Could the company’s silence about its capital allocation plan be an indicator of bad earnings news in the pipeline? Is Apple planning to use news of a dividend increase as a poultice for a share price bruised by some disappointing financials?

That’s a theory that has been growing legs in recent weeks. If Apple were to report March results below its guidance on April 23, bundling those numbers with an increase to its shareholder dividend could take some of the sting out of them.

“The lack of announcement [has] increased speculation that the company is planning to package the good news of a new capital plan with the bad news of the quarter or even worse … fears of a pre-announcement,” BTIG analyst Walter Piecyk explains. “Even the contemplation that the management team would stoop to packaging good news with weak results should be disappointing enough to investors that have considered this company as ‘different’ and above the cosmetic games played by far too many management teams.”

Certainly a plausible theory. And it may well be that we see it play out on the 23rd.

Or not. Apple recently changed the way it provides earnings forecasts, moving from a conservative point estimate of results that it had reasonable confidence in achieving to a range of guidance that it feels it’s likely to achieve. And that’s the big wild card in the company’s next earnings report. If that shift in guidance succeeded in lowering analysts’ expectations to a more reasonable level for the March quarter, it’s entirely possible that Apple will meet them — assuming that it meets its own forecast. Note that Apple’s guidance for the quarter it will soon report was for $41 billion to $43 billion, and there are a few analysts calling for it come in below that.

So, if Apple reports in that range — or surpasses it — it’s good news.

And if it announces a dividend at the same time? Well, that’s very good news, indeed. It’s just the sort of propellant Apple’s share price needs right about now. And something very different from the “cosmetic game” some folks fear the company will play.

“We approve of what Apple said.”
– China Foreign Ministry spokesperson Hong Lei

As expected, Apple’s rare public apology to China for its allegedly unfair warranty and repair policies has proven a fast-acting and effective antidote for escalating tensions in the country. Not 24 hours after its publication, and already the country’s state-run media has eased off the vitriol and is trading mudslinging for bouquet tossing.

China’s Foreign Ministry on Tuesday lauded Apple for its “conscientious” response to the country’s concerns. And government mouthpiece The People’s Daily, which just days ago had been slagging Apple for its “unparalleled arrogance,” held the company up as a model for other foreign businesses.

“The company’s apology letter has eased the situation, softening the tense relationship between Apple and the Chinese market,” the publication wrote. “Its reaction is worth respect compared with other American companies. CCTV also deserves our respect and encouragement for daring to criticize a business giant like Apple.”

“Unparalleled arrogance” to “worth respect” in a day — what a swift and thorough rapprochement. Not bad for the small price Apple paid. As I wrote early this morning:

“Apple’s apology in China cost the company very little; indeed, the changes made to its repair policies in the country were relatively minor. But what it stands to gain from such a public mea culpa from Tim Cook could be significant, extending well beyond a simple easing of tensions in Beijing.”

Someecards

Those are questions many are asking after Monday’s unusual act of public contrition from the company, in which it pledged to amend its warranty and repair policies in China after nearly three weeks of attacks from state-run media. And there’s an easy answer to both.

• Apple apologized because it can’t afford a prolonged war of words with the Chinese establishment in what is now the company’s second-largest market.
• Yes, Apple’s apology was absolutely necessary. If it wasn’t, you can be certain Apple wouldn’t have bothered.

So why did Apple bother? Short answer: The company’s sales in China hit $22.5 billion in fiscal 2012. That’s more than double what they were in 2011, and it represents about 15 percent of Apple’s total revenue for the year. China is crucial to Apple’s future growth. Indeed, it’s so important that the company recently made Greater China a new operating segment. As Apple CEO Tim Cook said earlier this year, “China is currently our second-largest market. I believe it will become our first. … It’s a very, very important country to us.”

In other words, China is not just a top priority in Apple’s global expansion. It is the top priority. That being the case, any altercation with the Chinese government — whether its origins be real, imagined or manufactured — is decidedly unwise, and almost certainly not good for business.

Recall that Apple isn’t the only tech company to suddenly find itself at odds with China’s state-run media, and the precedents others have set don’t exactly suggest a favorable outcome. As Citi analyst Glen Yeung notes, Hewlett-Packard went a few rounds with Beijing back in May of 2010 and, as a result, the company lost an estimated 42 percent of its market share in the country over the next 12 months.

If you view HP’s 2010 experiences is China as a template for what Apple might face were it not to address the state-run media campaign against it, things could have gotten very ugly, very quickly.

