Bloomberg on Bloomberg’s Apple production cut scoop: Nevermind

From Alex Webb’s “The Global Chip Crisis Is a Blip for Mighty Apple” posted Wednesday:

The havoc besetting global trade is lapping at the feet of Apple Inc. The world’s most valuable company looks set to cut production targets for its new flagship smartphone, the iPhone 13, by 10 million units, Bloomberg News reported on Tuesday.

That even Apple is feeling the supply chain ructions reveals the extent of the problems. But it also underscores the mastery that Apple wields over that supply chain.

Because if you unpick the numbers, the actual impact on the company will be far from cataclysmic. Indeed, the stock closed just 0.9% lower after the scoop.

My take: The air is coming out of Tuesday’s story.

See also: Report of iPhone 13 production cut slices Apple in the aftermarket

23 Comments

    • Bart Yee said:
      @Horace

      I love one of your replies:
      “Pro tip: all inside info is bogus.”

      1
      October 13, 2021
  1. Kemble Widmer said:
    There they go again…..
    A careful read of the original rumor/article reveals the rumor was merely that the end of year builds may not hit their original target. The term “production cut” implies intentional throttling back IMO.
    In any event; let’s take solace the FUD machine couldn’t trot out the yearly “Apple slashes iPhone production” trope and had to get creative and try and twist component shortages into a production “cut”.
    Our yearly buying opportunity.

    3
    October 13, 2021
    • Kemble Widmer said:
      Years ago I designed production and assembly lines. If we had a target to build 300 widgets in a day, and only built 290, it’s not a “production cut”, it’s a missed target.

      3
      October 13, 2021
    • Kirk DeBernardi said:
      @ Kemble Widmer —

      Although I don’t have spare dry powder ($) to buy big, when I saw AAPL dip below 140, a long-tenured and rarely-rung bell went off in my head.

      Time to buy.

      Ding-ding.

      2
      October 13, 2021
  2. bas flik said:
    in the end its all about demand. supply without demand is killing. demand without supply is a missed opportunity.
    demand outpacing supply i can sleep on.

    3
    October 13, 2021
  3. Robert Paul Leitao said:
    @Joe Bland: Your reference is to an article written by a freelance writer without indication of any professional credentials the writer might have and was written for an accounting journal in 1999. It’s not a reference to a publication from a government agency or regulatory body. SEC Rule 10b – 18 has been amended and amended since the time of the article you cited. Apparently you can not provide any authoritative references to support your claim of an extended “blackout” period sourced from a federal agency or regulatory body with jurisdiction on the matter. That’s OK. You’re a nice guy. You are free to have your own opinions. In this instance I was looking for you to support your claim with facts.

    4
    October 13, 2021
    • Robert Stack said:
      @Robert, Joseph: Your discussion and my own curiosity about this issue prompted me to do a little research of my own. Here’s a quote from a White Paper by State Street Global Advisors:

      www dot ssga dot com/library-content/pdfs/etf/us/b27-buyback-blackout-periods-do-not-negatively-impact-performance.pdf

      “As a refresher, buybacks are when a company purchases its own stock in the public market for reasons that range from managing capital allocations between debt and equity to returning cash to shareholders. Some companies temporarily suspend share buyback programs during earnings blackout periods. These periods typically start a few weeks3 prior to reporting and end a few days after the earnings release.”

      The number “3” which follows the word “weeks” is a footnote, which reads: “Under Securities and Exchange Commission’s (SEC) Rule 10b–18 companies also need to consider corporate trading windows when repurchasing stock. The length is variable, but typically is a few weeks prior to announcement.”

      This report is dated September 2019, so it’s not out of date but I cannot say how authoritative this is. It says “Some companies temporarily suspend share buyback programs during earnings blackout periods.” To me this infers that blackout periods for repurchasing company stock are optional and not required by the SEC, otherwise wouldn’t they say all companies are required to implement such? OTOH, the footnote states that the SEC rule that Robert cites states that companies “need to consider corporate trading windows when repurchasing stock.” I’m confused!

      0
      October 14, 2021
      • Troy Thoman said:
        I get how blackout periods could be relevant to some companies in some instances, but if Apple say purchases 10,000 shares a day, I don’t see why they couldn’t continue to do that daily through earnings. Now if they suddenly bought 100,000 on a dip a week before earning when they already know the results, I get how that could seem sketchy and why a blackout period might be used to shield from the view of impropriety.

        3
        October 14, 2021
      • Robert Paul Leitao said:
        @Robert Good find! Because Apple has an ongoing repurchase plan and has been repurchasing shares on a regular and sustained basis since 2012, there isn’t much of an issue. If Apple, for example, suddenly chose to enter the market and repurchase huge numbers of shares with knowledge of favorable and undisclosed news immediately before earnings, there might be a really big issue. The SEC, to my knowledge, hasn’t established firm and fixed guidelines. To my knowledge, Apple hasn’t publicly disclosed a firm and fixed policy on when the company will and will not enter the market to repurchase shares. Management can voluntarily choose to suspend buybacks for any reason. In closing, claiming Apple is prohibited from repurchasing shares at any particular time, outside of guidelines set forth in SEC Rule 10b – 18, is not based in fact. The corporate trading window relates to the trading of individuals in their own company’s shares. Management is free to set its own best practices guidelines on the repurchase of the company’s shares.

        0
        October 14, 2021
        • Bart Yee said:
          @Robert, I’ve posted this before, now with a bit of update. This is what Apple has actually done during each month after quarter end, before or during earnings report. Except for the extraordinary April 2020 month at beginning of the pandemic, Apple buys significant #’s of share in its “potential” blackout month. Only proves shares are bought, not when in the month, nor whether there is or is not a blackout period at any point in the month’s days before or after the earnings report. I suppose when shareholder meetings are done in person again, someone can ask the question of blackout periods to Luca.

          Checking the month following quarter closing and end of that month earnings reporting: January, April, July, October. From 10Q’s, open & pvt. market transactions only as reported, % shares computed on # of shares basis, not $$ spent:

          2021 July TBD at earning report Oct 2021

          2021 Apr 57.0M sh x $129.97/sh = $7.4B, 41.9% of quarter’s shares, excluding a May 2021 ASR

          2021 Jan 63.9M sh x $133.04/sh = $8.5B, 43% of quarter’s shares

          2020 Oct. 25.81M sh x $116.23/sh = $3.0B, 12.9% of quarter’s shares

          2020 July 67.99M sh x $94.68/sh = $6.44B, 40.3% of quarter’s shares

          2020 April no shares repurchased (at beginning of Covid Pandemic) but shares bought in May and June.

          2020 Jan 17.794M sh x $309.09/sh = $5.5B, 28.5% of quarter’s shares

          2019 Oct 17.988M sh x $233.48/sh = $4.2B, 45.0% of quarter’s shares, excluding a Nov. ASR.

          2019 July 23.86M sh x $205.36/sh = $4.9B, 27.8% of quarter’s shares, excluding finishing Feb. ASR

          2019 April 30.999M sh x $201.62/sh = $6.25B, 35.3% of quarter’s shares

          2019 Jan 28.04M sh x $153.57/sh = $4.3B, 39.1% of quarter’s shares, excluding a Feb. ASR

          1
          October 14, 2021
          • Robert Paul Leitao said:
            Bart: Thank you. The data suggests open market repurchase activity continues unabated in the months Apple reports results. I appreciate the research.

            1
            October 14, 2021
            • Robert Stack said:
              Thanks to all for a very enlightening discussion!

              1
              October 14, 2021

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