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Apple Q4 2011 earnings disappointment attributed to iPhone transition 'hiccup'

post #1 of 93
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After Apple's quarterly earnings failed to live up to Wall Street consensus estimates, some analysts have labeled the September quarter a "transitional quarter" for Apple, while remaining reassured that the first quarter of iPhone 4S sales will make up for the so-called "hiccup."

Piper Jaffray

Piper Jaffray analyst Gene Munster said in a note to investors late Tuesday that Apple's recent quarterly results were the first earnings and revenue miss since 2002. The analyst pointed out that he had expected sales of the iPhone to reach 22 million, but Apple announced just 17 million units, a sequential decrease from the June quarter.

"We see this as a disappointment, but given the strong start to iPhone 4S sales, we believe it is clear that units were pushed from the Sept. quarter into the Dec. quarter as customers waited for the "iPhone 5,"" he said.

Munster had expected first weekend sales of the iPhone 4S to reach 2.5 million, but actual results blew past expectations to top 4 million. Apple itself said during the conference call to discuss its quarterly results on Tuesday that it was confident it would set an all-time high in iPhone sales next quarter, the first of the 2012 fiscal year.

The firm also remains confident in Apple's continued earnings growth because of indications of high customer loyalty. According to surveys by the investment bank, 94 percent of iPhone owners will buy another iPhone. Munster speculates that, if 80 percent of the 40 million customers who purchased the iPhone during the 2010 fiscal year decide to upgrade next year, 30 percent of his 2012 estimate "is very solid."

He also pointed to Apple's iPad sales as "the key data point" from the quarter, as unit sales grew 166 percent year over year, comprising roughly one quarter of the company's revenue. Munster predicts Apple will sell 52 million iPads in the 2012 calendar year.

The analyst also made note of the fact that Apple's December quarter guidance is "less conservative than usual." Apple has said it expects a record-breaking $37 billion in revenue next quarter, 1 percent above the Street consensus. According to the firm, Apple has, on average, provided revenue guidance 2 percent below consensus.

"We believe Apple's Dec-11 quarter guidance is evidence of the company's confidence in iPhone 4S and iPad sales in the Dec-11 quarter," Munster concluded.



RBC

Mike Abramsky of RBC Capital Markets told investors that Apple's first miss in five years was "transitional." He also viewed the company's guidance as unusually strong. According to him, Apple may see "strong catalysts ahead."

The analyst did warn, though, that the miss could spark near term volatility in Apple's stock "pending improved investor visibility to forward catalysts," such as the iPhone 4S product cycle and strong growth in Asia.

RBC had projected $34 billion in revenue and $8.00 in earnings per share next quarter, compared to Apple's guidance of $37 billion in revenue and $9.30 EPS.

Morgan Stanley

Katy Huberty said late Tuesday that Apple's results were just a "small hiccup," adding that the pump is primed for the company to see improved revenue growth in the fourth quarter of calendar 2011. In her view, there are "no structural issues" related to Apple's performance last quarter.

"We believe the Street underestimated the degree to which September was a transitional quarter for the iPhone but with strong iPhone momentum out of the gate in October, we dont see the light iPhone shipments as a cause for concern," she said.

After the June quarter's blowout results, analysts noticed that Apple guidance for the September quarter was unusually low. When asked about the figures, Apple Chief Financial Officer Peter Oppenheimer warned that a "future product transition" would have a material impact on revenue for the quarter. In hindsight, the assumption that the transition in question was a reference to the next-generation iPhone proved to be accurate, as customers appear to have held off on purchasing the smartphone while awaiting the rumored fifth-generation model.

Huberty also called attention to Apple executive comments that may suggest plans for lower-priced iPads and iPhones. She also noted Apple CEO Tim Cook's remark that he wasn't married to the idea of hoarding the company's cash.

The analyst did say that a "lower than expected uptick in iPad shipments was the only real "flaw"" in the quarter. She viewed sell through of 9.6 million as only a slight improvement from the 9 million in June. Huberty expects 13 million iPads in the December quarter, noting that she does not believe that Apple has lost tablet share to competitors.

Morgan Stanley has raised its price target from $470 to $480 dollars, maintaining its $50 bull case EPS estimate for calendar year 2012.

