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Apple Blames Earnings Miss On iPhone 5 Anticipation

Posted by Soulskill on from the doesn't-fall-far-from-the-tree dept.

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.'"

40 of 242 comments (clear)

  1. Absolute nonsense by Anonymous Coward · · Score: 3, Insightful

    There's nothing remarkabe about iApple products anymore, they're no better than MicroSoft products.

    1. Re:Absolute nonsense by ByOhTek · · Score: 5, Insightful

      Or in this case, hypowned.

      Actually, I would initially argue Google as well as MS, however aside from Hype, there is one thing, which at first glance can look like a bad thing, but can also be turned into a case of 'turning your weaknesses into your strengths'.

      Apple has much less variety in product lines than Google or MS in terms of the small-form-factor mobile market (cell phones, int the case of Google, tablets), or MS in terms of the notebook/desktop market. One reason I wouldn't get a MacBook - I'd have to pay a premium for things I don't give a damn about, while still missing things that are important to me.

      How does Apple turn this weakness into a strength? Several things, some good, some, IMO, underhanded.
      1) More time for QA - since the products are tied together, and their is a smaller variance, Apple can spend more time on QA per product, while still spending a lot less money on QA. I wouldn't argue they are any more stable than a good MS or Google product, but they certainly are less quirky than all but the very best MS or Google alternatives, and they are more polished in most regards, than any of the competing products.
      2) Marketing - Apple can get by the lack of options by convincing the market they want what Apple is selling, rather than selling what the market wants. Often promoting hackish/clunky workarounds as acceptable. The caveat, is these tend to also primarily affect smaller groups in the market.
      3) Less confusion - users won't get option overload, which easily happens for a user not fairly well knowledgeable in a subject where there are many options.

      --
      Self proclaimed typo king, and inventor of the bear destroying coffee table (patent not pending).
    2. Re:Absolute nonsense by ethanms · · Score: 3, Insightful

      Apple has much less variety in product lines than Google or MS in terms of the small-form-factor mobile market (cell phones, int the case of Google, tablets)...

      How does Apple turn this weakness into a strength?

      The smaller number of products as well as a better defined launch schedule with stable form factors, UI, feature sets and accessories are also good at capturing an audience of people who are either techno-phobic or simply do not have the time or desire to re-buy and re-learn products every couple of years.

      I am a highly technical person, but I appreciate how simple it is to use a iPhone, and what I learned 5 years ago is still largely applicable to using one today, but with some incremental additions.

      The same cannot be said for most cell phones or smartphones from 5 years ago, changing UIs, changing feature sets, etc... all make it very difficult to know what you're getting or how to use it--at least without spending significant time with it. There are a gazillion "Android" phones out there... how do I know if I want 2.1, 2.2, 2.3, 3.0?, what do the different processor names mean?, can I actually compare "GHz" to get a reasonable idea of what is best (no)?, what apps will or won't run on this?

      Often times you're forced to wait for extensive reviews of a product before you consider it because "specsmanship" means almost nothing with some of the garbage produced by certain companies. Fortunately HTC, Samsung and others have started learning that although outright lying and inflating capabilities may inflate short term sales, it only does long term brand damage, so it seems like they're producing better products these days.

      Let's also not forget support--it's far easier to find people to help you use an iPhone than some random smart phone from some manufacturer. There are constant updates to the SW and apps, and for the most part these things tend to make improvements, whereas I've found with Android an update can wind you up in a broken state (this is where the walled garden, closed OS and tight HW control makes the world of difference)

    3. Re:Absolute nonsense by jedidiah · · Score: 2

      It's funny how market share metrics suddenly become something that only weirdos would be interested in once it is some form of Linux that is making a good showing.

      It's just nice to know that the future isn't owned by Apple.

      --
      A Pirate and a Puritan look the same on a balance sheet.
    4. Re:Absolute nonsense by oGMo · · Score: 4, Insightful

      There are a gazillion "Android" phones out there... how do I know if I want 2.1, 2.2, 2.3, 3.0?, what do the different processor names mean?, can I actually compare "GHz" to get a reasonable idea of what is best (no)?, what apps will or won't run on this?

      Clearly a troll, but common FUD nonetheless---and, as per the parent, Apple turning a weakness into a (perceived) strength). However, either:

      • You know enough to care, in which case you want the latest. You read a few reviews (there really aren't that many top phones every year) or ask someone you know, and find the clear winner. You know enough to compare simple numbers, such as versions.
      • You don't care, you just want one of these shiny smart android things you saw in a commercial. You ask the person at the store. He or she recommends one, you buy it. You're happy.

      Despite "choice is bad" propaganda, which is surprisingly successful, especially among those who should know better, actually making a good choice is not difficult for anyone.

