Tuesday, April 26, 2016

When Analysts Surrender

 It’s bad enough when analysts thank CEOs for letting them ask a question on an company earnings call, at least when they do it in a way that goes beyond a simple act of politeness and more towards a cringe-making act of fawning, which too many analysts have a way of doing these days.
 This is, after all, a business: it’s an analyst’s job to ask questions; it’s a CEO’s job to answer them.   Get on with it.
 What’s worse, however—much worse—is when an analyst who asks a good question gets schmoozed by the CEO, and instead of following up and getting an answer, surrenders.
 It happened tonight on the Apple call.
 After thanking the company for “fitting me in” (really?) the analyst asked Tim Cook—all quotes are from the indispensable Seeking Alpha—a very reasonable question about the “top two or three things” that had changed from the previous quarter, when Apple’s CEO was way more bullish about the demand environment for iPhones than it turned out to be.
 Cook’s response turned the question into a math equation:
 “…we did not contemplate or comprehend that we were going to make a $2 billion-plus reduction in channel inventory during this quarter. And so if you factor that in and look at true customer demand, which is the way that we look at it internally, I think you'll find a much more reasonable comparison.
 The analyst jumped on Cook for changing the subject—after all, he said, the fact that you decided to cut $2 billion out of channel inventory must mean you had $2 billion more product in the channel than you expected, which means “true customer demand,” as Cook called it, was $2 billion weaker than plan, right?
 Ha!  We’re joking.
 The analyst did no such thing.   He surrendered.   “Okay, great.  Thank you,” he said, and then asked a softball follow-up.
 Tim Cook took home $10.3 million last year.   He can handle tough questions.
 Personally, I’d like to know why Cook—who gets on his high moral horse every time some politically correct brushfire starts up somewhere in America—gives up without a sound when the Chinese authorities demand the Apple Store stop carrying apps involving the Dalai Lama.
 We know the answer: money.
 Still, it would be fun to ask.
 But don’t hold your breath.

Jeff Matthews
I Am Not Making This Up

© 2016 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.  This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever.  Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored.  The content herein is intended solely for the entertainment of the reader, and the author.

2 comments:

Anonymous said...

Great piece. Speaking of which, why didn't someone ask about automated cars again at the Berkshire meeting? GEICO is #2 now and they bought Van Tuyl and GM stock.

Jeff Matthews said...

Why bother?