Another quarter has rolled around, so did a
bullish Apple embarrass the Wall Street analysts yet again? Such an event
has seemingly been a quarterly tradition by now. But this quarter's
earnings reports, while sticking true to tradition in revenue and several other
areas, actually fell short of analyst's typically overly conservative
expectations in two areas.
This quarter's earnings will likely be
over-scrutinized in the face of much bigger questions facing the trendy gadget
maker. While there'd been a bit of optimism surround the upcoming
iPad 2 and availability of
a CDMA (3G) iPhone on Verizon, most Apple-related financial chatter over
the past two days had centered around the company's CEO, co-founder, and
creative guiding hand, Steven P. Jobs taking
a medical leave of absence (the CEO has battled cancer over the last
decade and is recovering currently from a liver
A strong earnings report wouldn't completely silence
concerns about a possible future Apple leadership crisis, but it
might offer a decent distraction.
Apple's official accounting of calendar Q4 2010
in at around 4:30 p.m. on January 18.
Revenue was $26.74B USD, a new record, grossly
surpassing the consensus expectation of $24.4B USD and the "high"
expectation of $25.5B USD. Earnings per share (EPS) similarly whipped
expectations to the tune of $6.43 USD, versus a consensus estimate of $5.38,
and a "high" estimate of $6.02.
IPhone and iPad shipments beat expectations,
recording 16.24 million and 7.33 million, respectively, units shipped, versus
respective expectations of 15.5 million and 6.2 million.
If there was one trouble spot in the earnings
report, it was the shipments of Mac computers and iPods, which fell short of
expectations. Apple only shipped 4.1 million Macs vs. a consensus of 4.3
million, and only shipped 19.45 million iPods vs. a consensus expectation of
The iPod shortfall is perhaps expected -- sales of
the portable music player have slumped as tablets
and smartphones have boomed, filling many of the niches once filled by the
portable music player. The lower than expected Mac shipments are a bit
more troublesome and a sign perhaps that Apple is slowing in its quest to gain
ground on industry leaders Dell and HP. The Mac shipments, while lower
than expected, represented a 23 percent increase from shipments a year ago.
The iPod shipments, on the other hand, represented a 7 percent drop.
Despite the couple of weak metrics, the record
revenue, strong iPad/iPhone sales, and higher than expected revenue/EPS
guidance for Q1 2011 all culminated to a generally positive reception of the
report. While it is early to fully characterize the net impact, Apple
stock in resumed after hours trading has swung upwards $7.23 USD/share, a 2.12
percent gain that almost erases a 2.25 percent Tuesday drop, which was driven by
the aforementioned leadership concerns.
Apple CEO Steve Jobs, put in a good word,
enthusing, "We had a phenomenal holiday quarter with record Mac, iPhone
and iPad sales. We are firing on all cylinders and we’ve got some exciting
things in the pipeline for this year including iPhone 4 on Verizon which
customers can’t wait to get their hands on."Note: We originally overstated the revenue as $27B USD. It is actually slightly lower ($26.74B USD). Some have questioned the analyst consensus surrounding Macs. We have consulted several different publications, and the figure 4.3 million is consistent across them and appears correct. Apple also fell short of its own Mac sales predictions.
quote: That said, the fact that you are calling the guys down at Wall Street utterly irrelevant just shows that you don't know what you are talking about. Apples stock was valued based on those expectations, and it will most likely have a negative impact, just as the same people undervalued their total revenues which will most likely have a positive impact.
quote: Professional analysts’ first year iPad unit forecasts in millions (sourced from TMO Finance Board)Brian Marshall, Broadpoint AmTech 7.0David Bailey, Goldman Sachs 6.2Kathryn Huberty, Morgan Stanley 6.0Shaw Wu, Kauffman Bros. 5.0Mike Abramsky, RBC Capital Markets 5.0Gene Munster, Piper Jaffray 3.5Ben Reitzes, Barclays Capital 2.9Keith Bachman, BMO Capital 2.5Jeff Fidacaro, Susquehanna 2.1Chris Whitmore, Deutsche Bank 2.0Scott Craig, Merrill Lynch 1.2Peter Misek, Canaccord Adams 1.2Doug Reid, Thomas Weisel 1.1Yair Reiner, Oppenheimer 1.1Here are the predictions from Tech Bloggers:Clayton Morris: 9John Gruber: 8Horace Dediu: 6Natali Del Conte: 5Ross Rubin: 5Mike Rose: 4.5-5Jason Snell: 3Andy Ihnatko: 3Apple sold 14.8 million iPads in 2010.I sometimes use the phrase “unforeseeable growth” to describe the kind of growth that not even the most knowledgeable observers of a market can predict. It’s usually an indicator that fundamentally transformational change is taking place.It’s not a sufficient condition, but it’s clear that “nobody saw it coming” is a common refrain when disruptions are seen in the rear-view mirror.If analysts, to a man, fail, you can be sure that competitors are no wiser. This collective shrug amounts to the greatest competitive advantage any entrant could ever hope to obtain.