Apple Discovers the World of Damage Control

February 28th, 2008

Consider that, relatively speaking, Apple’s stock has been down in the dumps of late. A lot of that isn’t due to any particularly bad news, just the illusion that bad news is on its way.

Take the iPhone. Now, although this continues to be misquoted and misrepresented over and over again, Apple has said that it hopes to reach the 10 million unit sales milestone by the end of 2008. That’s not saying there will be 10 million sales this year; that’s the total sales since the product was first introduced in the summer of 2007. I just want to get that distinction out of the way before the wrong version is repeated all over again.

Well, Apple’s chief operating officer, Tim Cook, took the bull by the horns at the Goldman Sachs Investment Symposium this week and reiterated Apple’s promise to reach the 10 million sales goal by the end of this year. Now this is no different from what Cook and other Apple executives have said all along. Unfortunately, Apple, though it usually meets its promises or comes pretty close these days, is still regarded with supreme suspicion, while Microsoft’s fanciful claims about products that are late, crippled or never reach the light of day, are usually accepted as gospel.

What a strange world we live in.

On the other hand, with the stock price dipping, Cook had to say something, and simply reiterating the promise was sufficient to drive that price point upward all over again. It doesn’t necessarily mean that it’ll reach $200 per share anytime soon, but if you’ve invested a ton of money in the company, you have to be pleased that things are finally improving at a decent clip.

What Apple discovered here is that, when the naysayers get out of control, they have to act fast to control the fallout before pundits decide to make up their own fantasies about what’s really going on.

A recent example is the case of the missing iPhones, where between one million and one-point-four million were somehow not accounted for by known activations. It doesn’t matter that the higher figure originated in the imaginative mind of one analyst. It was repeated over and over again, took a life of its own, and people started wondering if there were tons of boxes of unsold iPhones catching dust at warehouses and in dealer stock rooms.

I wasn’t surprised to learn they were just plain wrong, although it’s definitely true that a fairly large number of iPhones were unlocked and used around the world with wireless companies that had no agreements with Apple and thus didn’t officially support the product.

If you go on eBay at any time of the day, you’ll still find lots of these phones available, often at prices above list, simply because they remain in such high demand. Then again, if you want to save some money and just buy a refurbished model through authorized channels, good luck. Apple rarely has them in stock, and when they do, it seems they disappear from the price lists real quickly. No, I’m not just guessing. When I was considering whether to buy an iPhone, I checked those lists several times a day for a couple of weeks, and finally simply decided to bite the bullet and get a new one at the nearest AT&T company store.

In case you haven’t heard, next week Apple will take the wraps off its long-awaited iPhone SDK. It’s widely believed that they were dragged kicking and screaming into creating a method for third-party developers to deliver officially-sanctioned products that supported all of most of the product’s features.

Now maybe that was true. But Steve Jobs said even before the iPhone came out that they were looking into ways to deliver an SDK while still providing acceptable levels of security. When he announced a Web-based solution at WWDC, the skeptics pronounced it a bad solution, forgetting the original promise entirely.

So did the proliferation of jailbreaking utilities finally force Apple to do another round of damage control and change its ways? I don’t think so. These authorized iPhone applications will most likely be distributed and installed by iTunes. Apple will get their cut off the top, so it’s going to be a cash cow for them. It strains logic to think they don’t want to mine every possible iPhone revenue stream. That’s definitely NOT their DNA.

However, Apple’s penchant for event marketing and keeping things close to its vest otherwise can sometimes be a bad thing. When journalists and personal bloggers don’t get the answers they seek, they speculate, and sometimes that speculation is passed off as fact and repeated around the globe as if it’s gospel.

So, from time to time, Apple needs to pick up the accumulated garbage and show what’s true and what isn’t. That usually settles things down for a while.

At least until the next unconfirmed rumor is upon us.

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3 Responses to “Apple Discovers the World of Damage Control”

  1. Mitch says:

    The sales goal for the iPhone has indeed been misquoted and misrepresented but you are on the wrong side of the misunderstanding.

    Steve said that Apple wanted to get 1% of the global market in 2008 which he estimated to be 10million iPhones.

    I disagree with your explanation of Tim Cook’s comments. He didn’t have to say a thing about iPhone sales. He reiterated the sales goal (not a promise) and indicated that Apple was confident it would meet the sales goal.

    Apple delivers numbers (which by law have to be accurate / honest) 4 times a year. The stock price will eventually correlate to those numbers. If Apple commented on all of the boneheaded comments that pass for Analysis, they would be very busy indeed.

    I like Apple’s traditional approach of not commenting on anything outside of quarterly financial results. Let the idiots bloviate all they want – the truth will set the record straight.

    Let’s note that Apple just reported its’ best Fiscal Year / Quarterly results EVER.

  2. jack53 says:

    The Street and Microsoft are run by reactionary conservatives. Apple is a progressive company and scares these guys. Their world is constantly threatened by them. They can try to keep Apple down, but fearmongering only goes so far, ultimately the people see through it and go for what works.

  3. Dana Sutton says:

    When Cook made his remark about Apple being willing to revisit the single-carrier marketing model for the iPhone he was probably thinking of the foreign market. The arrangement works sufficiently well in the US that Apple has no compelling reason to change it. But after all these months, the iPhone is officially available in only three, count ’em, three foreign countries, although there’s allegedly a thriving grey market for unlocked iPhones in other nations, and iPhone sales are much less than they could be. I suspect the reason is that Apple is discovering it’s much harder to negotiate deals with foreign carriers than they had originally imagined due to problems with local laws, politics, cultures, and technologies. They’re not used to situations where you have to deposit a couple of million in the Cayman Islands bank account of the brother-in-law of the Minister of Torture before you’re even allowed to start negotiations with a local carrier, but a lot of the world still works that way. Apple has two possible ways of responding. One is the “wink-wink nudge-nudge” approach where they sell only locked iPhones, but are careful not to make them very difficult to unlock (this is their current policy). The other is to offer unlocked iPhones in all countries where single-carrier contracts don’t exist (i. e., not in the US, UK, France, or Germany). Especially since weak iPhone sales helped trigger AAPL’s tumble, Apple has a powerful reason to rethink its current policy (lots of folks in Cupertino have AAPL stock options).

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