It’s amazing to see Wall Street blow it quarter after quarter on Apple. A huge 47.5% jump in third quarter income took analysts by surprise. Quarter after quarter they predict a sharp fall in iPod sales and quarter after quarter they are surprised by the strength of iPod. This time analysts were surprised by the sharp jump in Mac sales, believing that the transition to Intel-based chips would hurt. And they were surprised by the rise in gross profit margins to 30.3% from 29.7%, thanks to cutting costs for components. For the design crowd not used to this kind of financial talk, the bottom line is that Apple did a heck of a lot better all across the board.
So what gives with Wall Street? Why is it missing on Apple? My guess is that Wall Street doesn’t “get” innovation. It still thinks Apple is all about aesthetic design—pretty stuff that people like to play with. Wall Street doesn’t understand that the iPod is a music ecosystem that allows people to manage their music libraries, not just a pretty thing. Analysts don’t get that Macs are now creative tools for user producers to make their own videos and music and share them with friends. It’s not about computers anymore.
So Wall Street blows it again and again with Apple. Sure, they’ll get it right from time to time but until analysts analyze what true innovation is all about, that it goes way beyond looks, they won’t “get Apple.”
But that won’t both Steve Jobs. He gets to constantly surprise investors on the upside with profit numbers, sending Apple’s stock higher.
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