October 30, 2019 / 9:27 PM / 13 days ago

Breakingviews - Apple needs CEO charm more than Facebook

The entrance sign to Facebook headquarters is seen in Menlo Park, California, on Wednesday, October 10, 2018. REUTERS/Elijah Nouvelage

SAN FRANCISCO/NEW YORK (Reuters Breakingviews) - Tim Cook’s charm offensive is coming just at the right time. The Apple boss has Washington and even Beijing on his side, while Facebook’s Mark Zuckerberg can barely speak without annoying someone in power – and his company’s apps are blocked in China. Yet since D.C. pressure ratcheted up a year ago, Facebook’s stock has performed better.

Zuckerberg has proved a poor advocate for his company. His assertion of nonpartisanship has fallen on deaf ears, both Republican and Democratic. He has been summoned to testify before Congress twice in the last two years. Last week, his defense of Facebook’s Libra cryptocurrency project failed to allay skeptics’ fears.

Meanwhile, Cook has successfully managed a mercurial Donald Trump. He has met the U.S. president and won tariff exemptions for Apple amid growing import taxes on Chinese goods. Despite accusations that the company’s App Store has anti-competitive elements, Cook hasn’t had to testify in Congress since 2016. Pulling an app used by Hong Kong protestors to track police movements curried favor with Beijing yet didn’t do much damage to the iPhone maker’s reputation.

But Apple’s huge, mature and complex business – worth over $1 trillion in market capitalization – means it has to play more defense. Over the last year, Apple’s stock has underperformed the Nasdaq 100 tech index. In the July to September quarter, Apple reported only 2% growth in its top line, and a 2% decline in Greater China sales. IPhone sales in the People’s Republic fell to their lowest level in five years in the period, according to Canalys, while rival Huawei Technologies gained a record 42% market share.

At one time Zuckerberg was besotted with gaining access to China but he has changed his tune. In a recent speech at Georgetown University, he cited Beijing’s censorship policy as a reason. For the time being, he may have lucked out in political terms. The social network still pulled in $5 billion in revenue from Chinese ad sales in 2018, according to Pivotal Research.

More broadly, the $540 billion Facebook’s advertising juggernaut keeps throwing off sales growth. It reported a 29% year-on-year rise in third-quarter revenue to nearly $18 billion, almost all ads. A $5 billion Federal Trade Commission fine imposed in July is a distant memory and its shares have outperformed the Nasdaq benchmark over the last year. Luckily for Facebook, it doesn’t need diplomatic skills like Cook’s as much as Apple does.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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