Tuesday, January 20, 2009

A Crucial Call

Tomorrow's Apple earnings call is likely to be the most important of the tech earnings season. Apple shares have been battered due to the ongoing worries about the health of Jobs as well as fears about the extent of the impact of the economic downturn on Apple's upscale products. The guidance that Apple gave back in October was widely panned as being outrageously conservative but analysts consensus projections on revenues are now within the range given by Apple. While there is no doubt that the steep dropoff in consumer spending has hit Apple, I believe that the various data points from the quarter indicate that the analysts have become too bearish with regards to Apple's earnings.

I am using a combination of NPD and Gartner numbers for the Macs/iPod's and the Net Applications OS share data for the iPhone numbers.

Unit Numbers
2.57m Macs
20.4m iPods
iPhones Sell-in 5m
iPhones Sell-through 5.5m

Financial Numbers
Revenue $10.45 billion
GM 33%
GAAP Earnings $1.49

These numbers would likely be enough to provide a nice jump in shareprice, but guidance will be a huge factor. The odds are that Apple will provide extremely conservative guidance. There isnt much to provide a boost to shipments as MacWorld was a non-event, however I expect to see a product update on the desktop side in the next few weeks or so. Apple also needs to cut prices on the iPhone to reignite demand ahead of an expected update this summer. The timing of such an event will be a large determinant on the course of the current quarter.

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