By Graham K. Rogers

Opening Gambit

Financial Fallout and Failures

A main concern was growth. Or to put it another way, a continuing ability to suck as much out of a company as possible. Apple does not work that way and listening to the comments of Tim Cook and Peter Oppenheimer the idea that Apple is in it for the long haul - which we have heard several times before - is totally ignored by analysts.

Mind you, one highlighted by Ernie Varitmos on Apple Investor, was Abhey Lamba, who is an analyst at Mizuho Securities USA. He believes that rapid growth days are over and this is a time for Apple to be considered more stable. Like Ernie, I do not necessarily think that growth has ended, particularly with the comments of Tim Cook concerning product rollouts later this year and next.

One of the positive reports came from Chris Umiastowski on iMore who looks at the increased revenue (up 11%) and the reduced earnings but does not think this is a problem. However, he does bring in the reactions of Wall Street. They like some figures but are wary of that growth idea. Chris Umiastowski examines the way the tech market has changed with the decline in PC sales, yet iOS sales are increasing, and even Apple's sales of Macs were far higher than the average industry decline.

Then he brings in some truths that Wall Street are never likely to accept (or even understand) beginning with Peter Oppenheimer saying that Apple is willing to make short-term trade-offs in profits for long-term growth, which Wall Street hates. Profit. Now. And that is why the share price is never going to reflect the true situation at Apple. While we are on Peter Oppenheimer, Brooke Crothers picked up something he said about the success that Cupertino has seen in Japan and Crothers calls this "unprecedented."

Cook mentioned they were frustrated to see the drubbing the price took, but in a way shrugged it off: not what Apple is about. This is a strong company (lots of money in the bank - Wall Street hates that too) and is not going bust any time soon. Chris is not worried about the stock at all; and while some think it will fall then rise, I think that $400 - 500 (sort of where it is now) will be fine and let Apple get on with what Apple does best. In some ways (and I hate to say this) I am in concord with some analysts who cut their targets after the figures were released, MacDaily News reports: "Current targets range from $400 to $880, while the median has slipped from about $568 to $540."

They were way too high to begin with and pushed Apple shares up unrealistically last year.

Whoops, we got it wrong again

Of course, the analysts are disappointed. They were all wrong before, so Apple has to pay. No products being released this week, tomorrow? so Apple is failing again, despite what the CEO says quietly and forcefully if they took the time to listen. AppleInsider reports on a number of the analysts and, take my advice, ignore them.

The first is Chris Whitmore of Deutsche Bank who just doesn't pay attention and after all the negatives on the figures, comments "Apple needs to introduce a 5-inch iPhone, a new 5S, and a low cost iPhone for emerging markets". Wrong. Wrong, Wrong. Apple does not listen to bankers stuck behind desks wielding calculators who want their goodies now.

What Whitmore and so many other analysts who want "now" from Apple fail to grasp is that Apple is not a manufacturer of mass market consumer products. Without doubt, the iPhones and iPads have sold lots - record breaking in every case - but to lump those in with the plastic output of a Sony or Samsung - shows a fundamental misunderstanding of what Apple does. The iPhone and iPads succeed because they are good. Consumers want a piece of Apple and they are buying into the quality production that we expect Apple to give us. That includes not only the nuts and bolts of the device, but the operating system and the software, all integrated to produce an overall user experience that cannot be matched.

For sure, Samsung/Android users may get a lead with some feature, but working with a system that is supposed to synchronise means currently either Android to Windows (whichever is flavour of the month) or Android to OS X; while iOS is a derivative of OS X and many apps have their OS X counterparts.

Apple ignores such ignorant advice, although this has not always been the case in the wilderness years when Jobs was away (learning what he should hve been doing) as the operating system was licensed as so many analysts said it should be then (and say the same thing now). The result was that sales of Macs fell while the cheaper clones sold but with their lesser quality gave a poor experience and Apple lost because of this. It took years to recover from that and the axe of Steve Jobs to begin the recovery.

Doubts? If you ever have a chance look at the build quality of an Apple product on the inside: the part most users never expect to see. Those of you who read the other parts of this Friday's Cassandra will see that the most reliable Windows PC is a Mac; which mirrors the comments of Walt Mossberg a couple of years back that the best desktop PC was an iMac. Quality. Older readers may remember this theme in Robert Pirsig's Zen and the Art of Motorcycle Maintenance which is still available on Amazon.

More Analysts Insights Wrong

I took the time and actually listened to the conference call which is available online. An edited transcript is also available from Macworld. One of Tim Cook's regrets, which seemed almost an aside when asked a question concerned the rollout of the iMac which had some delays and affected the last quarter's results (and the share price subsequently). Lance Whitney among many others seized on the comments and the wish that Cook expressed that they had delayed the release. This is why Apple does not usually do fast.

One of the major changes that Apple announced this week as part of its share buy-back scheme that is to be expanded, was the borrowing of money to finance this. Apple - the company that is the epitome of liquidity - is to use debt to finace the acquisitions. I expect some on Wall Street are delighted. Apple should do well here as the interest rates mean that such debt is cheap and this will be more than covered by annual income. Evan Niu on The Motley Fool examines this change in an article titled, Apple Just Changed Everything [I am tempted to add "again"].

The article looks at the phenomenal negativity, athough does not mention this was Wall Street and arriviste pundits. Niu looks at the whole picture of the figures, the repurchase plan, dividends and, with a Standard & Poors rating of AA+ (like the US government) ends positive, "It wasn't a blowout release, but it definitely topped low expectations. Even if investors were left wanting more, Apple has just changed the conversation. This ain't your grandpa's Apple." [My source for this was MacDaily News.]

Note that the same positives were seen as negatives by others, as MacDaily News reports on the 4 red flags of Seth Fiegerman in Mashable. Oh, Mashable. . . .

Also commenting with an article that had a headline that began Apple is Doomed, was Philip Michaels on MacWorld. Let me complete that headline, "Apple is Doomed - to make money" and there is a link to their latest podcast in which he and Jason Snell try to make some sense out if it all.

With more income in a day than some companies make in a month, calling Apple doomed suggests that those making the suggestion may be in the wrong field.

Late on Thursday here, with the markets on Wall Street about to open, Ernie Varitmos reported that Apple seemed poised to "gap up" when the market opened, adding that this may have been helped in part by one analyst's upgrade from long-term buy to buy, Ernie Varitmos reports on Apple Investor.

By late evening here Thursday, the share price had crept up by abut 1%.

Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs.