©Joe Carson 10-6-00

The Sky is falling! The Sky is falling!

(Chicken Little)

Apple announced its 3rd quarter financial results this past week and for the 12th consecutive quarter showed not only a profit but a steady gain. In fact, it posted a larger profit than the same quarter last year. Ordinarily we would expect Wall Street to greet any normal stock with that record with glowing reports and recommendations. Instead, they played the part of Chicken Little and announced once again that Apple was doomed and the sky was falling, saying that stockholders should get rid of Apple stock. The Wall Street Sheep did exactly as the Witch Doctors on Wall Street ordered them to do and Apple stock tanked by more than 50%

Eh? What's going on here?

Some news sources were running about trying to blame the general stock weaknesses in the tech sector all on Apple's stock drops this past week, stock drops related more to Analysts' errors than real problems. For instance, Alan Goldstein and Leah Beth Ward wrote an article "Apple bruised as PC growth concerns become a sell-off" for The Dallas Morning News that was trying to tell us that Apple caused a tech sector panic and sell-off. Hello! Where have they been over the last few weeks? Tech sectors have been weak for the last two or three weeks unless my news services have been lying too me. Big names like Intel, Dell and Compaq have been getting drubbed, long before Apple's current announcements.

CNNfn posted an article "Apple warns on earnings" that claims that Apple's problems are unique and not industry wide. Where did the author get that info? If you read the article you discover that it came from Compaq, of course. Gee, what a reliable source of info on Apple's finances!

Some virulently anti-Apple types on Wall Street even posted scurrilous articles full of absurd misinformation, such as claiming Apple was not making headway in getting new users and were selling only to established Mac users. Say again? Apple's own surveys show exactly the opposite is true. In an article that reads as if it were lifted straight from any anti-Mac site, Sergio G. Non's article "2HRS2GO: Apple's financial cube is cracked" at ZDNet Inter@ctive Investor made statements that read more as if Mr. Non was planning a party for his Wintel friends to celebrate the hoped for demise of Apple which Mr. Non clearly is trying to hasten with his own personal brand of misinformation. There are professional PC Weenies, and Mr. Non is clearly one of them. The thrust of the article is seriously flawed and biased. Claims of "fundamental" problems at Apple are simply pure hogwash and Mr. Non knows it!

Mr. Non was not alone in making claims that the problems were unique to Apple. Oh yeah? Well then perhaps Mr. Non and the other "analysts" who are making these statements could perhaps explain this little article that appeared a few days later, "Dell Not Immuned to European Slowdown" by Clint Boulton at Internetnews.com that tells us that Dell is experiencing problems remarkably similar to Apple's.

In another article that reports on Dell's problems just a few days after one report had Dell smugly telling us that they, unlike Apple, were just fine, we discover that Dell is not only having financial troubles but has been having them for two years now. In Mr. John Pletz' article "Dell Computer now must sell itself to skeptics" for the Austin American-Statesman he has done something very unusual compared to the Wall Street reports slamming Apple. He is telling is the unvarnished truth regarding the tech sector and not trying to tell us that somehow only Apple is having a problem.

According to Mr. Pletz' article, Dell has failed to meet expectations for 3 out of 4 quarters and has been in a two year slump. Nonetheless, analysts are pushing Dell for a "Buy" while Apple, which has had 12 quarters of steady growth exceeding analysts' pessimistic projections for all but the most recent quarter (in which Apple posted a bigger quarter than it did last year but didn't meet Wall Street analyst's unrealistic projections) faces lowered ratings.

Do I smell the rotten stink of hypocrisy here?

Now that a big PC maker is having a weaker quarter than the analysts were predicting, Wall Streeters are talking out of the other sides of their mouths. I don't see anyone calling for a rush to dump Dell stock. Perhaps that's because those same analysts who called for dumping Apple actually own Dell stock and don't want to see their own portfolios drop in value? It is a smelly question that perhaps the SEC should investigate.

For a clearer view of what may be going on, we could go and read David Reynold's article at MacAddict.com, "Analysis: Apple Reality Check". Mr. Reynolds tells us that the analysts and the panicked stock buyers are being idiots again. The old We-Hate-Apple habit of Wall Street isn't dead, it was just dormant.

Mr. Reynolds points out that Apple's "shortfall" of only $110 million is actually up from last quarter and definitely higher than this quarter a year ago. So we have to ask.... how did this get to be "bad news"

Answer... the Wall Street Tea Leaf Readers guessed wrong again about Apple, for the 12th quarter in a row, only this time they guessed too high after misreading the info that was in plain view. They are now downgrading Apple to cover the fact that Apple is just fine but the "Analysts" fouled up their guesswork. DUH!

One web Writer, Tim Wilson, in his column "Road Hog" at Creative Mac posted an article "110 million clues that Wall Street is run by scared, little lambs" took on the Wall Street analysts in terms not calculated to make any friends in that crowd. Anyone who thinks I am rough on PC Weenies or Wall Street analysts should go and read Tim Wilson's articles. He is far and away meaner towards them than I ever have been here. I strongly urge you to go and read his article.

