lesson to independent analysts:  don’t believe your own press

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    Posted: 19 October 2011 12:01 AM #46

    serious - 19 October 2011 02:55 AM

    Let me digress a little and exercise another thought. How does it matter to Apple management whether 5 millions iPhones are sold in September or December quarter? It only matters to the investors who want to make a quick buck on the gyrations of the stock market.

    As long as Apple keeps its customers happy with new versions of the product and customer loyalty is blemish less, then Apple management should only worry about keeping the stock price steady and growing at their internal models.

    The execution failure that I had pointed out earlier, namely synchronizing the release of iPhone 4S and IOS 5 to generate revenues for FQ 4, may be irrelevant from the management’s strategy. It is extremely difficult to modulate product introductions and sales funnel in the consumer sector.

    Given this, should we not really take the analysts, including the independent ones, to task for jumping ahead of management defined models? In fact, the guidance given for fourth quarter brought the stock down. But the analyst community do not seem to dissect the reasons for leading quarter projections in the earnings call. Had they done so, they may not have set earnings expectations so high.

    Excellent analysis.  that is why Apple goes thru the motions of giving guidance to please WS and is forced to show sales for prior quarter because they are publicly traded.  But in the long run they make good products and sell a boat load quarter after quarter.

         
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    Posted: 19 October 2011 12:13 AM #47

    Walter Piecyk, analyst at BTIG, summarizes the miss for most analysts in a succinct way:

    ?Apple beat our revenue, gross margin and EPS estimate for Fiscal Q4 on strong MacBook Air sales but failed to match Street estimates that were overly optimistic on iPhone sales estimates that did not adequately factor in an expected lag ahead of a new product launch,? he writes in a research note. ?The company flagged this issue on their last quarterly call and it has been a historical pattern ahead of past product launches.?

         
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    Posted: 19 October 2011 12:18 AM #48

    Roman, .Cranium.  Prazan.

    Thank you for your posts.  Thoughtful and probing.

    Gregg:  I didn’t dissent from the 8, 9, 10 numbers because I AGREED with them.  Now, licking my woulnds, all I am asking my fellow Apple enthusiast bullish investors for is an honest and searching and fearless post mortum.

    Yes , it hurts.  Yes, these are hard questions.  Yes, PED made us feel invincible.Yes, we DID see group think in action as DT cajoled Mav into raising his estimate.

    I do not think that these observations qualify me as a troll but if you do, well, it saddens me because I have respected your posts in the past and I place a great value on civil discourse.

    Hopefully, we all live to fight another day.  The market is a treacherous beast. 

    To traders and buy and holders, I wish you all the best.

    X

    [ Edited: 19 October 2011 12:47 AM by Xtra ]

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  • Posted: 19 October 2011 12:37 AM #49

    Xtra - 19 October 2011 03:18 AM

    Yes , it hurts.  Yes, these are hard questions.  Yes, PED made us feel invincible.Yes, we DID see group think in action as DT cajoled Mav into raising his estimate.

    Maybe PED made YOU feel invincible but you can’t presume he had that effect on others.  DT made very well reasoned arguments for his projections that Mav may have ended up buying in the end but he also was the loudest and longest advocate of the field of thought that Apple would take a huge hit for the lack of a new iPhone in the past quarter.  I’m certain he wishes that he hadn’t changed his mind but the very fact that he did implies he considers himself human, subject to change and far from invincible.  These are the things that bother me about your post.  All of the people here are posting what they THINK.  It’s only you that is projecting how they feel.  (invincible) Just because a consensus seemed to have been reached doesn’t mean that this board is a victim of group think.  It just doesn’t.

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    Posted: 19 October 2011 12:55 AM #50

    Fair points all, Bill H.

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  • Posted: 19 October 2011 01:22 AM #51

    Xtra - 19 October 2011 03:55 AM

    Fair points all, Bill H.

    Thank you and that’s all I’m really looking for so the rest isn’t aimed at you.  smile

    This stuff is really hard and I give props to you that even give it a whirl.  In one of my previous lives (as I’ve stated in the past) I had to do sales projections for a good chunk of the country.  The manufacturer was dependent on 6 managers/sales people to decide staffing levels, material procurement etc.  so I know full well the difficulty involved and the anguish that comes from misses even with the best information available.  It’s my belief that there isn’t a single poster that is influenced or driven by headlines or hits and that misses are inevitable in both directions plain and simply because they lack data.

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  • Posted: 19 October 2011 02:53 AM #52

    serious - 19 October 2011 12:51 AM


    That the independent analysts got it way wrong is worrisome.

    Why?  Did they do something that others didn’t?

