What's wrong with Apple: Slowing growth? Increasing competition? Falling margins?
Maybe not so much. Maybe the biggest issue is poorly managed expectations.
Apple of course reported holiday quarter revenue of $54.5 billion on Wednesday, up 15 percent from $46.3 billion a year ago. (Factoring in the quarter was 13 weeks compared to 14 last year, revenue was really up 26.7 percent.) Net profit came in at $13.1 billion, flat with a year ago or up 7 percent if you factor in the short quarter. (Read More: Apple's Revenue Falls Short, Shares Dive)
Apple now trades at a discount to Microsoft, which is expected to report revenue up 3.1 percent from a year ago, and net income down slightly. Let that sink in.
(Read More: Apple Should Not Be Trading at This Multiple: Cramer)
Here's what makes this part puzzling: Apple's iPhone actually took market share from Android on Verizon in the holiday quarter, which suggests it's doing just fine against Samsung. (Read More: Apple Stock: How It Got Here, and Where It's Going)
Google's Nexus tablets were a nonfactor in the quarter from a unit perspective. And however well Amazon's Kindle Fire might have sold at $200, Apple still sold $329 iPad minis in the quarter faster than it could build them.
On slowing growth, let me offer a couple of charts. First: iPhone unit sales. You don't have to be a statistician to look at it and see there's nothing wrong with the growth curve.
Apple's data released Wednesday showed iPhone units were up 29 percent over last year, and revenues were up 28 percent. Factoring in last week's long quarter, sales were up closer to 40 percent. iPad sales? Similar story. Units are up 48 percent year over year, sales up 22 percent, before you factor in the short quarter.
What about declining margins? Aren't those a sign that Apple's facing pricing pressure?
Not exactly. The average selling price of an iPhone this year: $641. A year ago: $646. The difference is less than 1 percent, and can probably be explained by Verizon's new ability to offer the iPhone 4 for free, subsidized. Apple said iPhone 4 supplies were constrained.
(Read More: Apple Suppliers Slammed, but Experts Say Buy)
Did iPad mini hurt margins? Sure – but not badly. The doomsday scenario with the mini, remember, was that no one would buy it when they could get a 7-inch tablet from Amazon or Google for a fraction of the price.
What did hurt margins was Apple's inability to deliver the redesigned iMac in sufficient volumes during the quarter. CEO Tim Cook said supply challenges and the short quarter meant Apple shipped 700,000 fewer iMacs than a year ago. That's about $1 billion right there.
(Watch Video: Is Apple Hurting Without Steve Jobs)
The iMac's gross margin is typically above the corporate average. So it hurts when Apple's not selling them. (This will continue to hurt Apple's margins in the March quarter, when it will no longer be supply constrained on the lower-margin iPad mini (and perhaps the iPhone 4), but will remain constrained on the higher-margin iMac.
The Expectations Issue
To recap: Growth, competition and margins are all legitimate challenges – but the numbers don't show them to be the sort of intractable problem that so many people seem to be suggesting.
Growth? Slowing, but not dramatically when you factor in quarter length. Competition? Not eroding Apple's position. Margins? Holding up perfectly well in Apple's flagship product. (Read More: Rumors of Apple's Demise May Be Greatly Exaggerated)
So perhaps the bigger problem is that Apple failed to get ahead of this story. Think about it:
Apple knew in the summer, before the most dramatic part of the stock's upward climb, that the story was going to get tricky at the end of the year with a massive multiproduct rollout. Apple could have signaled then, while investors were still feeling good about the stock, that this would be a different kind of year as the company prepared for the future.
It seems that perhaps Apple realizes that in the absence of information, chaos takes over – and now that it's the most valuable company in the world, investor chaos can be awfully distracting.
The new revenue and gross margin guidance, if Apple keeps it honest, should really help stabilize things. No longer should we have a range of iPhone estimates, like we did for the holiday quarter, between 43 million and 63 million units. No longer should supply chain rumors have the same kind of impact on the stock. Apple will have to be creative about not giving away product launches in guidance – but there are ways to do that.
Take a look at Facebook. There's another stock that got crushed on the uncertainty surrounding its IPO. But as it began to report numbers and tell its story, things have brightened a bit.