Breakingviews - Apple departure points to wider mystery

A customer compares the size of the new iPhone XS and iPhone XS Max at the Apple Store in Singapore September 21, 2018. REUTERS/Edgar Su

NEW YORK (Reuters Breakingviews) - The surprise departure of Apple’s retail chief, Angela Ahrendts, leaves two questions. Why did she leave? And had she done a good job? Investors can’t know the answer to either. The $821 billion smartphone maker has a penchant for hiding information that investors would find useful. The lack of clarity helps explain the valuation discount hanging over its stock.

Ahrendts received $170 million in compensation in her five-year stint at Apple – a figure that includes unvested equity. The company added several dozen stores, and renovated more, between fiscal 2013 and today. These glistening temples of consumption buff Apple’s image, and help customers get their iPhones fixed or figure out which Mac to buy. But the company stopped breaking out the sales and profitability of its stores years ago, so outsiders are left guessing on performance. They can’t see whether Ahrendts’ departure, announced on Tuesday, signifies problems or a mission satisfactorily completed.

In the past, Apple’s silence has been a precursor to unpleasant news. The company said last year it would stop disclosing unit sales of iPhones, Macs and iPads – and issued a profit warning a few months later. The company said little about its watch sales when that product had a slow start. Sure, most rivals don’t disclose unit sales either, and context is important. Apple’s increasing reliance on services means declining numbers of gadgets sold might be nothing to fear, but the company can always explain if that’s the case.

Apple could also disclose how much of its services revenue comes from Alphabet unit Google, which pays to be the default search engine for the company’s gadgets. Goldman Sachs once pegged it at $9 billion annually, or more than one-tenth of the company’s pre-tax profit. Perhaps best of all would be more information on what projects the company is working on, since a company’s value resides mostly in the earnings that come years from now.

Investors aren’t giving much credit to Apple anyway. The stock trades at just 14 times estimated earnings, according to Refinitiv data, a lowly rating for a tech company. Disclosing more might persuade the market the future is brighter than they thought. In any case it might earn Apple some credit for giving a fuller picture.


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