Why Apple is underestimated so insanely always

Last year, the level of stupidity surrounding Apple was best exemplified by Haunted Empire, the calamitously bad book that tried to make the "Tim Cook's company is doomed" meme mainstream. Yesterday, Apple announced the most profitable quarter in the history of the business world — of which the other four companies in the top five are oil magnates. So, beyond market manipulation and negative attention seeking, what makes otherwise rational, intelligent analysts and journalists experience such a continued, collective blindspot when it comes to Apple's prospects?

Ben Thompson, writing for Stratechery:

It's difficult to overstate just how absurd this is, but here's my best attempt: last quarter Apple's revenue was downright decimated by the strengthening U.S. dollar; currency fluctuations reduced Apple's revenue by 5% – a cool $3.73 billion dollars. That, though, is more than Google made in profit last quarter ($2.83 billion). Apple lost more money to currency fluctuations than Google makes in a quarter. And yet it's Google that is feared, and Apple that is feared for.

Ben chalks the endless underestimations up to bad assumptions — that markets are monolithic, that consumers care more about specs and price than they do experience, and that when Apple says all they want to do is make great products, it's not given credence.

Tim Cook from our Q1 2015 transcript:

Apple's mission is to make the greatest products on earth and enrich the lives of others. Through the success of iOS, we have provided hundreds of millions of people with powerful personal technology that is simple and fun to use. Our customers are using Apple products to transform education, discover new ideas for business, and express their creativity in ways that no one could have imagined when we sold the first iPhone less than eight years ago.It's amazing to watch, and it reminds us that people and great ideas are the reasons we make the things we make.

That the same people can be wrong about the same thing so completely always — and that people continue to publish and link to their wrongness — is what the rest of us have a hard time understanding.

"Okay, Apple made some money this quarter, but next quarter they'll fail."

"Okay, Apple made some more money this quarter, but now next quarter they really have to fail."

I experienced it again yesterday. After reporting on Apple's quarter, I was told it was just a temporary blip — pent up demand for bigger phones that, now exhausted, would leave Apple to "once again" plummet in the market.

It seems insane, but it's really not that dissimilar to a certain kind of gambling mentality. Some people see Apple as betting on the same thing quarter after quarter, year after year, and they figure Apple's luck just has to run out. The more Apple wins, the more they believe the odds stack against Apple, and the more likely they think it is the company has to lose — and soon. Every time Apple wins, they not only expect the loss to be inevitable next time, they want it to be.

The problem is, Apple isn't betting. They're investing.

The company is lining themselves up — rather conservatively — behind a very few product categories at a time, and with a strategy they've proven for decades. And like I wrote yesterday, while many continue to misunderstand or ignore the "make great products" strategy, Apple is doubling down on it.

Rene Ritchie
Contributor

Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.

