Thursday, April 29, 2010

The illogic of results v predictions

The market is correcting itselft today, up 119 points. Akami (AKAM) rose 20% today, due to reporting 1Q earnings of $.35/share, v the expected $.31/share. This is where the market's illogic comes in. The estimate of $.31/share was by the "experts" who read tealeaves, looked at fortune cookies, whatever, and decided that they knew what this company would report for earnings, even though they were looking from outside in. Sure, they could call suppliers, but that's not all that goes into reported earnings. I won't go into everything, but trust me, there's a crapload of work that is required to develop quarterly financial statements. And the analysts don't do it because they don't have all the details to develop them. So, where do these estimates come from? "Educated" guesses? Magic sphincters? You tell me.
iRobot (IRBT) is up 33% for the same reason: "announcing better-than-expected revenue... "I digress.
The reason I went through all that is to make the point that Akami's shares are up 20% for one reason: the experts were wrong. Had the experts predicted $.35/share and the company came in at $.35/share, the stock would probably not have moved at all. In conclusion, today some folk got rich(er) because some other folk didn't know what the heck they were talking about.
Palm got bought yesterday by HP. I saw that coming. Don't know what HP is going to do with them. Kinda like when FedEx bought Kinkos a couple years back. I think they royally screwed the pooch on that one. I come to that conclusion from the fact that they are dropping Kinkos from the FedExKinkos outlet signs. Say what you will, but when Time Warner dropped AOL from the name, it wasn't because they couldn't afford all those letters on the headquarters. Again, I digress.
I wonder what HP is going to do with Palm now that the iPhone has opened up the "we want phones to do more than make calls" chant. Not that it's the greatest phone ever, but because it has 20-30,000 developers working to make it do anything and everything. Google's Android OS has a chance, mostly because Google has more money than the Vatican. But at the end of the day, the number or people who want a phone to be just a phone is shrinking fast. The more apps, the more useful. The more useful, the more people will want it. My prediction is that the winners in the cell phone race will be those platforms that have the most apps available. Period.

In other news, Eastman Kodak (EK) posted a gain of $119 million, v a loss of $360 million last year. Their shares lost 17%. Yeah, go figure. Again, don't apply logic. The people who made out on iRobot and Akami today weren't any smarter than you, they were just luckier today. By the same token, those who lost on Kodak weren't dumber, just holding the hot potato at the wrong time. Don't let anyone tell you they predicted any of this.

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