Wall Street analysts, after watching disappointed investors sell-off some Apple shares, Wednesday attempted to remind consumers that the iPhone 4S maker is still a rock star, pulling in profits like nobody else on the planet.
Hyped to expect a raft of rumored design changes, investors came away from yesterday’s Apple announcement somewhat disappointed, a mood reflected in an early 5 percent sell-off of Apple shares. “Investor expectations were high heading into the event and Apple did not meet some of them, e.g. multiple new phones,” acknowledged Morgan Stanley’s Katy Huberty.
Deutsche Bank’s Chris Whitmore seemed to be the lone analyst who shared consumer confusion over CEO Tim Cook’s presentation. In a reference to the danger of allowing too much time between iPhone refreshes, the analyst writes “We believe 15 months is a long time to wait for a processor speed bump and higher resolution.” Additionally, the absence of “a more aggressively priced mid-range iPhone misses a significant near-term growth opportunity.”
However, the majority of analysts took the position of trying to talk a jumper off a ledge, reminding investors Apple’s success is not all about shiny exteriors.
“The market tends to forget that software is what differentiates Apple from the competition, and that was the case again [Tuesday] with iOS 5, which featured Siri intelligent assistant and iCloud content management,” notes Huberty.
Others built on the software argument. “Clockwork-like refinements in software is key to Apple’s success, writes Merrill Lynch analyst Scott Craig. “Apple continues to make refinements to the OS, which we view as critical for constantly improving the user experience and extend Apple’s leadership in the space,” he adds.
As for the software upgrades, all of Wall Street could not say enough good things about the Siri voice-activated personal assistant. “Once investors dig into Siri, we think its addition will overshadow the lack of full iPhone form factor change,” weighs in J.P. Morgan analyst Mark Moskowitz.
Siri will convert the iPhone “from what was before a fairly dumb phone even though it was dubbed a smartphone,” concludes analyst Charlie Wolf of Needham’s.
Although speculation before the event included whether or not former CEO Steve Jobs would appear, the iPhone 4S announcement was pure Tim Cook, showing the change in stagecraft. Where Jobs was all about wowing the audience with the thinness or the smallness of an items exterior, Cook, the former nuts-and-bolts guy highlighted the internal coolness of the iPhone. In advertising lingo, Jobs sold the sizzle, while Cook focuses on the steak.
Ed Sutherland is a veteran technology journalist who first heard of Apple when they grew on trees, Yahoo was run out of a Stanford dorm and Google was an unknown upstart. Since then, Sutherland has covered the whole technology landscape, concentrating on tracking the trends and figuring out the finances of large (and small) technology companies.
20 responses to “Analysts React to Disappointed Investors: Software is Apple’s Killer Product”
Yet more evidence of rampant greed, gullibility, and STUPIDITY of Wall Street investors. Glad I’m not one of them.
I was only disappointed by watching Tim Cook. He didn’t sound very excited. He was dreadful throughout.
I don’t want to be to dismissive of analysts, but I don’t think very many get or have ever “gotten” Apple – with a few notable exceptions. Any one who’s spent ten minutes “analyzing” Apple would be well aware that they are incredibly innovate but also extremely thoughtful and strategic. Much of their success can be traced back to the explicit rejection of things that Wall Street business wonks prescribe as “pillars” of enterprise and business growth. For one thing, the iPhone line so far gets a major refresh every other year – which falls next year. It’s fine for geeks to consider the possibility of a surprise, but for a professional analyst to be disappointed only demonstrates a lack of familiarity with the market/product they are supposedly supposed to be expert on.
I actually thought he was great. Obviously, he’s not SJ. No one is. That said, I’m looking forward to hearing him in the future – he strikes me as very well poised, genuine, thoughtful, and almost slightly bashful. All in all, very endearing. I love all the folks at Apple mostly for the work they do, but I for one am delighted that it’ll be Cook and not Forstall or Schiller doing the major launches.
Good point. Tim Cook is not Steve Jobs. Yet, I had the feeling that Tim desperately tries to be Steve. I know it’s his first major product launch appearance and I believe that he will (for everyone’s sake) find his own unique style of presentation. But this one made me turn off the keynote after just 16 minutes of watching it…
‘Additionally, the absence of “a more aggressively priced mid-range iPhone misses a significant near-term growth opportunity.” ‘
What the hell do you call the iPhone 3GS for “free” and the iPhone 4 for $99 if they’re not aggressively priced mid-range iPhones? Too much ignorance-based, emotionally-driven investing is going on with Apple stock. Buying opp for the smart money.
I hope you’re not saying that that affects your iPhone buying decision. :-)
Yeah, I mean, I certainly noticed things too – turns of phrase, indulgences in over-the-top hyperbole, doing things that Jobs would typically do and do well. I suspect the writing/coaching team is the same. I think he did great, but I would like to see him develop a style that is more reflective of his demeanor and personality, which I think ultimately is strong and pervasive. I think he is more of a speak-softly-and-carry-a-big-stick kinda guy, vs Jobs who’s a classic ringmaster.
So… the only thing people wanted was a new shape?
It just may. Depends on if I am ready to fork over $200 in November 15th when I’m eligible. Only two things I like about it is the 8MP camera and Siri. However Siri won’t be perfect since AT&T has sucked since 3G came out around the Pentagon. The best I’ve received in my area was 4 MBPS and reported connectivity failures for years.
And they still have yet to get their crappy network to go right.