“Apple (AAPL) and CFO Peter Oppenheimer have a history of being conservative with their guidance. Listen to a conference call, or read a transcript and you’ll hear repeated remarks about forecasts the company can ‘confidently meet.’ It’s like a lawyer that won’t ask a question in court without first knowing the answer; similarly Apple seems incapable of making a projection without being sure it will come true,” Seth Gilbert writes for Seeking Alpha.
“The history tracks back quarter after quarter… By now one would think the markets would be used to it. It’s an obvious enough pattern: first Apple gives conservative guidance about future earnings. The economy, a product shift, a parts shortage…something, warrants more caution. Next, the numbers come: conservative projections are blown away by stellar earnings that probably shouldn’t have been a surprise. Then, lest expectations get too lofty, the upside of the stellar earnings is tempered with another round of conservative guidance. It’s the Apple M.O., the ‘Oppenheimer effect’: Apple’s way of under promising, over delivering then under promising again,” Gilbert writes.
“Last quarter in the earnings call Peter Oppenheimer was crystal clear. He told analysts, ‘[Apple is] giving very strong guidance. We are very confident we will achieve it.’ And guess what, that’s exactly what they did. This second quarter, the wording isn’t much different. In forward guidance for Q3, Apple is projecting revenue of $7.2b and earnings of about $1.00. Those numbers seem a little low, and it’s likely they will be,” Gilbert writes.
Much more in the full article – recommended – here.
Please note that Oppenheimer said in the conference call, “Looking ahead to the June quarter… we are targeting revenue of about $7.2 billion, or approximately 33% growth over the prior June quarter… We expect to generate EPS of about $1.00.”
“About $7.2 billion. About $1.00 EPS.” Reports that exclude the “about” are incorrect. Apple is not guiding “$1.00 EPS,” they are guiding “about $1.00 EPS.”
And the stock drops. You figure it out.
Sell and buy back operations, if I had real time quotes I would do the same.
As an investor, You’re a sucker if you rely on any companies Forward looking statements. AAPL under Peter Oppenheimer makes sure that all forward looking statements are conservative. As Oppenheimer sees it conservative is what accounts are and should be.
Mr. Jobs, would you pass this along to Mr. Gore? Thanks.
Ethanol was initially promoted as a vehicle for America to cut back on foreign oil. In recent years, biofuels have also been touted as a way to fight climate change, but the food crisis does not augur well for ethanol’s prospects.
“It takes around 400 pounds of corn to make 25 gallons of ethanol,” Mr. Senauer, also an applied economics professor at Minnesota, said. “It’s not going to be a very good diet but that’s roughly enough to keep an adult person alive for a year.”
Versus Ballmer, the cheap snake-oil salesman who over promises and under delivers on everything.
“Apple seems incapable of making a projection without being sure it will come true,”
Gee, isn’t this preferable corporate behavior?
@ ron
Get yourself a real-time chart, son.
AAPL 169.54 +.60 10:57 ET
Ethanol is not the answer but extracting the alcohol does not ruin the part of the kernel that is useful for food stuffs and animal. This issue is economic. Ethanol drives the price up. Cheap food has bee the cornerstone of American economic success
Should have been “animal feed” and “been”. Can’t type this morning.
@ ron
This from wikipededia:
Current, first generation processes for the production of ethanol from corn use only a small part of the corn plant: the corn kernels are taken from the corn plant and only the starch, which represents about 50% of the dry kernel mass, is transformed into ethanol. Two types of second generation processes are under development. The first type uses enzymes and yeast to convert the plant cellulose into ethanol while the second type uses pyrolysis to convert the whole plant to either a liquid bio-oil or a syngas. Second generation processes can also be used with plants such as grasses, wood or agricultural waste material such as straw.
Like all good technology, early attempts are typically inefficient but are improved upon. A bit like the iPod one could say.
We need to look into all alternatives for energy. Just because it isn’t perfect it doesn’t mean we should not use it and learn how to improve the process. We’re killing the planet and we will need many different approaches to solving the issues.
hmm. I think Apple does a great job with their guidance. Apple has been growing at breakneck pace for several years now, it is more like predicting the score of a basketball game than expected earnings. I am in the medical field. It is relatively easy to predict how we will do from year to year; our business is neither expanding or contracting, it is “stable.” Apple is disrupting multiple markets at once- this is unstable and harder to predict. Better to err on the side of caution.
World effort is turning away from corn and other extractable waste. Current news is putting the stink on replacing foodstuffs. Cellulosic wastes is what world research is focusing on…. and we have a lot of agricultural and forestry-related waste.
Besides ethanol is stupid to produce anyway. Butanol or higher is where its at. It can replace gasoline in your car at this very moment! Ethanol cannot.
Back to topic…what is the point of this article? Should Apple overpromise and under-deliver? MS has the monopoly on that approach.
I would think giving guidance is one of the riskiest things a company has to do. If I had to do it, I would be conservative too, and be damn sure I could beat it. I see no problem with the way Apple handles it.
Why set yourself up for disaster if you don’t have to?
Apple is ONLY looking longterm…and so should we. If it is only about each quarter, they would be strategically launderizing each and every variable in the mix in order to have the best report. It’s complicated enough as it is.
The guest adviser on Fox Business channel last night said that M$ will be a good long term investment as soon as they get past the Vista cycle. WHAT an idiot. His projected target for them was high 30’s/low 40’s. Let’s all drop what we’re doing and quickly call our broker.
Now if Bush really had a good plan, he would ask that we stimulate the economy with our IRS return by dropping it into AAPL.
To Rusty Cheesepuff:
I’d settle for Homeland Security dropping Windows.
“about $1.00 EPS.”
