You may or may not have followed the iPhone hype, but here’s a little story to indicate just how nuts and irrational the stock markets – or their players – act.
When Apple launched the iPhone on Friday June 29th, 2007 their exclusive mobile network carrier AT&T was so overwhelmed with the number of registrations that a considerable number of customers suffered from long delays in the registration process of their mobile service contract. Meaning: by Monday night there were a lot of people who had bought the iPhone, but the mobile phone service was still not activated. Both AT&T and Apple refused to release any information as for how many units were sold during the first 2 days.
This last Tuesday July 24th, 2007 AT&T announced their financial results for the last quarter. This time the whole world was watching as one expected them to announce how well the business with the iPhone had started. AT&T said they had activated 146’000 iPhone contracts during the first two days. So, they were talking about activated contracts while everybody was waiting for the number of units sold to be released.
Bummer! And the crowd goes: what, only 146’000 iPhones sold? But analysts expected between 400’000 and 700’000… What happens to AAPL (the Apple stock symbol)? It plunges over 6%! For no reason. The only interest one should have in the figure announced by AT&T is to find out how big the discrepancy between activated contracts and units sold really is, which would show how big the mess that AT&T created with their activation delays is.
So, ok AAPL plunged for no good reason, but only one day after AT&T’s report Apple itself was reporting their quarter figures. This was yesterday afternoon Wednesday July 25th, 2007. Steve Jobs reported that they had sold 270’000 iPhones within the first 30 hours. Considerably less than what the overly enthusiastic analysts had hoped for, but still a fair number! More than that, Apple reported record high earnings. Now that’s a reason for a soaring share prices. APPL compensated for the stupid 6% fall with a 9% plus. Is all well that ends well? No!
Never trust a company’s share price, because it is irrational. Of course, it’s the pure ‘supply and demand’ principle that I love so much but with a group of people on the demand side that is, what, out of their minds
Ohhh, and lesson learned for Apple? Why did they allow AT&T to report on the number of activated contracts? They’re out of their minds, too. Wasn’t it obvious that the public would somehow not be able to comprehend the true meaning of those numbers? Even a stock market novice like myself could predict what would happen after AT&T’s report. I’m still shaking my head over this.