Apple Earning Call: Are Apple Expectations Too High?

Apple Earning Call: After a disappointing earnings report, many people are beginning to wonder what is wrong with Apple Inc. (NASDAQ:AAPL). While there are a lot of theories on what is going on and what the company can do to get back on track, many are overlooking something very simple: expectations.

In other words, do people, including investors and analysts, expect too much from Apple Inc. (NASDAQ:AAPL)? Do they expect every new product to be the next big thing? Do they expect the stock price to increase, no matter what?

For a better idea of what the future holds for the company, check out this overview of a recent video interview with Bloomberg Television markets reporter Jon Erlichman: Jon Erlichman Discussing What is Next for Apple Inc.

The issue of managing expectations was recently tackled by CNBC technology correspondent Jon Fortt. Here is a brief excerpt to clear the air:

“What’s wrong with Apple: Slowing growth? Increasing competition? Falling margins?”

“Maybe not so much. Maybe the biggest issue is poorly managed expectations.”

“Apple of course reported holiday quarter revenue of $54.5 billion on Wednesday, up 15 percent from $46.3 billion a year ago. (Factoring in the quarter was 13 weeks compared to 14 last year, revenue was really up 26.7 percent.) Net profit came in at $13.1 billion, flat with a year ago or up 7 percent if you factor in the short quarter.”

“Apple now trades at a discount to Microsoft, which is expected to report revenue up 3.1 percent from a year ago, and net income down slightly. Let that sink in.”

After looking that over, you may begin to realize that expectations for Apple Inc. (NASDAQ:AAPL) are entirely too high.

Here is what Fortt had to say about competition, growth, and margins: