GENERALLY SPEAKING, A $62.9 billion quarterly revenue would be recognised as a good thing, especially when it comes with $14.1 billion in profits. Yet for Apple, the immediate aftermath of the Q4 2018 earnings call was a seven per cent drop in share prices, briefly dragging Cook & Co between the $1 trillion mark. Billionaires get the worst luck.
Share prices have ticked up a little since then, so no need to start GoFundMe pages for the impoverished of Cupertino, but it still raises questions. On the earnings call, Tim Cook described the fiscal year of 2018 as having “the strongest revenue and earnings in Apple’s history,” so why are investors getting antsy?
It’s not that Apple made less money than planned: the company’s own forecasts estimated revenues of between $60bn and $62bn, so it cleared that hurdle. Revenue, too, was up from $11.5bn in Q3, which isn’t bad at all considering the new iPhone Xs and Xs Max were only on sale for nine days of that quarter, and the new XR only went on sale yesterday. Indeed, it seems that despite iPhone sales being flat in the period, profit was up, thanks to more expensive units. Services – iCloud, Apple Music, the App Store, etc. – hit the $10 billion in revenue mark, too.
Instead, investor alarm seems to have been triggered by two factors. Firstly, the firm’s sales projections for the holiday season are ‘just’ $89bn to $93bn, as compared to $88.3bn in the same period last year.
But perhaps more importantly is the fact that Apple announced plans to be considerably less open about where its money is coming from in future, saying it will no longer break down sales by product category. Apple justified the move by saying it was no longer a useful metric for the firm’s financial health, but investors unsurprisingly disagreed.
“This is a little bit like if you go to the market and you push your cart up to the cashier and [they say] ‘How many units you have in there?'” said CEO Tim Cook on the call, pretending that he still goes to supermarkets. “It doesn’t matter a lot how many units are in there in terms of the overall value of what’s in the cart.”
That may be true, but investors like as much information as possible, and if a company abruptly stops boasting about how many items it sold, the natural response is to wonder why the sudden need for secrecy. µ
Source : Inquirer