Why the pundits are wrong, wrong, wrong about Apple

On Sept. 23, Apple “warned” investors about likely financial results in the current quarter. The bad news? There wasn’t any. Because sales of the iPhone 5s and 5c were so strong — more than 9 million were purchased in just three days — the results would be better than expected.

The SEC requires companies to tell investors when anything happens that’s likely to change the company’s financial results, and those warnings are almost always bad news, as we saw so dramatically with BlackBerry recently. But coming as it does close to the second anniversary of Steve Jobs’ death this past Saturday, this good-news alert is altogether symbolic.

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Once the darling of fanboys and investors alike, Apple and CEO Tim Cook now can do nothing right in the eyes of some on Wall Street and legions of pundits. The stock has been pummeled, and word of mouth (or, more properly, word of blog) always seems to be negative.

But wait a minute. Think about what it means to sell 9 million units in three days, one of the most (if not the most) successful product launches in history. Apple sold 2,083 new iPhones every minute, or 34 every second. And don’t, as one Apple-hating pundit likes to do, natter on about sell-in versus sell-through. The difference between the two is only significant if units are shipped back to the manufacture from the channel (by and large, that means carriers and retailers). I have yet to hear about any returns from the channel and am willing to bet that there haven’t been and likely won’t be any. In fact, Apple is one of the few mobile makers (Motorola Mobility is the other) that reports units actually purchased by customers, not stuffed into the channel in hopes they might sell later.

So is Apple facing stronger competition from Google and Samsung? Of course. Has it lost market share? Obviously, though its sales have far from declined. Has it invented an entirely new category of device this year? No. But none of that means that Apple is in trouble. Here’s why.

Apple’s a profit machine

Apple, say pundits like Business Insider’s Henry Blodget, has lost market share and is being “shortsighted” and obsessed with “short-term profits.”

Short-term? Seriously? Apple has consistently invested heavily in R&D and in building an unmatched global supply chain. The profits that made it the most valuable company in the world (measured by market cap) didn’t fall out of the sky. One small but telling illustration: The cover for an iPhone 5c case sells for $29 on Apple’s website. The cost to Apple is a couple of bucks at most, says Trip Chowdhry, principal analyst at Global Equities Research. The rest is margin. Tim Cook may not have the panache of Steve Jobs, but the man knows how to run a supply chain.

OK, says Blodget, Apple may be rich, but so was BlackBerry. That would be a warning to take seriously if the facts sustained it. But the former Research in Motion didn’t collapse because someone brought out a smartphone with a bigger screen. It failed because BlackBerry completely and repeatedly missed the point of having a smartphone: first the mobile Web, and now apps. Show me a comparable, business-fatal mistake made by Apple and I’ll listen.

Another favorite argument of the naysayers: Apple has lost market share. Well, of course it has. First-mover advantages in technology are always fleeting. That’s how it should be. After the iPhone’s success, I can’t imagine anything other than what happened: lots of companies jumping in to pursue the mobile gold Apple showed was there. Though Apple’s share of the mobile market has declined, it’s still the big kahuna of the bottom line, with 57 percent of the industry’s profits, while Samsung snags the remaining 43 percent, says analyst T. Michael Walkley of Canaccord Genuity.

The A7 is a game changer

What about the lack of innovation we hear so much about? After all, the iPhone 5s doesn’t look all that different from the iPhone 5. “But there’s more to innovation than the size of the screen,” says Chowdhry, who went from fairly negative on Apple earlier this year to quite positive now. What changed his mind? The 64-bit A7 processor, a chip that runs roughly 44 percent faster than its 32-bit predecessor.

Because Apple manages both the development of the A7 chip and the compilers and development tools within Xcode, developers can easily take advantage of new hardware and instruction set efficiencies when they recompile their apps to run on the A7. As 64-bit apps roll out, says Chowdhry, users will see significant benefits in four critical categories: video, sound, imaging, and games.

It’s worth noting that Apple-bashing is nothing new, says longtime industry analyst and Apple watcher Horace Dediu: “No matter how many breakthroughs it makes, the assumption is (and has always been) that there will never be another. At this point of time, as at all other points of time in the past, no activity by Apple has been seen as sufficient for its survival.”

Dediu’s comment appeared in the post “Apple under siege” by Jean-Louis Gassée, a former Apple executive. Gassée sums up his argument this way:

I recently experienced a small epiphany: I think the never-ending worry about Apple’s future is a good thing for the company. Look at what happened to those who were on top and became comfortable with their place under the sun: Palm, BlackBerry, Nokia. … With that in mind, one can almost appreciate the doomsayers — well, some of them. They might very well save Apple from becoming inebriated with its prestige and instead force the company to remember, two years later and counting, how it won it.

Gassée may be right that the constant criticism will keep Apple from getting complacent, acting as a proxy for the relentless drive to do more that Steve Jobs embodied now that he is dead. But that criticism all too often is over the top, and it too frequently fools investors, buyers, and other people who don’t evaluate Apple every day. That’s maybe an even bigger threat to Apple than anything, especially if it makes the mistake of listening to it too much.

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This article, “Why the pundits are wrong, wrong, wrong about Apple,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.