Risk-Reward Snapshot for Apple | Source: Morgan Stanley.
post #2 of 93
The real test will come after the initial enthusiasm of 4s sales (mostly to iPhone 3G/S upgraders) dries out.
Most of the iPhone-4 owners will not upgrade and will wait for iPhone-5, potential newcomers will have a choice between HD/LTE android phones and iPhones with the same old dwarf screens.
post #3 of 93
Quote:
Originally Posted by AppleInsider View Post

Morgan Stanley has raised its price target from $470 to $80 dollars, maintaining its $50 bull case EPS estimate for calendar year 2012.

Ummm, that would be a negative price target raise. $80??

My remark sounds silly, huh? A negative price target raise. What is so silly is the lack of proofreading.
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post #4 of 93
An outsider estimate was made, and the reality was different. And thats not called the analysts' first miss, its called Apples first miss?

(P.S. Do trolls think they impact the market?)
post #5 of 93
Quote:
Originally Posted by nagromme View Post

An outsider estimate was made, and the reality was different. And thats not called the analysts' first miss, its called Apples first miss?

(P.S. Do trolls think they impact the market?)



: touché!
post #6 of 93
Quote:
Originally Posted by nagromme View Post

An outsider estimate was made, and the reality was different. And thats not called the analysts' first miss, its called Apples first miss?

(P.S. Do trolls think they impact the market?)

amazing, isn't it? Apple pretty soundly beat their own estimates and had strong earnings (52%) and revenue growth (38%) and it keeps being reported as a bad quarter. If only more companies had such poor quarters.
post #7 of 93
Android is killing the Iphone/Ipad sales.

The product transition that users are waiting for is the G5 Powerbook.

post #8 of 93
Of course figures were down - iPhone 4 was being sold below normal costs because of pending new release (which came later than rumoured) and consumer confidence is down leading to slowing in iPad sales, and effecting other non necessary purchases.

If they dont rebound strongly for the next two quarters, driven by 4S sales, then that would be news.
post #9 of 93
Apple currently offers 3 different iPhone models for sale all have the same screen size and basic design, for 2012 Apple should consider offering two or three different iPhone sizes or else I see Apple losing market share in the long run.
I'm not looking into getting a new Mac before 2014, I already spent a lot of money last year buying both a MacBook Pro and a Mac mini and then upgrading them this year. However, an upgradable midrange tower would get me to upgrade immediately. A Mac Pro with desktop-grade Core i7 processors instead of server-grade Xeon should be inexpensive enough to qualify.

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post #10 of 93
So a group of people in the financial markets says Apple had a weak quarter and we are supposed to what? Cry. Apple has what 80 billion dollars in cash. Really what company has that much cash sitting around? Who gives a crap what the analyst says. Apple is strong and will remain that way because they get it. They understand what makes us tick. We love Apple because it just works so screw the analyst.
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post #11 of 93
Apple exceeded the guidance estimates they gave last quarter. It only delivered less than the wall street crystal ball gazers guessed at. In my book thats 'double winning'
post #12 of 93
Quote:
Originally Posted by Dickprinter View Post

Ummm, that would be a negative price target raise. $80??

My remark sounds silly, huh? A negative price target raise. What is so silly is the lack of proofreading.

You are correct. It should have added the 4 in their but the Internet and smart phones with Twitter has turned the world into a chicken scratch form of short hand, but devoid of any of the short hand rules.
post #13 of 93
These Wall Street guys crack me up. They are playing everybody. I'll bet many had placed bets that Apple's stock would fall, then they worked hard spreading the iPhone 5 rumors, and, when their predictions didn't bear fruit, they act as if it's Apple not performing, then they laugh all the way to the bank.

Apple did just fine, and as they themselves had predicted. That also must bug the heck out of WS, who can't get anything right.

 

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Your = the possessive of you, as in, "Your name is Tom, right?" or "What is your name?"

 

You're = a contraction of YOU + ARE as in, "You are right" --> "You're right."

 

 

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post #14 of 93
Quote:
Originally Posted by nagromme View Post

An outsider estimate was made, and the reality was different. And thats not called the analysts' first miss, its called Apples first miss?

(P.S. Do trolls think they impact the market?)