      --

      Don't think of it as a flame---it's more like an argument that does 3d6 fire damage

    5. Re:Absolute nonsense by Belial6 · · Score: 2, Insightful

      No. You are not a highly technical person. Either that or you are a liar. A highly technical person would not have to spend significant time trying to figure out how to use an Android phone. A highly technical person would know that the OS version you want is whatever is the highest number, and would already know that one version back is fine. A highly technical person would know that getting the one product that isn't the best can be head and shoulders above the 'best' of a competing product. A highly technical person would know that worrying about what apps will run on Android makes no more sense than worrying about what apps run on iOS.

      In fact, you don't even have to be mildly technical to follow the regularly given advice for getting a phone that is as good or better than an Apple phone, that runs everything that can get run, and to make sure you always have the best version of the OS. Just buy a phone with the name Nexus.

    6. Re:Absolute nonsense by Anonymous Coward · · Score: 4, Insightful

      Bullshit

      http://biopsychiatry.com/happiness/choice.html

    7. Re:Absolute nonsense by Anonymous Coward · · Score: 2

      I'm someone that's never had their technical chops questioned, and even I'll say that Android isn't nearly as intuitive as iOS. I switched from ios to android a couple years ago, and I started getting buyers remorse the first day I had my android device.

      I won't try to think up all the "why am I choosing default apps for the same thing multiple times" type scenarios, as much of it could have changed. And obviously lots of things were appropriately obvious the first time through.

      After I got used to it, I'd never go back. But ios does do a far better job with intuitiveness. And yes, that's easier to say when ios always looks like ios.

    8. Re:Absolute nonsense by billcopc · · Score: 4, Interesting

      I certainly agree with most of your comment, but I do have one big gripe, and I say this as a lifelong PC freak.

      One reason I wouldn't get a MacBook - I'd have to pay a premium for things I don't give a damn about, while still missing things that are important to me.

      This is where I have to rebut. I've owned, repaired and/or sold just about every PC laptop on the market. When the time came to replace my own aging laptop last year, I looked everywhere for the right fit. There were none. Then someone hired me to write mobile apps so I needed a Mac. I bought a Macbook Pro, and it is the best damned laptop I've ever owned. I still hate the OS, but the hardware is fantastic. Fast, quiet, sturdy, functional, epic battery life. It is everything I want in a laptop. I don't feel like I paid a premium, because high-end PC laptops are just as expensive, yet they're pitched as "desktop replacement" devices, which is a euphemism for "big fragile noisy non-upgradable piece of tethered junk with a built-in UPS". I paid a high-end price for a high-end machine, got exactly what I wanted.

      I kid you not, I'm in the PC sales and service business, and for years I've recommended Dell laptops, because hey at least you get a good warranty with your shitty laptop. I still do, because for most people, that's all they need, but for any professional use I try to steer them toward a Macbook. As a freelancer, I quite enjoy the convenience of a full day's work on a single charge. Worst case, if I'm doing compile-heavy stuff, I can quickly top-up during a coffee break, head over to the pub and sip a few pints while logging the other half of the day's billables.

      Now, on the converse, I am not at all interested in Mac desktop computers. THAT is paying a premium for run-of-the-mill hardware. I wouldn't even buy an iMac for myself, because I can bolt a mini-ITX box to almost any LCD and have the same small footprint at a quarter of the cost. I sell "luxury" PC desktops (gamers, design nuts etc), and I don't think of Mac Pros as anything even remotely luxurious. Shiny, but not powerful for the money.

      --
      -Billco, Fnarg.com
    9. Re:Absolute nonsense by billcopc · · Score: 2

      It's not that choice is bad, but Android is so fractured a platform that it negates its open-source benefits.

      My partner learned that lesson when she bought her first Android phone: a Motorola Milestone. Piece of shit. Zero software updates, Motorola practically disowned it months after launch. The only option available was to root it and install 3rd party firmware that sort-of worked but was very rough around the edges. Her brand new phone was so bad, she lusted after my tired old iPhone 3GS. When she finally got out of her contract, I steered her toward a Galaxy Nexus. Pimp phone, now I'm the envious one.

      Still, it's a bit sad that it took Google this long to deliver a decent phone and OS. Ice Cream Sandwich seems quite nice, as is the hardware, but meanwhile my 3 year old iPhone is still doing fine, despite me being a techie. Her 2 year old Android is a paperweight and she's just a casual user.

      Choice isn't bad. Immature software running on cost-cut 3rd-world hardware designs are bad.

      --
      -Billco, Fnarg.com
  2. Its a miss... by Anonymous Coward · · Score: 4, Insightful

    But still insane profit.

    1. Re:Its a miss... by PopeRatzo · · Score: 5, Insightful

      Its a miss...But still insane profit.

