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  • Why Are Industry Analysts Still in Business?

    April 12th, 2013

    I suppose we need people who can consult the tea leaves, or Tarot cards, and somehow decide whether a company is doomed to fail, or will become a smashing success. When it comes to a specific product or service, such people will offer their predictions about how things are going. Some companies, such as the NPD Group, will actually consult sales figures to make their reports as accurate as possible.

    Given that other analyses of Apple tend to be completely wrong, though, I have to think that the people who make these predictions are lucky to still have jobs working in that business. I would think that a track record of making wrong guesses would come back to haunt them, assuming anyone is paying attention. Or maybe having a business card from a company with a prestigious name is sufficient to gain credibility regardless of what’s being said.

    So this week came two reports about PC sales. One, from IDC (a division of the company that brings you Macworld magazine), projected that PC sales in the March quarter declined by 13.9%, the highest percentage since the 1990s, and it’s dire news for Microsoft. U.S. reports indicated a 7.5% drop in Mac sales.

    By itself, the IDC survey would seem a compelling document that even Apple can’t beat back the inevitable decline of PC sales. Clearly Windows 8 hasn’t helped matters either. But there are more shoes to drop.

    Recently, NPD Group, which bases its figures on real sales as I said, reported that Mac sales in the U.S. were up 14% during January and February of this year. So if IDC is to be taken seriously, Mac sales would have had to drop through the floor in March, until you read a certain survey from Gartner.

    Now Gartner’s analysis also indicates a substantial, though smaller drop PC sales, estimated at 11%. However, U.S. Mac sales reportedly increased by 7.4%. That’s more in keeping with the trend reported by NPD Group, although the final figures won’t be known until later this month when Apple releases the real numbers for the March quarter.

    Before you take Gartner seriously, though, what about the time when they predicted that Windows Phone would have a 20% share of mobile devices by 2015? Clearly that doesn’t seem to be in the cards unless things begin to really turn around over the next year.

    Sure, you expect surveys to have a margin for error, but the disparity between IDC and Gartner when it comes to Mac sales for the quarter are telling. The results are also troubling, because it clearly indicates that one of these two companies either missed the mark big time, or both are dead wrong.

    But if I had spent a bundle to buy services from either company, or both, I would wonder if I was wasting my money. After all, what sort of track records do these companies have for delivering accurate data? Does anyone keep tabs of their surveys to see where they succeeded and where they failed? Shouldn’t that be a key indication whether the reports should get attention from the media?

    Of course, not all reports of sales or future products are given equal weight. So, for example, when Digitimes, an Asian IT publication, makes a prediction about something, they are frequently wrong. Journalists who do their research will report that anything coming out of Digitimes should be taken with a grain of salt, and that makes sense. However, on the slight possibility that the information may be correct, it is quoted anyway. Maybe the best approach is not to pay attention.

    I can say the same for those financial and tech pundits who have been so busy explaining what Apple has been doing wrong all these years, and how to fix those problems. Certainly if any of these people actually know how to run a successful multinational corporation, why are they working as an online or print commentator? The pay isn’t nearly as good, and there are no golden parachutes should they be laid off.

    So is there any solution to the chronic problem of poor industry analysis? One way would be for someone with time on their hands (and surely an expert at spreadsheets) to examine an individual or company’s record for accuracy, and make sure it is widely published in a form easily quoted. It wouldn’t take long to determine whether IDC, Gartner, or any other firm engaged in that business deserves to be taken seriously.

    From a casual glance, though, it appears as if the answer is no.

    But imagine if every single report about one of these surveys contained the accuracy record. Imagine someone saying that Apple’s next revolutionary gadget is doomed to failure, accompanied by a report that the very same analyst predicted that the iPod, the iPhone and the iPad would also fail. It happens occasionally, but having that information in every single report about someone’s analysis would be the kind of news you could sink your tooth into. It may even encourage some of these analysts to get their acts together, or find another line of work.



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    6 Responses to “Why Are Industry Analysts Still in Business?”

    1. Ted Schroeder says:

      The analysts are just trying to get clicks and eyeballs and make a buck. I think some of them have a quota for X number of Apple stories per week. It’s a strategy that’s been proven to be successful for them. And I think some are in cahoots with the hedge funds and big money players and they helped tank Apple’s stock price.

      Let’s take, for example, a big firm like Morgan Stanley Smith Barney. They are trying to sell clients/investors into managed portfolio products. A year or two ago, when AAPL was going like gangbusters, the MSSB folks had a hard time getting clients into portfolios with a 3-5% return when the clients’ cousin or brother-in-law is making 25% or so on AAPL. These clients start moving their money into AAPL. “We can’t have that,” says MSSB and the other big players. So the sell orders and the downgrades and the shorts and the disinformation campaign and the Jim Cramers of the world start driving the stock price down.

      (Now it looks like MSSB keeps trying to drive the price up with rumors of a ‘killer app’. When I heard ‘killer app’, I thought, wow- there’s a blast from the past. They must have people there as old as I am.)

      The analysts are just a part of it. The ones at the WSJ I think are really in bed with funders. (And the SEC seems to be on permanent vacation these days.)

      It would be fun and useful (imagine that!) to have accuracy ratings included with articles. But that ain’t gonna happen. It would amount to a site having a disclaimer: “We suck! And here’s more BS!”

      NPD seems more reliable than the others, but I wouldn’t pay a nickel for any of ’em. But what do I know? I think it’s nuts that Amazon’s stock price keeps going up even though they barely make a profit. If I remember right, Apple’s profit is almost twice Google’s or Samsung’s and the stock price is flat. Oh well…

    2. DaveD says:

      I would like to see two additional boxes to check off when rating an article along with the usual “How good was it?” boxes. Extra box 1 is “Worthless bunch of words.” Extra box 2 is “Find another line of work.” The ratings would be above the article by that author’s name.

      A few times after glancing an interesting headlines, I proceeded to read the article. Somewhere in the middle of the piece came a quote from Mr. Rob Enderle. The writer had the audacity to use this person as a resource. It was full stop, do not proceed and avoid this Web site in the future.

      Too many times we see “shipments” used as a so-called valuable piece of information. It would be a better gauge on companies’ performance if both sales and returns are reported.

    3. Bill D says:

      I actually think you’re onto something here. Of course the web sites and media sources that employ these so-called analysts and pundits would never agree to having their articles graded on the historical acurracy of the writer — that would be self-defeating. What I think would work is a news grading service that tracks the accuracy of various “fortune tellers” and grades their performance. Any savvy reader and/or investor would then be well advised to vet the credibility of any given news item against this website’s ratings of the person or persons behind the article. Eventually word of mouth would get around and the lowliest of this muck rakers would be out of work.

      Something to think about.

    4. John says:

      One issue is that Apple is silent about new products and business trends. This leaves a vacuum that needs to be filled. People want something, even if it is unreliable.

      Second, as stated above, it seems that many of these so called analysts are just in the business of stirring the pot. They say outrageous things to get attention.

      • @John, Apple has to be steps ahead of the competition. And announcing a product refresh prematurely guts sales of existing models. Look what happened to Mac sales when the iMac was announced in October 2012, but not delivered in quantity for another three months.

        Peace,
        Gene

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