tl;dr – yet another block buster quarter…
Essentially beat their own guidance but “missed” expectations set by Wall Street which is why the stock got clobbered. Previously in the past, analysts undershot the numbers by a large amount. This time around especially after the way Apple demolished the Q3 numbers, this time, the analysts shot for the high end. Since the iPhone was a major product transition during the quarter (and normally in the past, released in the June/July timeframe where those sales numbers would be included in the Q4 earnings), Apple came under expectations at 17 million units versus an expected 21 million. What is amazing is that despite the anticipation of the new iPhone, there were still 17+ million sold in the quarter (4S revenues are going to be counted in the Q1 2012 numbers). Guidance for the holiday quarter is somewhat insane since Apple anticipates revenues of $37 billion. Considering that Apple has consistently been sandbagging guidance, the company could be baking in at least $40 billion in revenues. 4S sales are already off to a record start and they’ll be launching in more countries at the end of the month.
What’s interesting about the stock action is typical Wall Street double standard. When Apple blew out expectations, the stock would pop but would usually close just marginally higher. This time around, since analysts were too bullish in their numbers and failed to take into account the iPhone product transition (a product transition was mentioned in Apple’s Q3 earnings call by Tim Cook), resulting in this rare (since 2002) “miss”. The reality though is that Apple still grew their bottomline and turned in record revenues for their fiscal year 2011. Regardless, the stock gets punished hard and ends up back below $400. But then again, this story isn’t new as its been happening since 1997 and is why there are always buying opportunities for me to add to my position. Contrary to the garbage that gets discussed on financial news broadcasts, the growth prospect remains intact since 2012 will bring about the next iPad, the next iPhone, and since the iPods saw only minor updates this year, will also likely see major changes in 2012. Then there will be the stream of updates to the Mac product lines. And Apple will likely begin outlining the next versions of iOS and Mac OS X at the 2012 WWDC.
Somewhere in here will be the future plans for Apple TV. While I have issues with it, I can also see its potential. I think if Apple finds a way to bring apps to it (think games), that will open up a range of possibilities (the major detail in the way of this is likely how to deal with 720p and 1080p resolutions since there are currently specific screen resolutions for the iPod touch, iPhone, and iPad.
Finally, Apple is in primed position to further disrupt the marketplace if they decide to introduce something which fits in between the iPod touch and the current iPad. Sure, Jobs did dismiss 7″ form factor tablets with his “sandpaper for your fingers” comment but this isn’t much different than when he dismissed photos and videos on the classic iPod. The distinction between tablet and smartphone is mainly one of semantics regarding the UI where on tablets, the 9.7″ screen on the iPad allows for more elements including multiple panes compared to smartphone sized screens (3.5″ – 4.6″). The devil would be in the details as well as the pricing (Apple has tremendous price elasticity where they could lower the pricing of the iPod line in order to hit the sweet spot for something like a 7.5″ inch form factor device if they decide to pursue something like that).
