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Apple Blames Earnings Miss On iPhone 5 Anticipation
Hugh Pickens writes "Reuters reports that Apple shed more than five percent of its stock price value in after-hours trading after the company reported its second quarterly miss on results in less than a year, highlighting how the Apple brand is becoming less resistant to the economic and product cycles that have plagued rivals. 'Clearly it was a disappointment,' says Channing Smith, Co-Manager of Capital Advisors Growth Fund. 'We expected a lot of consumers will probably delay their upgrade and their purchases until the iPhone 5 comes out. We saw a similar trend occur last year with the iPhone 4S.' Executives acknowledged buyers were refraining from purchases because of 'rumors and speculation' around the iPhone 5, which sources have said will ship in September with a thinner and larger screen. 'The iPhone 5 is already the most hyped device and for it to exceed expectations is going to be really hard,' says BGC Partners analyst Colin Gillis. This is one of many reasons Apple is so notoriously secretive. With the levels of hype that Apple product launches garner, it would undoubtedly crush its own sales if it announced products even months in advance. Instead, Apple slowly and silently draws down inventory in distribution channels, and then the upgraded product is available immediately (or nearly immediately) after it's announced. According to Apple CEO Tim Cook, 'there is an incredible anticipation out there or for future products and as you would expect given what we've been able to deliver in the past.'"
There's nothing remarkabe about iApple products anymore, they're no better than MicroSoft products.
But still insane profit.
but imagine how bad it will be when apple's competitors products are no longer being blocked by the court system in frivolous lawsuits.
Anyone with a shade of education will understand statistical deviation around a steady trend. If you expect to make the exact extrapolated revenue figure, well, you should maybe go back to school or finde a more appropriate job than administering investment funds or consulting for the investment community. Just a thought.
The only people who were disappointed with Apple's results were the "financial analysts" (and I put that in quotes for a reason...) who made wild predictions and were proven, as they often seem to be proven, wrong. I don't know of any other profession, _including_ meteorologists, where being wrong in your prediction that often is acceptable.
Anyone who couldn't foresee buyers slowing down on iPhone purchases as the refresh date approaches, is an idiot. Apple has released their new model like virtual clockwork for several years. There was going to be a slowdown. Expect it. Here, I'll make a bold prediction - in one year's time, rumours will ramp up of an "iPhone 6" (which will actually be called the "iPhone 5S" though nobody will be smart enough to foresee that...) and sales of the iPhone 5 will slow down though Apple will still have an exceptionally strong quarter selling an enormous number of devices though "market analysts" will claim it's a disappointment. Write it down. Take it to the bank. That's a prediction you can bet money on.
Seriously, why investment firms pay these morons even a penny for their ill-informed random guessing is beyond me. Actually, that's not fair - if they were guessing randomly, they'd at least have a chance of periodically getting it right and the majority of these people get it 180 degrees wrong every time...
Yea, I have a 3GS and am ready to replace it with a new phone. I like the iPhone but am waiting on the 5 before I upgrade, especially since it's just a couple of months away.
[John]
Shit better not happen!
Who cares about 5 measly percent? You must be a daytardotrader to care about 5 measly percent.
They miss their targets while their competitors (credible) competing products are banned? Wow, apple better pray the judges don't unban Samsungs products.
They have predictable product launch dates, which is not a good thing in reality. Everyone and their mother knows with apple stuff you buy when it comes out since they never lower the price... Most products come out at a full MSRP then gradually drop in price to keep up demand. Well Apple doesn't do that, so people figure this out and buy when it comes out and the tech is newer/fresher since you pay the same as you would six months from now for the same tech. That with yearly product updates creates this seesaw pattern on sales. So they have two big products iPad and iPhone that all the iSheep. They separate those into two different quarters and those are going to be their best quarters, the other two will be weaker. Until they either come up with four killer products that everyone wants or come up with a better pricing/update strategy they are going to be stuck with this pattern. Blame the analysts for being too dumb to take this into account.
That's a surprise.
Mommy, mommy, I'm not the coolest kid in school anymore. Some guy who transferred in and eats kimchi is wearing all-black jeans and a turtleneck. That's not fair. Black's my color! I thought of it first.
