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Comment by zapzupnz | Hacker News Reader

> As Apple struggles with sluggish iPhone sales

Yeah, iPhone sales are below expectations, but Apple's struggling? Hyperbole remains the tech journalism's go-to, I see. I was hoping tech journalism might've made cutting that nonsense out part of their New Year's resolutions, but apparently not.

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I used to feel that it was hyperbole when a big deal is made at huge companies that miss earnings but still do significantly better than most. The problem is investor sentiment. All investors want their investment to grow which makes stability (not stable growth but actual stability) seem bad. New investors including hedge fund managers making decisions for thousands of investors will want to choose investments that grow. Less demand will end up decreasing the value of the stock, potentially wiping billions away from the marketcap. The actual company could be making gobs of money but the way the market is, companies get a premium on their valued based on multiples of their future growth potential. If growth potential goes away, the stock price will take a hit accordingly. An investor might see iPhone sales increasing year over year and conclude that their investment will be worth more because of the future value gained from more and more sales in the future so they hold the stock. If the hope of increasing growth goes away or decreases in any way, so does that premium. Dividends help with this reduce this effect but not completely.

The effect you're referring to is caused by speculators who predict that growth will continue and bid up the stock price, which then falls back to the baseline when the prediction is shown false. Companies should stop eating their seed corn just to keep quarterly profits above the level dumb speculators predicted it would be, at the expense of the long-term health of the company. But most of them probably won't as long as executive compensation is tied to short-term numbers rather than long-term numbers.

I hate inaccurate journalists as much as the next guy, but I think you're being a bit hyperbolic on a single adjective while also misreading it. I think they mean it's the sluggish sales they are struggling with, not a struggling company.

Even so, they're missing expectations — still selling millions of devices. If that's struggling, I'd love to struggle.

They are struggling with something, not themselves struggling (I shouldn't have said adjective earlier, that is used as a verb it's different). Either way, with the really bad journalism these days about tech companies, this specific pedantry is hardly notable.

I don't agree. Every instance of the tech press using their one weapon, language, to do what they've always done — lazily yet consistently spell the doom of so-and-so company — is always worth a mention. Ignoring one symptom of a cold doesn't make the cold go away.

When it's difficult to identify a cogent strategy, other than milking the cash cow, I think it is definitely a concern when the cash cow shows weakness.

Remember Microsoft's position pre Ballmer? That's Apple.

Tim may be one monkey dance away from being the next Steve Ballmer.

52-wk high 233.47

52-wk low 142.00

I don't think "struggling" is hyperbole. They are still making lots of money, sure. But the market smells something significant.

That is the Apple stock price, not iPhone sales. These are related, though separate issues. A stock price can go or down for a number of reasons.

What I was replying to:

"Yeah, iPhone sales are below expectations, but Apple's struggling? Hyperbole remains..."

The complaint was specifically the article's characterization that Apple is "struggling".

First sentence of the article: "As Apple struggles with sluggish iPhone sales and a falling stock price..."

falling-stock-price

I have a naive question related to this:

Why does a company care what its stock price is? If I buy or sell a share of Apple, Apple doesn’t get any money from the transaction, right?

Why should a company be concerned about its stock price at all?

I’m not talking about when a company IPOs and sells shares, I’m talking about after that.

The company doesn’t care so much as the employees, especially those who have a significant amount of comp coming from RSUs or other forms of stock, which these days is a large part of the workforce at big tech companies.

Because when it's lower than expected, shareholders start meddling, sometimes in ways that counter company goals.

And in the extreme case, an undervalued company may be subject to a hostile takeover. Apple is somewhat protected by its sheer size, but at a P/E of 10, it's a quite attractive target.

To the extent that you believe a company's primary responsibility is to it's shareholders, increasing the share price (over the long term) is the main thing a company is meant to do.

I would state it more broadly and say that it is the responsibility of the company to ensure a good return on the shareholders' investments. That could be by increasing the share price, but it could also be by paying dividends. Also, remember that a company's stock value doesn't necessarily reflect its true intrinsic value. Sometimes when a company is liquidated, it turns out that it was undervalued by the market. But more importantly, it may valuable to control the company in a way that is not reflected in the share price at all. Warren Buffet gave an example of this the board of the Washington Post in the 70's, when he was advising them how to invest the money in their pension fund. He said that for a newspaper specifically, it might make sense to invest in a printing company because of the benefits it might give to the newspaper to control the printing company. The value of owning the printing company might not directly be reflected in the in the financials of the printing company, but indirectly in the reduced costs or higher quality product of a different company.

Struggling to meet high expectations isn't the same thing as generally struggling.

But saying that a company is struggling because it stocks price is falling is like saying that a dog is happy because it is wagging its tail. In other words, it is reversing cause and effect. A company’s stock price may be falling for any number of reasons, one of them being that the company is struggling in the market, just like a dog may wag its tail for any number of reasons, one of them being that it is happy.

You don't think they sit in board rooms speculating/struggling on how to get the stock price back up? Discussing potential non-root-cause fixes like buybacks, PR, etc? Whether it makes sense or not, company leaders do often fret about stock price separate from the actual drivers.

No, I don't think they do in most boards, unless the board members are individually dangerously exposed to drops in the stock price (Elon Musk cough). Apple more so than most other companies, is famous for taking the long view strategically, so I would be very surprised if drops in the share price in and of itself would cause them to alter their strategy. They haven't any of the previous times in the last two decades, when the stock dropped significantly.

Oh, thanks. Since there were two options, at first it seemed the earlier reply was concerning both.

Also, on the falling-iphone-sales - I also wonder how big the fall is; but I am conscious that journalistic reporting might use hyperbolic comparisons to an extreme.

Yeah. The iPhone 4 sold like hotcakes, but the antennagate media circus made the stock go up and down like mad.

Seems like the market alternates between irrational exuberance and irrational pessimism.

And there are rewards for being on the leading edge of both, if others follow.

Apple makes their money from services, not hardware. Declining new iPhone sales would only be a problem if people left the ecosystem to buy Android phones.

That’s not true. They make less than 20% of their revenue from services. The iPhone accounts for about 60%.

Here are some nice charts you can look at: https://www.macrumors.com/2018/11/01/apple-4q-2018-results/

Most of their money comes from hardware. And for the largest part of 2010s their services (Store, Music, iCloud) income were insignificant. Even now it's just around 20% of total revenue.

This is false.

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