Analysts enraged at Apple for not obeying their predictions

By Josh Fruhlinger 5 comments

October 16, 2009, 1:21 AM — If you spend enough time reading all the ancillary jive put out by the tech pundit class, you'll know that analysts have kind of a hard time with Apple. This became particularly clear when just about the entire analyst class last year said that Apple was going to be coming out with a netbook any day, and Apple's execs kept saying pretty clearly, no, that's not a market we're interested in, and then the analysts started getting actively angry and saying that no, Apple had to make a netbook, there's a recession on, people, don't they know anything? And then it turned out that Apple was making gobs of money on high-margin products.

The problem, I think, is that for whatever reason, out of all the numbers they play with, analysts find market share to be the most compelling. This is all well and good, but for an actual corporation, the real number of interest is profit, and Apple seems to have decided that its path to profits lies in high per-unit revenue rather than total market domination, at least when it comes to PCs. (For a market where Apple decided instead to flood every conceivable niche at every price point, see the iPod.)

Anyway, in the run-up to the release of Apple's quarterly sales Monday, some analysts are just kind of throwing up their hands and saying, yes, fine, Apple's going to sell a bunch of pricey computers and will make some good money. I'm particularly charmed by this line from IDC VP Bob O'Donnell: "Last month we called Apple [sales] low, and we got it wrong. I take full blame for that I thought, 'How can they possibly maintain share?' But they defy logic."

For those keeping score at home, both Gartner and IDC predict that Apple will announce modest increases in Apple sales over the same quarter last year. There will continue to be big boosts in raw numbers of units sold for Acer and Toshiba and their many low-margin netbooks. Really getting squeezed is Dell, which doesn't really have much credibility as a premium brand (it's goofy Adamo marketing notwithstanding) but isn't necessarily a big laptop vendor either. (Yes, Dell does sell laptops, but they aren't the core of their offerings, and Michael Dell has been talking smack about them lately.)

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Josh Fruhlinger is ITworld's associate online news editor.

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Anonymous 2 years ago

Like Steve said!At the risk of sounding arrogant - what a pleasure to read some comments from people with brains, understanding of how business works, and an inclination to apply logic rather than petulant whining.These incessant cries for Apple to copy the self-destructive tactics of most of the PC industry! Such nonsense. Just look at the company's value --- in the sense of market cap, not the silly figure of "market share".Anyone with a marketing background (I think!) knows the dangers of trying to cover all sectors of the market, of trying to be everything to everyone. It is almost always a disaster. In general, quality brands cannot go cheap without shooting themselves in the foot; and econo-brands cannot go upscale. There is no sound business reason for Apple to join the race to the bottom and to razor-thin margins.

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Anonymous 2 years ago

but quality, ease of use and customer support should be the foremost in company's and users minds. What the Apple executives said about netbooks is true and I don't think it's merely a slam. I'm sure that for the average computer user, netbooks would be cramped and underpowered and they would likely tire of using them very quickly. Even Michael Dell has admitted that much. I'd bet the base price of any computer should be about $500. Probably no mainstream American computer company can make profit by selling such low-cost items at $300. Quality and function (and likely customer service) would have to be sacrificed to keep the prices that low.I'm curious as to whether most analysts have ever used a netbook for any length of time. I'm certain these analysts only care about cutting costs and don't care anything about end-user satisfaction and that's a pretty sad state of affairs. They're telling businesses to build low-quality products just to quickly move products with no long-term potential. That's foolish for long-term investors. Apple needs to keep quality up and give good service to users to maintain brand loyalty even if they have to charge more. That formula should continue to work at least 15%-20% U.S. market share.I hope Apple stays the course and doesn't have to keep lowering prices if they are going to sacrifice quality and service. The analysts may try to chop down Apple for charging more, but Apple is continually opening stores and providing jobs at a time when most companies can't. These things are important and I don't see why investors don't understand that. Analysts pushing and praising companies that build the cheapest products is just disastrous for the computer industry. Building products cheaply or cutting corners merely to gain market share is plain foolish.I'm hoping Apple makes $200 a share following earnings and maybe $220 by the end of 2009.

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Anonymous 2 years ago

I make my living doing simulation of a highly non-linear, dynamic system. I often tell my colleagues and customers that reality always wins.

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Anonymous 2 years ago

Sometimes in professions where the job is to theorise and create models (such as financial analysts, academicians, and scholars) the theories become so compelling to the ones using them that they forget that their theories are merely abstractions and models of reality and not reality itself. This amnesia happens and happens often.Thus, you get an analyst who says Apple "defies logic". Well, stupid, how about saying that your theoretical model of the world is actually problematic or even wrong?Sometimes scholars run into the same pitfall. I know, because as an scholar myself, I've run into colleagues in the field doing the same thing where they animate their theories and models thinking that that is life and then when life doesn't fit their models, instead of revamping the model they create some silly reason.Apple isn't defying logic. Logic is logic. It's your silly financial models that aren't working. Hey, how else did we get into this financial crash? It's not that the world defies logic. It's that people got it wrong. They had the wrong model.D'UH!

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Anonymous 2 years ago

Just wanted to say thanks for the two comments above. How very true! Rare intelligence in a sea of nonsense.Steve

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