Numbers matter. Wisdom and experience tell us that numbers alone seldom describe the whole story. Apple is a rich company that puts up stellar financial numbers quarter after quarter, but some numbers are more important than other numbers.
Which of all the numbers regarding Apple as a company are most important? For some, stock price and shareholder value. For others, marketshare. Some look at revenue and profit growth. Others look toward the future of new product and market opportunities.
Which numbers are most important? Which are least important?
Allow me to start with the least important business metric. Marketshare. Yet, that’s the metric that gets tossed around with abandon by market analysts and contrarian critics. With few exceptions, Apple products have always been sold from the premium end of the product spectrum. That’s the area where prices are higher, gross margins are higher, and marketshare is lower.
See the problem with marketshare as a metric that matters? It. Does. Not.
What about revenue and profits?
Both are important metrics but not to everyone. Apple manages to grow revenue even while iPhone, iPad, and Mac unit sales– remember, Apple is a hardware company– have faltered for years. How so? Prices. Every new product Apple announced in recent months has a higher price tag. That means a higher gross margin on each unit sold, which translates to higher revenue and higher profits.
What about shareholder value?
Most Apple Villagers agree that shareholders matter less to Apple than shareholders want to (stock holders don’t actually add anything of value to the company but manage to take home some of the profits in dividends), but look what happened after the most recent financials were released. Another record quarter was describe this way by Benjamin Rains:
Should Investors Worry About Apple Stock After Disappointing Q4?
Disappointing? How? Yet, Rains very next sentence went the other direction.
Shares of Apple fell over 6% through early morning trading Friday just one day after it reported some better-than-expected Q4 results.
Maybe we should have a primer on the valuelessness of mixed messages.
Apple fell short of some key segment estimates and said it would stop breaking down iPhone unit sales.
What happened after such stellar financial results should have been anticipated by savvy investors. AAPL dropped like a rock. Bad, right? Unless you’re in a buying mood and Apple had tens of billions of dollars lying around just waiting for the right time to push the button on the Stock Buyback Program.
Maybe the announcement that Apple would no longer reveal sales unit numbers by product was a shrewd move to let some air out of the stock so a buyback would cost less money per share. If so, it worked. iPhone, iPad, and Mac unit sales numbers are history. Just like all of Apple’s competitors who do not announce such numbers. Now it’s a level playing field.
Which Apple numbers matter the most?
It depends on your perspective, but to Apple, it should be obvious that the marketshare metric is at the bottom, and both revenue and profit are at the top; but not in that order. Apple can afford to help prop up AAPL because of all those higher gross margins and resulting profits, so that makes shareholders happy. Apple executives and other employees appreciate a higher stock price thanks to the company’s generous stock option plans.
Stock price matters, yes. Not as much as profits.