Pretty much every sector of the economy that benefits either directly or peripherally from high oil prices is seeing similar 20%-ish drops. Companies in these sectors who are looking to upgrade their workforces with the latest technical gadgets are likely to hold off on upgrades and refresh plans until their markets recover. Many iPhone 6 buyers are still under contract and are toting an already damn good device. I'm not even thinking about upgrading until the iPhone 7 at the earliest.
Wall Street is so massively schizophrenic at this point. They've worked themselves into a frothing and drooling mess worrying endlessly about turmoil around security, regional unrest, the China financial market stumbling, and the endless rumination from the purveyors of doom and gloom.
Whether Apple's next readout is up or down it is nice that they're not flailing around trying to prop up an imaginary falling sky that arrives on a daily basis. They're staying focused on designing and building great products and letting the chips fall where they may.
I forgot to mention that in China, you have to be careful of their channel data, even if they are your own employees.
It is good that Apple is opening many stores in China. It will give them a more accurate demand assessment compared to gathering through purely third party data.
Have a friend whose IPO dream was dashed within a very short time because that dream was based on fake data reported by his Chinese subsidiary for years.
HP had a sophisticated channel data analysis team. They hired PhDs to run the modeling for demand forecast using channel data. When they implemented the same reporting system in China, they found incredibly up-to-date and 100% accurate data submitted by their distributors. Most of the time, real world channel data is spotty and behind time.
On further investigation, they also found the distributors hired a separate team of channel executives just to cook up perfect data. The real team continue to run amok.
It is reassuring to see a large company like Apple adjusting their inventory boldly. I remember in the early days, Jobs often cited their Mac inventory performance during his keynotes. As someone with channel marketing background, I sure miss news on channel management sciences.
The motivation for these channel movements may not be due to just 1 cause. The management usually commit them for multiple valid and beneficial reasons, not necessarily falling demand.
Of course we don't know what any of this means because we don't know Apple's production cycles, channel inventory etc. The question I have is if the March quarter is going to be brutal would Apple have to pre-warn about that? Or would they only have to warn if they were going to significantly miss December estimates?
Such stock adjustment is crucial for channel health. All the companies I worked with didn't dare to make meaningful adjustments. They keep stuffing the channels despite weaker demand. In the end the company spirals out of control because the channel wouldn't take any more new orders without getting compensated for existing inventory. Sony was the most prominent example here. Samsung is another one. They use other better selling SKUs to force the retailers to carry less desired SKUs, or carry more than they need. The CEOs didn't dare to properly account for their inventory for fear of knee jerk reaction like this, even though adjustment is not a bad news. It is to counter bullwhip effect and spikey demand, keeping inventory under control.
This is an extremely difficult problem to solve, partly because of human nature and compensation schemes. I used to sell channel inventory management solutions. The CEOs, COOs and VPs channel marketing all saw the problem, but most didn't want to manage the problem. They chose to cruise along and then hop to another company when the channel inventory problem caught up to them.
The right thing to do is to adjust the inventory as needed. Now _if_ Apple is rumored to introduce new phone(s) in March for the first time, then they will also need to take into consideration the potential cannibalization of the existing phones. The inventory control needs to be even tighter for more SKUs. They need to adjust now instead of when the new phone(s) come out.
If the next few phones in 2016 are different enough, they may also have to reconfigure some existing lines to make capacity for the new products.
The other possibility is a change in channel structure. Apple preparing for South America supply chain, or reconfiguring its EU supply chain to meet new tax regulations may also prompt this sort of organization change as they shift supplier relationships around.
All good points but still would indicate low guidance this Q. I'm coming to see this as a buying opportunity.
Apple probably did stuff the channel. That could mean that they beat guidance last Q and guide low this Q.
The market will react to the second one.
Not necessarily. Channel stuffing is illegal in US.
If the demand was based on realworld data, it's not channel stuffing. They are simply reacting to known spikes in demand.
Channel stuffing typically refers to activities many companies practices when they coerce with the distributors to fulfill fake or forced orders. It is very common in Asia (heck, some distributors smuggle products across border and call them parallel import too).
Some Asian distributors also treat the stuffing as their primary business model. They just park the inventory, and then demand so called market development funds from the brand owner periodically.
There is no evidence Apple is stuffing channel since they adjust their inventory openly and proactively.
Apple probably did stuff the channel. That could mean that they beat guidance last Q and guide low this Q.
The market will react to the second one.
Not necessarily. Channel stuffing is illegal in US.
If the demand was based on realworld data, it's not channel stuffing. They are simply reacting to known spikes in demand.
Channel stuffing typically refers to activities many companies practices when they coerce with the distributors to fulfill fake or forced orders. It is very common in Asia (heck, some distributors smuggle products across border and call them parallel import too).
Some Asian distributors also treat the stuffing as their primary business model. They just park the inventory, and then demand so called market development funds from the brand owner periodically.