“Apple derives ~16 percent of its sales in China (CY12) and China accounted for ~24 percent of Apple’s revenue growth in the past 2 years,” Yeung explains. “If Apple were to lose as much as 50 percent of their China market share, this would equate to ~$13.1 billion / $3.62 in revenues/EPS.”

Even if Yeung’s estimate were only halfway accurate, that put Apple in an untenable situation. Better to act quickly and publicly make amends than to risk more “Destroy Apple’s ‘Incomparable’ Arrogance” editorials in the People’s Daily, and the prospect of increased regulatory scrutiny from Beijing. Because neither of those things are going to help reach the goal of turning China from Apple’s second-largest market into its first.

Apple’s apology in China cost the company very little; indeed, the changes made to its repair policies in the country were relatively minor. But what it stands to gain from such a public mea culpa from Tim Cook could be significant, extending well beyond a simple easing of tensions in Beijing.

My guess is we’ll see some sort of rapprochement here pretty soon.

Update: And, like clockwork, here’s the rapprochement. From the People’s Daily, via Reuters: “[Apple's] apology letter has eased the situation, softening the tense relationship between Apple and the Chinese market … Its reaction is worth respect compared with other American companies.”

In the letter written in Chinese and posted to Apple’s website on Monday, Mr. Cook said the company deeply reflected on recent “feedback” on its warranty policies and apologized for misunderstandings created by poor communication with consumers.

The statement from the top of Apple’s leadership reflects the desire of the company to end the negative press onslaught in its second-largest market after the U.S.

Read the rest of this post on the original site »

If you want to see what Apple’s CEO looked like in the mid-70s, head over to Reddit, where user whitbaker has uploaded images of what appear to be Tim Cook’s yearbook from Alabama’s Robertsdale High School.

Is there news value in any of this? Nope! But you’ll probably want to click anyway. Meanwhile, since you’re here, this is not a home video of Cook and some of the other winners of the optimist oratorical contest.

Still here? All right, all right, all right!

Asa Mathat / AllThingsD.com

A U.S. District Judge on Wednesday ordered Cook to sit for four hours of deposition in the suit, which alleges Apple and five publishers colluded to raise digital prices in an attempt to thwart Amazon’s practice of discounting e-book best sellers.

Apple, which has dismissed the Justice Department’s efforts to depose Cook as a “fishing expedition,” had argued that Cook’s testimony wouldn’t add anything new to the case. It claimed there is no need for Cook to testify since he wasn’t named in the original complaint, nor has he been mentioned by any publisher witness involved in the case.

But U.S. District Judge Denise Cote disagreed. While the government’s complaint didn’t mention Cook, it did refer to Apple co-founder Steve Jobs. And now that Jobs has passed away, Cote believes Cook should sit for the questions Jobs would have had to answer. Said Cote, “Because of that loss [of Jobs], I think the government is entitled to take testimony from high-level executives within Apple about topics relevant to the government case.”

Now that Penguin, HarperCollins, Simon & Schuster and Hachette have all settled with the government, Apple is the last man standing in this suit, which it has been fighting tooth and nail.

As the company said when the DOJ first filed charges: “The DOJ’s accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon’s monopolistic grip on the publishing industry. Since then customers have benefited from eBooks that are more interactive and engaging. Just as we’ve allowed developers to set prices on the App Store, publishers set prices on the iBookstore.”

For Apple’s component supply chain, February is typically a sluggish month, but this past February was quite a bit worse than usual.

Sales data for a group of component suppliers that generate more than half of their revenue from Apple fell significantly during the month of February, says Topeka Capital Markets analyst Brian White, a foreboding sign for the iPhone maker. White says that his Apple Monitor, a metric that tracks key Apple suppliers, declined 31 percent sequentially over the month. That’s nearly four times the 8 percent dip it typically posts for the period. And even accounting for wildcards, like Chinese New Year, the numbers are bad.

“Since the timing of Chinese New Year can negatively impact sales in February, we also calculated the average February performance when excluding a January Chinese New Year, which equates to down 15 percent,” White explains. “Either way, the Apple Monitor came up short and delivered the worst February we have on record.”

Potentially ominous news for Apple — certainly a metric on which to keep an eye. That said, it’s also one that should be assessed while keeping a few important caveats in mind.

The first: This past February was lousy for the entire consumer electronics supply chain. White notes that every single one of his component monitors posted poor metrics for the month, with four of them turning in the worst or second-worst February on record. So Apple’s not the only company here with potentially concerning supply chain markers.

