Apple Dumps “Scotty Principle” for Financial Guidance

| Apple Stock Watch

Apple CFO Peter Oppenheimer raised a few eyebrows during the company's first fiscal quarter earnings conference call when he announced the company was changing how it offered guidance to what he said would be less conservative. The implication was that Apple had been under promising and over delivering, or in other words, employing the Scotty Principle.

The Scotty Principle: Under promise and over deliver, just like AppleThe Scotty Principle: Under promise and over deliver, just like Apple

"To further increase transparency we're changing our guidance approach," Mr. Oppenheimer said. "In the past, we've given a conservative estimate. Going forward, we plan to project what we are likely to achieve."

Historically, Apple has outperformed its quarterly guidance -- so much so that analysts and investors have routinely assumed the guidance numbers were low.

The Scotty Principle is a nod to the classic Star Trek TV series. When asked how long emergency repairs to the starship Enterprise would take, Mr. Scott would offer up a time estimate that he was always able to beat, earning him the title of miracle worker. He eventually shared his secret with another Enterprise engineer, Geordi LaForge.

Back in the real world, Bernstein financial analyst Toni Sacconaghi pressed Mr. Oppenheimer on the guidance changes asking, "Are you saying when you provided guidance before, it was uniquely conservative and that level of conservatism no longer exists?"

"In the past, we provided a single point estimate of guidance that was conservative and we have reasonable confidence in achieving," Mr. Oppenheimer responded. "This quarter and forward, we're going to provide a range of guidance that we believe we're likely to report."

For the March quarter, Mr. Oppenheimer said Apple was expecting between $41 billion and $43 billion in revenue with operating expenses just under $4 billion. Presumably that means Apple really does expect to bring in that much cash instead of some higher figure. Whether or not analysts buy into that remains to be seen.

Apple reported selling 47.8 million iPhones during the first fiscal quarter along with 22.9 million iPads, coming in below analyst estimates 48 million and 50 million iPhones. The company sold 75 million iOS devices during the quarter.

The company currently has $137.1 billion in cash with $94 billion of that outside of the United States.

[Mr. Scott and Star Trek are Paramount properties]

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