What Went WrongAs for the company, it provided a whole host of reasons why it missed earnings expectations and offered, even by Apple standards, weak fourth-quarter guidance. China is slow. iPhone revenue in Europe was flat year-over-year. The fall transition and the strong dollar will drag on margins, but, rest assured, the product pipeline is stronger than ever. Bulls like Tim Cook latched onto strong iPad sales in the quarter for comfort. Others, such as Ina Fried at All Things D, referred to "the bright side" as the declaration of Apple's $2.65 per share dividend. When the dividend becomes a bright side, you know something is amiss. Let's review some of the carnage: A Q3 EPS miss that comes in $1.06 less than the Capital IQ consensus, according to my Briefing.com feed. Q3 revenue off by more than $2 billion. Q4 EPS guidance for $7.65 vs. the $10.23 Capital IQ estimate, which, again, is low even for the traditionally conservative Apple. A Q4 revenue projection nearly $4 billion below consensus. And there's more. Apple sold 3 million fewer iPhones than Wall Street anticipated, and a half a million fewer Macs (it blamed that on an Intel ( INTC) chip delay). And for Q4, it expects margins to decrease to 38.5%, compared to a consensus estimate of 43.1%. No matter how bulls try to spin it, this is not good. AAPL longs make a huge and incredibly dangerous assumption as they blow off this quarter's miss and take for granted smashing iPhone 5 sales come the holiday shopping season. Munster cited a survey his firm conducted that shows more than 90% of current iPhone owners intend to buy another. I'll spare you the lecture, but if you've studied statistics and survey research at all, you know you cannot trust the unscientific data investment analysts produce. It's almost always poorly gathered.
But strong sales of reiterations of existing product lines only tell part of the story. If iTV does not knock the public's socks off, it will plant the seed that Apple's future might not be so bright. And at day's end, isn't that the reason why AAPL has stagnated? There are concerns about the company's ability to out-innovate going forward.Simply put, AAPL bulls, for months, have underestimated the loss of Steve Jobs. I know they're sick of hearing that, but it's the elephant in the room. It has been for some time. That became apparent when Tim Cook caved on the dividend and rumors began to swirl that Apple might, against Jobs's better judgment, release a mini version of iPad. Consider the trend here. Don't discount it. Don't ignore it. While still superior to the competition, the gap between Apple and everybody else continues to close in the Tim Cook era.