On the cost of silence, at times an euphemism for obfuscation.
On Friday 2nd of November Apple said it would stop reporting unit sales. Following in the wake of a downbeat estimate of fourth-quarter sales, the announcement knocked the iPhone company’s share price down by 7%.
The wipe-out of US$70bn from a company’s stock market value in one single session – a tad more than what most listed companies on the planet can boast about their market capitalisation – would by itself have been an interesting piece of news.
Yet I found more food for thought in the claim that part of the drop was down to the upcoming change in the way the company will start reporting revenue – from next quarter, it will skip unit sales and report a raw revenue figure only.
At least two effects seem to have punished the share price: first, that the value of the Apple stock would now be harder to figure out; second, that the cutback in disaggregated information might be masking a weakness in unit sales, only countered by price rises.
But there is a third effect that might impact company valuation harder – the erosion of trust when the company retains crucial information without offering a convincing explanation for doing so.
Investors and analysts are generally not stupid – why play cat and mouse with them?
Read it on ft.com