Apple 2.0

Covering the business that Steve Jobs built

The Apple analyst who couldn't shoot straight

November 3, 2008: 7:04 PM ET

What is it with Craig Berger and Apple?

The FBR Capital Markets analyst made headlines Monday with a report that Apple had slashed iPhone production for this quarter -- down as much as 40% from the September quarter (fiscal Q4) in which Apple racked up record sales of 6.9 million units. (See here.)

Berger bases this gloomy forecast, he says, on "recent checks" with unnamed sources, and goes on to draw some macro-scale conclusions:

"That the firm's iPhone production plans are being revised lower suggests that the global macroeconomic weakness is impacting even high-end consumers, those that are more likely to buy Apple's expensive gadgets, and that no market segment will be spared in this global downturn. This is a negative signal for global demand, in our view." (link)

Sounds pretty scary. But perhaps best taken with a grain of salt, given Berger's track record with Apple. To wit:

  • In February 2008, Berger wrote that "recent checks" showed that Apple had cut its build plans for iPods and iPhones, from an anticipated 50% decline between fiscal Q1 and Q2 to a 60% decline. He also reported that Apple had cut its build forecast for MacBooks for the same period, from down 35% to down 50%. (link)
  • In April, Apple reported its fiscal Q2 earnings. iPhone sales were indeed off after the Christmas quarter, but only by 26%. And MacBook sales, rather than falling 50%, actually rose -- up nearly 7%, from 1.3 million in fiscal Q1 to more than 1.4 million in Q2. (link)
  • In May 2008, Berger checked again with his contacts in Apple's supply chain and reported another round of bad news: his sources were telling him that orders for iPhones for fiscal Q3 had been cut 25%. (link)
  • A month later, Berger went back to those sources and came back with a very different story: 2008 iPhone build volumes, he said, had been "revised significantly higher" -- with more than 15 million 3G iPhones plus two million old 2G iPhones forecast for 2008. Apple's notebook and desktop build volumes were also revised up -- by 10% and 20%, respectively. "The firm," he wrote, "continues to knock the cover off the ball in terms of product innovation, sleek designs, attractive price points, and effective global deployment plans." (link)
  • On Monday Berger was back to singing the blues. Despite predictions from other analysts that iPhone sales might grow 40% or more this quarter, Berger writes that Apple had been expecting to cut iPhone production 10% and was now looking to cut it four times more. This 40% cut, he says, "could end up painting an ugly picture." (link)

Berger could not reached for comment.

It should be noted that Berger specializes in chips, not computers or smartphones. He is not on StarMine's list of analysts who spend a significant amount of their time covering Apple. Nor does he appear on the list of analysts participating in Apple's quarterly earnings calls.

Apple (AAPL) closed down .59% for the day. FBR Capital Markets ((FBCM) closed up 4.17%.

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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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