Zaky: iPod Sales Account For Just 14% of Apple Revenue


Andy Zaky of Bullish Cross

For some time, you could hardly read about Apple without “iPod-maker” following closely behind in press and analyst comments. However, that symbiotic description is dated, according to one of the rising stars among unpaid Apple watchers, Andy Zaky.

Zaky, who watches Apple sales figures from his post at Bullish Cross, wrote Monday iPod sales contributed just 14.2 percent to the fourth quarter revenue of the Cupertino, Calif. company.

By this time in 2009, the iPhone will replace the iPod as the second-greatest revenue generator for Apple, next to Mac sales, the blogger wrote. Last week, Apple reported selling 6 million iPhones for the quarter.

The blogger is among a new breed of Apple analysts not employed by financial houses to provide estimates and insight. Fortune recently gave bloggers the nod over pros in predictions on Apple’s recent Q4 report.

We caught up with Zaky to ask his opinion on the current state of Apple analysis.

Cult: Why are bloggers now being viewed as an alternative information source to professionals?

Zaky: I think a very narrow group of highly experienced ‘nonprofessional’ analysts are being viewed as an alternative source of information simply because for one reason or another, the analysts and their estimates can no longer be trusted.

The blogger said there are several theories for the change, none he really ascribes to. However, he called one theory about Apple analysts “a lot more plausible.”

Zaky: Another theory is that the analysts simply don’t understand how to analyze stocks like Apple. They either haven’t followed the stock long enough or simply don’t do enough financial analysis to arrive at reasonable estimates.

“It doesn’t matter why analyst expectations can no longer be trusted as providing a reasonable picture of Apple’s financials, it only matters that they simply and consistently get it wrong,” he said.

Cult: Which analyst do you think ‘gets’ Apple?

Zaky: The best professional analyst covering Apple is Gene Munster of Piper Jaffray. I generally respect his opinion on the stock and while some on Wall Street are dismissive of Munster’s estimates as being too bullish, his track record is easily the best of the professional analysts.

Cult: What information sources do you use to prepare your estimates?

Zaky: The sources I generally use are tracking Apple’s guidance history, NPD data, Gartner and IDC data and IMEI tracking for iPhone production rates by members of Mac Observer’s AFB and AAPL Sanity Board at Investor Village.

Cult: Should non-professional analysts, such as yourself, be given the same consideration as professionals?

Zaky: If more people like Deagol (of Mac Observer’s Apple Finance Board) and Muller (Tully Muller of Financial Alchemist) held positions as senior analysts at the top Wall Street firms, things would run more smoothly than it does under the control of the current analysts.

Tully Muller of Financial Alchemist
Tully Muller of Financial Alchemist

“Sound analysis is badly needed for Apple,” Muller told Cult of Mac. “It’s a prime target for hedge funds to manipulate,” he said. The blogger, who worked who worked as a mortgage trader, is now a Charted Financial Analyst.

Cult: What are your expectations for December, the first quarter of fiscal 2009?

Zaky: Right now, I’m looking for Apple to report between $1.90 to $2 in earnings per share on $11.5 billion in revenue. That’s significantly higher than the consensus estimates.

Zaky is finishing his final semester at UCLA’s law school and plans to open a hedge fund “sometime in late 2009.”

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