Beware December Quarter Guidance

The March quarter will also be diverging

Rumor has it that Apple will split the launch of the latest iPhone models across two quarters. The high-end iPhones will be announced as always, in September, but the base models will be released in the following quarter. I don’t know if this is to be believed but there are other factors that might affect the next quarter that are out of the normal.

Pricing may change. Memory costs have increased so much that Apple has had to increase prices across all products apart from the iPhone. The iPhone may not be spared any longer and the normal pricing cadence may be disrupted. This cadence has been illustrated over the years as the “stairway to heaven” graph.

There might be a new form factor. Rumors are abundant about a folding iPhone being launched this fall. If true, it will probably be priced above the iPhone Pro Max given the size of the screen, battery and overall mechanical complexity. How well this product will do given the new form and new price is difficult to predict. The supply/demand balance may take some time to optimize.

Normally i don’t use rumor information as it’s easily corrupted, however in this case the confluence of multiple factors could cause a disturbance in the usual reliability of guidance. Here’s why.

If there are new products or even a split launch, the company will not pre-announce this at earnings time. These changes in the portfolio could have a significant effect on growth relative to the previous year but the reason cannot be specified. This leaves a dilemma for providing guidance. If they provide accurate but historically divergent guidance they are tipping their hand on the mix/split/pricing. If they withhold guidance to protect the launch then they might be seen as signaling a miss.

Alternatively they might not provide any guidance since they don’t know the exact impact of the new mix and pricing.

Either of these changes will undoubtedly be misinterpreted or falsely attributed to declining demand for the products.

It’s also possible that the new CEO will change how it communicates guidance overall. This is not unprecedented as guidance changed a few times in the last twenty years:

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