I'm not a lawyer, but I play one on the Internet. Blog
IMHO even if the next iphone is cooler than the previous ones and the competition, there can't be the same amount of emotion over the arrival of a fifth generation of whatever product. The next big thing needs to be different enough from the current way of interacting with iphone and tablets. Apple will still be dominant because apple products say: "I can afford to spend more money than what's needed" and there's a market for that.
---- MISSING MISCELLANEOUS DATA SEGMENT --- [sigdash] trolololol
Surely if Apple know that they are releasing a new phone at a certain time, and based on previous releases there is a good chance that information about its release will be leaked, shouldn't they adapt their expectations for the preceding months accordingly?
Although saying that, Apple are probably so secretive that their accountants who produce these expectations probably have no idea when the next phone will be released either.
I've heard these stories for years now. "Apple misses targets of financial analysts" except that the the last three words are often left out. They missed the targets of others for years and years with the iPod. If Apple made one gazillion dollars next quarter, the analysts would complain they didn't make two gazillion dollars. Apple themselves does not put out targets like this because the rampant speculation is bad enough now. Other companies also have to deal with analysts' expectations too.
Well, there's spam egg sausage and spam, that's not got much spam in it.
If I can make 5 bucks a day, or 5000 in 2000 days, I take the 5 bucks a day thank you very much.
Or in other words, numbers pulled out of your ass have no value.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
And rightfully so
I believe this will be the first of a whole new kind of progress report for Apple. I didn't really believe Steve Jobs was the mastermind behind the brand before he died, but since he's been gone the progress of the company feels like it's relying on inertia from days gone by...
I don't like Apple any more than I liked Microsoft in 2003, but I foresee a very near future where they are the underdog and people will be rooting for their comeback.
Apple invented the smartphone and all these other foreign copycat companies are killing their market share. They should be stepping up their litigation to prevent these other 'smartphone' manufacturers from bringing their products into the country.You only need an iphone, nothing else is required.
Seriously, what are these analysts paid for. Anyone who knows the slightest bit about about what's happening in technology knows what's happening. The iPhone 5 doesn't even have a huge challenge. All they have to do is make the phone in a nicer metal body (liquid body) and maybe slimmer, which is one thing Apple can be depended on for, since their designs are industry leading. Make the screen a bit larger, make Siri a bit more functional, improve the camera a bit, and other iOS 6 features are coming anyway, put in a bigger battery, LTE, and NFC. This is all they need to do to make an absolute killing with the iPhone 5. This isn't a trivial industrial design challenge, but stuff Apple can do as a routine now. It is nothing like the quantum leap needed to launch the iPhone or the iPad. All the other pieces are in place. Their app ecosystem is in place, and thanks to Android fragmentation, the app experience with iOS apps is miles ahead of most Android apps. Only Samsung have the marketing and industry clout to take on Apple, but their design and development departments are far behind. It won't take much to make the SGS3 look plasticky and tacky in comparison, hell it already does. Whatever HTC do, they're too small to tale on carriers and market their products as Samsung and Apple are able to, which is why the superior HTC One X is getting trounced by the SGS3.
The iPad is still killing the tablet market, over two years after release. Making a successful 7" iPad is again absolutely trivial for Apple because they have a tablet app ecosystem to back them up that is miles ahead of Android, with the lead growing every day.
And a disappointment? It took Samsung two months to sell 10 million Galaxy S3, but Apple still sold 26 million iPhones in three months. This is before Apple even launches the next iPhone.
If I could, I would be buying up Apple stock like crazy.
I was ready to plunk down roughly $2000 for a new iMac, and they didn't announce it. How many others were also waiting? I realize the iPhone has become the primary source of revenue for Apple, but the iMac still provides a significant amount of money and shouldn't be ignored. If Apple wants to position their products in the upper end of the market, they need to keep the technology inside on the cutting edge.
Anyone could also see that Tim Cook is no Steve Jobs (it's unrealistic to expect that of ANYONE). Why everyone just assumed that Apple could continue on without taking at least some hit with the loss of Steve Jobs that is beyond me. Love him or hate him, you have to admit that there are very few leaders capable of inspiring and leading Apple staff (or bullying/conning them, if you want to take that view) quite like Steve Jobs.