Wall Street Mob: Everyone knows that means EXACTLY $2.00 per share. A penny more or a penny less and I will slash your stock price in two!!! [muah-ha-ha-ha]
@ DogGone
Regardless of the secondary process, irrigating, fertilizing, harvesting, and converting Biomass to fuel is extremely inefficient.
Ethanol was sold as a) a cleaner alternative to fossil fuels, b) a path to reducing dependence. Neither is true.
Even the UN is admitting that the push for ethanol has resulted in unanticipated problems:
Deforestation, Wildlife habitat encroachment, reduced food crops.
Pushing ethanol is not good policy.
http://www.globalpolicy.org/socecon/envronmt/climate/2007/1020biofuel.htm
Everyone here continues to pound in some story that when Apple reports on earnings, their stock drops because their guidance was conservative. This is simply not true. With the exception of Q1 (reported in January, when the entire world was down big time), AAPL managed to rise quite a few percentage points after their report. In October, it was up to $192. In July, it was up to $150, In April last year, it was up to $95 or so. And two days ago, it was from $162 to $171 (it’s currently hovering around $169). I don’t see anything wrong about this guidance business. Mr. Oppenheimer, please continue exactly as you’re doing. Don’t change one thing.
“Apple under promises, over delivers…”
Those arrogant Apple bastards… Oh wait, that’s a good thing.
No new news here folks, Apple just doing what it’s been doing for the better part of five years now – Razzle-Dazzling the market place – the same marketplace that said Apple was going to cave for a decade and a half.
Would you rather have someone come to you in peace and leave you in fear or come to you in fear and leave you with peace?
Peace out.
I wrote this a few days ago and it still holds true:
“Remember the analysts words are meant for their clients who never know if they are selling or buying on the market or selling to/buying from the investment firm.
One scenario: Advise your clients you’re worried over iPhone sales and AAPL doesn’t look good. Broker calls client who says: “OK, sell”. Broker earns money. Firm buys from client say at 130 a while back and holds on to the stock, it never leaves the firm. Later, say a week ago, analyst issues note, broker calls client (a different one of course) and says he’s bullish on AAPL. Client buys at say 150, firm earns commision and 20 bucks a share. Do this over and over again and you make lots of money.
In fact, in-house trading is a huge source of revenue. It’s easy to calculate:
1) Look at how much capital a given investment broker has.
2) Multiply this by the cost, for example 1%/year + any performace bonus.
3) Add earnings from commission, annual fund fees.
4) Add 2 and 3 and subract from gross earnings
5) be amazed at how much you are being screwed.
If you’re a customer, demand to know that the transactions you’re making are on the open market. Check your buys/sells against daily high/lows. Chances are you’re often buying on highs and selling on lows towards the firm who in turn is buying on lows and selling on highs towards the market.
So ignore the wall street game, invest on your own in companies you know and trust ( AAPL)”
Now they’re selling their own shares to customers at a huge profit; who do you think is behind the surge in recent weeks? Soon they’ll start talking the stock down again only to repeat the procedure. Don’t pay any attention to these d***heads. Why is the buy coming now? Only because they’ve been loading up on AAPPL at a low cost for the pas few months.
Oppenheimer guided three things: one, revs of $7.2B, two, eps of “about one dollar”, and three, gross margin of 33%.
Revs of $7.2B is 96% of revs of $7.5B this past quarter. Gross margin this past quarter was 32.9%. Oppenheimer did not state that anything unusual was expected for operating costs, so one can use the GM as a proxy in extrapolating eps. Since GM for this quarter of 32.9% is virtually identical to the guidance of 33%.
So, doing the math, 96% of $1.16 eps this quarter, gives us guidance of $1.11 eps next quarter. That’s what “about one dollar” actually works out to. This $1.11 is a penny about estimates.
The bottom line is that Apple guided inline with expectations, and not 10% lower, as $1.00 is 10% lower than $1.10.
Further, Oppenheimer stated that they would not recognize iPhone revenue from March 6th until late June when the new iPhone software would be released. That’s at least a $100M hit to revenues, cause it wouldn’t be accumulative, but ratably deferred.
Since the analysts didn’t know this when they made their estimates, their estimates are $100M high. In other words, Apple guided $100M more than analysts predicted.
@Buster
<World effort is turning away from corn and other extractable waste. Current news is putting the stink on replacing foodstuffs. Cellulosic wastes is what world research is focusing on…. and we have a lot of agricultural and forestry-related waste.>
I wonder what effect burning up all this cellulosic “waste” will have on the bio fertility? This cellulosic waste is food (energy) for the vast, unseen, mostly carbon based soil fertility. Looks like a new scenario for unanticipated but realized down the road consequences
Energy is free but you don’t know it because it is very well taxed by hidden systems.
Energy from chemicals/botanicals is a farce, incredibly inefficient. The sun gives pure energy, nature converts it to botanical, man converts botanical to energy. What is wrong with that equation?
Very little is what it seems, especially when there is a power/profit motive.
You know MS is a despotic, monopolistic, criminal, organization, this schema applies to other industries too. You could earn just as much and work for one-third of the hours – that even applies to fat US and EU citizens (aka consumers) if the bankers weren’t manipulating the game and taking their cut.
There is no red pill, you have to think for yourself. It takes time, at first it seems incredulous, but isn’t MS domination of the software market incredulous? Who the hell buys that shit?
Knowledge is widely advocated by the bankers, and they give it to you, for free, news, advertisements, it’s getting more difficult to tell the difference every day. There is an aphorism, it is worth what it cost. Knowledge is but the first step, then there is understanding, then there is wisdom, maybe there is a higher level but as yet my wisdom is incomplete.
MagicWord ‘years’ – it takes a few, at least