Actually, there is some good evidence that they do.

Providing that quantity of content required by instant and continuous news means the village idiot, once ignored, is now all of a sudden 'interesting'.
post #15 of 93
Very defensive here today. Of course the iPhone numbers were a tad bit disappointing, despite Apple's guidance ( which is always low-balled anyway). Apple actually called it correctly, they suggested a drop in iPhone sales to a product transition - most people thought that meant that they would have a hiccup in sales in the last Q as they introduced the iPhone 4S in the last Q, what they meant was that the rumours would reduce demand. So it happened.

In any case the guidance is high.
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post #16 of 93
Quote:
Originally Posted by shompa View Post

Android is killing the Iphone/Ipad sales.

The product transition that users are waiting for is the G5 Powerbook.


Apple always fails to achieve much growth the Q before a transition to a new product. All that pent up demand is coming good now, even though the 4S is only available in 7 countries. Add to that the fact that the 4S and the 3GS are showing price elasticity, and are being sold down in inventory already ( despite the imminent arrival of the 4S in more countries this month) and Apple will probably double sales of the iPhone this month. There will be little or no dip in Q2 either as the 4S wont be on all carriers until Q2.

So iPhones > 30M. iPads > 20M this Q.
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post #17 of 93
Quote:
Originally Posted by asdasd View Post

Apple always fails to achieve much growth the Q before a transition to a new product. All that pent up demand is coming good now, even though the 4S is only available in 7 countries. Add to that the fact that the 4S and the 3GS are showing price elasticity, and are being sold down in inventory already ( despite the imminent arrival of the 4S in more countries this month) and Apple will probably double sales of the iPhone this month. There will be little or no dip in Q2 either as the 4S wont be on all carriers until Q2.

So iPhones > 30M. iPads > 20M this Q.

I think the most significant metric regarding Apples earnings disappointment is 22 days. If they had shipped the 4S 22 days earlier, they would have sold more than 21m iPhones and surpassed the Streets numbers. Then there would have been none of this hand-wringing. Instead, the 4S revenue was pushed into the Dec. quarter. I think that (and the 14th week) is why Apple is giving surprisingly high guidance.
post #18 of 93
In the last year they had another aggressive guidance quarter. The one where analyst disappointment occurred over missing a 6M iPad sales estimate, vs. something like 4.1 M actual. You know, the iPad to iPad 2 transition quarter. Then analysts interpreted the next quarter high guidance as Apple trying to reassure everyone all is OK. As opposed to the reality. All the "rule of large numbers", "Apple has reached its peak" discussion. Analysts like to make their own projections, and somehow, we should patently dismiss the Apple guidance because they purposely sandbag. LOL

Let's look at the 37 B guidance. I have not examined active selling prices, etc. so will approximate based on memory/guesstimate. Hey, I am just doing my morning reading and responding immediately as if we were talking at the coffee shop. Q 01 2012:

27 M iPhones at $700 = 18.9 B
15 M iPads at $600 = 9 B
5.5 M Macs at $1300 = 8.25 B
iTunes = 2 B
Software = 2 B (wild guess have never studied the Apple earnings in depth )

Total > $40 B.


Want to be as good as any analyst or blogger (indie)?

1. Make a spreasheet with the above data.
2. Adjust the unit sales based on your own feeling.
3. Adjust the ASPs (prices) to something closer to what is reported by Apple. As opposed to my guesses here.
4. Add a row to your spreadsheet for profits (use similar methods).
5. Update your spreadsheet quarterly.


I think this can be no more than a 15 minute homework assignment. Maybe 30 minutes the first time and 15 minutes each quarter thereafter. As an investor for the long term I mostly care about:

1. Sustainable competitive advantage
2. Headroom for growth
3. Strong execution
4. Excellent R&D.

Market gyrations are expected. Guidance and quarterly estimates only serve the purpose of reinforcing the headroom cow growth bullet point. The beauty of Apple is the price gyrations allow an ability to acquire at lower prices over time.
post #19 of 93
Quote:
Originally Posted by nagromme View Post

An outsider estimate was made, and the reality was different. And thats not called the analysts' first miss, its called Apples first miss?

Exactly. Apple didn't miss - the analysts did.

