

Apple’s Earnings Fall Below Street Expectations - canistr
http://techcrunch.com/2011/10/18/apple-q4-2011-earnings/

======
jpadvo
This is not a story about Apple Computer, this is a story about analysts who
mis-predicted something. Apple had predicted revenue of $25 billion, and they
actually had revenue of $28.27 billion, their second best quarter ever.

So why did this fall below the expectations of the analysts? The article gives
one clue:

"Well, even though Apple’s own guidance for the quarter was $25 billion in
revenue, analysts seem to have wised up to Apple’s always-low estimates and
were projecting numbers far higher: they were looking for around $29.5
billion. Apple came in at $28.27 billion."

The analysts assumed that Apple would do so insanely well that the only way to
accurately predict how well they would do was to wildly overestimate. Turns
out, they _did_ overestimate.

Here are a few alternate headlines that could be applied equally well to this
story:

"The iPhone 4S launch gives Apple second best quarter ever"

or

"Apple exceeds their expected revenue by $3.27 billion dollars"

I'd rather read about _what actually happened and why_ , then to read about
how somebody misestimated what was going to happen.

~~~
swombat
Actually, from the sound of it, the iPhone 4S launch is not even in that
quarter.

~~~
jpadvo
Wow, thanks for pointing that out. That completely invalidates one of
invalidates one of the alternate headlines.

My reading-comprehension-fu must be weak right now.

------
davidedicillo
"So why the miss? Well for one thing, Apple’s iPhone sales dipped over 3
million compared to last quarter. This is undoubtedly because the world was
awaiting the next version, the iPhone 4S, which launched last week."

Exactly, indeed they sold 4M just in a weekend.

~~~
bjtitus
And these sales were not reported in the aforementioned quarter. I think this
sell-off is extremely stupid and short-sighted. Q1 will be huge for Apple,
especially with holiday sales.

~~~
georgemcbay
"I think this sell-off is extremely stupid and short-sighted."

Taken at face value I think the whole thing is stupid too and I say that as
someone who dislikes Apple and refuses to buy their products personally.

However, whether or not this situation is really stupid and short-sighted
depends upon who you're talking about, the guys starting it off (evil, not
stupid) or the herd who follows them (stupid).

The basic idea is this:

1) Initiate Apple sell-off (via analyst number games and maybe even selling
off a small percentage of your own large holdings)

2) Wait for the herd to follow you, driving the price down significantly. Buy
back during the dip.

3) Profit (as price goes back up to reality)!

I've heard from many different people in the finance sector that Apple stock
is the go-to stock for large player manipulation these days.

------
mlinsey
Impressive that iPhone sales, despite dipping vs. the previous quarter, were
actually up 21% year-over-year. The year-ago quarter was the iPhone 4's launch
quarter. If I'm remembering correctly, the iPhone 4 was supply-constrained
around launch but could be found in stores somewhat easily by the end of
August 2010.

Undoubtedly the presence of the Verizon iPhone accounts for most of this
difference, but it's still very impressive that the iPhone 4 had many more
sales in its last quarter (as the flagship phone) than its launch quarter.

------
yaykyle
"Apple’s own guidance for the quarter was $25 billion in revenue" - So they
didn't miss their own goal.

~~~
Steko
Apple's guidance has historically been laughably low.

~~~
chugger
so a quarterly revenue of $25 billion is "laughably" low?

~~~
nobody314159
No - it's saying Apple routinely lies about it's expected earnings so that
every quarter there is a headline saying "Apple earnings beat expectations"

So the street takes Apple's figures and add 20% because they know Apple always
understates by 20%, so on those figures Apple didn't do as well as they should
have.

The problem is that you don't know if Apple really expected $30Bn and under-
performed or really expected $25Bn and over-performed.

Apple is a public company with shareholders and has a legal(and moral) duty to
actually produce honest figures. Ultimately massaging them down is just as bad
for investors as talking them up.