If you don't trust a report emanating from a Macintosh oriented source, how about this one from Reuters? Eric Auchard gives us a dispassionate and objective report that isn't taking the Apple Must Die!approach we have seen in so many Wall Street "Analysts'" reports. In his article "First Intel, Now Apple: Has PC Growth Hit a Wall?" reminds us that Intel was one of the first Big names recently to have problems. Gee, I wonder why the other so-called "Analysts" didn't mention that one?

Ever dispassionately objective, Mr. Auchard's report on Apple's stock fall also notes some analysts are insisting that these problems are Apple's alone and not related similar weaknesses in the PC sales drops. I can almost hear Mr. Auchard muttering under his breath, "Yeah, right". He reports on how other PC makers are in fact facing many of the same sales slowdowns and for largely the same reasons, despite anti-Apple analysts trying to claim otherwise. David Wilson of Bloomberg in his article "Apple Shares Fall Victim to `Multiplier Effect'" tells us that Apple has been the victim of the "multiplier effect", a new economic theory that tries to explain irrational and excessive stock drops on relatively minor negative news. When the Multiplier effect is used, Kodak suffered an even larger problem on an even smaller low price per share drop. If you translate what he is saying in blunt terms, what it means in essence is that Stock buyers (and the analysts who advise them...) are stupid!

Of course, some of the writers in the Mac Universe have their own theories about why Apple is having trouble. The most common villain mentioned: the Cube. Benjamin Jonas-Keeling as one example, is one of many web writers who finger the Cube as Apple's bane in his article "Despite sell-off, there is sunshine in Apple's future" at Right On Mac. The problems often listed are high prices (true, about $200 too high), inadequate memory (64 MB on a G4 system? You can't even run Mac OS X properly on that little memory.) and cracks (The jury's still out. Is it a serious flaw or merely visible molding seams?).

Mr. Jonas-Keeling comments on absurd share price drops in Apple stock and commenting how Apple has forgotten that a pretty case does not a computer make (re: reportedly poor Cube sales).

At least one Mac oriented writer has a good handle on the reason why Apple's sales were below expectations although still quite good. The recent Macinstein article "Why Apple´s Stock Fell" pulls no punches. According to Macinstein Apple's problems stem from poor product upgrades: rehashed iMacs with different colors and the same old G3 processor, PowerMacs stuck at 500 Mhz albeit with two processors, and the Cube getting ohs and ahs, but few sales.

In fact I found that sales on most Macs and even Cubes are actually good but not as good as Apple had hoped for and there is a shortage of some models that are in high demand. You can't show a profit on units you haven't sold because you don't have them to sell. Apple has a problem with a shortage of parts. Read: shortage of G4 processors from Motorola.

On the other hand, one report from CBS Market Watch by Mike Tarsala "How Apple blindsided Wall Street" may have more than a little merit as to what happened. Mr. Tarsala blames Apple's stock drop on "Analysts" for not doing basic research and Apple for excessively withholding needed info (the kind of thing that gets the SEC to seek prosecution.)

In other words, did Steve Jobs' paranoid obsession for secrecy hurt Apple?

In the midst of this fuss over Apple stock prices and profits there is some good news. Some of the more rational and opportunistic in the media have noted that Apple's stock is now an underpriced bargain. We do have to remember that the last time Apple's stock tanked, within a few months the stock price had climbed so high that a stock split was needed to keep the individual shares from being priced out of reach. One such report was "Apple Now a Delicious Buy?" by Michelle Delio at Wired News. This article reminds us that now would be a very good time to emulate the Smart Money and buy the now underpriced Apple stock.

However, although the artificial stock panic over Apple finances is a chimera, Apple's real problems are far from over. Most of Apple's real major problems stem from one source alone: Motorola. The discussion of Motorola's Dilbert-esque corporate culture and its negative effects on Apple merits a complete article and there isn't enough space for now to talk about it, although it is a temptation... I think I'll save that particular rant for the future.

Intel Processor Problems

In case you thought that only Apple has problems with processors, take a gander at these news reports about Intel's problems. First, PCWorld reports in "Intel Delays Pentium 4" that Intel is delaying the Pentium 4 again, supposedly because of problems with the chipset that accompanies it. Then I found two reports of Intel scrapping its plans for a low cost chip that was supposed to make supercheap computers available to the Common Herd. Both the Associated Press report, "Intel Scraps Plans for Low-End Chip", and the Reuters report "Intel Scraps Plans for Low-Cost Timna to Run PCs" tell us that PC makers expressed no interest since they could see no way such a processor could save them any money. So much for the "Cheap PC" mythology.

Who Does Bill Gates Think He Is?

Did you know that Bill Gates' password on his own computer some years ago was "God"? I don't know if it is still his password, but it does indicate a certain megalomaniacal frame of mind.

Scientists Want Mac OS X

Architosh is reporting in their article "Scientists hunger for Mac OS X, initial report" on how scientists are waiting impatiently for Mac OS X. There is a huge body of scientific software for Unix and now Mac OS X promises them a UNIX that doesn't require that the user become a computer scientist just to boot it up. Standard Unixes are incredibly powerful but simply too obtuse to use. Windows NT and other OS flavors from Microsoft have proven to not be quite up to the task. The ideal solution seems to be Mac OS X with its BSD UNIX base and Macintosh interface. Now UNIX power can be accessed without spending more time figuring out how to open a file than running the project at hand.

joecarson@applelust.com