Even before
The reasons they cited were almost aways the following; "channel checks", "supplier checks", "Asia tech team checks" or "supply chain checks."
These misleading Wall Street reports and data points have been time and again been proved false by Apple's results.
Tim Cook, CEO of Apple, himself stated the following when the company reported earnings for the December 2012 quarter back in January 2013:
"The (Apple) supply chain is very complex, and we obviously have multiple sources for things. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business."
As far as I know that's the only time Tim Cook has made that statement on a conference call open to investors and analysts.
So, something that is so blatantly contrived, if not false, has yet again taken on a life of its own in the last couple of months with Wall Street analysts issuing reports on a daily basis with some citing channels checks of the supplier kind.
Other analysts will credit their Asia tech teams and still others will come up with some combination of the two in order to lower their estimates for not just the current (December) quarter but also for the March 2016 quarter as well.
As a result, Apple shares are significantly under-performing this year.
Like I have said many times, Wall Street analysts move in a tight herd and recently we have seen even the bullish analysts quietly lower their estimates and price targets under the guise of a "reiterating our Buy" report.
Since Apple reported earnings for the September quarter on October 27, 2015 and then climbed to a post earnings high of $122.57 per share on November 3, shares are now off around 14% and are also down 21% from its all-time highs made earlier in February of this year.
Apple shares have also lagged since Tim Cook became CEO compared to almost peer group or compared to any of the indices one chooses to look at, no matter which way the returns are analyzed.
If that were not bad enough, Apple shares are now negative on the year and are lagging even the staid S&P 500 (which is also negative on the year but not as negative as Apple) as far as return on investment in 2015.
So, the question that is burning in my mind is as follows:
If the channel check/supply chain check/Asia tech team checks are indeed inaccurate predictors of Apple's (iPhone) revenues as Tim Cook stated on that conference call almost two years ago, then why has he not bothered to put out a statement or reiterate the same again and again till investors and analysts don't even bother paying any heed to that nonsense any more?
The following are the possible reasons that investors and I have very often wondered about:
- The first is that those supply chain checks etc. are now able to predict to some extent or maybe even to the full extent of how iPhone sales are faring which is why Cook has chosen to not say a word about it again.
- Or, the second reason is that Tim Cook was mistaken when he said two years ago that these checks were not accurate predictors of Apple revenues.
- Tim Cook's apathy and hubris.
- Tim Cook's massive compensation.
I don't think either of the first two are possible only because I think Tim Cook is not that sort of CEO who would make an irresponsible/erroneous statement like that and then leave it hanging for almost two years. That's just not his style from what I have seen and heard about Tim Cook as a person.
So, then we have the very strong possibility that it is the last two of the above four reasons why Tim Cook has not bothered to nip the channel check/supply chain check nonsense in the bud once and for all.
Most CEO's in Corporate America have a standard reply when asked by Wall Street why his/her own company shares are lagging/underperforming at any given point.
The pat/standard/rote answer is, "I (Mr. or Miss CEO) don't focus on the share price, I am too busy running the company. I leave the share price up to Wall Street and investors to figure out."
That has been Tim Cook's response as well on many occasions when he has been asked about Apple's shares under-performing the general market or its peer group or whatever benchmark the shares have been compared to.
As far as Tim Cook's hubris, we have seen that time and again in the way he has dismissed shareholders in the past like he did when an institution questioned his decision to spend company money on "green initiatives" by saying that shareholders that didn't like that should sell their shares. In addition, Cook does come across as a very prickly sort of individual so I would not put it past him to not bother with rumors and innuendo since he has already made a clarification that one time, two years ago. His rationale or thought process could be something along the lines of the following: Darn it, I am the CEO of Apple, the biggest Company on the face of the earth. I told investors and analysts back in January of 2013 that they should not pay attention to the supply chain/channel check nonsense and if they are still focusing on that, it's their issue not mine.
Yes, he did tell investors and analysts not to focus on those checks.
He did that two years ago.
If those data points were nonsense, would it really be too much of a bother for him to repeat it as often as he has to till the said nonsense is done with forever?
When Tim Cook was appointed CEO, as part of his "welcome package," he received 1,000,000 restricted shares as an award/gift. The restriction was that he would have to stay on with Apple for a period of 10 years from the date of his appointment. Half of those shares would vest in 2016 and the other half in 2021, on the date of his (CEO) job anniversary, August 24.
Of course, since that "welcome aboard" award, Apple shares have split 7-1 and so has his award, so Tim Cook now has 7 million shares. Let's not even talk about the stock options or salary and perks and additional stock grants he has received in the 4 years and change since he has been CEO, which more than likely have also totaled in the hundreds of million of dollars.
Just those 7,000,000 shares alone are worth $735 million to Tim Cook at current prices, which is why he can afford to say that he does not care about the stock price of Apple.
After all, those shares were given to him as an "award/gift" which means he did not have to pay a dime for them.
For you and I with our 1,000 shares or 10,000 shares or 25,000 shares, a $10 per share difference in price means a lot of money (actually even a $1 per share price can mean a lot of money) because we have invested in Apple shares through our earnings/savings or in other words actually paid for those shares (no matter what the cost basis is-$1 per share or $100/share), while Tim Cook was just given a million shares pre-split or seven million post-split by the company.
If someone just gave you seven million shares of Apple free and clear, would you really worry too much about the share price? Whether it was up or down 10%? 20%? Whether next year you would be able to sell 3,500,000 shares for $500 million or $600 million or even $200 million for that matter? Shares that you were just handed over in the first place? Then, you would get to do it all over again in 2021 with another 3,500,000 shares.
Yes, I know that Tim Cook worked very hard along with Steve Jobs to turn around Apple fortunes but that's not what this article is about.
This article is about why Tim Cook has not bothered to correct the nonsense the analysts and others have been spewing.
If Apple shares were at their all-time highs, Tim Cook's "welcome award" alone would have been worth a cool billion dollars.
However, here's what you need to think about: What can $1,000,000,000 (value of Tim Cook's award at all-time highs) buy you that $735,000,000 million (value of Tim Cook's award right now) can not?
Especially when the shares have just been given to you totally free and clear no questions asked, save for the vesting period restriction.
Finally, have you ever heard a lottery winner ever complain about taxes?
No, and you never will because that money is a gift from the heavens and lottery winners know that.
As does Tim Cook with his 7,000,000 share award, which is why you will never hear him complain or worry about the stock price whether the shares are at $130, $106 or $86 per share.
This is exactly why Tim Cook can say, "I don't focus on the stock price," and the two reasons above are the possible reasons why he has not bothered to put the "channel check/supply chain check/Asia tech team check" nonsense by Wall Street analysts and others to bed once and for all.
It's a combination of Tim Cook's hubris, apathy and his massive compensation (so big as to make no meaningful difference to him or his net worth where the share price is or will be) that is to blame for the continued under-performance of Apple.
Finally, just as you will never hear a lottery winner complain about how high taxes are, you will never hear a massively over-compensated CEO of a company ever complain about where the shares of his/her company are trading.
Both know never to look a gift horse in the mouth. Or in this case, question the value of the said gift horse.
(Long apple, long and short options)
