Apple shocked the investor community earlier this month when it announced that it would no longer report iPhone sales, or shipments of any particular product, during its quarterly earnings calls.
Most every stock analyst agreed that it meant Apple wanted to hide them. Some said they no longer trusted the company. One called it a “jaw dropper.” Another said “frustrating.”
I say “duh.”
Other tech companies are notoriously opaque on performance details. For instance, Facebook doesn’t carve out what it spends or makes on Instagram, which is believed to account for a solid chunk of its business. Alphabet doesn’t reveal sales on YouTube, and while its self-driving car subsidiary Waymo is estimated to be worth more than $175 billion, there’s not a shred of reliable, publicly disclosed data to confirm or refute that number.
Similarly, Facebook doesn’t report how many Oculus VR headsets it sells, though it happily promotes the potential market for VR totaling many billions of dollars…somehow, someday.
You’d think public companies would be held far more accountable by accounting rules arising from them being public ’n all, but it turns out there’s a fair amount of wiggle room when it comes to the details.
A lot of it was tradition, not regulation, like the monthly comp store sales numbers that retailers used to report because, well, that’s just what they did (many of them no longer do so).
Only tech companies have no such habits to break, and the transparency thing gets even cloudier when it comes to VC-backed tech businesses,
Just consider Uber, which is thought to be worth north of $100 billion, even though it has never managed to make a profit (the last quarter evidenced one, but it came from a financial transaction). AirBnB could be worth $31 billion, thanks in part to a reported two thousand seventeen EBITDA of $100 million, it’s first-ever profitable year, though while that might sound good, it came from revenues of more than 3.5 billion, and without much breakdown to explain it, we’re left with an EBITDA to sales ratio like 2%.
If Apple reported that margin, it would be considered worthless (its ratio is consistently 30% or more, by the way).
Do you see a disconnect here?
Tech companies get lots of slack from investors who are happy to embrace sometimes insane predictions of future performance, based on little more than wishful thinking or upwards-pointing arrows on powerpoint slides. Whether public or private, if we want to determine the valuation of a tech company, we’ve been taught to look at what we think other people think the valuation of the company should be. Gazillions of dollars have been invested based on this metric, and this metric alone.
Sales details, or actual, sustainable profitability, let alone realistic growth forecasts? That stuff’s for suckers.
So why should Apple be held accountable to some higher standard than other tech companies?
I find it crazy that we’d actually know less about company performance now than we did back in the old days of pencil scrawls on ledgers and stock valuations accomplished by hand gestures on noisy, crowded exchange floors, but so be it.
Today, less transparency is the rule, not the exception.[This essay originally appeared as a podcast at The Brand Populist]