      What's insane is that a company that did so well is considered to have "missed".

      If you extrapolate from this one fact, that Apple does extremely well but is said to "miss" and the stock price goes down because their profits didn't grow faster than before, if you extrapolate from this one fact, you can understand why the economy - the whole economic system - is collapsing under its own greed. Enough is never enough.

      [Full disclosure: I'm a shareholder since the Michael Spindler days, and yes, I understand about corporate "guidance" and what it means to say they "missed". My point stands.]

      --
      You are welcome on my lawn.
    2. Re:Its a miss... by Kokuyo · · Score: 4, Insightful

      I agree wholeheartedly... it's even worse than that: Take Swisscom as an example. They make about a billion in profit per year. Last year, IIRC, they made about 1.1 billion. This was, again IIRC, more than they made the year previous.

      Since analysts had expected them to make 1.2 billion, their stock fell. They made more than the year before and still they get the finger just because they made less progress than some other random schmuck expected.

      How's that even sane?

    3. Re:Its a miss... by gorzek · · Score: 5, Insightful

      It's truly bizarre that someone would sell their Apple stock (which is what a lower share price really means--people are trying to offload) it just because profits weren't high enough, especially considering that Apple has only recently decided to start paying dividends.

      With so many companies struggling just to break even, dumping a profitable stock just because it's become slightly less profitable doesn't strike me as the least bit intelligent or wise, and instead points right back to our dysfunctional business culture, in which nothing matters but short-term profits, regardless of the company's long-term prospects and potential.

      (I say this as someone who is no fan of Apple, but damn if they aren't great at making money.)

      --
      Check out my world simulator thingy.
    4. Re:Its a miss... by ceoyoyo · · Score: 3, Informative

      "become slightly less profitable"

      Apple's third quarter profits were up year over year from something like $7 and change per share to $9 and change.

      Investors dumped the stock because profits didn't go up as much as their guesses. Apple themselves guessed a little low, as usual.

    5. Re:Its a miss... by Anonymous Coward · · Score: 2, Informative

      But you are wrong. They exceeded their own guidance in all categories (revenue, margin and earnings).

  3. it looks bad by Anonymous Coward · · Score: 4, Insightful

    but imagine how bad it will be when apple's competitors products are no longer being blocked by the court system in frivolous lawsuits.

    1. Re:it looks bad by Chrisq · · Score: 5, Insightful

      but imagine how bad it will be when apple's competitors products are no longer being blocked by the court system in frivolous lawsuits.

      From Apple's point of view they are far from frivolous. They are a delaying tactic, so that competitors products come to market later than the equivalent Apple technology generation.

  4. Maybe the expectations are unrealistic? by zzzy · · Score: 5, Insightful

    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.

    1. Re:Maybe the expectations are unrealistic? by MickyTheIdiot · · Score: 4, Insightful

      The thing is they don't care about your fancy book learning, they want that money in their back account NOW.

      It's yet another problem with corporate governance. They'd rather take the $5 they earn right now rather than the $5000 it can grow into if they cultivate a long-term strategy and act in a sane manor.

  5. Duh! by Anonymous Coward · · Score: 5, Insightful

    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...

    1. Re:Duh! by CastrTroy · · Score: 2

      I don't think any fault lies on apple for this one. The financial analysts were wrong. I'm sure if you had asked accountants at Apple 2 months into the quarter they could have told you a much more accurate number of where they would be at the end of the quarter. All that being said, the analysts were only off by 6%. That's not all that much in the grand scheme of things. Especially considering they made a 23% profit (8 billion from one source I read). Any company that can make 23% profit selling electronics should be applauded.

      --

      Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
    2. Re:Duh! by dgatwood · · Score: 2

      I'm going to let my inner cynic out for just a few minutes. I think you're missing the point of stock analysts. Their purpose is not to help others make good decisions. Their purpose is to encourage people to make bad decisions that the big hedge funds can profit from. If you want to make money from the stock market, watch what the analysts say, then do the opposite. If they're saying that a company is going to have a really strong earnings report, sell the day before the earnings report, buy again the day after.

      --

      Check out my sci-fi/humor trilogy at PatriotsBooks.

  6. Re:The rot setting in? by Anonymous Coward · · Score: 2, Insightful

    You are an idiot. Did you read the article or look at the numbers?. They missed analysts made up predictions (downwards) and their own predictions (upwards) Apple made 1.5 billion more than the same period last year.

    The only rot that has set in is between your ears

  7. Re:Waiting for 5 by vux984 · · Score: 4, Interesting

    I've got a 3GS also, but am really at a crossroads. I bought the 3GS week one after the launch. At the time it was the exact phone I wanted. Now, though I'm torn... my 3GS screen just cracked and nothing is quite right.