There is no evidence Apple is stuffing channel since they adjust their inventory openly and proactively.
Channel stuffing would presume they're shipping product for which there's no expectation of payment wouldn't it? On the contrary when Apple ships products ( and most other companies as well) it's either already paid for by the distributor/retailer/end-user or payment arrangements were already made. I've no idea what the OP meant by "channel stuffing" when discussing Apple.
Foxconn makes stuff for lots of other companies as well. PC sales are down. Maybe a chunk of the slump came from them?
Easily. Christmas season is when most electronics get sold.
Foxconn has at least 18 major customers, the only one that Apple haters pay any attention to is Apple. Not even a one track mind, they're welded to the rails.
Not necessarily. Channel stuffing is illegal in US.
If the demand was based on realworld data, it's not channel stuffing. They are simply reacting to known spikes in demand.
Channel stuffing typically refers to activities many companies practices when they coerce with the distributors to fulfill fake or forced orders. It is very common in Asia (heck, some distributors smuggle products across border and call them parallel import too).
Some Asian distributors also treat the stuffing as their primary business model. They just park the inventory, and then demand so called market development funds from the brand owner periodically.
There is no evidence Apple is stuffing channel since they adjust their inventory openly and proactively.
Channel stuffing would presume they're shipping product for which there's no expectation of payment wouldn't it? On the contrary when Apple ships products ( and most other companies as well) it's either already paid for by the distributor/retailer/end-user or payment arrangements were already made. I've no idea what you mean by "channel stuffing is illegal" when discussing Apple.
Nope. Channel stuffing does result in payment. That's the whole point for reporting purposes. Most of these shipped goods get returned later. :-D
It is fraud.
if Apple ship to meet typically higher demand in the holidays, that's just forecasting and fulfilling spike in demand to prevent stock out.
the goods in the channel will still be sold to real customers down the road after the spike.
The news we read are all from the supply side. There is no official indication of demand per se.
Not necessarily. Channel stuffing is illegal in US.
If the demand was based on realworld data, it's not channel stuffing. They are simply reacting to known spikes in demand.
Channel stuffing typically refers to activities many companies practices when they coerce with the distributors to fulfill fake or forced orders. It is very common in Asia (heck, some distributors smuggle products across border and call them parallel import too).
Some Asian distributors also treat the stuffing as their primary business model. They just park the inventory, and then demand so called market development funds from the brand owner periodically.
There is no evidence Apple is stuffing channel since they adjust their inventory openly and proactively.
Channel stuffing would presume they're shipping product for which there's no expectation of payment wouldn't it? On the contrary when Apple ships products ( and most other companies as well) it's either already paid for by the distributor/retailer/end-user or payment arrangements were already made. I've no idea what you mean by "channel stuffing is illegal" when discussing Apple.
Nope. Channel stuffing does result in payment. That's the whole point for reporting purposes. Most of these shipped goods get returned later. :-D
It is fraud.
if Apple ship to meet typically higher demand in the holidays, that's just forecasting and fulfilling spike in demand to prevent stock out.
the goods in the channel will still be sold to real customers down the road after the spike.
The news we read are all from the supply side. There is no official indication of demand per se.
Actual "channel stuffing" will get you nailed by the SEC. Every big company knows they can't do it, and they don't, especially a high-profile company like Apple. But that doesn't mean there's not excess inventory that gets sold by 3rd party clearance vendors at a discount. For example eBay had a number of specials over the holiday from companies offering for brand-new iPhone 4S at a deep discount. Still do as a matter of fact. Next quarter you might find new 5's or 5c's discounted. So they do get sold, not dumped in a landfill somewhere. Nothing illegal about it.
EDIT: Well I guess there already new discounted 5c's for sale. According to the listings they were originally built for ATT. Now as little as $280, unlocked, and free shipping.
This ass clown regularly calls and asks questions to Tim Cook during earnings calls.
Tim Cook should chew him out and spit him out if he dares calling again. Unreal that this clown has the nerve to call Cook and Apple liars.
So people here are allowed to have multiple accounts? Or get banned and come back as something else?
Well, AFAIK the Sog35 account wasn't banned, but he promised a self-ban. The second account that sprung up spewing the same shit may have been banned - I just noted that the comments on one of the threads was removed. This is the second one this week I believe though.
Nope. Channel stuffing does result in payment. That's the whole point for reporting purposes. Most of these shipped goods get returned later. :-D
It is fraud.
if Apple ship to meet typically higher demand in the holidays, that's just forecasting and fulfilling spike in demand to prevent stock out.
the goods in the channel will still be sold to real customers down the road after the spike.
The news we read are all from the supply side. There is no official indication of demand per se.
