Markets

Apple Earnings: Beating Estimate May Not Help Stock This Time

By Conrad Aenlle

Updated on: July 19, 2010 / 9:11 PM EDT / MoneyWatch

Apple's latest quarterly earnings report, due out after the close today, arrives with the stock (AAPL) on a rare losing streak, down 12 percent in the last month, including a 4.1 percent drop Monday morning. Earnings are likely to beat the Wall Street consensus estimate of $3.10 a share, but don't be surprised if any bounce in the stock fades quickly.

The decline, from an all-time high, has coincided with a triple whammy of a bad stock market, bad press surrounding the iPhone 4 and its dodgy antenna and even worse press related to Apple's response to the antenna problem.

A quick recap: As soon as customers got the iPhone 4 in their hot, little hands beginning June 24, they discovered that their hot, little hands could interfere with the antenna, causing calls to be dropped. Apple issued let-'em-eat-cake advice, telling owners to hold the iPhone 4 in a different way.

Between the glitch and the major malfunction of the PR effort, Apple has garnered heaps of ridicule. A particularly punishing blow was the decision by the respected Consumer Reports not to recommend the iPhone 4.

Apple has continued to address the antenna's wonkiness and the ensuing criticism in a stubborn, tone-deaf way. Instead of recalling the phone and replacing the antenna, the company said it would offer customers a free "bumper," essentially a strip of plastic intended to limit the loss of signal.

As changes in tactics go, it wasn't much of one. Apple keeps apologizing for the problem while more or less denying that there is one and suggesting that anyone who thinks otherwise is an idiot or has malicious intentions.

In a press conference Friday announcing the bumper giveaway, Steve Jobs, Apple's chief executive, said nothing that indicated an attitude adjustment on his part. That's unfortunate for Apple shareholders because it makes it all the more difficult to keep the public, in shopping malls or on Wall Street, from adjusting their own attitudes toward the company.

It's one thing to be pleased with yourself when you're doing everything right, as Apple and Jobs seemed to do for years. When you start screwing up, however, and don't tinker with your tude to convey less hubris and more - how about just some? - humility, you look like a jerk who can't learn from his mistakes.

That tends to bring out critics eager to point out those mistakes, and it looks as though that is happening to Apple, and not just in connection with the iPhone 4 antenna. The New York Times recently highlighted rapidly rising wages in China, the source of the guts for many Apple products, although a post on Thestreet.com makes the case that the impact on earnings will be negligible.

The earnings report today may give Apple and Jobs no reason to think that they have made any serious blunders. The iPhone 4 was introduced only a week before the quarter ended, and initial sales were very strong, thanks to millions of Apple faithful.

Results for the next quarter will hinge on an ability to convince the multitudes who remain agnostic to take a chance on an iPhone, ignoring the antenna episode and the expanding number of alternatives in the smart phone market. With Apple's stock still expensive, any rebound in the next few days will provide a good opportunity to sell.