Macurmudgeon 2.0

The Consumer Electronics Stock Blog (CESB) is currently entertaining a discussion about whether or not Apple CFO Peter Oppenheimer was being overly - or even deliberately - conservative in lowering its revenue and profit guidance for the upcoming Q2 of FY 2006, after a gangbusters report on Q1.

Cheap attention-grabber headlines like TheStreet.com's No Shine on Apple have been typical of the response to Oppenheimer's Q2 guidance.

So CESB wonders if Oppenheimer was just being coy, or if there really are reasons behind Apple's lowered expectations. Quoting an exchange between Oppenheimer and an analyst from Wednesday's Apple conference call, CESB criticizes Oppie for being evasive and not answering the question - an accusation that does little except pile more foolishness on TheStreet.com et al's snarky gloom-and-dooming.

The question remains, is Apple being conservative? And the answer is, absolutely - anything else wouldn't be prudent.

But I don't think Apple is being unduly conservative. Oppenheimer cites multiple reasons for the new guidance. And it's true that analysts already had factored some of them in - Q1 was a week longer than Q2 will be, and is always better than Q2 for seasonal reasons, for example.

But here's what analysts didn't necessarily already know, or at least what they weren't already sure about:

• That Intel based Macs would be announced in January;
  
• That Intel based laptops wouldn't be shipping until 5 or more weeks after announcement (and therefore until the halfway point of Q2 at best)
  
• That at the end of Q1/beginning of Q2 the iPod channel would have slightly more inventory in it than expected (except for 4GB nanos) - especially given the fact that Apple sold even more iPods than expected (a situation that does not intuitively match up with excess channel inventory left over after such a buying spree).
  
• That Apple has sufficient iMac G5 and Powerbook G4 stocks left that it will continue to sell them on the front page of the store, alongside Intel Macs.
  

And what all this means is:

• Powerbook sales will absolutely fall off a cliff, while MacBook Pro sales will be limited in their ability to compensate because of release date and likely initial supply issues.
  
• Intel iMacs now, and almost certainly MacBook Pros next month, are being shipped direct from Asia via air freight, which raises costs for Apple.
  
• iPod demand will be down from Q1, but beyond that the number of new iPods that will actually have to be manufactured (and therefore counted as new sales to the channel) will be even lower because of the channel inventory left over as of Jan. 1.
  
• PPC based iMacs and laptops will almost certainly have to be sold at significantly reduced prices by the middle of Q2, reducing revenue, while the production costs for those machines will of course remain unchanged since those machines presumably have already been manufactured.
  

Now, it's certainly possible that this week's lowered expectations are all part of a new practice Apple has gradually eased into since it started recovering from the dot-com bust thanks to the iPod - namely, Apple has been beating the street's estimates by noticeable, but not suspiciously large, margins for almost every quarter in the last couple of years. So it could be that Apple has taken to publicly predicting earnings at the very low end of its actual, internal estimates (instead of predicting something that might be closer to the middle of its internal estimates).

But beyond that, there's no evidence that Apple is doing anything shady here, that it's being any more conservative than normal, or that it's engaging in any kind of intentional low-balling.

It seems more likely that Apple is just smarter about its own business than everyone else.