I don’t know if anyone else spotted it, but I’ve been seeing a pretty hefty bandwagon careering its way through Twitter since Apple announced its third-quarter results. And it seems, from the mostly incoherent yelps I can hear coming from a rickety, albeit popular, vehicle passing through my account traffic, that the King, if he isn’t already dead, could be on the way to croaking it.
Yes, Apple, the darling of new media professionals and amateurs across the globe, has disappointed Wall Street with the lowdown on its quarterly results. Not only has the company failed to meet the targets expected by analysts, they’ve even had the temerity to miss them by as much as $2 billion. Quelle horreur.
For every dollar missing from Apple’s predicted results, it seems that a news article or comment piece has sprung up to answer why it has happened. Mashable has kindly demanded that Apple bring out an iPad mini to counter the obvious and immediate threat of the Nexus 7. The Independent thinks that the iPhone 4S is responsible for the blip, with sales stagnating due to its inconvenient position in the latest smartphone cycle. And The Week has provided a handy five point guide to let you know exactly what might have gone wrong.
So far, so conventional, for any piece of news relating to Apple. But, when you actually examine the figures, almost all of the literature following this announcement can be best described as bunk. Why? Because, rather than actually analysing the figures, journalists, bloggers and commentators have been falling over themselves to explain the incorrect figures of analysts.
In fact, rather than having a tough quarter, Apple has actually exceeded the expectations they set themselves at the end of April. After posting quarterly revenue of $39.2 billion in Q2, Peter Oppenheimer, Apple’s CFO, projected that the company’s revenue in Q3 would be $34 billion. The results announced recently showed that the actual revenue for the quarter was $35 billion – in other words, up a billion on expectations.
Crucially, it was the success of both the iPad and the iPhone that funded this. While the company saw a not insignificant 10 per cent drop in iPod sales, Apple chalked up a record 17 million iPads while shipping a further 26 million iPhone 4S handsets as their principal source of revenue.
As a result, the company recorded revenues that were nearly $7 billion higher than last year as well as nearly $1 billion in additional profits. Far from being a disappointing year for handsets or tablets, it was, in fact, a fairly spectacular one. So where is the doom and gloom about these results actually coming from?
The answer is simple: it’s the analysts, stupid. Disappointment with Apple’s results isn’t coming off the back of pisspoor projections or shocks in the market. It comes from misplaced faith in the analysis of experts on Wall Street, who supposedly have their pulse on the industry.
According to these gurus, Apple was, despite its better knowledge, on course for profits of $37.2 billion. This puts the predictions of the analysts out by more than $3 billion despite predictions that Apple made way back in April. Therefore, the supposed shortfall in Apple’s performance is not being studied from the reasonable perspective the company outlined. Instead, most writers are jumping from the incorrect figures provided by supposedly infallible “experts”.
And this has lent a strange backward logic to many of the arguments about Apple’s performance. For example, iPhone 4S sales missed the target of 29 million sales touted by Wall Street even though Apple played no part in creating that figure. So iPhone 4S sales are responsible for Apple’s poor performance, even though the company had not set its stall by them.
The result is that we’re again being forced to look at the tech industry from a perspective that acts, consciously, to blind us. Rather than being encouraged to study results from the more grounded perspective of the company concerned, we’re being told instead to base what we think on flawed figures and predictions from parties with their own fiduciary interests.
That should terrify us. The idea that we disregard advice from those in the business for morself from people who sit on the outside, attempting to pick off scraps, is very troubling. We only have to look back to the Facebook IPO a few months back to see what happens to even the most high-profile companies out there when predators and vagabonds distort expectations for their own ends.
In fact, both the cases of Facebook and Apple contribute to a sense that a bubble is being blown up around the tech industry by those at the heart of finance looking for vulturistic bucks after their bailouts.
By coincidence, I’ve been reading Joseph Stiglitz’s Freefall, about the financial crash in 2008. He argues that part of the reason for the devastation wrought by the bursting of the global property bubble came in part to a “talking up for profit” culture in the finance industry. From mortgage providers telling homeowners that house prices always go up to credit agencies slapping AAA ratings on junk mortgages, the aim was to make a quick buck, disregarding long-term health.
Of course, the author applies his liberalism to the book as eagerly as I butter my toast, but it resonates greatly with what seems to be happening with the technology industry today. Cash is chasing trivial, questionable products like SocialCam, Instagram and DrawSomething while companies at the top are being pressured to produce ever-greater profits to benefit shareholders.
While Apple can support themselves, thanks to ludicrous profits and cash reserves, fragile startups and mid-sized companies, like Digg, may not be able to. So before you jump on the financial results bandwagon, remember one thing: this is the bandwagon that the speculators want to set off, to accumulate idiots on the way. Turn your back on their cynicism.