I think the headline from yesterday’s AllthingsD blog says it all: “Apple Earnings: a Bummer, Not a Beat” (click here). While Apple hit their very conservative guidance, it was only the second time in 39 quarters the company reported results that missed analysts’ profit and revenue expectations (click here for The Wall Street Journal details). Apple’s stock dropped about $30 dollars or around 5% in after hours trading yesterday.
At center stage and Apple’s main issue were sales for iPhone have slowed down much more that expected and at the moment, iPhone drives sales and margin for the entire firm. Apple sold 26 million iPhones in its quarter ended June 30, a 28% increase from the same quarter a year ago but down from the 35.1 million sold in the prior quarter this year.
Rumors, the strongest for any non-announced product I can think of in recent memory, have been rampant and many US consumers are holding out for this mythical iPhone 5. Add that demand in Europe was weak and sales in China did not pick up the slack resulted in a bummer quarter for Apple’s standards. As John Gruber of the Daring Fireball blog stated (click here), “It’s a testimony to just how remarkable Apple’s last few years have been that 23 percent year-over-year growth looks so bad on a chart.” Dan Frommer of blog SplatF does an excellent job graphically illustrating how Apple’s major product lines have trended in recent quarters (click here). I guess its not surprising that Apple pushed up the release for its new Mountain Lion OS (click here) for the day after the earnings call so that the business press will have something else to talk about other than Apple’s Q3 sales and earnings.
Philip Elmer-Dewitt of the Apple 2.0 blog is the best in the business on tracking Apple particularly on the financial side. Click here for yesterday’s post earnings call commentary, click here for the amateurs vs. pros forecast analysis on Apple data, and click here for commentary from all the financial analysts thoughts on yesterday’s call details.
The bottom line is Apple was “bitten by the product transition bug” as stated by one of the analysts. Other than iPad, Macs got a major OS overhaul as well as significant product refresh, and everyone is waiting for a new form factor iPhone 5. Moreover, the Apple TV rumors as well as a new 7-inch iPad mini are quite strong as well. I feel the analysts are correct; Apple’s Q4 (July, August & September) will also be very soft. However, Q1 (October, November & December), and Q2 (January, February, & March) should be back to Apple’s standards or better if we see at least two of the three rumored products (e.g., iPhone 5, Apple TV and/or iPad mini). One of the analysts called this “the calm before the storm” and if I had the money, I’d buy now before some of these new products push the stock even higher.
Something to thing about today…
Associate Professor of Marketing
Stillman School of Business
Seton Hall University