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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.'"
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...
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.
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).
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.
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.
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.)
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