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  • For Apple the Hits Keep on Coming

    April 19th, 2013

    So there’s a report this week, unconfirmed as usual, that Apple has severely cut back on component orders. As you might imagine, the already sinking stock price has tanked big time. If this claim were true, it would mean that sales of Apple gear have really fallen to lower than expected levels. If it were true.

    Unfortunately, the latest report supposedly originated from “related upstream suppliers” courtesy of Digitimes, an IT publication from Asia that has a poor track record for accuracy. But it is being believed largely because it plays to the belief that Apple is somehow suffering, even though there’s no solid evidence that any of it is so.

    So we see, for example, that some four million iPhones were activated by Verizon Wireless during the March quarter. This is supposedly within the expected range, but it also means more than half the smartphones the U.S.A.’s number one wireless carrier activated were made by Apple. So much for Android taking over, although the picture is reversed in other parts of the world. Regardless, the Apple universe is plagued with lots and lots of unknowns. Ahead of next week’s announcement of the financials for the March quarter, estimates are all over the place.

    So Mac sales are down, or maybe they are up. Sales of the iPhone 5 have tanked, or maybe sales are steady, and the same can be said for the iPad, although it has become clear that the winner is the iPad mini. If Apple fails to meet their own guidance, things are going to be really difficult in terms of convincing the temperamental skeptics that things will be all right soon. But that only assumes the worst case scenario.

    Certainly Apple will say nothing during this period, but it leaves plenty of room for people to just make up stories. Some of it can benefit traders who might want to push Apple’s stock price down so they can buy up shares cheap and earn big profits when the price goes up. But that assumes Apple didn’t already reach a plateau to which they’ll never return. That requires making assumptions about recent sales, current sales and future sales that have no factual basis, so I won’t go there.

    So the critics continue to hack away at Apple, with each piece of potential bad news simply buttressing previous pieces of bad news.

    Even if Apple does reasonably well, I still think they might have done more to correct the misstatements. So, for example, when Tim Cook responded to reports that Apple had cut back on display orders for the iPhone 5 in the December quarter, he gave a policy wonk response. He said that you can’t take one supply chain metric and apply it to the entire supply chain. Apple may adjust, terminate, or increase orders from time to time even though sales are running at a good clip. How do you know?

    Take the published report recently that Foxconn had cut back employees, because of a perceived slowdown in demand for Apple gear. Don’t forget that Foxconn also builds PCs for a number of makers, whose sales have dropped by double digits according to recent surveys. Would that not be a key factor in any decision lay off workers?

    And what about the later story that Foxconn had been hiring more people to work on the production lines in anticipation of new products by Apple? Not much is being said about this apparent contradiction. But both statements can be true if you attribute any possible reduction in workforce to flagging PC sales. But it has to be all about Apple, or it doesn’t get attention.

    In the end, though, if all the bad news, or most of it, is totally false, I do think it would have helped for Apple to make some more pointed statements about the matter. Even a brief press release quoting Tim Cook might calm Wall Street. Saying nothing only makes the bad news seem all the more credible. Of course, it’s possible Cook will say things during next week’s conference call that will calm things down. But the language has to be focused as much towards the general public as the investment community. Being a little too technical may be appropriate for a conference call of this sort, but it doesn’t help knowing that the world is watching and will parse every word a thousand different ways to find the hidden meanings. And that’s true even if there are no hidden meanings.

    So this week ends with Apple not getting the love, at least when it comes to rumors about flagging demand and flagging sales. Someone who bought Apple stock at much higher prices must have freaked when it went below $400 without a bottom being reached. At least the truth will come soon enough, and if the critics are wrong, do they apologize for causing financial havoc? No, there’s seldom any payback for offenses of that sort, if, as I said, the stories are all wrong.



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