A Case Study In Managing Expectations

Any of you familiar with TQM know that managing your customers’ expectations is important. In case you ever needed that lesson reinforced…

Apple profit surges 95 percent on iPod sales

SAN FRANCISCO (AFP) – Apple Computer reported a 95 percent rise in quarterly profits on exploding sales of its iPod music players, and notched more than one billion dollars in sales through its retail stores. …

Apple reported net income of 565 million dollars, or 65 cents a share, for the first fiscal quarter to December 31, up from 295 million a year earlier. The report beat analyst forecasts of a profit of 55 cents per share.

Sales rose 64 percent to 5.75 billion dollars. Chief executive Steve Jobs disclosed Apple’s quarterly revenue result January 10 at the Macworld conference in San Francisco.

Consumers snapped up 14 million iPod devices during the holiday quarter, and Apple has now sold more than 40 million since late 2001. The groundbreaking product has transformed Apple from a niche PC maker into the leading purveyor of digital media.

Apple also sold 1.25 million Macintosh computers during the quarter, a figure that was up 20 percent from the year-earlier figure. Apple is in the process of transitioning its Mac line to Intel rocessors, and it expects to have all of its PCs running on Intel chips by the end of this year.

“We are thrilled to report the best quarter in Apple’s history,” said Jobs.

“Two highlights of an incredible quarter were selling 14 million iPods and getting ready to launch our new Macs with Intel processors five to six months ahead of expectations. We are working on more wonderful products for 2006, and I can’t wait to see what our customers think of them.”

iPod sales are booming, Mac sales are up 20% at a time when the critics said Apple would die because of the Intel transition… Things can’t get much better in Apple land right now. – One would think that if you had numbers like those in a Fortune 300(ish) company and you announced that you DOUBLED profits that your stock would soar on the announcement, right?

Apple issued a second-quarter profit forecast of 38 cents a share on 4.3 billion dollars in revenue. That outlook fell well short of a Wall Street-estimated profit of 48 cents a share on 4.63 billion dollars in sales.

The forecast drove Apple shares down more than five percent to 78.07 in after-hours trades. It had given up 2.22 in the daytime Nasdaq session.

Now you know why they talk about past performance not affecting the future performance of a security. 😉

It’s all a game of course, Apple is simply managing Wall Street’s expectations. The street can’t expect doubled profits every quarter. So Apple estimates a low number then when they beat it, the stock price rises again. It’s all about managing expectations.

But still, the juxtaposition of these two bits of news still seems weird.

So much for "close enough only counts in horseshoes, hand grenades, and thermonuclear warfare..."
Don't close that book quite yet...

16 Comments

  1. Dignan January 19, 2006
  2. BlogDog January 19, 2006
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  14. Joe Ego January 20, 2006
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  16. Paul January 20, 2006