Google And Apple: What They Should Do For Investors (Pt 2)
In my earlier post, I talked about the Street's expectations for Google. Now, I'll focus on Apple . The company suffered much the same thing as Google these past few months, when it came to the iPhone and the exuberant expectations around this product. We knew it was going to be big; important; game-changing; huge; fill-in-the-blank with the adjective of your choice.
And then the estimates over what to expect began to climb. And climb. And climb. And because they were coming from "experts," including market research firms and Wall Street analysts, we in the media dutifully reported them. On what they were based didn't seem to matter. Only the number mattered. 200,000. 500,000. 750,000. In a single weekend. And Apple shares climbed. And climbed. And climbed, seemingly with every report.
Our first hint on iPhone's performance came from AT&T , reporting this week that it activated 146,000 iPhones. Apple shares plunged on the news, suffering their worst, one-day point drop in seven years! A disappointment. Never mind that the AT&T news suggested that Apple was selling a staggering 4,000 phones an hour during that 30-hours that counted toward this quarter's earnings report. Apple simply didn't measure up to the expectations (based on what nobody seemed to care) and the stock got creamed.
A day later, Apple reports its own earnings and discloses that it actually sold 270,000 iPhones. Still below those lofty expectations, and the stock was halted. So, Apple actually sold 6,000 phones an hour, or 50% better than what AT&T reported (the discrepancy apparently comes with AT&T's inability to activate all the phones that were actually purchased). And the stock still takes an initial hit when it re-opens.
But then, something mildly miraculous: a kind of "financial chill-pill" for Wall Street courtesy of Apple's chief operating officer Tim Cook on the company's conference call. He re-iterates the company's, the COMPANY'S, original forecast of 10 million iPhones sold in 2008, and pushes the Street toward a longer-range, more realistic forecast.
"We're very satisfied," says Cook. "The starting gun has been fired and we're off to a great start. However, our primary focus is not on initial sales. We're focused on building a third great business for Apple, along with our Mac and iPod businesses. Our focus is years, not months-but the rewards are huge for Apple."
Wow. Measured. Focused. Realistic. And Wall Street listened, promptly adding a whopping $13 billion in market cap to Apple as the stock soared on the comments. A big chunk of that massive rally dissipated with today's big market downdraft, but the message is clear: Analysts and market researchers have a job to do. So do companies. But it's hardly a perfect science. And as much as we all want quick answers and the 20/20 vision into the future, these are really all just pieces of the bigger "reality puzzle."
The volatility surrounding both Apple and Google, generating massive press coverage, could've been largely avoided with better communication. In the meantime, investors are caught in the middle, forced to read the tea leaves. And companies just trying to run a business will be forced to fend off the frenzies.
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