West MP, Julius Ndegwa
Nandi Hills MP, Alfred Keter
Nominated MP, Sonia Birdi
Mt. Elgon MP, John Serut
Kitutu Chache MP, Richard Onyonka
Parliamentary committees implicated in corruption
Public Accounts Committee members
The Agriculture committee members
Judiciary officials implicated in corruption
Former Chief Registrar, Gladys Shollei
Former Deputy Chief Registrar, Shollei Kakai
 

Other State officials implicated in corruption
Secretary to Cabinet Francis Kimemia
National Police Service Commission Chairman Johnstone Kavuludi:
EACC claims Kavuludi is linked to financial impropriety, misappropriation, abuse of office and that he made various foreign trips without accounting for money spent.
Auditor General Edward Ouko:
Ouko allegedly defrauded the World Bank, fraudulent budget more than double costs to the tune of KES 500 million. KENAO allegedly paid KES 100 million in advance for the purchase of audit vault through single sourcing procurement.
Former Nairobi City Mayor, George Aladwa
Former Prime Minister’s Chief of staff Caroli Omondi
Former PS Ministry of Information Bitange Ndemo:
Ndemo allegedly involved in irregularities in procurement of Konza Ranch, and other eight accused persons.     
IEBC Chief Executive Officer James Oswago
IEBC Deputy CEO Wilson Shollei
IEBC Director of Finance Edward Karisa
IEBC Head of Procurement Willie Kamanga
Former IIEC senior officials
Parastatal heads implicated in corruption
Geothermal Development Company MD Silas Simiyu
Nzoia Sugar Company MD Francis Oyatsi
NSSF Managing Trustee Richard Langat
Kenya National Examination Council (KNEC) CEO Paul Wasanga
National Water Conservation and Pipeline Corporation acting CEO Evans Ngibuini
KENTRADE CEO Alex Kabuga
Export Processing Authority (EPZ) former CEO Richard Mutule
FKF Secretary General Sam Nyamweya
Kenya Meat Commission former Managing Commissioner Ibrahim Isaac
Kenya Airports Authority MD Lucy Mbugua
Kenya Pipeline Corporation MD Charles Tonui
Mumias Sugar Company former MD Peter Kebati

FINALLY COMBATING CORRUPTION IN KENYA

2015's Most And Least Reliable Countries To Do Business In

Are you looking for new international suppliers for your company? Or thinking about where to open an overseas office? When you evaluate your international customers, do you care about the stability of their business environment? What about government corruption? If you already have foreign offices, have you checked on the risks of natural disasters like floods and earthquakes in those locations? How sound is the infrastructure there?
For country-by-country shortcut answers to those questions, consider the “2015 FM Global Resilience Index,” a ranking of 130 countries by FM Global, the 180-year-old international commercial and industrial insurance company based in Johnston, RI. FM Global’s main business: providing loss prevention services to big companies around the globe.
FM Global puts countries through a rigorous evaluation process and produces a list of the places it deems most resilient. Landing in first place is a country that may not be at the top of your list for opening a subsidiary or factory: Norway (ExxonMobil has operated there for more than 120 years; ConocoPhillips also has longstanding oil fields there). Coming in second is a more obvious choice, given its bank secrecy laws and stable political environment: Switzerland. The Netherlands, with its healthy economy, solid infrastructure, sophisticated ports, extensive offshore wind power system, and secure dyke system, is in third place.
The U.S. doesn’t rank until 10^th place and then only for a portion of the country FM Global calls Region 3, made up of 26 states in the Southwest, Midwest, and the South, plus Washington, DC., which FM Global deems safe from wind storms and earthquakes. The U.S.’s Region 1, which includes Florida, Louisiana, New Jersey and New York, is vulnerable to storms and places 16^th on the list. U.S. Region 3, threatened by earthquakes, ranks in 21^st place, just behind the United Kingdom and above Portugal. Region 3 includes California, Oregon, Hawaii and Alaska.
FM Global’s methodology involves measuring countries’ strength in nine areas, under three rubrics: economic, risk quality and supply chain. It looks at these nine things:
1. GDP per capita
2. Political risk including terrorism
3. “Oil intensity,” meaning the chance the country will experience an oil shortage
4. Exposure to natural hazards
5. “Quality of natural hazard risk management,” meaning the country’s preparedness to deal with a disaster like an earthquake or a flood
6. Quality of fire risk management
7. Control of corruption
8. Quality of the infrastructure
9. Quality of local supplies
FM Global used the following sources: The International Monetary Fund supplies the GDP data, the information about the oil supply is from the U.S. Energy Information Administration, and the data on political risk and corruption comes from the World Bank’s “Worldwide Governance Indicators,” which pulls from 31 data sources. The Global Competitiveness Report, put together by the World Economic Forum and based on its survey of thousands of executives, is the source of the data on infrastructure and local supply chain quality. Finally the data on risks like exposure to natural hazards, readiness to manage natural calamities and ability to fight fires, all come from an algorithm FM Global developed to calculate risk at more than 100,000 commercial properties it insures around the world.
There are no surprises among the top 25 countries, which I’ll list below. They’re mostly European—Ireland, Luxembourg, Germany, Finland, Belgium, Denmark, Sweden, etc. New Zealand and Australia also make the top 25, as do Hong Kong, Singapore and Qatar.