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Apple’s Tempest In A Teapot Earnings Report

Investors punished Apple in after-hours trading Thursday for one or both of two reasons.

Despite a show-of-force performance in its fiscal fourth quarter, Apple’s revenue forecast for the coming quarter was merely around Wall Street’s previous average estimate. So far so not so serious.

What really seems to have ticked off the cranky collection of investments analysts, though, was Apple’s decision to cease reporting unit sales of iPhones and the other gadgets its sells. Analysts, who like to be spoon-fed as much information as possible, interpreted this change to mean Apple foresees declining unit growth of iPhones. That would be bad.

Apple didn’t respond directly to that fear. Instead, it called the unit measurement increasingly irrelevant, noting that it’s higher-priced phones are selling better (a good thing), making the overall flat unit volume a false data point. iPhone revenue, a figure Apple plans to continue reporting, rose 29% to $37 billion.

This feels like a tempest in a teapot, though if investors think it’s a gale in the technology ocean, then indeed it is. Apple CEO Tim Cook cleverly suggested the clerk at the supermarket doesn’t ask how many “units” are in the shopping cart. Apple (AAPL) instead suggests focusing on, you know, making money.

There were pockets of concern. The strong dollar weighs on Apple’s forecasts even more than it stands to benefit from falling memory-chip prices. A handful of emerging markets are doing poorly; Cook namechecked Turkey, India, Brazil, and Russia. And though China sales were strong, up 16%, Cook noted that a government crackdown there on mobile games has crimped business for developers. Importantly, Cook termed the government action, which has hit gaming titan Tencent particularly hard, a “domestic issue” having nothing to do with the U.S.-China trade spat.

Analyst Gene Munster, in a note to clients, suggests it may take a year for investors to become accustomed to Apple’s changed reporting. If Apple’s shares fall Friday, and if the unit-measurement brouhaha is just that, this will have been a classic buying opportunity.