Analyzing The Analyst Meeting, Part I: Delivering The Message

Apple held its semi-annual financial analyst meeting yesterday. The four hour event was webcast due to recent rules changes from the SEC regarding the dissemination of information. It seems that all investors are entitled to the kind of information that was once the exclusive purvey of analysts for most of the last century. The reality is that analysts are likely to get less information today than they did before the rule changes, but the public is also going to get more. Thatis a good thing in our book.

Part I of our analysis involves Appleis effort at delivering the message.

Most of the meeting was spent giving the same presentation we saw in the keynote at MACWORLD San Francisco, though in a much more informal manner. The biggest difference in the two events was that Steve Jobsi was plagued by hardware difficulties with the PowerMac G4 and the clicker he was using to control the presentation. Mr. Jobs largely controlled the frustration he had to be feeling and even managed to crack a few jokes about the situation. A technician named Wayne is now famous (or infamous, as the case may be) for being the person responsible for getting the equipment working again. Once Mr. Jobs started taking analyst questions, one of the first was whether or not Wayne would have a job tomorrow. Mr. Jobs said cracked that yes, Wayne would still be employed, but if this had been MACWORLD, it may have been a different matter. That elicited a laugh from the analysts in attendance, and Wayne can probably thank that analyst for saving his butt. In all fairness to Wayne, it certainly was not anything that was directly his fault. Feel free to write us Wayne, and we will tell your story. :-)

One thing that many Observers may not understand is how important it is for Apple that Wall Street believe in the companyis direction. This impacts their stock price, but it also impacts their credibility, their credit ratings, and the many other tangents that spin off from Wall Streetis opinion. Because of this, the Apple execs in attendance at this meeting went over many things that are well known to Mac users. In some cases, they went over the same concepts more than once, but it is important to remember that the audience was not a collection of hard core Macheads (like an Expo keynote), but a small group of financial weenies whose interests and background knowledge seldom coincide with those of us following this in the Mac Web. To quote our live coverage yesterday:

Analysts often need to be led by the hand through what a company like Apple is doing. These are often the same folks who think that MHz is all important and that Apple needs to exit the hardware market and just make software "like Microsoft." They need all the help they can get. Since Apple is going in a direction that no other hardware maker is going, it becomes even more important. If the analysts donit leave this meeting "getting it," then Appleis stock and image will continue to languish.

The most important part of Mr. Jobsi portion of the event concerned the future of the PC and the nature of Appleis Digital Hub concept. Many analysts and tech pundits are screaming about the death of the PC. According to these luminaries, Internet Appliances and handheld devices will wipe the desktop computer off our desks in a matter of moments. Mr. Jobs believes this will not be the case, and he stuck to his vision of the Digital Hub as outlined during his Expo keynote address. He went into more detail during the analyst meeting, however, including some answers to analyst questions. The pivotal moment of the entire meeting was when Mr. Jobs attacked the current trend in industry thinking that the browser is all we need for our computing.

He said that the issue of confusing the Web browser for the Internet itself has blinded us all. He asked the analyst what the #1 Internet application was, and then told them it was e-mail. Handheld devices are great, but you canit get a good interface on a screen thatis only a few inches across. He also talked about how programs like Word or Photoshop were not simple programs, and they needed the complexity of a PC to operate. Mr. Jobs also targeted Internet Appliances by challenging their weakness as static devices. When there are changes in the Internet or related technologies, it is often not possible to follow those changes with appliances. Once again, the PC allowed the flexibility needed by computer users. This message was later echoed by CFO Fred Anderson in an equally passionate speech in reference to questions from the analysts about Appleis sales shortfalls from last quarter. "There are evolving dynamics in the PC industry, and we know that," said Mr. Anderson. "The PC is the digital hub and it is not dead. We all believe that. We hadnit gotten a kicker in the MHz area for 15 months. Thatis what people want!"

Lastly, Mr. Jobs talked about how people have predicted that the collision of the PC and [insert technology here] would kill the PC for years. Yet the PC has always won this contest as technology and people changed. People adapt to new technologies, according to Steve, but so do PCs. More to the point, Steve said that the Mac is well positioned to adapt to todayis technology. Steveis message was delivered passionately and in our opinion, convincingly. Apple is the only company to be articulating this kind of message, and that will either work to their advantage or leave them out in the cold. It is my opinion that Apple will weather the storm of change in the PC industry and come out stronger than it is today.

In a related note, Michael Dell recently said that he thought two of the top ten PC hardware companies would not be here in the next five years. He is most probably right, and I would not be surprised if it was one of the larger companies. None of them seem to be able to understand the nature of the change at hand, at least as well as Apple seems to understand it. This can be evidenced by the entire industryis inability to match the success of the iMac, now some two and half years old. The best they could do is to ape Appleis efforts and imitate the iMacis design.

Whether or not the analysts get this message remains to be seen. So far, reaction has been mixed. has an excellent piece to this effect. Apple will be archiving the meeting until February 28th. For those who can not get a stream, we provided live coverage of the four hour event for your reference. For other stories regarding Appleis stock activity, visit our updated Apple Stock Watch Special Report.