Quote:
Originally Posted by Nairb View Post

Of course figures were down - iPhone 4 was being sold below normal costs because of pending new release (which came later than rumoured) and consumer confidence is down leading to slowing in iPad sales, and effecting other non necessary purchases.

And this is a great example of why Apple tries to maintain a veil of secrecy over new product launches. People who say that folks like Gizmodo who illegally obtain pre-release information are not hurting Apple are just plain wrong.
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"I'm way over my head when it comes to technical issues like this"
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post #20 of 93
Apple Earnings are dependent on the iPhone. Almost half of the over all rev figure is iPhone. 22 Million is an over estimate. The 4s will not make up for this difference in Q1. A large majority of users are waiting for an iPhone 5 and Android is stealing market share.

The initial unit sales numbers for the iPhone 4s are good but the expectation is too high. One Analyst was predicting ALL 3GS users were migrating to the 4s. Not so. There are over 18M 3GS users that could potentially migrate to a 4s but I believe the majority of those users are waiting for iPhone5.

For those that say the analysts missed. The price of a growth stock, like Apple, is dependent on that companies projected growth rate. The stock price is reflective of these growth estimates. So when growth slows the stock price will adjust to reflect the slower growth.

Apple is a great company with great growth potential. However, it simply cannot continue to maintain this rate of growth with "incremental" products. The question is will Apple have the vision to create new products that are game changing and deliver the growth expected?
post #21 of 93
@andrewoliv

Fair enough and specific. I feel like we are having the same conversation that Mutual Fund managers are having with respected analysts. Just we make a lot less $ for the effort. :-)
post #22 of 93
APPLE DISAPPOINTS, AAPL DROPS TO LEVELS NOT SEEN SINCE LAST WEEK!

Hmm... Not a big deal.
post #23 of 93
For all this chest-beating, AAPL is still at $400, and, as of today, is still the largest company in the world by market cap.

I can live with that.
post #24 of 93
As predicted, US traders will defraud share holders to scrape a profit off the cake.

Before opening the stock is already just over $400.

It'll be back up around $420, if not more by the end of the week.

Then Gallup comes out with this absolutely fraudulent ``poll'' about how 2/3rds of the US is anger at Congress and NOT WALL STREET.

My rear end we aren't angry at Wall Street, the Banks and the Congressional leaders that were bribed.

It's a soup of anger.
post #25 of 93
Quote:
Originally Posted by Minnesota_Steve View Post

...Want to be as good as any analyst or blogger (indie)?

1. Make a spreasheet with the above data.
2. Adjust the unit sales based on your own feeling.
3. Adjust the ASPs (prices) to something closer to what is reported by Apple. As opposed to my guesses here.
4. Add a row to your spreadsheet for profits (use similar methods).
5. Update your spreadsheet quarterly.


I think this can be no more than a 15 minute homework assignment. Maybe 30 minutes the first time and 15 minutes each quarter thereafter. As an investor for the long term I mostly care about:

1. Sustainable competitive advantage
2. Headroom for growth
3. Strong execution
4. Excellent R&D.

Market gyrations are expected. Guidance and quarterly estimates only serve the purpose of reinforcing the headroom cow growth bullet point. The beauty of Apple is the price gyrations allow an ability to acquire at lower prices over time.

Exactly. What I recommend and what I do.

Right now, I don't buy AAPL unless it's below 375 - sell when it gets up over 410. The machine traders play it on $5 variations @ 3000 trades per second.

AAPL only got as low as $393 - before I went to bed, last night. Already back up to $400 in premarket, this morning. So, no trade for this cranky old geek.
post #26 of 93
This is BS anyway. Apple beat earnings and revenue from the same quarter last year. That typically si how these things are evaluated. Now Apple is being compared to the previous quarter, which normally isn't the proper valuation.
post #27 of 93
Quote:
Originally Posted by AppleInsider View Post

RBC

Mike Abramsky of RBC Capital Markets told investors that Apple's first miss in five years was "transitional." He also viewed the company's guidance as unusually strong. According to him, Apple may see "strong catalysts ahead."

The analyst did warn, though, that the miss could spark near term volatility in Apple's stock "pending improved investor visibility to forward catalysts," such as the iPhone 4S product cycle and strong growth in Asia.

