Tuesday, 23 April 2013

Rumour: Business Magazines to Fire Clueless Reporters

All kinds of rumours are floating around about Apple ahead of their latest quarterly report, due today, after a precipitate drop in their share price. The picture here (from Google Finance) exaggerates the effect because the graph scale isn’t zero-based, but the drop from the peak of $702 on 19 September 2012 nonetheless is spectacular.

One claim is that Tim Cook is about to be dumped as CEO.

Another story doing the rounds is that Apple has run out of innovations in the absence of Jobs, since nothing new has appeared for the past 6 months. A possible concern – except that Apple had a huge launch season late 2012, and seldom refreshes a line in less than a year. This creates stability in the market, and avoids customers feeling they wasted their money buying a product that’s instantly obsolete. The iPad mini was launched in November 2012, and the latest iteration on the iMac a little later. True, these models are not major new blockbuster sector definers: the iPad mini extends the reach of an existing line, and the new iMacs are a refresh if with significant detail changes. And the iPhone 5, announced latish 2012 (September) is also an incremental change, rather than a major new sector definer.

So is the big worry instead that Apple is not “innovating” in the sense of defining whole new industries any more? But how often does a company need to introduce really big new changes? If we consider this sort of repackaging to be insignificant, what are Apple’s major new products and how often are they launched (starting from Jobs’s return to Apple in 1996)?

  • iMac 1998
  • iPod 2001
  • Power Mac G5 (and successor Mac Pro) 2003
  • iPhone 2007
  • iPad 2010

That’s an average of one major new product line every 3 years or so. Which is pretty impressive. You could argue that Apple is due for another major breakthrough. Of the above, the Pro line is the only one that wasn’t much of a game changer, so you could adjust your expectations down to Apple “only” averages a game-changer design about once every 4 years. Either way, the absence of some major new design is not a reason to dump the stock.

To inject some reality: here are the latest mobile device operating system stats from Netmarketshare. Not only does iOS dominate but, after a period of slight decline, iOS share is on the up again (March 2013: 61.41% vs. 24.85% for Android, the next biggest competitor). That may be a short-term effect but is hardly indicative of a massive drop in popularity or loss of market share. These figures rely on Netmarketshare’s methodology and I have no measure of how accurate that is in absolute terms, though the trend their number indicates is unlikely to be biased relative to the broader market.

So is Apple in trouble and should Tim Cook go?

Not on any evidence I can find.

The source of much of this speculation appears to be a rumour mill in some cases fuelled by players in the market who are shorting the stock – or possibly planning on buying it when it sinks low enough. Those who actually work the numbers claim that far from an unstainable bubble, Apple’s rapid rise in value is justified based on traditional calculations like PE ratio and variants, and the stock is now extremely inexpensive.

So unless Apple has some truly horrible surprise in their quarterly report due out later today, I will be very, very surprised if Tim Cook is going anywhere soon, or Apple’s stock is going anywhere but up, once the current hysteria has subsided.

What baffles me about all this is that stock manipulation in the US is illegal. Shouldn’t the SEC be investigating the more obvious instances? For that matter, couldn’t a large group of stockholders identify the more significant rumour mongers and hit them with a class action suit? Possibly not, since the actual numbers will reset the stock price.

Back to the title of the article: I wish it were true. It’s not only in this field. Climate scientists have renamed the Wall Street Journal the Wall Street Urinal because their science reporting is so absurd.

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