Ahead of Apple’s Financials: Hysterics
January 26th, 2016While financial and industry analysts aren’t all predicting doom and gloom for Apple, the word “blowout” doesn’t appear to apply to most estimates. That said, it doesn’t appear as if sales will decline either, but that will be known in short order.
Meantime, regardless of the final numbers, there will be recriminations from the media about Apple’s perceived shortcomings. Chief among them is no doubt the alleged overreliance on iPhone sales, as if Apple planned it that way and doesn’t have a clue about introducing or expanding other product lines. One commentator referred to it as “iPhone fatigue.”
But any company would be delighted to have a single product become so popular, so this ought to be a badge of honor, but not to Apple’s critics who have for years been hoping and praying for changes they can believe in — the failure of Apple.
Don’t forget that it wasn’t many years ago when Apple’s main product was the Mac. Of course, that’s when the critics pronounced it a niche platform, and fated to remain a niche platform. Some said Apple might as well give it all up. Once upon a time, Michael Dell, founder and CEO of Dell, suggested Apple close up shop and return the money to the investors.
I wonder what he’d say about that statement today.
In any case, if iPhones weren’t here, Apple would still have a large revenue base. That would include the iPad which, as is reported, was actually first conceived before the iPhone arrived although it wasn’t released until three years later. It’s not that Apple has been rushing things.
Understand, I have no clue what Apple will report when those financials are announced, so this article will have a relatively short shelf life. But it’s clear to me that attempts to make Apple seem unsuccessful are a little overwrought.
Even if iPhone sales are flattening, there’s nothing to apologize for. It had a great run, and sales will remain pretty high for some years yet. But the stock price will suffer.
Compare that to Google’s situation, where roughly 90% of its income comes from just one thing — targeted ads. If there’s an advertising slowdown, what’s Google’s backup plan? It’s not that Android is filling the coffers, since the OS is given away free. It’s intended to spread the joy — or whatever you call Google’s ads — so that hundreds of millions will tap at least some of them. Since Google is paid on a per-click basis, that’s what rings the cash registers.
So maybe the critics should be fretting about Google’s one-act play. Yes, they have other businesses, but hardware hasn’t been profitable, and many of their services are in perpetual beta. They come, they go. Gmail? Quite popular, but revenue is mostly about the ads. There’s not a whole lot from Google’s apps and services.
Samsung is under pressure from both ends of the smartphone market. Apple dominates for premium smartphones, and there’s so much cheap gear out there, it’s not that Samsung stands out although they move loads of units. Profits are lacking.
Indeed, with Apple earning 94% of global smartphone profits, where does that leave the rest of the industry? If Apple fails, will Samsung pick up a piece of the action? Or if Apple simply stays put with existing revenues and profits, it is still number one in the area that counts.
Now even if Apple reports records sales for the December 2015 quarter (their fiscal year 2016 first quarter), all eyes will be on the guidance for this quarter. Apple already has over three weeks of sales under its belt, so it should have a fairly good idea where things are going. If they predict flat sales or a slowdown, that will count for a lot, since the company tends to be conservative about such matters.
To be sure, the financial industry’s perception of those results may be fairly obvious by the nature of the questions asked during the quarterly conference call. Then again, questions are usually highly technical or softball, and key concerns are rarely addressed except in the most general terms. Follow-up questions are hardly illuminating.
Meantime, speculation will grow over what new products Apple plans for this year. Will there be a new 4-inch iPhone to fill a demand the larger handsets cannot address? What about a Mac Pro revision? The first of the new design appeared at the end of 2013, and two years is a long time in the tech industry. Intel has faster Xeon chips, and there are better graphics out there. And what about Apple’s moribund display line? Does many people even buy Thunderbolt displays at a time where Retina displays are dominant?
Will there be a MacBook with a larger — or smaller — display? What about the aging MacBook Air? Will it gain a Retina display with the next revision, and can Apple do it without increasing its price? Imagine a Mac note-book with a Retina display for $899.
Meantime, I’ll have lots to say about the financials in Wednesday’s column.
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The “doom and gloom” analysts have all been present during years of rising revenues and profits of Apple. They’re not there when so many times Amazon has not made a profit. Yet to me, Apple have done the correct things like dividends, stock split, and buyback to support the value of the stock.
Let me make an obvious guess of the path of the stock value after the earnings report. If history is my guide, it will obey the law of gravity.