The second: As Apple CEO Tim Cook reminded us during the company’s first-quarter earnings call. “I would suggest it’s good to question the accuracy of any kind of rumor about build plans,” Cook said. “I would also stress that even if a particular data point were factual it would be impossible to accurately interpret what it meant for our overall business, because the supply chain is very complex and we obviously have multiple sources for things. Yields might vary. Supply performance can vary. … There’s a long list of things that would make any single data point not a great proxy for what’s really going on.”

In other words, a single peek at Apple’s supply chain is just that: A peek. And it may not be a good indicator of the overall picture.

Outside the U.S., iMac shipping windows remain at a week or more. In France and the U.K., they’re five to seven business days for the 21.5-inch models and one to two weeks for the 27-inch models. In Germany, the window is two weeks for both models. And in Japan, the 21.5-inch models ship in two to three weeks, and the 27-inch models in three to four weeks. So, overseas, iMac availability clearly remains somewhat constrained.

Why the intercontinental disparity in shipping windows? Simple: Apple has amassed enough North American inventory to meet expected demand. But this is true only of the iMac’s four standard models. The addition of any customization, even if it’s simply swapping in a trackpad for a mouse, pushes the device’s ship time back out to two to three weeks. Outside the U.S., the story is the same as it has been to date. IMac supplies still aren’t at the level Apple wants. As CEO Tim Cook noted on the company’s last earnings call, “We left the quarter with significant constraints on the iMac. … We are confident that we are going to significantly increase the supply. But the demand here is very strong, and we are not certain that we will achieve a supply-demand balance during the quarter.”

That remains the case today, as these varied shipping windows demonstrate. Which is not to say that Apple isn’t making headway. It is. As I noted here recently, Mac sales rose 31 percent year over year for the month of January, according to NPD, and the reason was likely improved iMac availability. But again, that was in the U.S. To reach supply-demand equilibrium overseas, Apple has to ramp up iMac production even more.

Last week, the fight between Apple and pugnacious hedge fund investor David Einhorn of Greenlight Capital went all flat when he withdrew a lawsuit after the company yanked a proxy proposal that would have allowed shareholders to vote on eliminating preferred stock from the company charter.

But the real issue at the core of the fight — the massive mountain of $137 billion in a cash hoard that Apple holds and that Einhorn wants it to distribute in some fashion to shareholders — still remains.

It’s not clear what Apple will do now, especially since a lot of it is overseas. But execs have indicated that they are evaluating what to do to best serve nervous investors, who have bidded the stock down 40 percent since the fall. While it’s not clear what that will be, it’s also pretty likely Apple will do something.

Until the company decides, though, I have some good ideas for CEO Tim Cook to consider:

* Apple could purchase 1,567,506 Tesla Model S Performance vehicles with 85 kWh battery and a carbon fiber spoiler at $87,400 each, which would effectively allow CEO Elon Musk to buy the New York Times (a bargain at $1.42 billion!) and use it as his own personal blog.

* It could buy 17.9 houses for each Yahoo employee located near its Sunnyvale, Calif., HQ, so they could be super-close to work, per CEO Marissa Mayer’s wishes. That breaks down to 206,015 overall homes for 11,500 workers, at a median sales price of $665,000 for the area.

* Apple could acquire a big chunk of the Internet all at once, including Groupon ($3.36 billion), Yahoo ($25.95 billion), Facebook ($61.7 billion), Twitter ($10 billion), LinkedIn ($18.32 billion), Yelp ($1.47 billion), AOL ($2.81 billion), Pandora ($2.09 billion), Zynga ($2.69 billion), OpenTable ($1.32 billion) and, finally, Pinterest ($2.5 billion). Phew.

* It could pay Andrew Mason’s $378.36 severance after getting jacked as CEO of Groupon 364,013,179 times over.

* Apple could pay for 97,857 parties for Yammer’s David Sacks’s 40th birthday (at $1.4 million each). Snoop Dogg included.

* It could foot the bill for the budget cuts to save the U.S. government $85 billion this year, so Americans could stop having to say “sequester.”

* Apple could buy $329 16 gigabyte Wi-Fi iPad minis for 416,413,374 people — everyone in the U.S. (315,429,318), plus France and Spain.

* Or it could just give the 7,069,909,686 people on the planet $19.38 each, and call it a day.

* Apple could use $1 bills to carpet an area of 560 square miles, which would more than cover Silicon Valley.

* Finally — and I think this would be a nice gesture to make up for calling his efforts a “silly sideshow” — Apple could give Einhorn 15.56 times the value of his $8.8 billion fund.

Or, of course, not.