    It appears to me that Apple could not execute the IOS 5 release with all the bells and whistles in July itself. If they had been able to do so, they would have released iPhone 4S in July itself. iPhone 4S release waited for IOS 5 in October. Asymco made a pointed reference to the need for releasing iPhone 4S in July quarter. Synchronizing the platform with the software is an execution requirement. And Apple failed in this. Execution is the key here and it worries me that Apple which is known to execute phenomenally is lacking in some respects.

    MSFT takes several years to release Vista, its a piece of crap, the update takes another year, and nobody complains.

    I guess when you’re the best at what you do, making a mistake isn’t allowed.

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    Posted: 19 October 2011 03:24 AM #53

    Gregg Thurman - 19 October 2011 05:53 AM

    MSFT takes several years to release Vista, its a piece of crap, the update takes another year, and nobody complains.

    I guess when you’re the best at what you do, making a mistake isn’t allowed.

    “Allowed” in the sense of cutting Apple’s management some slack (I’m the first to do so!).
    “Allowed” even in terms of customer expectations - they’ll be delighted by iCloud and Siri.

    Shareholders? That’s another story. When everyone and their neighbor’s dog expects EPS 8-10, and AAPL gives 7, they’re not “allowed” to keep the same price as if nothing happened. Compare AAPL vs MSFT on a 5-year chart, or better yet 10-year chart. Microsoft HAS been punished. They have a P/E… I mean ISM smile—of 10. We had closer to 17 this morning. (Don’t tell me about AMZN, I’m scratching my head there).

    Anyway, again the point is not to play the blame game (probably 99% on AFB are on the wrong side of the trade here) but to try and see where our own sentiment led us astray versus other investors, analysts, institutions, and Apple itself.

         
  • Posted: 19 October 2011 03:25 AM #54

    MSFT takes several years to release Vista, its a piece of crap, the update takes another year, and nobody complains.

    I guess when you?re the best at what you do, making a mistake isn?t allowed.

    MSFT OS releases actually takes place once in four years. It appears, for good or for bad, iPhone releases and models are pegged to two year obsolescence cycles. In future, it may go to four years. That makes product introductions and sales funnel management a very complex task. If I am in the Apple management, and keeping Apple accounts, I damn well know that revenues for my models are any way going to come, if at all delayed by a quarter or even less. I make profit for Apple probably delayed by a quarter or less. So why sweat over the product, managing the complexity of the funnel and the product introductions. I would cautiously relax and let things play out.

    Apple marketing machinery started feeding stories about iOS 5 as far back as April, though the demo only occurred on June 6th. Part of the problem is marketing being over indulgent.

    The problem still remains, why did not the analysts and independent one included pay heed to earnings projections in the July quarter earnings call? They could have analyzed the Apple’s internal models on the basis of those projections. We want to believe in our irrationality, or in the irrationality of the analysts, and some how hope that the stock will keep on moving 100% year over year.

         
  • Posted: 19 October 2011 03:45 AM #55

    BillH - 19 October 2011 03:37 AM
    Xtra - 19 October 2011 03:18 AM

    Yes , it hurts.  Yes, these are hard questions.  Yes, PED made us feel invincible.Yes, we DID see group think in action as DT cajoled Mav into raising his estimate.

    Maybe PED made YOU feel invincible but you can’t presume he had that effect on others.  DT made very well reasoned arguments for his projections that Mav may have ended up buying in the end but he also was the loudest and longest advocate of the field of thought that Apple would take a huge hit for the lack of a new iPhone in the past quarter.  I’m certain he wishes that he hadn’t changed his mind but the very fact that he did implies he considers himself human, subject to change and far from invincible.  These are the things that bother me about your post.  All of the people here are posting what they THINK.  It’s only you that is projecting how they feel.  (invincible) Just because a consensus seemed to have been reached doesn’t mean that this board is a victim of group think.  It just doesn’t.

    I was having fun with Mav in the same way we have chided each other for years. If I couldn’t risk being off I wouldn’t put up numbers. I know what my models indicated and the September quarter numbers were contrary to trends that appeared to emerge.

    Apple could have put up better numbers (I’m not blaming Apple) but chose to move cautiously on iPad channel supply and again pulled the trigger on iPhone shipments in a transition.

    I’m forecasting 50% revenue growth that might be sustained through FY 2013, putting revenue in that fiscal year at close to one-quarter billion dollars. But there are some warning flags being waved in the September quarter results. I posted my first review of the numbers and my mea culpa here.

    As I said to Mercel on the phone just before the release, if we hit the numbers I’m having ravioli for dinner. If we don’t hit the numbers I’m having ravioli for dinner.

    PED didn’t make anyone feel invincible. I’m not blaming PED and I’m not blaming Apple for a languid quarter. I’m also not blaming any other of the bloggers for their numbers. Apple is changing by the quarter, the global product market changes almost by the day and we learn with each set of numbers that are released on a quarterly basis.

