Apple’s lower outlook no surprise to the savvy

The lower outlook for Apple Inc.’s revenue sent shares plunging, but it wasn’t a surprise to some money managers.

“Warning flags were flying,” said William Fleckenstein, a Seattle-based money manager who has shorted Apple for the last three months. “You could see the deterioration in the lack of unit growth over the last couple of years and the market share loss. It was only the mania that held the thing together and now that finally blew.”

Apple sank as much as 8.5 per cent in after-hours trading Wednesday following CEO Tim Cook’s announcement of a reduced revenue outlook amid slowing iphone sales, weakness in China’s economy and supply constraints on other products.

The Cupertino, Calif.-based company dropped the biggest hint that iphone sales weren’t going well in November, saying it would no longer report unit sales. Other indicators came from a growing roster of suppliers cutting their own revenue forecasts for the year-end quarter. But, analysts and investors speculate that Apple held out until the end of the quarter in vain hope that holiday shopping would turn the tide.

“I think this is after they got through Christmas,” said David Katz, chief investment officer of Matrix Asset Advisors in New York. “They had a good look at where the world is. I think they’re properly disclosing.”

The company probably wasn’t hiding anything, Katz added. “We’re not a conspiracy theorist,” he said. “It wouldn’t have helped if they lowered guidance two weeks ago and then had a robust Christmas season — you don’t want them to give too much info too soon.”

Jeffrey Gundlach, CIO of Los Angeles-based Doubleline Capital, said he was unsure Apple should or could have disclosed negative information sooner. “Economic things have been changing quickly,” he said in an email.

As a widely held stock, Apple’s share plunge is reverberating across investment portfolios.

One reason the market may be taking the news so badly: Apple’s warning was its first in almost two decades. “It’s hard to believe that a miss of this magnitude was not evident in December but we are dealing with a company that has no experience in how to guide down,” analyst Walter Piecyk at BTIG said via email. Bloomberg