Linked by Thom Holwerda on Wed 4th May 2016 09:39 UTC
Apple

Apple CEO Tim Cook insisted last week that everything was great with his company despite its first quarterly revenue decline since 2003. He and Apple's chief financial officer used the word "optimistic" 10 times during a conference call with analysts. Then the company's share price pessimistically fell for eight consecutive market days -- something that hasn't happened to Apple in nearly 18 years.

Declaring victory didn't work the first time, so Cook made a trip to Jim Cramer's therapy couch on Monday to try to soothe investors. It's unfair to compare Apple's numbers to the 2014 debut of the iPhone 6, which was a tough act to follow, Cook said. He added: Everything is great. Look at how much money we're making. The smartphone market has plenty of room to run. Customers love us so much. Then Cook attended a gala at the Metropolitan Museum of Art.

Here's what Cook didn't say: 1) Apple has been misjudging its own business, and that makes it tough to believe what executives say; and 2) The company failed to prepare investors for an inevitable slowdown in growth -- even if that slowdown proves temporary. If one duty of public company executives is to underpromise and overdeliver, Apple has flopped in that job.

A lot of people will just mockingly file away articles like this under the "Apple is doomed!" moniker, but what these people don't understand is that most of the stock market isn't about whether or not Apple is doomed or not - it's all about meeting expectations. You can suffer a massive loss, but if the loss is less than what you and the market predicted, your shares would go up. You could be doing incredibly well like Apple, but if you underdeliver, your shares will go down.

And this article makes a strong case Cook failed at underpromising.

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Hand over fist
by FunkyELF on Thu 5th May 2016 12:08 UTC
FunkyELF
Member since:
2006-07-26

I'm not an economist, so I don't understand why it's not enough that a company is making money hand over fist. Why does it need to make more each quarter than the quarter before? Even when you continue to make more and more money it is perceived as bad if the rate at which your revenue increases is slowing down?

Is this sustainable? On a small island with 10 companies could they all show growth each quarter? How about a planet with thousands of companies?

Feel free to give me an economics lesson.

Reply Score: 4

RE: Hand over fist
by darknexus on Thu 5th May 2016 19:59 in reply to "Hand over fist"
darknexus Member since:
2008-07-15

Probably can't afford the latest gold toilet. Or maybe the price of kopi luak went up.

Reply Parent Score: 2

RE: Hand over fist
by tylerdurden on Thu 5th May 2016 22:02 in reply to "Hand over fist"
tylerdurden Member since:
2009-03-17

The expectation is that with population growth so does consumption.

Of course, anyone that has ever used a petri dish for nefarious purposes understands that finite spaces imply finite growth potential.

Reply Parent Score: 2

RE: Hand over fist
by avgalen on Fri 6th May 2016 06:34 in reply to "Hand over fist"
avgalen Member since:
2010-09-23

I'm not an economist, so I don't understand why it's not enough that a company is making money hand over fist. Why does it need to make more each quarter than the quarter before? Even when you continue to make more and more money it is perceived as bad if the rate at which your revenue increases is slowing down?

Is this sustainable? On a small island with 10 companies could they all show growth each quarter? How about a planet with thousands of companies?

Feel free to give me an economics lesson.

Companies don't need to make money hand over fist at all. Most companies are already satisfied if they make enough money to cover all of their cost and preferably have a small surplus to build up some reserve for balancing a future bad year.
Publicly traded companies (stock) are a whole different story though. As soon as a company is starting to trade publicly the people buying those stocks have to decide how much they want to pay for those stocks. This amount is based on what they expect from that company not only now but also in the future. So if this value would be determined at 100 Euro there wouldn't be any reason for this stock to ever become > 100 Euro if the company performs exactly as expected. So if a company is expected to earn 10 billion per quarter and does that the stock stays stable because the price of that stock was already based on 10 billion coming in every quarter. If the company was expected to grow by 1 billion every quarter and eventually stay stable at 10 billion that is another kind of expectation.
So you can see that for a stock to grow or shrink there has to be 1 of 2 situations:
1) The company does not perform as expected (once). The stock goes up or down a bit.
2) It becomes clear that the expectation was wrong. The stock goes up or down a lot.

And of course buying a stock for 100 is useless if you expect to sell it for 100 a few years later. The company that sells stock will also have to make expenses for dividends to give people a reason to buy stock that isn't expected to change in price. This dividend should be > inflation.

Reply Parent Score: 2

RE: Hand over fist
by dionicio on Fri 6th May 2016 18:11 in reply to "Hand over fist"
dionicio Member since:
2006-07-12

Then the money should go to highways, and to coral reef and beach restoration, but Apple [and Microsoft and Google] probably dummy at those tasks.

Reply Parent Score: 2

RE[2]: Hand over fist
by dionicio on Fri 6th May 2016 18:28 in reply to "RE: Hand over fist"
dionicio Member since:
2006-07-12

Some times, at some economic fields the conditions do indeed appear to healthy growth. But THERE ARE NOT UNIVERSAL 'MAGICIANS'. Leave that to TYRANTS PACKS, or CRIMINAL ORGANIZATIONS [Sort of the same].

Collect YOUR winnings and GO inverting at something else where you HAVE EXPERIENCE on. Or hire the Institution with the generational experience to do it in your behalf, and the behalf of the Society you live within.

Reply Parent Score: 2

RE[2]: Hand over fist
by dionicio on Fri 6th May 2016 18:49 in reply to "RE: Hand over fist"
dionicio Member since:
2006-07-12

Tyrants by the millions everywhere there are. Few of them dominate the art of the PACK-ing. Any examples? ;)

Reply Parent Score: 2