RBC had projected $34 billion in revenue and $8.00 in earnings per share next quarter, compared to Apple's guidance of $37 billion in revenue and $9.30 EPS.

I am very confused by Mike Abramsky / RBCs position

Apple beats its own guidance by 13% on revenue and 28% on EPS

Abramsky calls the miss against analysts expectations "transitional", which seems clear.

And then he sets his own projection at 9% under Apple's own, on revenue and 14% under Apple's own on earnings.

What sort of game is being played here?
post #28 of 93
Wasn't those analyst the ones that predicted an iPhone 5?
They are the ones to blame in any case... Record quarter and is a disappointment?
LMAO...
post #29 of 93
Quote:
Originally Posted by Henry 3 Dogg View Post

I am very confused by Mike Abramsky / RBCs position

Apple beats its own guidance by 13% on revenue and 28% on EPS

Abramsky calls the miss against analysts expectations "transitional", which seems clear.

And then he sets his own projection at 9% under Apple's own, on revenue and 14% under Apple's own on earnings.

What sort of game is being played here?

Is called "Speculation"
Remember oil prices?

From wiki:

"Speculators may rely on an asset appreciating in price due to any of a number of factors that cannot be well enough understood by the speculator to make an investment-quality decision. Some such factors are shifting consumer tastes, fluctuating economic conditions, buyers' changing perceptions of the worth of a stock security, economic factors associated with market timing, the factors associated with solely chart-based analysis, and the many influences over the short-term movement of securities"
post #30 of 93
This is exactly like a weatherman predicting sunny with a high of 85, and then clamoring about the weather's disappointing turnout for being sunny and 82.

Also, who the fuck cares? 6 BILLION in profit, a miss? Nope. RECORD Mac sales, disappointing? Nope. $100Bn in sales? Astounding. Sounds like a party to me. But someone always has to complain when they expect too much.
post #31 of 93
These record-breaking sales are different than my clueless expectations! Apple is doomed, DOOMED I say!
post #32 of 93
Quote:
Originally Posted by Bergermeister View Post

These Wall Street guys crack me up. They are playing everybody. I'll bet many had placed bets that Apple's stock would fall, then they worked hard spreading the iPhone 5 rumors, and, when their predictions didn't bear fruit, they act as if it's Apple not performing, then they laugh all the way to the bank.

Apple did just fine, and as they themselves had predicted. That also must bug the heck out of WS, who can't get anything right.

I completely agree! I despise these alleged "analysts" that say if a particular company doesn't meet "their" expectations, then there is a problem. The only problem is with the stupid analysts themselves. We really need to stop the nonsense, fire all the analysts, and just go back to looking at a companies earnings AFTER the quarter, without any expectations from some idiot sitting there trying to "predict" what a company is supposed to do. It is very obvious that Apple knows what it is doing, and Wall Street doesn't have a clue.
post #33 of 93
Again - too defensive. iPhone sales were disappointing.
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post #34 of 93
Quote:
Originally Posted by Eideard View Post

Exactly. What I recommend and what I do.

Right now, I don't buy AAPL unless it's below 375 - sell when it gets up over 410. The machine traders play it on $5 variations @ 3000 trades per second.

AAPL only got as low as $393 - before I went to bed, last night. Already back up to $400 in premarket, this morning. So, no trade for this cranky old geek.

It's a good strategy. I hold some long also. But for some quick returns on cash, very nice. Better than a bank.
post #35 of 93
Quote:
Originally Posted by tylerk36 View Post

So a group of people in the financial markets says Apple had a weak quarter and we are supposed to what? Cry. Apple has what 80 billion dollars in cash. Really what company has that much cash sitting around? Who gives a crap what the analyst says. Apple is strong and will remain that way because they get it. They understand what makes us tick. We love Apple because it just works so screw the analyst.

No one cares whether you cry, chant meaningless Apple slogans or do whatever.

What's meaningful this time is not the analysts' *disappointment* but rather Apple's own attitude. When Oppenheimer started pointing fingers at rumors, it is a defensive posture. It was unnecessary and frankly not befitting of Apple. Clearly, they were expecting higher numbers.
post #36 of 93
OCCUPY WALL STREET. These people have no connection to the real world anymore, and do not contribute in any significant way to US and global society. Their time has come. Wall Street, Bankers and many Politicians do not have a clue what is going on and do not create nor deliver any real value to both the economy and human society in general. Stop believing their lies, stop supporting their decadence.

