Feet to the Fire: How Analysts Missed on Apple iPhone Shipments

With Apple (AAPL) having shipped 13.7m iPhones in 2008, this is a timely column on how badly analysts/journalists missed iPhone shipments over last two years. Wish people did more of this sort of thing, holding people's feet to the fire of their own estimates:

Lance Davis, writing at the UK Register, heavily discounted the likelihood of the iPhone reaching such stratospheric heights. He was wrong on every count. "It would be surprising if iPhone accounted for one per cent of sales just within the one network which had been announced -- AT&T." That would be half a million smartphones. Apple sold more than 1.1 million phones in Q307, the first full quarter it was available, alone.

Mike Elgan, writing for Computerworld (like The Industry Standard, a publication of IDG) said selling 10 million phones was "probably an unreachable goal... by setting the bar at 10 million iPhones sold by 2008, Jobs unnecessarily risks the erosion of faith in Apple when the company fails to reach that goal."

Quoted in the New York Times, Edward Snyder with Charter Equity Research said Apple would "have a difficult time" selling 10 million iPhones in 2008.

Charles Jade at Ars Technica wrote "it's a good thing Steve Jobs dropped out of college" since analysts with "advanced degrees in business and economics" doubted Apple's ability to sell 10 million iPhones in 2008.

[via Industry Standard]

Comments

[frs:]

"How Analysts Missed on Apple iPhone Shipments" ????? - Well, generally speaking, the analysts are complete morons. Is it any surprise they missed? Really, they rarely work from empirical data, possess poor analytical reasoning skills, operate often on the basis of their bias, and just plain don't do much more than take a guess. It's worse than predicting the weather....to repeat, they are just plain stupid and simply don't know how to analyze anything.

Jan 22 05:49 PM

[Doug, Mtn. ...:]

Analysts are like your average generic critic: incompetent and incapable. Were they any good, they would go into business selling their visions of the future to real customers, who would hold them accountable. As this article demonstrates, the above-quoted individuals would clearly quickly fold if they went that path. The safer thing to do is take a job as an analyst, draw a salary, and never say "sorry to be so blatantly wrong." They are the Capt. Wrong-Way Peter Peachfuzz of their industry --- do just the opposite of what they command, if you know what's good for you.

Jan 22 06:09 PM

[sgmsg:]

Yesterday, i was a bit surprise: after astronomical result of Apple the stock goes up. Usually any news lower the stock. Wait couple of days and the stock will go down. Almost all "analysts" gonna find a reason good or wrong (especially wrong) to disqualified the company. I can write one: Munster decrease his target, so Apple is overestimated... bla bla bla.

For those who read Graham :~ " I bought IBM, everybody said its a bad company, the stock was going down to downer, but i kept buying. I wasn't sure but IBM seem a good company to me" Couple of month later, he made more money than the previous 20 Years l

Wait and see.

Jan 22 07:56 PM

[Anonymous W...:]

Glad you published. Let's all get out there and publish the details about how these bad analysts get it wrong. Make them accountable and spread the word. Then either they will have no clients or they will be forced to get honest or get out of the way. Reward the good analysts with consistent records of performance and honesty.

Jan 22 08:20 PM

[top_tier:]

How they missed on iPhone shipments? Are you kidding me? Why stop there? Missing the iPhone number is the least of most of the analysts problems on Wall Street; their guidance was pathetic, so pathetic in fact that it makes me wonder why anyone would bother listening to them ever.

The best analysis I've seen in the last couple years has come from Zaky and Muller, they were off .03 and ,02 cents respectively the last quarter and these are unaffiliated numbers crunchers that put wall street to shame

Jan 22 09:36 PM

[Charles Jade:]

While it's great to be upgraded to the status of an analyst—I eagerly await my six-figure paycheck, corner office, and trophy secretary—I'd really appreciate if you read this again.

"Assuming Apple sells 1.3 million iPhones in the second quarter, that would be 3 million for the first half of the year. This means Apple would have to sell 7 million iPhones from July through December to get 10 million in 2008, or more than were sold in the first year of sales. Based on those numbers, one can see why analysts with advanced degrees in business and economics might doubt.
It's a good thing Steve Jobs dropped out of college."

