The end of hardware transparency at Apple

Going forward, the company will no longer be releasing unit sales numbers for iPhone, iPad and Mac.

CFO Luca Maestri casually dropped his bombshell in the middle of Thursday’s Q4 2018 conference call. The talking heads on CNBC went a little nuts. I don’t think they heard another word he said.

Cook and Maestri offered several justifications. At the supermarket check-out counter, Cook suggested, they don’t ask you how many units you’ve got in your cart.

Other metrics, he argued—not very convincingly—give you better insight into the company’s performance in any given quarter.

Maestri also pointed out, correctly, that none of Apple competitors share their unit sales numbers. So Apple should be more like Samsung?

The transparency Apple offered analysts—professional and the armchair variety—was one of the things that made it unique. That’s over now.

My take: This seems wrong, and not just because it puts a stake in the heart of my quarterly earnings smackdowns.

18 Comments

  1. David Emery said:

    “At the supermarket check-out counter, Cook suggested, they don’t ask you how many units you’ve got in your cart.”

    Really? Maybe Tim Cook doesn’t do his own grocery shopping, but most big stores have “12 items or less” lines. Some have even more differentiation on the number of units in your cart.

    Frankly, that’s a dumb analogy. Because at the end of the day, they know (a) how many things you had in your cart, (b) the unit cost for each; (c) the total cost. And that strikes me as EXACTLY what Apple is now giving up, the number of items in the quarterly cart, and how much they (collectively) cost.

    1
    November 1, 2018
    • Walley Francis said:

      Consider this: Do grocery companies report how many “items” they sell or rather how much (in dollars) that they sold? Should a six pack of beer or soda be counted as one or six items? Should we or they care how many grains of salt or peppercorns are sold? To me, the answer is no. What we should be concerned with is the amount of their sales and the GM that they are obtaining. That is what is driving the business. Products come and go but financial results will always be there and are how a company should be evaluated.

      5
      November 1, 2018
      • David Emery said:

        Yeah, but that’s not the analogy Tim used.

        0
        November 2, 2018
  2. Jonathan Mackenzie said:

    Going forward it gives Apple a great deal of flexibility in terms of new product reporting. And now we’re not likely to ever see those watch numbers some of us were waiting for. I support the move, but I’ll miss the drama.

    7
    November 1, 2018
    • David Drinkwater said:

      Yeah, but the drama means you need Dramamine during reporting season.

      And it also gives more tools more tools to play with while tooling with Apple earnings.

      And as much as I had wished Apple hade told me the iPhone was coming *before* I sold shares in 2007, they do the right thing by keeping secrets.

      2
      November 1, 2018
  3. Peter Kropf said:

    So now we’ll get analysts who’ll be paid to estimate those numbers.

    Here’s one benefit I can think of:

    They’ll be able to hide the iPhone, iPad, and Mac model and RAM mixes. Tim and team believe they are about to kill it in 19, 20, and 21 and they don’t want to help competitors see where the Apple-led market is going.

    9
    November 1, 2018
  4. John Konopka said:

    If Apple still reports the ASP then we will have estimates of the units sold. I’m mostly interested in this from the viewpoint of getting a feel for the magnitude of the business.

    0
    November 1, 2018
  5. Robert Paul Leitao said:

    Apple’s announced decision on changes to revenue reporting are totally appropriate and the new data that will be provided will be more relevant to analysts and shareholders.

    The market is and has been obsessed with iPhone unit sales to the point it has obfuscated and obscured the company’s emerging revenue model. This is a first step in what I’ll call the “post-iPhone era” for Apple.

    For Apple, quarterly results are little more than a static snapshot of a fast-moving enterprise object. There is little to be gleaned from quarterly unit sales reports when the release dates for product upgrades and new product releases move between quarters.

    The new reporting model will provide revenue and gross margin information on hardware devices and services. Several Wall Street analysts have been quoted on the digital pages of Apple 3.0 suggesting Services revenue, on a dollar-for-dollar basis, should be accorded a higher valuation than revenue from device sales. Under Apple’s new reporting model, the necessary information for valuation purposes will be provided to analysts and investors.

    Apple is much more than iPhone unit sales. The Street’s obsession with quantitative data on iPhone unit sales versus interest in qualitative data on revenue and margin by segment for all of the company’s major revenue segments will now begin to come to an end.

    12
    November 1, 2018
  6. Gary Morton said:

    Excluding the unit sales figures will likely have a slightly positive long term impact on the stock price. Analysts and investors did get way too focused on the unit numbers. For my own modeling, the unit sales were quite useful, but it will be nice to get a little more granular information on the margins.

    One unintended impact will be in the IDC and Gartner unit sales estimates which until the last few quarters were often wildly off, to the downside, especially on Mac sales. Now there will be no definitive information to assess the accuracy of such reports. Not sure what impact that could have. IDC especially seems to have an anti-Apple bias.

    In the long run, investors will look to revenue as the ultimate measure of health for Apple instead of iPhone unit sales. Since revenue is the first input into the P&L, and ultimately EPS, the reporting change will drive a more comprehensive and most likely more accurate way to assess the business.

    5
    November 1, 2018
  7. Gregg Thurman said:

    Dropping units sold reporting is a dream come true for me.

    0
    November 2, 2018
  8. David Brashear said:

    One of the problems that American companies face, with their transparent reporting, is that they essentially give away vital marketing and strategy information to their foreign competitors. While investors like the open books – competitors love the open books even more. Apple shouldn’t give any more detailed sales related information than Samsung or any of the Chinese manufacturers. It’s a competitive world – and you’ve got to have a winning strategy. As an investor I’ll miss the details – but I completely understand the shift.

    0
    November 2, 2018

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