The great iPad Mini announcement should have been a tell that Apple's (AAPL) quarterly earnings were going to come up short.
The reason? The new iPad launched in March failed. The only good news is that CEO Tim Cook saw this failure coming and addressed it quickly.
It's unusual for Apple to have announcements barely a month apart, but that's what happened. Cook delivered a complete refresh of his computer line a month after releasing new iPhones and iPods.
The reason came in the fourth-quarter earnings release. The "new iPad" wasn't different enough from the iPad 2 to be worth a premium price, so the older product cannibalized sales of the newer one and momentum slowed generally. We also saw the admission of error in the company's decision to switch a month's "new iPad" sales for iPad 4 units, free.
The iPad numbers were first reported as "a little light." In fact, Apple was rapidly losing market share to cheaper Android tablets. Sales of the new iPad were 2 million units short of estimates, and slower growth in China seemed especially troubling.
But here's the good news: Cook and his team saw this problem very early. And it may be that the slow launch in China, and disappointing numbers there, were a "tell" that they were working on it.
The big news out of Apple's fall announcements was heavily emphasized by Apple at both of its fall events. First was a new way of attaching ultra-thin screens to aluminum backs containing components borrowed from the aircraft industry. This innovation results in products that can be both more powerful but much lighter and thinner. Second was a complete corporate commitment to its Retina screen -- something I'd criticized in the spring when I was worried about power consumption, but which readers set me straight on.
This had an added benefit. The new screens come from LG. Samsung had been the primary supplier for the new iPad, made at new plants Apple invested in and were going to be ready in quantity -- and Apple quietly committed to that in the spring. Given the legal battles between Samsung and Apple over the look and feel of Samsung's own tablets, this was a win-win for Apple. (And by buying into the plants, Apple made certain rivals couldn't follow it in the new feature.)
One point Apple emphasized this month is that the iPad Mini is not a smaller iPad, but a real iPad that's smaller. Its screen is completely compatible with that of the iPad 2, and comparisons to that product were made frequently during the October event. The company looks set to make a major push for bulk sales to schools, and those numbers won't show up until the third quarter of 2013. The bulk battle between the $200 Kindle Fire and a $300 iPad Mini is going to be fun to behold, but note that Apple has always had more share and a bigger sales force in this area than Amazon. It should prove to be no contest.
So Apple saw its problems in the spring, took steps in manufacturing to correct them, invested in order to do that, and was ready with a full refresh of its product line based on these new manufacturing techniques in October -- one that should open up new bulk markets as well as diversify the company away from its chief corporate enemy. It took the hit in its most recent quarterly report but is once again firing on all cylinders, with products that are worth a premium price.
All good for Apple bulls. The recent pullback is a big buying opportunity.
Disclosure: I am long AAPL.