Apple won’t be peeled. Let’s cut through its seedy affairs
The tech giant’s refusal to reveal its sales is typical of Silicon Valley
Considering how well Silicon Valley has done out of Wall Street, techies do not seem to hold their besuited peers in very high regard.
Technology companies often whine that the rigours of quarterly financial reporting, the short-term responses of investors and the demand they make a profit, run counter to their true calling of changing the world.
Just one look at the stock market performance of the tech industry in recent years shows this to be nonsense. The majority of the most valuable companies in America are internet or computer giants.
The likes of Amazon and Tesla have received massive valuations despite years without making profits. And Wall Street has overlooked many a privacy and political scandal at Facebook.
But unimaginable riches have not brought Silicon Valley much joy. This summer, Elon Musk declared he was fed up with Tesla being a public company, and decided he would rather take a big chunk of money from Saudi Arabia to help take it private. Many younger startups have chosen to take huge amounts of private capital in order to avoid the gaze of the public markets.
And last week, Apple thumbed its nose at Wall Street in its own way. The world’s most valuable company said it would provide less information to investors and analysts, no longer revealing how many iPhones, iPads and Macs it sold each quarter.
The news, combined with a disappointing forecast for the forthcoming Christmas quarter, sent shares tumbling on Friday and pushed Apple below the trillion-dollar valuation it had achieved three months earlier.
The drop may seem like an overreaction, but it does raise a question about corporate transparency. Apple is under no obligation to reveal how much of each device it sells – as chief financial officer Luca Maestri pointed out, none of its competitors did.
Public companies in the US are required to reveal their income statement, balance sheet and cashflow figures, and nothing more. After all, surely what should be important to investors is not the number of gadgets Apple sold in any three-month period, but how much revenue and profit it is making. The number of iPhones sold, although closely followed by the media, seems closer to a piece of trivia than a relevant piece of financial information.
This is how Maestri put it. He said that such figures were “not necessarily representative of the underlying strength of our business”. This may be true, but Apple has revealed its sales numbers for decades.
It has done so since at least the 1990s, before Steve Jobs returned to the company and well before the iPhone – or even the iPod – existed.
So when it changed course last week, investors jumped to the most logical conclusion. They took the news that Apple was going to stop saying how many iPhones it had sold as a sign that that number was going to fall. After all, if iPhone sales were growing hand over fist, it wouldn’t be hiding the fact.
Silicon Valley companies tend to provide financial transparency when it suits them. Facebook provides exhaustive data saying how many users it has in each geography, and how much money it makes from them. On the other hand, it does not reveal how much it makes from Instagram, now a major part of the company – perhaps because it does not want to give the impression that that is where Facebook’s future lies.
Twitter provides monthly user figures, but not the daily figures that Facebook and Snapchat do, most likely because they are not so impressive.
Amazon has turned vagueness into an art form, often choosing to announce that it has sold “millions” of a particular thing, a figure that is about as useful to a financial analyst as saying nothing. And yet on the occasion it has come clean about its business, it has prospered. In 2015, when it began to reveal financial figures for its cloud computing division Amazon Web Services, shares rocketed. In April, when Jeff Bezos revealed the company had 100 million subscribers to its Prime membership option, the same thing happened.
Apple’s business has changed immensely in just a few years. After the iPhone was released in 2007 and the iPad followed in 2010, both grew rapidly. But iPad sales peaked in 2014 and those of the iPhone have been effectively flat since 2015.
The market for smartphones and tablets has now peaked. According to IDC, sales in the last quarter industry-wide fell by 6% and 8.6% respectively. Apple’s strategy is less about selling more gadgets these days than selling more expensive ones – the average price of an iPhone in the last quarter was $793, an increase of more than $150 in a year.
Apple would no doubt prefer fewer headlines about iPhone sales falling and, without accurate sales figures, they can no longer be written. But it is not as if such transparency has hurt Apple: it is the world’s most valuable company; shares have doubled in the last three years even as iPhone sales have been flat.
If Apple had nothing to hide, it would not be hiding. – © Telegraph Media Group Limited