Horace Dediu's Asymco Predictions for 2012 ...
... are refreshing.
Horace is the founder and author of Asymco.com), an independent industry analysis site and a a company selling software development and consulting services for companies interested in deploying mobile applications. Horace has been observing the PC and mobile phone business for years now and has made himself a name with sane, insightful and fact-based analysis regarding Apple and its competitors. He is an extremely accomplished chartist and his quarterly forecasts for Apple (AAPL) in recent years have been exceptionally accurate. Horace’s office is located in Laajasalo – eastern Helsinki – where he has a view of the Baltic. He writes most of the Asymco blog and counts industry analysis among his hobbies. Horace has eight years of experience as an industry analyst and business development manager at Nokia, preceded by six years of software development and management in a startup environment, two years of IT management and five years of computer science research in an industrial laboratory. Horace has an MBA from Harvard Business School and MS Engineering from Tufts University.
Asymco.com is here: asymco.com
>> Predictions for 2012
Horace Dediu
ASYMCO | Category: Theory
January 6, 2012
asymco.com
I have none to offer.
It may sound strange to hear me say that I don’t make predictions even though I often talk about how things will change and even provide some forecasts. The difference is one of degrees. A prediction to me is a very specific, time-sensitive and materially valuable recommendation. An observation about the future is an imprecise, intuitive hunch based on pattern recognition. It’s mushy. It’s theoretical. It’s the difference between saying a company is great and recommending to buy its stock with a price target in a time frame.
But it gets even weirder.
One of the recurring themes in Apple analysis has been that independent analysts, as a group, have been, on average, more accurate in quarterly forecasting than highly paid Wall Street Analysts. Many have asked why. I believe that the answer is because independent analysts are theorists who make observations while professionals are data gatherers who make predictions.
First, we should understand the reasons why each group does what it does. Wall Street sell side analysts are rewarded for making Buy/Sell recommendations that cause clients to retain the services of the firm they work for. They are not paid to be accurate with specific forecasts in fundamentals. They are paid to predict how stocks move. The objective is not to be accurate in the quarterly but to support the “call” or prediction. The disconnect from accuracy comes in trying to sustain the call with a “conservative” forecast.
For example, an analyst with a “Buy” recommendation (and a prediction in the form of a price target) thinks Apple could ship 30 million iPhones this quarter and generate EPS of $10. But he also thinks the stock looks cheap even if they only ship 28 million iPhones and report EPS of $8.50. In this scenario he’s incentivized to publish the lower (less accurate) number. That way he supports his prediction. By dampening expectations, the stock rises on the “surprise”.
Because an analyst sells predictions, he self-censors what he believes.
Contrast that with the motivation of an independent analyst (aka blogger). His motivation is to (presumably) gain a reputation of accuracy and insight. He sells his reputation as a keen observer. Precise predictions or recommendations can turn out wrong quite often. Getting caught with these errors exposes the independent to instant negative feedback. The risk is far greater than the opportunity.
So here is the difference: Analysts have an incentive to put forth a version of the future that supports their call on the stock. Bloggers have an incentive to put forth the most accurate version of the future. By taking the prediction out of the picture, accuracy in describing the future improves.
So I don’t have any predictions or recommendations. I just hope to help you see patterns that lead you to making your own predictions. ###
>> The Outsider: Why This Top Apple Analyst Is Different
Om Malik
GigaOm
Dec. 20, 2011
“Public information to me are secrets in plain sight,” Apple analyst and Asymco.com blogger Horace Dediu told me last week. “Private information on the other hand has no insights and can also lead to wrong deductions.” I am pretty sure many on Wall Street would disagree. Then again, Dediu couldn’t be further away from Wall Street, despite having being called the most accurate analyst covering Apple by Bloomberg.
I met Dediu in a coffee shop in one downtown Helsinki, where the native son of Romania used to work as an analyst for Nokia for for eight years. Dediu was educated in USA and attended the Harvard Business School. In 2007, when Apple introduced the iPhone, he saw it as an immediate threat to Nokia and the reigning mobile world order. Of course, no one listened. When Apple introduced the iTunes app store, he started a company that would help others build iPhone apps.
In order to get constant attention to his company, he decided to blog on Asymco.com. That was in February 2010. Soon after, John Gruber of Daring Fireball linked to some of his analysis, and before he knew, his apps consultancy business was shoved aside as he started focusing almost fulltime on the blog. These days, his analysis is being read by more than 300,000 visitors a month. He is so unlike other analysts, which is why everyone from fellow bloggers to hedge fund managers and mutual fund gurus eagerly await Dediu’s next blog post.
Analysis Matters
As we sit and sip our coffees, the conversation turned towards how he approaches the market. I wanted to know: What makes him tick? He paused and thought hard in response to my questions and then concluded that what worked for him was the fact that he was an outsider. “Lot of analysts reply on connections and it is usually that what they are doing is gathering information and not doing any analysis,” he said. “I don’t have any such inside connections. What I have is Internet as my connection as it is more valuable to me than those special connections.”
So what is on his mind these days? Horace said he was thinking about the TV business and how Apple would play a role in the Internet-enabled TV revolution. “Next year will be about a new kind of a television experience,” he told me, explaining that we will start to see more “different” use cases emerge for connected television. “We need a new way of thinking about content and not duplicate the old way of thinking about content,” he says. Agreed!
Just as apps were able to become a big source of revenue on mobile phones, apps will open up monetization opportunities for video-centric content. YouTube based monetization is difficult, he argued, because one needs big audiences to create ad dollars. However, if you get paid directly for apps, even small, niche video content can thrive. These apps, of course would have to be re-imagined for bigger displays and new interaction methods through new kind of controllers – iPad or Siri, for example. And before we part ways, he points out, all the tiny bits of information are out there in public, on the Internet. ###
- Eric - |