What political party do you join when you don't like Bible-thumpers *or* hippies?
The fun thing about comments like yours is that they completely misunderstand the influence of analyst targets on prices. A company's stock price depends A LOT on its ability to generate *future* cash flows. Analysts try to estimate these cash flows and from that a 'fundamental' present value (and, say, estimated 12mo target) for the company. Many (institutional) investors depend on these projections to choose investments for a given return target. Now, if a company misses the analyst projected revenues, that has an immediate impact on the calculated 'fair value' of its stock. Which, in turn, gets reflected (rather quickly for heavily watched/invested companies) in actual stock price.
So yeah, missing analyst expectations matters. Besides, this was not a miss for some whacky out-of-tune-with-reality analysts, it was a miss on the average estimate.
Apple themselves does not put out targets like this because the rampant speculation is bad enough now.
Actually they do, Apple do give out specific guidance and forward looking statements to the financial markets on expected earning targets. For this Q3 Apple said they would be making $34b revenue, and they did $35b, similar for profit - so they beat their own targets.
But, the problem is that they have historically so consistently given guidance significantly below actual results, quarter after quarter, even very close to publishing the results (and enjoying all the "Apple crushing expectations again" headlines), so that when this time the gap between the Apple guidance and actual results were much much less, it was a negative surprise even to the people trying to listen to the guidance directly from Apple themselves.
Should be downgraded as it is clear they don't know dick.
One day I feel I'm ahead of the wheel / the next it's rolling over me / I can get back on / I can get back on
What you gotta realize is that the stock market, and especially the price of certain closely watched stocks like Apple's, are driven by trader's emotions and expectations. If they believe the price will go up, they buy, and the price goes up. If they believe it will fall, they sell, and the price goes down.
If it were objective, based solely on P/E ratios and such, Apple would already be trading at over $1,000.
I thought Samsung was the reason Apple sales went south. They said so themselves!
Let's be clear about it. An analyst will say whatever he thinks will be accepted, so they can pretty much juggle with whatever figures and estimations they have, based on pretty much anything.
More importantly though, and this is becoming more and more rare among (especially big) companies: margin went up from 41.7 to 42.8 percent. The margin is already quite impressive, and they're becoming even more profitable.
http://www.apple.com/pr/library/2012/07/24Apple-Reports-Third-Quarter-Results.html
Other than that, revenue still went up, which is still quite remarkable, seeing as competitors are now becoming more and more active. 'Normal' people now know who Samsung is and what they do, instead of tablet computer = iPad. So ... meh ... don't believe the analysts, if we believed them, Apple would've died in 1996 (in 1997 they kicked out Gil Amelio and put Jobs as iCEO for the time being).
Life is great! (as told by Lady Susan)
I don't doubt that analysts have impact. I question their accuracy. They are almost never right in their estimations. They miss obvious factors. For example, many of those analysts badly missed their targets for the iPad for Q2 2011. Almost none of them anticipated that after the holiday season and Apple drawing down inventory for the iPad 2 would mean lower sales even though these two events were obvious.
Well, there's spam egg sausage and spam, that's not got much spam in it.
That's what people don't get: stocks trade on what people think how well the company will do in the future. And if the earnings miss that, then of course the stock price goes down or the other way if the company does better than projected.
As far as the "greed" is concerned - for us regular Joes, there's no place to get a decent return on our money. Bank rates are chump change, bonds pay nothing and they're effectively paying negative interest, real estate is for shit in most parts of the country, and the only place one could get any sort of decent return is the stock market.
Greed? Pffft! It's more like trying to stay even!
In the meantime, some members of the elite are getting $60 million pay-offs because they worked at Google doing something that for the life of me I can't get a solid idea what they did and look great in a cocktail dress and heels- even though they have no plan on how to justify their pay.
Greed, indeed.
From all the stories I've read they didn't even note Apple's estimates. They are all harping that analysts predicted 29 M iPhones and Apple sold 26M; however, none of the analysts bothered to mention that 26M is a Q2 record. Forbes calls out the ridiculousness of the situation.
Well, there's spam egg sausage and spam, that's not got much spam in it.
While analysts do live in their own world to an extent, they do listen to the companies. After all, those companies know best as to what is actually happening with their products in terms of numbers sold and all that.
