Apple's Quarterly Groundhog Day

The response to the Apple Computer (AAPL) earnings was just like the Bill Murray movie Groundhog Day. It seems that every time AAPL reports the company beats analysts’ consensus estimates, guides to lower expectations for the next quarter, and then trades lower. Then once again the next quarter we hit the replay button and the same happens all over again.

If you want to find fault with the lowered margin numbers then OK, sell the stock. Just realize that even with Mac sales on the rise, an increasing product mix including iPhones and iPod will lower margins. Does anyone care that Mac is stealing market share from Microsoft (MSFT) every single quarter? I do.

My guess is that the Steve Jobs health issue was cause for about 5 to 8 points of after hours’ selling. Just ask yourself this question – Is Steve Jobs solely responsible for the success at AAPL? Think about it – he may have set the direction of the company a few years back and was the force behind the company’s turnaround. However, the team that Jobs has assembled is what is driving the AAPL machine these days and not Jobs himself.

Apple's big mistake this quarter was making the Jobs story a personal one and not a company one. AAPL needs better communication skills not better business execution. Expect that iTune to change soon.

Disclosure: At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of AAPL --- although positions can change at any time. 

 

Comments

[Murphy Mac]

It's an extremely frustrating cycle to watch, especially if you're long. But you get used to it and hope each Christmas brings them up another notch or two.
What's more frustrating is the shoddy reporting, and headlines claiming the market will drop on "poor results". Apple's numbers were a far cry from "weak". There's a difference between poor results and lowball guidance. Get it straight media outlets. I'm looking at you Reuters and AP.

2008 Jul 22 07:54 AM

[russ]

It is hard to decide which group is more reprehensible, the short term speculators in the stock or the media. No one should pay any attention to Apple guidance, it is historically always low. Look at the facts, which has been growing market share, great new products, and an adoring customer base. I agree that Jobs deserves credit for the team but it appears they can and have performed beyond his personal involvement

2008 Jul 22 08:14 AM

[Channon]

Well stated.

For 2009, I'll take the slightly smaller slice (30% margins) of the much larger pie (total earnings).

2008 Jul 22 10:39 AM

[tom1234]

excellant ---you have logically communicated the reality of what is -- at apple-- everyone gives credit to the company as a Job's thing but give credit to the people Jobs hired which is also a Jobs thing---and the make the wheel turn smoothly

2008 Jul 22 11:58 AM