Perhaps every analyst who thought Apple wouldn’t hit their announced Q1 numbers should take a step back and turn in their bonus?
The most obvious clue is that EVERY publicly traded corporation in America announces numbers and are required by law to update those numbers if they will deviate substantially in the negative aspect … in other words, der.
Did Apple make any announcements? No.
While Apple is not prone to make many announcements along the way, both acting CEO Tim Cook and the CFO made public appearances/interviews and while they were their usual secretive close-to-the-vest in saying much, at no point did they hint or announce the Q1 numbers would be substantially less as they are required by law …
No, in other words, “What was the first clue?”
I guess some figured the news had to be too good so they wanted to be the first to say, “I told you so?’
At least the analyst, RBC Capital Mike Abramsky who went out on a limb with his out-of-left field/idiotic research manned up and admited he was wrong. That should be applauded as that’s rare but the right way – usually these analysts try and weasel out of what they announced by citing some obscure stat missing out on the HUGE amount of information released.
And people wonder why Mac fans think analysts are idiots.
Because Apple is a technology and consumer electronics company but it’s like no other.
Sure, we are in scary economic times and thing could change slightly or much more grimly but then who would tell us first? Apple’s management team.
But here’s a shortcut to anyone confused about Apple and its strengths in its core markets.
The MAC
First, it should be pointed out that while Apple does not command a large market share in the personal computer market, the key is to tabulate up all the profits of EVERY personal computer company and measure that up against Apple. How many PC makers are actually profitable in 2008 and 2009? In other words, what is Apple’s market share in the PROFITABLE sector of the personal computer market?
It’s not necessarily easy to tabulate since many large conglomerates do not break out sales & profits just for the personal computer division … but competing against hundreds of PC sellers, how many companies? How many are profitable? 3?
Market share without profit makes NO SENSE. It means you lose money on EVERY transaction – that might’ve made sense 30 years ago to establish a foothold and hope the profits come later but PC’s are tractors or corn flakes – what is the point of selling every one at a loss?
The Average Selling Price of a PC hovers in the $500 range and dropping with each quarter while the average selling price of a Mac is around $1,400 ($1,413 in the last quarter). Some PC users are quick to think this means that Macs are “overpriced.” What this actually means is that Macs are priced close to its supply & demand price* while the PC supply & demand price reflects its value at $400-$500 dollars.
* Since Mac sales dropped 3% this past quarter, you could argue on a simplistic basis that Mac pricing was off by 3%+
On a simplistic term, it means that Macs are valued by its buyers at 2-3 times the value they place on a PC. Sure, the economy is tough now and presumably, Apple’s average selling price will drop some but clearly, there is room for Apple to adjust pricing slightly downward and still maintain its audience and selling pace (and margins).
For many PC buyers and analysts, they find it hard to fathom why a Mac would be valued 2-3 times as much – but clearly it is as buyers continue to buy at enough numbers, they answer that everyday. Perhaps analysts feel like they are taking a stance on the debate on whether you prefer a Mac or a PC or why but clearly, there are two different supply & demand markets at work here.
Just because Apple sells a personal computer does not mean you automatically lump them in other PC makers. Clearly they are different. Only Apple can open 200+ retail stores and have it full of people in there day and night. Even if you hate Apple products, you have to give them credit as the fastest to a billion-dollars retailer ever. That does not happen because Apple is like an other PC manufacturer – again, the reasons are not as important as the bottom line.
The iPod
Dismissed from the beginning and continually dismissed, analysts are finally realizing that it’s not just an MP3 player and especially with the iTouch now. It is the PDA of today with WiFi. Add in Skype or another VOIP, WiFi access and you have a contract-free phone with some limitations. Add in the iTunes store with movies to buy, movie to rent, TV shows to buy, games, podcasts, audiobooks, music, music videos and daily sync and backup … what else do you need?
The iPhone
Analysts seem to think that $99 is some magical mark for an iPhone when clearly users understand that they need to pay a month fee – so $199 or $299 is not going to make a big difference after 2-years but the biggest key that analysts forget is that after all is said and done, set it AIRPLANE mode and turn on WiFi, you have a “free” iTouch – people realize that so $100 is not going to make a huge difference upfront – it’s the AT&T charge (or whatever your phone company is internationally – that is the key).
The Competition
Much as with the iPod (before it became the iTouch) is that the foundation of its success is NOT based on whimsy or the default “marketing.” If Marketing could buy you success, Microsoft spent $300 million on advertising – how’s that going for them? Same with the iPhone – it offers so much to different people that it’s a moving target – a competitor might have the touch screen but not iTunes.
This is not to say that Apple will not stumble at some point in the future but right now? In the next two or three quarters. Nope.
Like enterprise realizing that the coolest technology is for consumers and they have to let it in, analysts have to look around more and fully understand what is going on here – it’s not about cheerleading, the reality distortion field or I’m a Mac-I’m a Pc debate, no, it’s about a company that has managed to be profitable during the biggest recession since the Great Depression. Why? And to FULLY understand the businesses they have managed to build when no one thought there was a market. They now have a multitude of multi-billion dollar business lines – three created from ZERO in the last 8 years – how many other businesses have create THREE multi-billion dollar businesses in the past 8 years? … and soon to be four with iTunes? ALL in the last 8 years? (Retail, iPod, iPhone – along with the ongoing personal computer & software divisions).
How many analysts thought retail, iPod or the iPhone would be billion-dollar divisions or did they dismiss them out of hand? And why are they finally realizing the prowess of Apple, Inc. only now?
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@Metroxing
Straightforward, all the facts, simply brilliant.
I’ve long thought the same about the media pundits but lacked the writing ability to put it all together in such a cogent manner; thank goodness you have done so.
Will it change anything, I doubt it. For one thing, the media is in thrall to finance speak, neither understanding how big corporations grow nor how emerging companies make marketing space. Successful companies are only ever judged against what has gone before and not in terms of how they do business. They seem unable to guage consumer zeitgeist if it appears to run counter to the accepted norm. In Apple, we have a company whose long view is so distant that myopia is the only safe course when the analysts talk their talk. I think they are fearful of calling out the establishment for the slow lumbering giants they have become. Hindsight is easy when the results are in but I expect normal service will be resumed within a few days.
Apple’s share price will drop around 10% whilst lumbering giant Microsoft’s share price and influence will go unchallenged. In fact I see their shares jumped slightly on their recent 32% drop in profits. There is clear danger here with MS absolutely at the mercy of the general PC market that has no new product, little vision of how to survive in a shrinking economy and a worrying reliance on loss leading netbooks at the cost of core profit. There is no industry incentive to upgrade to an unknown, unproven and as yet unreleased Windows 7 OS.
Apples strengths going forward(particularly deferred iPhone income) must seem like a strategy visitation from Mars compared with their own failing businesses. I expect fear of the unknown will be heaped on Apple simply because they are bucking the trend.