Ah, here we are again! Divining the future of the world’s biggest technology corporation, Apple Inc, by reading not the entrails of a chicken but the entrails of Steve Jobs. But this is as it must be, given Apple’s infamous culture of secrecy.
Apple’s brief, almost content-free announcement that Jobs, their chair and CEO, has gone on medical leave should come as no real surprise. Jobs is a sick man, as has been known since the August 2004 revelation that he had been diagnosed with islet cell neuroendocrine, a rare form of cancer of the pancreas.
The Washington Post’s chronology reminds us of Jobs’ “treatable hormone balance” in 2009, then the “more complex” health problems, then the liver transplant, then continuing speculation through 2010 about his gaunt appearance — but don’t you worry about that. Look at this shiny new iPad!
No, this shouldn’t trigger surprise. But it should certainly trigger … curiosity.
The news of Jobs’ medical leave comes on the eve of Apple’s quarterly earnings call at 2pm Tuesday PST. That’s 9am tomorrow AEDT.
One might hope we’ll hear more about Jobs’ health and perhaps a succession plan. While as Bloomberg Businessweek points out, this information doesn’t necessarily need to be made public, “greater clarity may be essential in the case of Apple, a company whose image is so intricately tethered to a charismatic CEO”. Well, yes.
Yet Apple has a history of denying shareholders this key information. Back in 2004 no-one was even told Jobs had been diagnosed with cancer until it was announced he’d been cured. Apple does have a succession plan, they claim. They’re just not sharing it. Board members have consistently kept schtum.
Now combine this with the fact that for years Apple has been publishing decidedly conservative profit guidance figures and then announcing — surprise! — sales and profits far better than “expectations”.
According to analysis to be published tomorrow at Business Insider’s Chart of the Day: “Since Sept. 2006, Apple has topped its quarterly EPS [earnings per share] guidance by an average 41%, and its revenue guidance by an average 9%.” If that were to happen from time to time, well, any business can have a good quarter or two. But for it to happen so consistently for so long?
One explanation is that this is just to fuel the mythology of Apple as a magical company. But it also strikes me that this combination of secrecy, consistently low estimates and then “surprises” creates the perfect environment for, well, canny and well-connected traders to make a killing in the days either side of these quarterly earnings calls.
At the very least, surely this works against the concept of a transparent market?
No-one seems to care, given that Apple’s shares have steadily climbed from under $100 to well over $300 in the last two years. As long as the music’s still playing, eh?
Tomorrow is trickier to predict. Apple changed the way it reports iPhone revenue a while back. However, Wall Street consensus is that we’ll be told an EPS of $5.38 on $24.4 billion of sales, according to Business Insider, compared with December quarter guidance of $4.80 on $23 billion. Using BI’s calculated average, though, it’ll be more like $6.77 on $25 billion.
Are we in for another “surprise”? Or does the Jobs announcement foretell of a surprise of a different kind?
The Jobs health news certainly hasn’t killed Apple’s share price. The opposite, in fact. As I file this story at 11.15am AEST, shares are trading at over $348 and rising — the highest price in Apple’s history.
Stilgherrian – re. your comment about the Apple share price holding up despite the news about Jobs’ leave of absence, this is because you are looking at the NASDAQ price and the US markets were closed overnight for Martin Luther King day. Long way of saying that the $348 per share price was the closing price last Friday night (NY time) before the news was announced.
Apple is also listed in Frankfurt, Germany and Apple shares on the Frankfurt exchange plunged almost 8% last night on the news. Expect further pain tonight when the NASDAQ reopens after the US long weekend.
The reason why people buy Apple shares is simple : it keeps going up. At some point in time, it will go back down, and then vulture lawyers will sue. Articles like the one above is merely ‘fodder’ to be used as ‘evidence’ that Apple has been ‘deceptive’. Anyone with internet access could have looked at the photo of Steve Job to see that he is sick, and getting sicker. If investors cannot even be bothered to search on Google, then they’re definitely not read Apple announcements either. They are merely buying/selling on price signal alone.
@Eugene Wong: You’re quite right. That’s what I get for straying from my core focus and knowledge of US public holidays.
As a related question, though. If the earnings per share is around $5 or $6, yet the shares are trading over $350, doesn’t this make the shares a tad overpriced? I’d be interested in comments.
Are you sure the EPS isn’t $15.38 rather than $5.38? Last time I checked Apple was trading on a P/E of 25 or so…pretty much the same as Google. This is not an unreasonable multiple for mature tech stocks with a bit of growth still to go..The price of a stock usually includes a growth premium.
My mistake. That EPS figure quoted by Stilgerrian is a quarterly…P/E rations are usually quoted on yearly earnings. Anyway, my original comment stands. Apple is not an overpriced stock.