We are the 100% that are responsible to ourselves and each other to STOP BEING SCAMMED. Would you let a thief simply take five dollars from your wallet every time you leave the house? Wall street steals thousands, maybe tens of thousands from everyone every year.

Here's the real irony. Apple has $80 billion dollars. That's *real money*, not the made up stuff Wall Street plays with. Due to the fractional reserve system Apple itself can be an $800 billion dollar bank.

We've read: APPLE IS WORTH MORE THAN ALL OF THE EUROZONE BANKS
http://www.reuters.com/article/2011/...77I46520110819

Now, that metric is by market capitalisation alone.

Let's look at actual financial reserves.

With Apple's $80billion dollars in assets it can also be a bank worth OVER $800 BILLION DOLLARS due to the fractional reserve system. And that's using the 10% Basel-whatever standard which is higher than what most banks capital cushions are.

Think I'm making sh1t up? Let's look at Citigroup, which was "too big too fail" and given just disgusting amounts of bailout money:
http://en.wikipedia.org/wiki/Citigroup

Revenue\t US$ 86.601 billion (2010)[2]
Operating income\t US$ 10.951 billion (2010)[2]
Net income\t US$ 10.602 billion (2010)[2]
Total assets\t US$ 1.914 trillion (2010)[2]
Total equity\t US$ 163.468 billion (2010)[2]

Yes, it has three times more "equity" than Apple but Apple's $80billion in reserves is arguably more liquid than this "equity" or "capital cushion" Citigroup has. Annual revenue? Beaten by Apple. Net income? Easily beaten by Apple.
post #37 of 93
This is the biggest ever dip in iPhone sales ever (both in absolute numbers and in %?). This is the real disappointment (as opposed to not meeting analyst predictions). The cause is clear.

Argue all you want about Apple not being late because they never announced a date. Not shipping a new iPhone in July was a surprise and disappointment. The market reacted. This should not have been a surprise. Apple should not have blamed anyone but themselves. 2012 will be interesting because their stray from a predictable pattern will create more chaos for customers accustomed to being able to plan their Apple purchases.

Secrecy is not always a good thing.
post #38 of 93
Quote:
Originally Posted by nvidia2008 View Post

OCCUPY WALL STREET. These people have no connection to the real world anymore, and do not contribute in any significant way to US and global society. Their time has come. Wall Street, Bankers and many Politicians do not have a clue what is going on and do not create nor deliver any real value to both the economy and human society in general. Stop believing their lies, stop supporting their decadence.

We are the 100% that are responsible to ourselves and each other to STOP BEING SCAMMED. Would you let a thief simply take five dollars from your wallet every time you leave the house?

Take a pill, dude. Are you going to bring up the nuclear disaster in Japan too?
post #39 of 93
Quote:
Originally Posted by Henry 3 Dogg View Post

I am very confused by Mike Abramsky / RBCs position

Apple beats its own guidance by 13% on revenue and 28% on EPS

Abramsky calls the miss against analysts expectations "transitional", which seems clear.

And then he sets his own projection at 9% under Apple's own, on revenue and 14% under Apple's own on earnings.

What sort of game is being played here?

No games. It's about the iphones. Even Apple called the numbers transitional. Stop blaming the analysts.
post #40 of 93
Quote:
Originally Posted by stelligent View Post

This is the biggest ever dip in iPhone sales ever (both in absolute numbers and in %?). This is the real disappointment (as opposed to not meeting analyst predictions). The cause is clear.

Argue all you want about Apple not being late because they never announced a date. Not shipping a new iPhone in July was a surprise and disappointment. The market reacted. This should not have been a surprise. Apple should not have blamed anyone but themselves. 2012 will be interesting because their stray from a predictable pattern will create more chaos for customers accustomed to being able to plan their Apple purchases.

Secrecy is not always a good thing.

I think you're right, and it's become obvious... iPhone 4S sales have been disappointing so far.
Hmmmmmm...
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Hmmmmmm...
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