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Technology Stocks : Apple Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Alomex who wrote (18644)	9/29/1998 11:50:00 AM
From: Eric Yang	Read Replies (3) \| Respond to of 213182

RE: Analysts missing the estimate for Q1,Q2,Q3 Al said "If a quarter is profitable because of great cost-cutting, analysts have not many ways of knowing this in advance, and thus they trail. If a quarter is profitable because of great retail sales they have the contacts to know that in advance." I don't agree with your analysis Al. Your comment implied that the "surprise" in Q1 ..etc were cost cutting...almost downplaying the significance of the great earnings. That was not the case at all. Apple reduced cost by $41 million in Q1 98 (Christmas 97). There was no surprise there. Just look at the three quarters prior to Q1 98. Geez..and we're suppose to believe that the $40 million cost reduction in Q1 98 caught analysts by surprise? Q2 97 $32 million cost cut Q3 97 $81 million cost cut Q4 97 $55 million cost cut Q1 98 $40 million cost cut I believe the reason why analysts were so far off with their estimates in Q1-Q3 98 was primarily due to their inability to forecast margin accurately. In Q1 98 margin jumped by 2.6% to 22.4% due to the intro of G3. That was what made the difference. In Q2 most analysts didn't look deep enough to realize that margin was going to climb to 24.8%. On the other hand, many of us here on this board anticipated the margin to go higher. We calculated the approximate margin on G3s based on Q1 98 data and combined it with the accurate estimate that G3 was going to make up 50% of unit shipment in Q2 98. The obvious conclusion (to us) was that margin would rise further. It was this insight that allow our earnings estimate to be much more accurate than analysts. Apple cut cost by 15 million in Q2. Not much of a surprise there... There are a hand full of insightful analysts that monitor AAPL closely such as Lou Mazzuchelli from GKM, Andrew Neff from Bear Stearns, Jimmy Johnson from AG Edwards...etc. Unfortunately too many analysts have been clueless about AAPL and behave like a bunch of sheep. At least the herd is finally turning. Eric

To: Alomex who wrote (18644)	9/29/1998 7:03:00 PM
From: Andrew Danielson	Read Replies (3) \| Respond to of 213182

Alomex RE: "earlier access" Access to the rumor mill might be one thing, but on what basis do you suggest that analysts receive sales data or market studies faster than the press releases? Why should market research firms care about analysts? It's easy to say from our position that analysts must be extra "special" somehow and know so much more than us. This is by no means true. At least, it's not true in the banking industry. I once asked my father about just this issue. He Senior VP in charge of investor relations at US Bancorp. He's in contact with analysts on a daily basis and has first-hand knowledge of what kinds of things they know and don't know. The problem for analysts with a company like AAPL is that they usually listen to the company for much of their guidance. In a mature company (like USB), guidance from the company is profuse and usually right. With a company whose numbers and general outlook changes as quickly as AAPL's, the CFO is much more hesitant to give concrete guidance to the analysts. His reputation is on the line if he tells them something that later turns out to be false--and that's especially true when he overestimates the company's future success rather than underestimate. Moreover, a bank's stock thrives on predictability and stability of earnings, which means the company will want to guide analysts as specifically as they legally can. Tech companies, on the other hand, build their reputations on upside surprises. Just ask Michael Dell. Stability is NOT the name of the game, and an earnings blowout can be good PR. Just ask Steve Jobs. Therefore, it's not always in the company's best interest to warn analysts that their estimates are way too low. After all, they'll find out soon enough. . . Andrew