Apple Inc. dropped a bomb on Thursday, but it wasn’t the weak forecast for the holiday quarter: It was the fact that it will no longer disclose unit sales of its products for investors, as it has for more than a decade.
Apple reported that unit shipments for the iPhone were flat at 46.9 million units sold in the fiscal fourth quarter Thursday, then executives in a conference call said it would be the last time the company gives such information. Investors should clearly take this as a sign that unit sales will decline in the future, and they will not be told.
Apple’s reasoning for the move was laughable. Chief Executive Tim Cook compared calculating the performance of a company valued at more than $1 trillion (at least until the stock opens on Friday) to an individual going grocery shopping.
“This is a little bit like if you go to the market and you push your cart up to the cashier and she says or he says ‘how many units do you have in there?’” Cook said.
No, Tim, it isn’t like that. It is more like when Oracle Corp., stopped breaking out revenue for its once hot cloud business after those numbers started to slow down. Or, to find a shopping analogy since Cook seems to like those, it is analogous to a manufacturer who has long sold you a package of eight cookies telling you that it may not be eight inside that package anymore.
Even that analogy is flawed, though, because at least you get to see what is inside the package once you buy it. Buying Apple stock doesn’t even get you that peek.
While Cook’s explanation was aggravating, Chief Financial Officer Luca Maestri’s was just confusing. He said Apple will stop reporting the important figure because it ... wants to make customers happy?
Beyond those answers, the general explanation was that total sales, as opposed to unit numbers, are more important. Both numbers are important, though. In the past few quarters, amid slowing iPhone unit sales, the company has managed to grow iPhone revenue with higher average selling prices and higher-end models like the iPhone 10X, making the average selling price of an iPhone the most important figure for investors and analysts. Without unit sales, that metric disappears as well.
The actual reasons for this move are likely twofold, and the first is simply, Apple can stop giving this figure.
“As I know you’re aware, by the way, our top competitors in smartphones, in tablets, in computers do not provide quarterly unit sales information either,” Maestri said.
Maestri is right — other tech giants do hide the actual performance of their largest business units, despite inquiries from regulators. Amazon.com Inc. does not break down allocation of its R&D spending or unit volumes on products like Kindle tablets or Echo speakers; Alphabet Inc. does not disclose the performance of Google’s YouTube business; and Facebook Inc. has yet to give details on Instagram and its other units.
Those companies have never given their investors that information, however, while Apple is now taking away something it has provided to investors for many years. That fact should worry anyone who has bought into this company.
Citigroup analyst Jim Suva gave the best summation of the most important actual reason for the change Thursday, bravely calling out Cook and Maestri and voicing what every investor should think.
“Some people may fear that this now means that the iPhone units are going to start going negative year-over-year, because it’s easier to talk about great things and not show the details of things that aren’t so great,” he said.
Talking about unit sales is no longer easy for Apple, so it will stop. What will be too tough for the company to disclose to its investors next? We will find out once Apple decides to stop.