         
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    Posted: 19 October 2011 03:51 AM #56

    BillH - 19 October 2011 03:37 AM
    Xtra - 19 October 2011 03:18 AM

    Yes , it hurts.  Yes, these are hard questions.  Yes, PED made us feel invincible.Yes, we DID see group think in action as DT cajoled Mav into raising his estimate.

    Maybe PED made YOU feel invincible but you can’t presume he had that effect on others.  DT made very well reasoned arguments for his projections that Mav may have ended up buying in the end but he also was the loudest and longest advocate of the field of thought that Apple would take a huge hit for the lack of a new iPhone in the past quarter.  I’m certain he wishes that he hadn’t changed his mind but the very fact that he did implies he considers himself human, subject to change and far from invincible.  These are the things that bother me about your post.  All of the people here are posting what they THINK.  It’s only you that is projecting how they feel.  (invincible) Just because a consensus seemed to have been reached doesn’t mean that this board is a victim of group think.  It just doesn’t.

    Mav is no longer here.
    He has jumped off something in despair.
    Actually, no he didn’t.
    Not even a stair.

    That rhymed.

    Was I swayed a little by DT?  Yes, of course.  I’ll get to that in a minute.

    I was way high all on my own, though ($8.81 originally), and I’ll take ownership for that, albeit as someone whose home game estimates were not given an expanded stage this quarter (lucky me).

    Except for my side bet (damn those side bets), I am quite well insulated from medium-term disaster.  Will my trades bleed red tomorrow, yes.  BUT, they’re all bull call spreads - even my nutty short-term bet I’ve mostly given up on.  ALSO, I’ve used crazy-conservative calculations for them, even as I overestimated earnings.  You always try to buy low.  I bought 6-7% too high?  We’ll see end of day.  My confidence in my Jan/Apr trades has gone from extremely confident to very confident.  I’m not bowed much by recent events because Apple is a steal of a stock, now with an unusual dose of future optimism built into next quarter.

    About DT’s “peer pressure.”  When you attempt to convince someone of something, persuasion is always involved.  I still made the choice to go higher at the end of the day - which btw, was the right call for Mac.

    The _problem_ was with iPhone.  I will be a little blunt here:  It seems clear to me in retrospect that Tim Cook’s (why-did-you-do-it) iPhone slide (which will surely come back to bite him) + discussion of exceeding the smartphone rate of growth (uh, not this quarter, not even close) was all about the Tribute to Steve.  Apple should not be doing these kinds of things, however “justified” they may seem at the time, and I’m not sure Steve needed that reaffirmation of iPhone’s success anyway, because it’s now a potential distraction.  Tim Cook’s slide/discussion gave off borderline-to-flat-out-misleading signals for fiscal Q4 results.  It’s very much like Oppenheimer’s “future product transition” comments in the fiscal Q3 2011 CC - technically kind of true, but they should not have been mentioned in the CC at all, because based on past history they implied a product coming in fiscal Q4 that never arrived.

    That’s why those two are now on my Apple Executive Watch List.  As I’ve said before, they’re not on my Warning list - but I’ll be following them more closely.

    [ Edited: 19 October 2011 03:58 AM by Mav ]

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  • Posted: 19 October 2011 04:00 AM #57

    Mav:

    Apple chose to go cautious on channel supply. On the iPad alone that meant a difference of 2 million units and again the company pulled the trigger on iPhone shipments (rightly or wrongly) ahead of the product transition.

    This was a quarter that was unprecedented in the company’s history on a number of fronts and management chose to play it in a cautious way. I don’t blame you for blaming me for raising your numbers.  :wink: I don’t blame Apple for a languid quarter in the midst of a product transition, I don’t blame PED for anything and I think blaming shouldn’t even be a consideration.

         
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    Posted: 19 October 2011 04:15 AM #58

    DawnTreader - 19 October 2011 01:10 AM

    ... I’m not really happy with Google’s performance at the moment (remember, I’m long GOOG too) ...

    Still not out of GOOG?  I heard they have stopped the 20% do what you like practice and could lay off hundreds to thousands of employees soon.  Please do your due diligence :evil:, don’t know reliability of my source!

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    Posted: 19 October 2011 04:24 AM #59

    I didn’t blame you for anything DT.

    But I blame you now for blaming me for blaming you.

    wink

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    Posted: 19 October 2011 04:29 AM #60

    pats - 19 October 2011 01:40 AM

    ... In this qtr we will need to decide if folks delayed purchase or are locked away for another 18 months ...

    In my circle, both.  Two of my friends bought Android because iPhone 5 is not out in Jun/Jul.  I waited to upgrade two iPhones.

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