I love a good capital gain as much as anyone, but didn’t the dotcom bubble and 2008 teach us not to confuse Wall Street with reality?
Evidently not as you can find headlines everywhere about “Apple’s (rare) miss.” As if the company was at the foul line in the 4th quarter and suddenly couldn’t find the hoop.
There are companies with fairly predictable growth rates or profit dynamics who then do their best to telegraph to the investment community any little divergences to guarantee that they’ll “beat” earnings estimates. Sometimes we call that savvy management, sometimes the more pejorative “financial engineering,” and sometimes predictable growth in earnings gets created the old fashioned way: pure fraud.
Apple famously doesn’t care a bit about this game. They lowball the next quarter then go out and run their business for their customers and the long term.
If you’re not aiming, you can’t miss. The miss belongs to the analysts making the prediction.
In their defense, predicting Apple’s results is really hard and no one is good at it. What they all seem to do is expect previous trends to continue when in fact Apple’s business is very, very lumpy, largely driven by product release cycles. To get this right you’d have to foresee both the blowout of pent up iPhone 4s demand a couple of quarters ago and its waning in anticipation of what’s next… no one has done this well. So the most optimistic were the heroes 6 months ago, as the pessimists are today. But those are just stopped clocks having one of their daily moments being right.
Ridiculous, though, is the idea that this is some kind of beginning of the end. Really? A company the size of Apple is still growing over 20% year over year — and this is some sort of fail? Of course the previous growth rates can’t continue forever. Actually it’s amazing that a company with the revenues of Apple can grow at all. And how many companies ever reach the size that equals Apple’s growth in the previous or next year?
My Single Takeaway: iPad
iPad. Wow. What momentum. Without a lower priced entry point. Without a smaller form factor. It’s the future of computing for the masses and look at all the focus on Google and Microsoft when Apple is running away with it.
Confirms what I’ve seen at my favorite (and canary-like) Starbucks. iPads are being used out in the wild in serious numbers. About half of them with keyboards looking like notebooks, about half without them looking like tablets.
What’s interesting is that at this very same Starbucks last December I noticed that suddenly all the kids seemed to have iPhones, where I used to see a healthy iPhone/Android/Blackberry mix.
Apple’s run won’t last forever. But it’s still early in the iPad story and I believe the only question is: Will it dominate like iPod or like Windows? (Though I’d guess that the web as a platform means we’ll never see a new platform dominate like Windows did.) And remember throughout the iPod’s growth era, there was always an iPod-killer just on the horizon.