Flickr user Gaku

Here are our Top 10 stories from the week of Feb. 25:

1.) “Physically Together”: Here’s the Internal Yahoo No-Work-From-Home Memo for Remote Workers and Maybe More [Previously: Yahoo CEO Mayer Now Requiring Remote Employees to Not Be (Remote)]

2.) Groupon CEO: “I Was Fired Today.”

3.) Exclusive: PayPal Co-Founder Levchin Launches New Payments Startup, Affirm

4.) Survey Says: Despite Yahoo Ban, Most Tech Companies Support Work-From-Home for Employees

5.) Why Silicon Valley Is the Next Detroit

6.) A Wristwatch Tells When Phone Calls, Emails Arrive

7.) Why Carriers Just Love Firefox OS

8.) Cook: Forget About Our Share Price, Apple Has Some Great Stuff Coming

9.) Yahoo Work-From-Home Controversy Already a Silicon Valley Billboard Meme

10.) Old Media Doesn’t Get New Media, Chapter 203: The Sheryl Sandberg Attack

For more of the week in review, you should follow us on Facebook and Twitter.

Asa Mathat / AllThingsD.com

If you’re an Apple shareholder dismayed by the downward trajectory of the company’s stock price lately, CEO Tim Cook feels your pain.

Remarking on the value of Apple’s stock, which has plummeted by roughly a third since reaching a high last fall, Cook said the company is obviously unhappy with its price. “I don’t like it either,” he told attendees at Apple’s annual shareholder meeting today. “The board doesn’t like it. The management team doesn’t like it.”

Cook urged patience, saying that if the company continues to focus on making great products, revenue and profit will follow. “What we are focused on is the long term; this has always been the secret of Apple,” he said, adding that the company has “some great stuff” in the pipeline.

Whether that’s the much rumored Apple Television or that so-called “iWatch” the company has been testing, Cook wouldn’t say. “Obviously, we’re looking at new categories,” Cook told shareholders. “We don’t talk about them, but we’re looking at them. … We invest in things we think are great to do.”

Beyond that, Apple’s shareholder meeting was pretty much a snoozer. As expected, the company’s board and management won strong support (Cook garnered a 99.1 percent approval rating). As expected, the issue of a lawsuit that forced Apple to remove a proposal from its proxy late last week was broached. And, as expected, Cook dismissed the suit with same rhetoric he used at the Goldman Sachs conference earlier this month. “I strongly believe it was a silly sideshow, regardless of how the judge ruled,” Cook said, adding later: “I don’t think the issue of returning cash to shareholders is silly, though. We’re seriously considering it.”

Previously: Apple’s Shareholder Meeting Likely a Snoozer

Apple HQ photo by Joe Ravi

Now that David Einhorn’s Greenlight Capital has successfully blocked a shareholder vote on a proposal that would have eliminated Apple’s ability to issue blank-check preferred stock without investor approval, there’s little in the way of interesting business to be conducted. Certainly nothing more contentious than votes on executive compensation, the election of directors and a pair of vanilla proposals, one that calls for Apple to create a board committee on human rights that would evaluate its supply chain, and another that argues that the company’s top executives should be required to retain at least 33 percent of their shares until they reach retirement.

So expect today’s meeting to be a largely dull affair — at least until the question-and-answer session that concludes it. There we might see a bit of action. With Apple’s share price down about 37 percent from the all-time high it hit five months ago, and some 14 percent since last year’s shareholder meeting, attendees may be more keen on pressing Apple to explain just what it plans to do to return to growth. Not that the company’s leadership will answer.

And then there’s that $137 billion in cash Apple is sitting on. The company has yet to clearly articulate its plans for that. Folks like Einhorn think Apple would be wise to release some of it to shareholders. Specifically, the longtime Apple bull wants the company to issue high-yielding perpetual preferred shares to existing shareholders.

It remains to be seen if Einhorn will attend today’s meeting to question Apple about his idea, but if he doesn’t, there’s a good chance someone else will. Again, not that the company will answer — or answer in a way that’s any different from what Tim Cook said during his recent appearance at a Goldman Sachs conference in San Francisco. “I think it’s creative, and we are going to thoroughly evaluate their current proposal,” Cook said. “We welcome all ideas from all of our shareholders, including Greenlight, and we’re going to thoroughly consider it.” Expect some variation on those remarks if the issue of Einhorn and his iPrefs proposal is raised.

So, barring any wild-card announcements from Apple (unlikely), today’s meeting will probably be a staid event — perhaps with a bit of flash and distraction if Einhorn shows up (also unlikely, I’m told).

Apple’s shareholder meeting kicks off at 9 am PT today at the company’s headquarters in Cupertino, Calif.