21 Comments
  • Google isn't feared so much for their business. They're feared for their business model and how they have so much control over the internet and how they use people's data to control what people happen to see on the internet. We all know that Apple is selling us shiny new things and saying "here are the things you get with it." iCloud and things of that nature. I understand Ben's point but arguing who makes more money between these two giants is like two dudes arguing about who has a bigger private area. But in the overall scheme of things, I do find it ridiculous that people say a bottoming out-Apple is on the horizon.
  • From the dawn of the PC compatible clone, a whole generation of journalists and pundits made their bones talking down the prospects of Apple compared to cheaper, poorly designed devices and operating systems. You can't delete that kind of rewarded behavior from an organism as simple as a tech journo. It's pavlovian conditioned response.
  • What porrly designed operating systems are you talking about? I would call wither windows, android, or Linux "poorly designed".
  • "porrly" "wither" If you can't proofread your own comment what would lead us to believe that you have a sense of quality in anything else? Just saying'.
  • You get the gist of what was said but dismiss it with the curveball "spelling errors". Just saying. Posted via the Android iMore App!
  • That whole comment was a mess. It wasn't just the spelling.
  • So just because of two spelling errors (Due to my phones weird keyboard) that means that you cant grasp the basic concept of what was said and you cant comment? wow.
  • Do argue with him.
    It's pointless. Posted via the iMore App for Android
  • Did you mean "wouldn't call" instead? I think that's what you meant. I think a LOT of people _would_ call Windows, Linux, and Android "poorly designed, " at least in comparison to Apple's operating systems. There are some areas where they are arguably better, but "design" is about the thing as a whole, not a bulleted feature list.
  • Always easier to try to topple the one at the top Sent from the iMore App
  • Analysts underestimate Apple because: - 70% of Apple's extraordinary revenue came from 3 slight variations on a single product. A lot of analysts see that not as focus, but as putting too many eggs in one basket. That may be true, but to downgrade Apple on that ignores it is one helluva basket. - Apple enjoys their riches because they eviscerated a seemingly impregnable leader (RIM) in one fell swoop, and they fear what Apple did to others can happen to Apple, and, with the aforementioned eggs-in-basket, such a stroke would devastate Apple. That ignores that RIM (and Mircrosoft, for that matter) left gaping needs unaddressed for years, which Apple has not done (yet). - Apple's fortune is literally unprecedented, so analysts think they have more room to fall than to keep rising. This is only natural, but it has nothing to do with Apple's products or fundamentals at all.
  • The persecution complex with Apple fans is getting quite old. Orwell never foresaw that when he penned 1984 but I guess it makes good press. Nobody fears Google (except the loonies who make them out to be the next demigod) and proving analysts wrong is like proving you occasionally get heads when flipping a coin. Thompson is just building up strawman arguments where they don't exist as you are basically pitting the moron analyst vs the asshat analyst.
  • Analysts don't fear for Google's downfall because they are believed to have a monopoly in their market. Same with Amazon. It was the same with Microsoft for a decade. Having a monopoly means nothing can hurt you, so therefore, the stock valuation and business will be stable. Apple has a hit driven business model and is therefore believed to be always dependent on the next hit, is one bad product refresh away from failure, or is one upstart company away with a better hit. So, they are always on the precipice. I think fundamentally, it is that simple. At least among the stock market and business analysts. I don't think the attitude will change unless Apple outlives the analysts or they've been in business so long that the meme burns out.
  • I could be wrong but I think why this quarter was huge was because for so long people have wanted a big iPhone and after several years it Exist so I think that's why there was such a big surge in sales as well as just being the 1st quarter of a new device . Don't think we will another quarter this year or even when the 6s and 6s plus are released. This year had the advantage of bigger iPhones, new design and higher price and all that together was a great recipe for a big quarter. Apple usually have a great quarter without doing much visual change but this year they did visual as well as a huge size increase so it makes sense as well as the fact it's available in more counties then previous devices it makes sense imo why they did so well. The bigger display made a huge difference, you keep people waiting for so long, when what people finally want comes they will jump at it in a instant. Posted via the iMore App for Android
  • Just like to add an additional thought between the Android and the IOS debate. Except for the the die Hard Android and IOS fans. Most folks don't give a flying Fuss about which one is better or not. They have their favourite Apps and want to make sure it works. Both OS have matured to the point where their isn't much difference to the general population. How many people of the general population wants to do custom ROMs and side loads? Just like we will always have folks that likes to build their own PC and customized their cars, this is in the minority but at the same time will always exist. But for the general population they just want their device, car, tools to work because people have busy lives and just want the device to work with the least amount of "tuning". Neither OS is bad, it just fits. And the Price difference....people in most cases are willing to pay higher cost for a perceived or actual quality, you can see this in many other verticals in the industrial world today. Apple is just following that model, and making Mega Coin on this concept. This has been a long term strategy and it's working far better than some companies as you already know.
  • I agree with everything you've said, and it's very nicely stated. I would like to add one thing that no one seems to get. Apple is the only tech company that assumes responsibility for the entire experience of their products, and the only company that pays attention to the details of the ENTIRE experience of owning their products. Apple makes sure that the box the product comes in is cool; makes sure the process of unboxing the product is awesome; makes sure the first start-up is enjoyable. Apple accepts responsibility for the hardware, the operating system, the connection to the internet, the family-friendliness of the company sanctioned content. By contrast, Microsoft is likely to blame H-P for Windows problems. That difference is not discussed by financial analysts. Specifications have numbers. Financial analysts get numbers.
  • my only question is what is apple's answer to Hololense, because that shit looks awesome as fuck. I don't believe Microsoft has UI down yet, they just showed flashy gestures which would be fun for gaming and a lot of general things, but as far as content creation? I need to see more of how that would work.
  • The only thing that will eventually haunt Apple is saturation point. There must be a plateau approaching for their new sales. However, if these quality products keep on coming, I foresee no reason for any dips. Sent from the iMore App
  • "Why Apple is always so insanely underestimated." Do you guys have an Editor?
  • I remember the debates I had here at iMore over 2 years ago when I suggested that Apple should be making phones with bigger screens as well as phones for emerging markets. I was assured that the iPhone was already the perfect size and that Apple customers did not want to be carrying a "phablet" around. The iPhone was a "premium" product. I noticed Tim Cook say in the conference call on Tuesday that there are still millions around the world who have never owed a smartphone, a clear hint at the market they will be aiming at.
    Apple's place in the market seems unassailable, but also was Tesco's in the UK grocery market. They once had over a quarter of all grocery sales in the UK with rapid growth and profits. In the past 2 days they have announced store closures and job cuts following falling sales and an accounting scandal.
    I have also previously predicted that when Apple's profits reached the point where they were breaking records there would be a greater scrutiny of how they are making this money and the contributions they are making to the community. This is not necessarily just knocking the company at the top.
  • In order for Apple to reach emerging markets and the potential of millions of customers, one would think Apple would make a much cheaper iphone. That ain't happenin'. Sooner or later Apple will have to truly innovate as the market will eventually saturate, otherwise people will get bored and move on. Then they'll come back. Then move on again. It's a cycle folks. Sent from the iMore App