Steve Jobs and Apple’s Last Previous Earnings Warning

Wednesday, 2 January 2019

Apple’s last earnings warning before today’s, on 18 June 2002:

Apple today announced that it expects to generate revenues of about $1.4 billion to $1.45 billion in the June quarter, down from previous guidance of about $1.6 billion. The lower-than-expected revenues are primarily due to soft demand in the consumer and creative markets such as advertising and publishing. Geographically, revenues in Europe and Japan have become particularly weak. The revenue shortfall is expected to be offset significantly by higher-than-expected gross margins primarily due to lower costs of some components. Accordingly, the Company has revised its earnings guidance to $.08 to $.10 per diluted share, compared to previous guidance of $.11 or slightly higher.

“Like others in our industry, we are experiencing a slowdown in sales this quarter. As a result, we’re going to miss our revenue projections by around 10%, resulting in slightly lower profits,” said Steve Jobs, Apple’s CEO. “We’ve got some amazing new products in development, so we’re excited about the year ahead. As one of the few companies currently making a profit in the PC business, we remain very optimistic about Apple’s prospects for long-term growth.”

That’s it — that’s the entirety of this warning. Two paragraphs, under 200 words. Tim Cook’s “letter to investors” today was about 1,400 words. Part of this is just the nature of Apple being an industry titan blue chip today vs. being an outlier in 2002. The iPod was Mac-only in June 2002. And just look at the numbers: their 10 percent adjustment was just $200 million in revenue. Apple adjusted revenue today by about $7 billion (and that was only 7 percent — less on a percentage basis than the 2002 warning).

But man, delivering bad news was one area where Steve Jobs really shined in a way that Tim Cook just can’t. Look at the tight construction of that message from Apple in 2002. First paragraph: put out the numbers. Second paragraph: it’s an industry-wide problem, but Apple has “amazing new products” coming. And then the kicker, the dagger: “As one of the few companies currently making a profit in the PC business…”.

We’ve got some short term bad news but don’t worry, we have this.” And… out. Short and sweet. Rip off the bad news Band-Aid, express quiet confidence that Apple is in great shape, and that’s it. Message over.

Even if Jobs were still around I don’t think Apple could get away with a message so short with today’s news. But Cook’s letter was just too long. There was no story to it, no narrative. It should have been something along these lines (paraphrasing for succinctness, obviously — well, maybe not obviously):

We all know the Chinese market is fucked up — half because China is China and half because of you-know-who’s dumbass trade war. This quarter that fucked-upped-ness hit iPhone harder than we expected. But China is the whole problem — everything else is noise. Customers around the world love the iPhone XS, XS Max, and XR, and iPhones account for 90 percent of the profits in the entire handset industry. We expect that to grow as our competitors struggle to differentiate themselves from each other.

Boom, drop the mic.

Jobs’s arrogance got him into trouble at times, but at other times it was his saving grace. One of the finest moments in Apple’s history, at least from a messaging standpoint, was the company’s response to the iPhone 4 antennagate controversy. That press conference was a masterstroke. But underlying its success were two things: (1) the story truly was vastly overblown — the iPhone 4 antenna did have a weakness but it was a terrific product overall; (2) Jobs knew this and took a “I can’t believe I have to waste my time with this bullshit, but OK, I’ll explain it to you” attitude into dealing with it.

I think Cook’s genuine and inherent humility holds Apple back on days like today. Apple needed less “I’m sorry, let me explain” and more “Fuck you, this is bullshit, let me explain”. What people took away from Cook’s letter and TV appearance today is that the iPhone laid a turd last quarter. Properly delivered, the takeaway should have been that China is crazy but the iPhone is still kicking the shit out of the entire rest of the handset industry and is only pulling further ahead.