Apple and Those Alleged Headwinds

January 8th, 2016

So, as in the past, there are once again rumors or alleged stirrings from the supply chain about Apple severely cutting orders for the iPhone for the March quarter. This has caused the expected Wall Street freakout, as if the problems on the market aren’t bad enough. Combine that with the problems China is having propping up its stock market, and it’s panic city.

Or at least it seems to be.

Now it’s not that China’s financial issues are anything new. Last time we had this problem, Tim Cook had to announce that, despite the imagined threats to sales, Apple was doing quite well. So far, though, he hasn’t said anything. Earnings are set to be revealed on January 26th. Coming this close to that date, it’s not unusual for a company to observe a “quiet period” and not say anything that would prejudice the market. This gives the Street tacit approval to engage in whatever speculation it wants, warranted or otherwise.

With all the bad hints, therefore, it’s now feared that Apple might miss its expected earnings targets. That’s certainly taking us into a rarified atmosphere, as Apple is usually pretty conservative about such projections. But if you believe the stories out there, and the decisions of certain financial analysts to downgrade Apple’s stock, you might worry about what’s really going on.

So is it true that orders for iPhones were cut back by 30%? Was that because there are millions of unsold units in the sales channel, or because of normal seasonal trends? Remember, that there are generally lower sales in the March quarter than the December quarter, so cutbacks are going to be expected.

But don’t forget how Tim Cook admonished the financial community a couple of years ago, during a quarterly conference call with investors, that they should not take a metric or two from the supply chain an assume it applies to the entire sales picture. Apple does shift suppliers from time to time as a matter of course, and not necessarily because sales are low. They know the reasons, we don’t.

Obviously, searching for breadcrumbs about Apple’s supply chain order patterns or overall sales can be a full time job for some people. But that doesn’t mean they have the remotest clue about how well Apple is doing. Still, there may be some clues when sales estimates for December quarter in the tech industry appear. Even then, such mainstays as Gartner and IDC are notorious for undercounting Mac sales, or splitting up tablet sales in arbitrary ways so as to make it appear as if Apple’s share of the market is lower than it really is.

I won’t suggest there’s a conspiracy against Apple, but you might wonder what’s going on when you look at the clients who hire these analyst firms to get some numbers, and whether the client, and the needs of the client, are somehow skewing the results.

Indeed, if you evaluated some of the long-term trends from these firms on accuracy alone, they’d fail big time. Does that mean their clients ought to be requesting refunds? Do you remember when it was once predicted that Windows Phone sales would exceed those of iPhones?

The long and short of it is that it’s easy to go online and Google (or Bing or Yahoo) the financial troubles in China. It is fair to suggest that situation could hurt iPhone sales, but those who are in the know won’t say right now.

The long and short of it is that, in the absence of a statement from Apple that probably won’t come until financials are released, the media and the financial community are having a ball claiming Apple is in trouble once again. Or that Apple is just lucky to escape a serious sales downturn, and it’s time to pay the piper.

Reports of problems with the supply chain appeared before, in late 2012. Despite record iPhone 5s sales, it was still deemed as unsuccessful. The iPhone 5c was said to be a dud, even though there was no evidence whatever that such a thing was true. In fact, from what Apple said without actually releasing figures, it appeared to have delivered the expected level of performance.

Still, Apple’s stock price nosedived through part of 2013. What Cook said to financial analysts was quoted here and there, but mostly ignored. He might as well have shut his mouth for all the good it did. This time, we have similar rumors about sales problems, and supply chain cutbacks. There is, once again, no evidence that any of it is so. Indeed, a analytics of iPhone 6s and 6s Plus adoption this past quarter, from Fiksu (a mobile marketing firm from Boston), reveal what is regarded as normal rates.

If Apple does release results that meet with their quarterly guidance, it’ll probably not be good enough. The expectations for the March quarter will receive close attention. But if sales just happened to be bad, as feared, Apple will get a much higher level of blowback than other tech companies facing sales headwinds. Same as it ever was.

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