The GP is right that Apple loved to understate their estimates for a long time. I think it started back when things were not going so well for them and they didn't want to falsely raise expectations (stocks can take a real beating if the company claims they will do well and then doesn't). However it then really did seem to become a case of them loving the continual cycle of "beating expectations."
So no surprise if analysts are starting to pad Apple estimates. Apple estimates X, you figure it'll really be X*1.1 or something.
Now none of this is to say Apple isn't doing great. They are making stupid amounts of money, and keeping it (it is unreal to me that more stock holders aren't demanding some of it in dividends). However that doesn't mean that estimates couldn't be that they would do more great, and be realistic. Currently a large part of the public has an insatiable apatite for iToys. Apple is fashionable so they buy new Apple products left and right to keep up with the trend.
How come no one ever blames the estimates for simply being wrong?
Answer: no
Google said themselves individual devices count - not a change in OS.
Please spread less fud.
This always happens. A company does fantastically, (Apple has pretty much built-up to Momcorp levels), but because their estimates were slightly higher then actual sales, investors start running around like headless chickens.
Of course, because this is the company is doing fantastically well, this is probably the best time to buy, while people are selling.
Worse yet, these are the people RUNNING OUR ECONOMY.
Often, Apple's estimates incorporate considerable uncertainty about the reception of a new product, and Apple tends to be very conservative about this. But this is a quarter with no major product introductions (the new MacBooks came out too late to have much impact) so Apple should be able to project sales pretty accurately from past data. And sure enough, they did.
But often with Apple, there are analysts who imagine in the absence of evidence that there will be some huge spike in income. So you see a mini-bubble in the price. Then when the actual numbers turn out to be about what Apple projected, the news reports say, "Apple fails to meet expectations!" and inevitably there are going to be some investors who panic and sell, thinking Apple's products have finally fallen out of favor with the public. Then, usually, cooler heads prevail, realizing of the "weak" sales are actually deferred purchases by people who are waiting for the next product introduction, and that this is just normal seasonal variation. So the stock price will creep up during the next couple of months, probably surpassing the price just before the earnings report. Then Apple will announce the new iPhone, and there will be news reports trumpeting, "New iPhone not as amazing as expected!" and the stock will drop again. Then it will start creeping up again toward the next earnings report...
I've heard these stories for years now. "Apple misses targets of financial analysts" except that the the last three words are often left out.
No you haven't. This prediction wasn't one from "financial analysts" - this was Apple's own sales forecast. This is only the second time since 2003 that Apple has missed. "Shares in Apple came under pressure after the tech giant missed its sales forecast for only the second time since 2003." Is it important? Maybe, maybe not - I suspect there are many companies that have missed some quarterly sales forecast in the last few years, it isn't exactly unusual, but it might indicate that Wall Street has overvalued Apple stock. But that also is not really surprising, the analysts have been predicting that Apple can maintain its massive growth for the foreseeable future, when the reality is that as the smartphone market matures and commoditises, prices will become more competitive and profit margins will fall.
Wait! They beat their own targets, but yet are complaining in count that they lost 2.5B because Samsung are copying their devices. So which is it?
"For every expert, there is an equal and opposite expert"
This prediction wasn't one from "financial analysts" - this was Apple's own sales forecast.
This was wrong. Apple Q3 2012 by the Numbers: $35B revenue, $9.32 EPS: Apple predicted revenue of $34 billion and made $35 billion. The reason this is news is that they undershot the analysts average by about $2 billion, and because they have revised down sales forecast for the next quarter to $34 billion again (ie. flat, no xmas jump). Analysts were expecting continuous growth from Apple, 10 months ago some analysts were predicting Apple revenue growth to $164 billion in 2013, so if growth stalls it will suggest that the share price was being massively overvalued.
They reduced the earnings expectation for Q4. If they were expecting to have a new product to be released in Q4 and thought they were still hot, they would have raised the earnings expectation for Q4. So they know full well that their market support is lukewarm rather than hot like it used to be.
So you mean to say, releasing a new phone every year cuts into selling the old phones?
I never got a college degree but even I knew that.
Be seeing you...
