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MacWorld: "Buy On Rumor, Sell On Fact?" Not This Time, Buy On Facts!
Seven days ago when I wrote that you shouldn't expect AAPL's price to soar on the earnings announcement, I didn't realize how right I would be. AAPL dropped almost 5% the day after earnings were announced. This reaffirms that old Wall Street heuristic: "Buy on rumor, sell on fact." On Wednesday (July 14th), in anticipation of the earnings announcement, which was rumored by everyone from Eric Yang to my local bagel vendor to be well beyond analysts' estimates, AAPL soared like a kite. Then Thursday, when even the most positive rumors were exceeded by the facts, the stock tanked leaving many investors scratching their heads. The price dip wasn't entirely due to the "sell on the fact" rule. There were several other factors involved in the sell off at the end of last week. Perhaps the most important one was that options expired on Friday. Calls on AAPL have been very, very good to option traders recently, and the type of personality that traffics in options is not a likely candidate for the Warren Buffett Long Term Holder Award. Some had predicted that there would be a lot of short covering on Thursday, but that assumes that option traders are vastly less savvy than they really are. Short covering began the day Apple closed above the notorious resistance of $50. Then there was the fact that the 20 something percent run up in the last two weeks was crying out for a hefty retracement just to relieve the overbought pressure on AAPL. Lastly, this is vacation time, so many people typically take their money off the table to pay for that Tahitian cruise, or whatever. What's next? Next up on Apple's calendar is, of course, MacWorld. As a member of the Mac punditocracy, I think it would be prudent for the speculative press to enter into a quiet period now and let our leaders deliver their message without us yacking Monday morning quarterbacks second-guessing their every announcement. However, as the Apple Trader and having mentioned the "buy on rumor, sell on fact" rule, I feel it is my duty to note there is a Mac version of that old cliché which goes, "buy on rumor, sell on Steve's Keynote Address". Now, before you get the flame thrower out, consider that I am not suggesting that this is a hard and fast rule. In fact, I think this year things will be different. Maybe. Why? I believe the unveiling of the consumer portable will have a huge impact on the Street and on speculators around the world. The appeal of the consumer portable is essentially similar to the iMac. The potential for sales is even greater than the iMac. Why? Because iMac sales tend to cannibalize the sales of the other Apple desktops. If you buy an iMac you don't buy a Blue & White. Essentially, Mac desktop computers are in competition with each other. That's why it's shear genius that Steve and gang have so radically defined and narrowed down the product line into clearly articulated and non-overlapping directions. The iMac competes as little as is engineeringly possible with the Blue & White. Still, desktops will compete with desktops. The consumer portable will do for PowerBooks what the iMac has done for the G3 desktop, which is to outsell it many times over and push it further into the high-end territory. This is not a bad thing; it's merely the natural geomancy of the four corners paradigm. * The populist consumer portable is a must-have for every Mac user, which is not the case with the elitist PowerBooks. Unlike introducing a new desktop computer, the consumer portable will begin with an entirely blank market slate. Everyone, every PC user and especially every Mac user, is a potential buyer. Moreover, we have a product with no real competition, zero market saturation, and no fears of cannibalizing other product lines. Plus, there exists the likely possibility that the 'iBook' will be transubstantiated from life as a mere computer to enshrinement in our culture as high fashion, groundbreaking and trend-setting information appliance coming soon to a Museum of Modern Art near you. Last year when the iMac was unveiled at MacWorld, it was an instant hit with the Mac faithful, but there was skepticism in the mainstream press and among computer analysts over the details. Could Apple really execute a well-managed product introduction? Would the iMac's all-in-one design appeal to consumers? How the heck do you sell a computer without a floppy drive, and what's USB? Finally, many "experts" said that even if the iMac is initially successful, it should prove to be a short-lived fad. After all, the fools crowed, everyone knows real computers will be beige and square for eternity! The tech pundits who claimed the iMac would not fly were dead wrong. In honor of the iMac's first birthday on August 15th, I plan a retrospective "Hall of Shame" to honor all those analysts, faux futurologists, and dimwitted PC borgs, who so vociferously denounced the iMac as a foregone flop. After all, many of these same people are still in the business of peddling their not-so sage advice on technology to consumers, yet rarely have they received the proper accolades for their services rendered to the Macintosh platform. My point is that no one, from Michael Dell to the guy with a ponytail who would sell his own father a bovine PC, doubts Apple's astounding ability to deliver the next generation in portable computing. Thus, unlike the introduction of the iMac one year ago, the introduction of the consumer portable is likely to be received a bit more graciously by the mainstream computer media, by the Street, and by investors worldwide. Perhaps this will be the Keynote Address Apple defies the "buy on rumor, sell on fact" rule. See ya at MacWorld! Your comments are welcomed. * It's very revealing to hear Steve Jobs speak of the consumer portable as the fourth corner of the Macintosh hardware strategy, as if he were invoking a cosmological map of the Macintosh universe. Steve leads with a kind of corporate shamantic style, so it is appropriate to hear him talk about Apple's product line as the four corners of the world, or the four directions of the winds. It's both an elegant and entirely functional metaphor. |