By Paul Carton

October 28, 2008

Steve Jobs must be keeping a close eye on our ChangeWave survey findings.

In a highly unusual move, he participated in Apple earnings phone call last week to ensure investors that despite the economic slowdown there's no reason to worry. And he did so even though Apple's outlook going forward came in well below the Street's expectations - exactly as our September ChangeWave survey had predicted.

In the conference call, CFO Peter Oppenheimer estimated Apple's sales would come in between $9-10 billion for the December quarter - well under the $10.7 billion that had been anticipated. He also said earnings per share would fall between $1.06 and $1.35 - also far less than the Street's $1.67 consensus estimate.

In our September PC spending survey of 4,262 consumers, we found Apple's real problem wasn't Mac sales over the previous 90 days - sales looked good. The problem was the outlook for Macs going forward.

Moreover, our findings pointed to a big turn for the worse in overall consumer spending just as the crucial holiday season was getting under way - with consumer electronics taking the biggest hit.

Here was our 'Bottom Line' based upon the September ChangeWave survey findings:

"While Apple's guidance is normally conservative, we expect it to be much more so on Oct. 21, when it provides its Mac sales projections for the holiday season."

Bulls-eye.

Note we also said that "Apple would meet its Mac sales numbers for the past 90 days."

They did.

Apple sold a record 2.6 million Macs for the September quarter, up 21% from the year ago period. However looking back a quarter, the year over year growth rate for Macs was 41%, and two quarter's ago it was an astounding 51%. So while Mac sales are continuing to do well, the actual year over year growth rate has slowed considerably.

Our conservative outlook on Mac sales growth projections notwithstanding, we reiterated in September that "the company still has a tremendous long-term outlook."

"For example, our latest consumer cell phone survey shows that...among respondents planning to buy a new smart phone in the next 90 days, 34% say they'll get an Apple iPhone - the highest level of smart phone demand in the industry...Based on our data, we fully expect Apple's iPhone numbers will beat consensus estimates on October 21st."

Cut to the October 21st Apple earnings call, where the stellar news in the quarter turned out to be much better than anticipated iPhone sales. As Oppenheimer put it, Apple "sold nearly 6.9 million iPhones during the September quarter, exceeding the 6.1 million units shipped over the entire lifetime of the first generation iPhone."

We also note that Apple has already surpassed its long stated goal of selling 10 million iPhones for the year - something our ChangeWave surveys have predicted almost from day one.

So Is Apple Really Vulnerable?

Peter Oppenheimer characterized Apple's reduced outlook as being "prudent" for these difficult economic times.

Still, Apple felt the need to pull out its big gun.

"We may get buffeted by the waves a bit, but we'll be fine," said Steve Jobs. "Apple just reported one of the best quarters in its history, with a spectacular performance by the iPhone--we sold more phones than RIM...We don't yet know how this economic downturn will affect Apple. But we're armed with the strongest product line in our history, the most talented employees and the best customers in our industry - and $25 billion of cash safely in the bank with zero debt."

Well said, Steve. But our ChangeWave surveys have clearly identified Apple's biggest potential problem - Mac sales projections going forward.

Mac visibility is the number one issue for the company and that's where our survey results show Apple is most vulnerable - caught in the fierce headwinds of the accelerating economic downturn.

Apple investors can expect a continued bumpy ride for the stock until consumers start spending again. But once the economy does start coming back, our ChangeWave surveys are clear about the long term outcome. Apple will continue to expand its already dominating lead over the rest of the consumer electronics industry.

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Andy Golub co-wrote this article.


Related ChangeWave PC Findings
--Spending Slowdown Catches Apple Mac Sales (10/7/08)
--Companies Hitting the Brakes on PCs (9/23/08)