Negative news for Apple will always hit their stock price hard since all the institutionalized holders know very well how over valued that company is. I think as of right now their market cap is even higher than google... which is absolutely ridiculous. The stocks performance has so far been too good for any fund managers to ignore it, but any APPL holder had better be aware that stock is poised to nose dive sometime in the future.
If it ain't broke, don't fix it.
"Apple Blames Earnings Miss On iPhone 5 Anticipation"
Apple Blames earning miss on a product that doesn't exist on the market yet. About right if you ask me....
EVERY YEAR Apple has the same issue. They release one product in each of their iOS lines once per year. Everyone knows this. Of course buyers wait for the new model, once it gets close to that time of the year. This is exactly why Android first beat iPhone in the spring, nearly a year before most of the pundits expected it.
Even Apple knows this is the case. That's why iPhone, iPad, and Mac introductions were spaced around the calendar. And, with the Mac falling to below 15% of Apple's business, probably the reason they pushed the iPhone from late Spring to early Fall.
Nothing to see here folks... other than the ego doesn't seem to have left the company with the loss of Mr. Jobs.
-Dave Haynie
I am buying a Samsung Galaxy Note in a few hours. First, I want the "super-sized" screen. Second, Apple is permanently off of the list due to the anti-competitive way they are doing business. Fuck 'em. They can't compete head-to-head? They can bite my shiny metal ass.
until they officially announce jellybean for it with a ship date... I'm holding out
Might I ask why? I do agree that sometimes the new OS version has useful features etc. Is there something in particular in JellyBean that you think you need, or do you just want a clear upgrade path?
I guess my question is, what do you want from the upgrade?
You're supposed to buy a 4s when it comes out and then buy a 5 when it comes out. It's the business model, dude.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
Clearly the iP5 is going to be a let-down on the hardware side. There's just not much left to include/improve that isn't already. So what is next? it's going to have to be cloud-based service integration. Apple is strongly positioned for this, better than the other hardware manufactures. Fully cloud-enabling iOS6 will be the next innovation. Then there are a few problems that creates:
1. Hardware manufactures can't follow because they will be cloud-locked to the vendor's cloud. Once you pick a vendor, you're stuck in their cloud. Apple has enough cloud services to be the clear best choice for cloud services. But for Motorola? You're stuck in MotoCloud, so that Samsung Nexus purchase is going to be a problem.
2. Cloud innovation is easy. Adding it to the OS is pretty trivial so Google can add Google's cloud services. So this isn't anything the hardware manufacturers can compete on. So Google's gets all the traffic, and the rising tide raises all ships. If you want to innovate faster than Google, then you're back at 1.
3. And we all know how good vendors are with timely Android OS upgrades...
Winner: Apple. But if Google was more assertive it could get the Alliance back together and give Apple a run for it's money. But it won't if it hasn't by now.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
If the iPhone 5 doesn't sell as anticipated, what will they blame it on? I'm not bashing Apple, per se, but the entire concept of product anticipation driving earnings. I have an iPhone 4 and don't plan on getting a new one, much less continuing the service. It's too damn expensive to justify over $100/mo bill when I don't have reliable work. I can reuse an old clamshell for $35/mo at Cricket and keep only the functionality I really need; the cellphone. For those that really need some app on a smartphone, I totally understand.
No sig for you! Come back one year!
Maybe true, but I don't exactly hear Apple issuing press releases pointing out that the analyst projections are wrong and people shouldn't be paying so much for their stock as a result. If people actually did what you propose and only listened to Apple's own estimates, then there would be a massive price crash as everybody started valuing the stock based on Apple's much lower projections.
Apple didn't 'miss' anything. They disappointed the lofty aspirations of some pointy-haired bean-counters on Wallstreet. Apple's YoY sales *increased* and they beat their own guidance. No miss there. Proof positive that Wallstreet has devolved into nothing but the gambling of billions of dollars based on nothing but comments made by self-important people.
What's next, Apple fans figuring out that if you skip the first two iterations of any Apple product you can get the final version with all the features without having to buy and throw away two devices at several hundred or thousand dollars each? Naaaah never happen.
Apple's earnings miss has little to do with the iPhone 5 per se, and everything to do with a slow release schedule and lack of compelling new features and products.
When all you have is a hammer, every problem starts to look like a thumb.