Actual "channel stuffing" will get you nailed by the SEC. Every big company knows they can't do it, and they don't, especially a high-profile company like Apple. But that doesn't mean there's not excess inventory that gets sold by 3rd party clearance vendors at a discount. For example eBay had a number of specials over the holiday from companies offering for brand-new iPhone 4S at a deep discount. Still do as a matter of fact. Next quarter you might find new 5's or 5c's discounted. So they do get sold, not dumped in a landfill somewhere. Nothing illegal about it.
That's not channel stuffing dude.
in case you didn't notice, _everyone_ had discount on Apple products over the holidays. It may not mean anything. No point singling eBay out.
Apple also sell reburbished products over eBay for the deal hunters. That's a smart/reasonable move too.
Nope. Channel stuffing does result in payment. That's the whole point for reporting purposes. Most of these shipped goods get returned later. :-D
It is fraud.
if Apple ship to meet typically higher demand in the holidays, that's just forecasting and fulfilling spike in demand to prevent stock out.
the goods in the channel will still be sold to real customers down the road after the spike.
The news we read are all from the supply side. There is no official indication of demand per se.
Actual "channel stuffing" will get you nailed by the SEC. Every big company knows they can't do it, and they don't, especially a high-profile company like Apple. But that doesn't mean there's not excess inventory that gets sold by 3rd party clearance vendors at a discount. For example eBay had a number of specials over the holiday from companies offering for brand-new iPhone 4S at a deep discount. Still do as a matter of fact. Next quarter you might find new 5's or 5c's discounted. So they do get sold, not dumped in a landfill somewhere. Nothing illegal about it.
That's not channel stuffing dude.
in case you didn't notice, _everyone_ had discount on Apple products over the holidays. It may not mean anything. No point singling eBay out.
Apple also sell reburbished products over eBay for the deal hunters. That's a smart/reasonable move too.
The one's on eBay aren't refurbished. They're brand new 4s and 5c models, obviously leftovers after they were discontinued. In the case of the 5c's they were originally built for ATT. And I already said Apple wasn't channel stuffing so you're arguing with yourself.
Seems it's an easier transition from 6 to 6s than 5s to 6 meaning higher yields and greater supply earlier. My guess is apple over ordered and cutback.
Pacific Crest just put out a research note essentially accusing Tim Cook of lying:
Management’s confidence now looks highly likely to be misplaced, which suggests that it was either ignorant of the challenges it faced or deliberately overstating underlying trends. The former seems unlikely, which suggests that management has taken a much more aggressive tone as growth in the high-end smartphone market has slowed. This reduces our confidence in Apple’s commentary going forward.
Comments
I forgot to mention that in China, you have to be careful of their channel data, even if they are your own employees.
It is good that Apple is opening many stores in China. It will give them a more accurate demand assessment compared to gathering through purely third party data.
Have a friend whose IPO dream was dashed within a very short time because that dream was based on fake data reported by his Chinese subsidiary for years.
HP had a sophisticated channel data analysis team. They hired PhDs to run the modeling for demand forecast using channel data. When they implemented the same reporting system in China, they found incredibly up-to-date and 100% accurate data submitted by their distributors. Most of the time, real world channel data is spotty and behind time.
On further investigation, they also found the distributors hired a separate team of channel executives just to cook up perfect data. The real team continue to run amok.
It is reassuring to see a large company like Apple adjusting their inventory boldly. I remember in the early days, Jobs often cited their Mac inventory performance during his keynotes. As someone with channel marketing background, I sure miss news on channel management sciences.
The motivation for these channel movements may not be due to just 1 cause. The management usually commit them for multiple valid and beneficial reasons, not necessarily falling demand.
The market will react to the second one.
If the demand was based on realworld data, it's not channel stuffing. They are simply reacting to known spikes in demand.
Channel stuffing typically refers to activities many companies practices when they coerce with the distributors to fulfill fake or forced orders. It is very common in Asia (heck, some distributors smuggle products across border and call them parallel import too).
Some Asian distributors also treat the stuffing as their primary business model. They just park the inventory, and then demand so called market development funds from the brand owner periodically.
There is no evidence Apple is stuffing channel since they adjust their inventory openly and proactively.
Easily. Christmas season is when most electronics get sold.
Foxconn has at least 18 major customers, the only one that Apple haters pay any attention to is Apple. Not even a one track mind, they're welded to the rails.
It is fraud.
if Apple ship to meet typically higher demand in the holidays, that's just forecasting and fulfilling spike in demand to prevent stock out.
the goods in the channel will still be sold to real customers down the road after the spike.
The news we read are all from the supply side. There is no official indication of demand per se.
EDIT: Well I guess there already new discounted 5c's for sale. According to the listings they were originally built for ATT. Now as little as $280, unlocked, and free shipping.
in case you didn't notice, _everyone_ had discount on Apple products over the holidays. It may not mean anything. No point singling eBay out.
Apple also sell reburbished products over eBay for the deal hunters. That's a smart/reasonable move too.