~~~
Steko
No there's a huge difference between lying and what Apple does. Apple produces
extremely conservative figures that take into account all sorts of negative
things that can impact the quarter like some Foxconn factory blows up or gets
shut down.

~~~
nobody314159
If your estimates are always 20% under what you achieve every quarter then you
are either deliberately underestimating or your CFO is an idiot.

If you are deliberately underestimating to be conservative - so if there is an
earthquake in Japan you can still make the expectation, or you do it to
produce a headline, it's equally bad for your shareholders.

Otherwise why not produce figures saying we might sell nothing next quarter
-if an asteroid wipes out all life on earth.

Of course it's still a nice position to be in compared to a company lies about
making a profit next quarter hoping for a miracle!

------
hvs
OK, someone explain this to me because I've never understood:

1) Company says it's going to make $1.00/share

2) "Analysts" says it's going to make $1.10/share

3) Company actually makes $1.05/share

4) OMG sell the stock!!1! it missed some arbitrary number!1

I'm a libertarian, but crap like this really irks me.

~~~
kooshball
Why does this irk you? It's a (mostly) free market and people do as they
please. The stock price follows that naturally.

Before the earning, the stock is priced in at the value from 2). After the
earning, the stock drops down to the price that's valued with the actual
earning numbers, which is lower than 2). This should not be a huge surprise to
anyone.

The apple case here is only slightly exceptional in that Apple is known for
giving very conservative guidances, which is why the analyst's estimates are
almost always higher than the guidance. In the past quarters, even that number
was exceeded. It's just not the case here and the stock drops accordingly.

I do think there is likely potential for future growth given the extremely
high guidance given for Q1, which knowning Apple, is still conservative.

disclosure: i'm long aapl

~~~
bestes
Because it feels like irresponsible reporting.

Fine for the Wall Street Journal, I guess, since those readers know what it
means.

I guess I should be happy if this is comparable to the "Apple is doomed!"
stories that used to be in vogue.

------
swombat
Time to buy Apple shares if you have any money to invest...

------
brudgers
> _"This is undoubtedly because the world was awaiting the next version, the
> iPhone 4S, which launched last week."_

Apple announced their upcoming announcement on September 21.

The quarter ended September 24.

Soft sales for the quarter were almost certainly due to strong competition and
a more commoditized market for smart phones.

The spike in 4S orders may be due to the T-mobile roll out and the fact that
T-mobile has offered its subscribers no contract plans at a discount when the
subscriber purchases their own handset.

I suspect the 4S is having the effect of converting many of those accounts to
two year contracts and a meaningful fraction of 4S orders are a side effect of
those conversions.

~~~
nobody314159
But people have been expecting an iPhone 5 all summer so they may have put off
buying an iPhone 4 even before the official 4s launch.

------
shalmanese
If the market is efficient, then companies should fall below expectations
exactly 50% of the time.

------
Steko
I think the most interesting thing is the number of iPads (11 mil up 20% from
previous quarter).

Apple will need exactly 15 million in the holiday quarter to hit their 40
million goal for 2011.

I really didn't think they would make it after their ipad 2 supply problems in
the Jan-Mar quarter where they only sold 4.69 mil but it looks like they may
pull it out. Maybe someone's bonus is on the line if they don't ship 40
million :)

------
georgekv
The thing I noted was their guidance for next quarter which is $37 billion.
That is a helluva lot of iPhones.

------
nfm
"25 billion iOS devices sold last quarter."

What?

------
chugger
For the quarter, Apple posted revenue of $28.27 billion and net quarterly
profit of $6.62 billion, or $7.05 per diluted share, _compared to revenue of
$20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted
share, in the year-ago quarter.

Apple's yearly profit and revenue were company records with Apple reporting
more than $100 billion in yearly revenue for the first time ever._

Typical BS. These are the same clueless analysts who predicted iPhone 4S sales
were going to be a disaster.

This is a blockbuster quarter for Apple. They earned $8 Billion more than the
year-ago quarter.

~~~
chugger
This too.

 _Apple profits jump 54% on record sales_

Only idiot Wall street analysts would be disappointed by a 54% jump in profit.

~~~
Symmetry
If you expected a 64% jump in profits and bought the stock at a premium on the
basis of that then you actually do have a right to be disappointed.

~~~
clarky07
Apple isn't selling at a premium though. It has a pe of < 12 when you take out
the cash. I agree that things go down when expectations aren't met, the thing
is the expectations don't make any sense at all.

Apple is the only company in the world that could grow 54%, have a pe of 12,
and still go down.

------
jchrisa
Apple may be one of the only companies that can get away with this without
being punished in stock price.

~~~
bennesvig
Down 23 points at the moment in after hours trading.
<http://finance.yahoo.com/q?s=aapl>

