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April 14, 2005
Apple does unreasonably well
What an ungrateful mob of bar stewards those investors are. I mean, look, Apple sells more iPods than it’s ever sold before, plus it sells a heap more Macs, lifting revenue for the second quarter by 70 per cent, and the share price … drops? Wouldn’t you think, what with the company beating its expectations significantly, and lifting profit to 34c a share, compared to just 6c in the same period a year ago, that the value of the stock might have risen just a teensy bit?
But no, that’s not how the stock market works. It works on what you might call the Oliver Effect, which is to say that investors always expect a little more. Many investors had expected Apple to report it had sold six million iPods, whereas the company shipped 5.31 million iPods in the quarter, a 558 percent increase over the period a year ago. And the company’s gross margin was a trifling [grinds teeth, mutters] 29.8 per cent.
Apple might be making a lot of clever devices, but it still hasn’t learned from Microsoft the secret of boosting the share price. What they do, every quarter, is deflate expectations. In other words, they talk the market down. “Yes, we’ve made $350 squillion dollars this quarter,” it routinely tells analysts, “but we can’t possibly continue that sort of growth.” Whereupon, the next quarter, it reports, sure enough, it’s made $400 squillion dollars. But, no way is it going to be able to manage something like that again! Investors love that sort of stuff.
It looks like Steve Jobs has finally caught on to this, however, because yesterday, in the company’s call with analysts, “executives tried to temper investors' expectations going forward and warned that they did not expect Apple to sustain its record-high growth rates indefinitely”. They claim to expect revenue growth to eventually start to hover at “a more reasonable 15 per cent level”, still higher than the industry average. They must be expecting to do REALLY well next quarter.
Posted by cw at April 14, 2005 12:23 PM
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Comments
“executives tried to temper investors' expectations going forward and warned that they did not expect Apple to sustain its record-high growth rates indefinitely”
Perhaps the investors are worried about what executives from a company using utterly superfluous words like 'going forward' says about their committment to reducing overheads, waste and bloat.
Posted by: Watermelon Boy at April 14, 2005 12:52 PM