    No point in buying a 4S with the 5 around the corner. (Hell even if i wanted a 4S, waiting for the 5 and picking up the 4S on sale or gently used makes sense. But really.. I don't have a 4 or 4S precisely becuase they added nothing I wanted. And iphone 5 isn't looking to change that.

    The Samsung Galaxy S3 is high on my list and well reviewed, but until they officially announce jellybean for it with a ship date... I'm holding out. I've been burned before on promised upgrades that never materialized. Jelly bean seems like enough of an improvement that I won't settle for for anything less.

    And even the Lumia's -- I actually really like them and am even seriously consideriing one for my next phone, but with WinPhone 8 around the corner, and it already being announced that the existing lumia's won't be upgraded. Again... holding out.

    Right now is just a terrible time to buy almost a smart phone, to the point I'm seriously considering getting the screen fixed on this one. I can hand it down to my daughter or something.

  8. Has to happen eventually by marcello_dl · · Score: 2

    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
  9. Re:Predictable product launch dates... by DrgnDancer · · Score: 4, Insightful

    This isn't really a "problem", except in the eyes on a market focused on quarterly earnings. They make most of their money in the quarters they release a new phone or a new tablet. That doesn't mean they make less money overall, it just focuses when the majority of that money comes in. What's really insane is that not only did they make a shit pot of money this quarter, it's a much bigger shit pot than the same quarter last year. For some reason it's a "problem" that the shit pot is slightly smaller than some random guys who don't even work for the company sort of though it might be. This is rather like you winning a gold medal at the Olympics and me being upset with you because you didn't also set a world record in the process.

    --
    I don't need a million points of light, just two points of multi-mode fiber and a 10 Gig-E router.
  10. Re:Predictable product launch dates... by SJHillman · · Score: 2

    A lot of Apple products (along with almost every other vendor) have issues when they first come out and you have to wait for the patches. Sure, it's generally still usable without the patch but some people will find software issues to be deal breakers. At my last job, we had iPhones for everyone who was on the road a lot. Stuff like wireless was hit and miss (especially before we finally upgraded away from WEP). For any product where software is a major selling factory (IE: iOS), I'll wait 6 to 12 months for them to get the worst of the bugs out unless I have a practical use for the absolute bleeding edge crap.

  11. Seriously? This sounds like a broken record by UnknowingFool · · Score: 4, Insightful

    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.
  12. Re:Predictable product launch dates... by gnasher719 · · Score: 2

    The "worst" thing is to release a new product 15 months after the previous new product. For example iPhone 5 fifteen months after iPhone 4S. So you have one quarter with sales going through the roof because of a new product, then four quarters later sales are quiet because everyone is waiting for the next great product.

  13. Where's the new iMac? by pastafazou · · Score: 2

    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.

  14. Re:Seriously? This sounds like a broken record by oldlurker · · Score: 5, Interesting

    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.

  15. Stock market is not objective by MikeMo · · Score: 4, Insightful

    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.

    1. Re:Stock market is not objective by Anubis+IV · · Score: 2

      Quite true, but what I don't understand is how their expectations can be so far out of alignment with Apple's guidance, which has a proven track record over the last decade or so as being consistently 8-10% under actual results (with the notable exception of the iPhone 4S' launch last year, which exceeded everyone's expectations). Apple doesn't play games with their guidance numbers, other than to shave off about a few percent in order to comply with good practice in providing a conservative estimate, and they've been remarkably accurate once you correct for that factor.

      Why analysts continue to expect record-breaking profits in quarters lacking devices that have incredible mainstream appeal is beyond me. I mean, the new Retina MacBook Pro is nice and all, but it's not going to lead them to new records like an iPhone or iPad launch will. Other than that, they issued their standard summer improvements to their laptop lines, so it's not surprising that their numbers matched their guidance.

    2. Re:Stock market is not objective by Hatta · · Score: 2

      If it were objective, based solely on P/E ratios and such, Apple would already be trading at over $1,000.

      If people bought and sold objectively, Apple wouldn't be worth anywhere near $1000. But tech purchases, like stock purchases, are based more on emotion than reason.

      --
      Give me Classic Slashdot or give me death!
  16. Analyst aren't paid to be realists by anerki · · Score: 2

    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)
  17. Re:Seriously? This sounds like a broken record by UnknowingFool · · Score: 2

    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.
  18. Re:Seriously? This sounds like a broken record by Sycraft-fu · · Score: 2

    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.

  19. Prophecy! by Quiet_Desperation · · Score: 2

    How come no one ever blames the estimates for simply being wrong?

  20. WTF? no. by poetmatt · · Score: 2

    Answer: no

    Google said themselves individual devices count - not a change in OS.

    Please spread less fud.