Friday, April 12, 2013

A letter to Tim Cook

Dear Mr. Cook:

After watching the debacle in the price of Apple common stock, I have finally decided to write you a note.

Above is a graph of your stock price. A, is when you had the problems with maps.  B is your 60 minutes interview, and C is when you stated, regarding the $140 billion pile of cash on your balance sheet, that you were “seriously considering” that issue.

Wall Street is very simple. It is expectation and earnings game, and you, as a CEO have failed Wall Street and much of the $250 billion of value, lost in AAPL stock, can be explained by management’s missteps.

Consider that you will release earnings on April 23, and as expected, will announce your dividend rate. Wall Street has come to the conclusion that a dividend increase will probably come at that time, ostensibly to diffuse your weak earnings and prospective guidance for the next quarter. (See Morgan Stanley’s research note today on 4/12/13).

Previously you stated that Wall Street shouldn’t look at AAPL trends/extrapolations from supplier issues. If that statement is true, then you have done a disservice to shareholders who actually, have to use their own money to buy the stock, and have reacted to those reports by selling Apple, as Wall Street has already analyzed that.

If however, your earnings are poor, then we can understand why you decided to wait on a dividend increase at earnings, because of the simplistic mind set at Apple. Either way, it shows poor judgment.

Here’s why.

Apple was held in very high regard by corporations and individuals alike. The stock swoon has caused individuals and corporations to take a closer look at Apple as a corporation, and the veneer of Apple, the corporation is being washed away. We know that AAPL the corporation has stashed $90 billion in cash overseas, to avoid taxes. We know that Apple as a corporation has a business model that depends on low wage Chinese workers to assemble your products, to increase your profitability, at the expense of those workers.  We know that AAPL as a corporation has stashed $140 billion in investments that have not generated any substantial return, and that their dogged pursuit of safety, shows that Apple’s money managers, have a fear complex that permeates their investment decisions. We also know, that Apple, as a corporation, spent billions on a buybacks at much higher prices than current prices, with a hastly conceived buyback program that aided Wall Street instead of shareholders! And we know that you have apologized to China, but have completely disrespected your shareholders who own shares of Apple. Wall Street trusted Steve Jobs to do what is right; Wall Street trusts you, only, to do what is wrong.

Now you may disagree with what I say, and you may completely disregard this letter as the ravings of a malcontent shareholder, but you will be sorely mistaken. The stock price already assures that at this moment in time, I am right and that Apple as a corporation has already made many missteps; and therefore, you have done the only thing you could do, and that is to ignore the issue, in that hopes that eventually, the stock price will rise, and then, your sagacious Zen like quietness will be proven to be proper, and therefore, in the future, you can tell shareholders that Apple, like Father, always knows best, and the best advice, is to ignore Wall Street.

But it isn’t Wall Street that you are ignoring; it is the shareholders and the buyers of your products who have become disgruntled with your brand, which has been badly tarnished by the resultant fall in your stock.

And now, Mr. Cook, your comparisons, to Steve Ballmer of Microsoft, has already started.  Microsoft never regained the edge that it had when Bill Gates handed over the reins, a situation that Wall Street feels is now happening with Apple. The result of that perception, and low expectations for the company, has caused Apple’s stock price, to be giddily pushed around by Wall Street, depending on the open interest of the weekly option expiration contracts!

Isn’t that ironic? The biggest and most profitable company in the world gets pushed around by Wall Street, because Apple has adopted a “Father knows best” attitude!

So you can ignore Wall Street, while you are safely seated in your Apple ivory tower, but it still leaves one question unanswered, “What if Wall Street is right?”


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