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Apple and Stock Market Analysts
Sunday, October 1, 2000 —
by George Wagner

It is amazing to watch the "stock market analysts." While they constantly present themselves as the forecasters of the market, I find them to be very reactionary. Not one of the downgrades to Apple came before the earnings announcement. They all run around trying to get press, trying to convince their clients that they know what’s going on. These are the same people who predicted that Apple would be gone two years ago. But, then again, analysts have been predicting Apple’s downfall since its inception. There were comments that read like Apple’s 11 quarters of consecutive profits were over, but Apple just lowered their profit estimate, they did not eliminate it. I half expected to start seeing "beleaguered" and "struggling" again.

Apple is never allowed to be average. They are either flying high or fending off death. While not a good piece of news, the earnings warning was neither odd, nor totally unexpected. People had been commenting about the long time between new iMac models for some time. This coincides directly with the slowdown Apple mentions in June. The month before the long rumored new iMac announcement, and a good 6 months after that generation’s release. In a marketplace that turns over every 3 to 6 months, that generation was getting long in the tooth. Now before anyone yells, I have an iMac DV of that generation and would NOT consider it obsolete or slow. However, perception is important, and the perception was that that model of iMac was old.

To be honest, while I drooled over the Snow iMac, the specs on the new models were not significantly superior to the previous model, bigger hard drive and a small speed bump were the only significant improvements beyond colors. The G4 desktops were also somewhat lackluster due primarily to the lack of faster processors. Dual processors are of limited use until Mac OS X, which is still months away. The G4 Cube was the only really impressive product, and it is really targeted at a smaller market.

A large part of this dilemma falls squarely on Motorola, and their inability to produce faster G4s. Had Apple been able to offer higher speed G4s, I expect that we would have seen a G4 iMac, and the G4 desktop models would have been much better performers for everyday functions, not just Photoshop and a handful of other products.

As an investor, I was not surprised by the earnings report, but by the response. Had Intel not had a similar situation about a week earlier, maybe the reaction would not have been so severe. But then again, those of you who do not have Apple stock might just want to scrounge around and get some. The earnings announcement was issued just prior to the end of the quarter, and the report is due on Oct. 18th. You have to expect that Apple adjusted the earning so that they will beat them. As shortsighted as Wall Street is, I would expect Apple to gain back much of the ground that they lost.

I am not a stock analyst, and do not claim to have any special knowledge. I do, however, have some memory of Apple’s history, especially over the last couple of years. I also have seen this scenario before. Apple lowered estimates, only to blow them away later and, if memory serves, just edged out the original numbers. But I suspect that no one at Apple would have expected such a disproportional response.


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