If you weren't a regular reader, you might not be familiar with my acerbic wit, or maybe you are a victim of public education (that would be the wit). However, I think it's pretty clear I was contrasting Steve's Jobs' admirable business acumen sans MBA with the aforementioned highly-paid pessimists of which you are writing about, in other words I was doing what you did way before Apple actually made the iPhone numbers.

Just wanted to clear that up, no apology is necessary, as I'll make fun of you on my blog that no one reads.

Jan 22 09:41 PM

[Doug, Mtn. ...:]

And now Munster has chimed in with depressing news: Apple won't be releasing a new iPhone (he says) in March when he (Munster) wanted Apple to do so. Of all the nerve, Apple! You aren't listening to Munster's commands? I am shocked!

The ANALysts remind me of Hamas: they shoot rockets into Israel, then get hammered and beg for a cease-fire. A couple of months later, they shoot rockets into Israel again, but expect different results. On and on it goes.

In a similar vein: Apple releases products at what are obviously regular intervals. June for phones, September for iPods. Yet here we have another ignorant ANALyst wondering why Apple is off of HIS calendar, not meeting HIS schedule. Time and time again, Apple has proven that it has a superior understanding of when to release products --- the results speak for themselves. But the ANALysts? They know better! Why, if only Apple would listen to them, Apple's sales would easily double!

Morons. They're all morons.

Jan 22 10:46 PM

[sheldon1:]

Many of these so called analysts seem to me motivated by trying to manipulate the stock prices. I has repeatedly stated that the SEC should review these highly negative articles ands the behind the scenes motivations of these individuals. Hopefully with these consistently exceptional results coupled with a very very strong balance sheet, coupled with the best design shop in the world, the analysts and the market will rejoin in praising APPLE.

Jan 22 11:29 PM

[Zoltan L. K...:]

The measure to Apple's potential is really not what "financial analysts" at banks try to impose on the company but the long term positioning of AAPL on the market. This is something they don't seem to have the slightest clue about. They don't understand the customer, nor the technology, nor product life cycles (especially depending on current market conditions). Its a gift they don't try to get involved as managers into high tech.

Jan 23 03:38 AM

[aapladay:]

I guess they figure in a declining economy that they will have to be right eventually. I don't blame them for low balling last quarter though, Apple flat out started that one.
While it is understandable that the early trends showed the 10 million iPhone goal out of reach, it was widely known that MANY MANY people were holding out for the 3G version. I believed they would achieve it and they did, but guess what I got for my reward? NADA!
Now, this stock is just a waiting game. In a few quarters the deferred revenue will be driving up earnings substantially.
Off the top of my head I'll say $6 a share this year, with $2 due for Xmas quarter. 20 million iPhones, Macs up 10%, and this will be the year of the iPod Touch. Don't give me crap, I told ya it was off the top of my head! Just like the analysts haha!

Jan 23 04:13 AM

[Kris Tuttle:]

Why does anyone listen to these analysts? Why does Paul Kedrosky worry about calling them out?

Back in February of last year we made it clear Apple would certainly reach their 10M unit shipment. (seekingalpha.com/artic...) The question wasn't even worth asking really.

Anyone paying attention ignores these areas and focuses instead on the questions and research that stocks will actually turn on. Throwing stones at analysts who have no idea or incentive to do real research is counter-productive.

Jan 23 08:43 AM

[brewer:]

Who is an analyst and who is really more of a spokesperson for a competitor or for someone looking to short the stock? Look, Apple doesn't make it hard to track shipments really. It's easily inferred from the serial numbers.

Jan 23 10:34 AM

[brewer:]

Someone needs to implement the Huberty Award for the most erroneous call of the year.

Jan 23 10:41 AM

[Channon:]

Nice post; I had not seen those comments.

I do think that one reason analysts are so negative on AAPL is because its defenders are so rabid. They end up hating the company because of its fans -- kind of like the world outside of NY with regard to the Yankees!

Jan 23 11:23 AM

[KenC:]

If your analysis is biased by your personal dislike of its customers, then you need to get into a new line of work.

People don't hate the Yankees because of its obnoxious fans, they hate the Yankees because of the team.

Jan 23 02:57 PM

[Roger Knights:]

Don't forget the obnoxious owner!

Jan 24 04:22 AM