Apple 2.0

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Apple Q4 earnings: Analyzing the analysts

October 22, 2008: 8:34 AM ET

Last week, Andy Zaky of Bullish Cross, representing a group of unpaid analysts who follow Apple (AAPL) in blogs, challenged the professionals who do it for banks and brokerage houses -- and whom the bloggers claim are clueless (see Apple Q4 earnings smackdown).

So now that Apple has reported its 2008 Q4 earnings, how did the two teams do?

The results are summarized in the chart below, with estimates closest to the mark highlighted in green and the worst highlighted in orange:

What jumps out of the chart for me is how badly the pros blew the iPhone numbers: the Street consensus was off by a shocking 72%. It was here that the bloggers shone. All three came within 8% of the actual number and Turley Muller of Financial Alchemist hit it on the head with an estimate of 6.8 million.

"I was just lucky the data was good," says Muller. "All the data -- my checks with Best Buy managers, counts at Apple stores, IMEI numbers, assumed production rates -- pointed to the same general number."

Muller, it must be said, had the worst estimates for total revenue and Mac sales -- overshooting actual sales of 2.611 million by 350,000 Macs. But everybody overshot Mac sales, which were hurt by weak school purchasing and customers holding out for the new notebooks Apple introduced last week. For some reason, the major sales tracking firms missed those trends.  "I can no longer rely on Gartner and IDC data," says Zaky. "They really got it wrong -- or if they didn't get a wrong, then sales overseas are collapsing."

Because everybody over-estimated Mac sales, they also over-estimated revenue -- Muller and Piper Jaffray's Gene Munster worst of all. But in Munster's defense, he has mastered the art of predicting iPod sales based on NPD data, and everybody who followed his lead got that number right.

Munster is also the only analyst I know who dared publish an estimate of deferred revenue, which Apple reported for the first time on Tuesday. When deferred revenue from iPhone and Apple TV sales is factored in, Apple earned a stunning $2.69 a share on sales of $11.7 billion last quarter. Munster's estimates were $1.60 and $10.1 billion, respectively.

Two bloggers -- Zaky and Deagol -- ended up with with the most greens in a row, with three best-in-category squares out of six and no oranges.

The prize for the most embarrassing call goes to Barklay's Ben Reitzes for missing the iPhone number by more than 3 million units, followed closely by Merrill Lynch's Jeff Fidacaro and Bernstein's Tony Sacconaghi.

Bottom line: Nobody got everything right, but considering how badly the pros misjudged iPhone sales and how close the unpaid analysts were on the other numbers, I have to give this round to the bloggers.

The best thing about the blogger-analysts is that you don't have to pay to read their estimates -- at least for now. The best places to find them on the Web are The Mac Observer's Apple Finance Board and Investor Village's private AAPL Sanity (registration required).

You can read our live-blog of Apple's Q4 earnings call here or read the transcript here. If you have an hour to spare, you can hear the Web cast -- which includes a rare guest appearance by Steve Jobs -- at Apple's Web site here, where it will be available for two weeks.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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