Has Apple Learned Anything After Its Third Straight Quarterly Sales Decline?

Apple, Inc. reported a third straight quarterly sales decline this week. The Wall Street Journal reports:

The Cupertino, Calif.-based tech giant posted sales of $81.8 billion for the quarter ended in July, down 1.4% from the prior year, but largely in line with analyst estimates. Net income was up 2.3% annually at $19.9 billion. The company’s all-important iPhone sales fell 2.4% to $39.7 billion, missing analysts expectations of $40.2 billion in iPhone revenue.

NLPC’s Corporate Integrity Project filed a proxy memo with the Securities and Exchange Commission ahead of Apple’s annual meeting on March 10, 2023, in opposition to Tim Cook‘s reelection to the company’s board. In the report we alerted our fellow shareholders to the consequences of Cook’s failures to foresee problems in the company’s supply chain, which is heavily dependent on communist China:

Since taking over for Steve Jobs as Apple’s CEO in August 2011, Tim Cook has been nearly synonymous with Apple’s brand. Under his watch, Apple has become the world’s most valuable and profitable company. He has been praised by media organizations for his leadership and for his outspoken opinions about corporate social responsibility. But his actual record has often fallen short of the hype…

 

Despite the obvious ethical risks, Mr. Cook has directed Apple to continue relying on Chinese suppliers for critical components in its supply chain. In 2016, Mr. Cook signed a five-year deal with the Chinese government to invest $275 billion in Chinese manufacturing facilities in exchange for lighter regulations. Mr. Cook has claimed that manufacturing in China leverages the country’s innovative workforce. But conducting business under an authoritarian regime has proven to be a strategic mistake.

 

Apple’s Foxconn factory in China, the world’s largest iPhone factory, was shut down in November 2022 under the Chinese Communist Party’s oppressive “Zero-COVID” strategy. According to Daniel Ives, managing director of equity research at Wedbush Securities, the shutdowns cost Apple “roughly $1 billion a week in lost iPhone sales. Now roughly 5 percent of iPhone 14 sales are likely off the table due to these brutal shutdowns in China.” Since 2020, multiple other Foxconn factories have been shut down due to zero-COVID policies, costing Apple between $4 billion and $8 billion.

Because of Apple’s vulnerabilities, NLPC presented a proposal at the company’s annual meeting asked for a “Communist China Risk Audit” report. Speaking on behalf of the proposal, Corporate Integrity Project director Paul Chesser said in part:

wise CEO – one who is not obsessed with climate change, ESG distractions, diversity quotas, and capitulating to the Communist government’s censorship demands – might have foreseen such problems in advance.

 

But past comments from Mr. Cook indicate his irresponsible decisions regarding China have been willful

 

Unfortunately Mr. Cook has disregarded the real threat posed by the detestable government he has partnered Apple with, which is quickly turning from a U.S. adversary into an enemy; a government that is credibly accused of genocide, threatening its neighbors, cracking down on political dissidents, and unleashing a deadly virus on the world then covering up its origins.

Cook is often preoccupied with ESG activism and virtue signaling above Apple’s financial performance. Unfortunately Apple’s management team supported his reelection as director, and shareholders ratified it.

At least in part due to the holiday shopping season production problems, as NLPC noted, Apple’s share price took a big hit, dropping to about $125 in early January from the previous summer’s high of $175. The stock has now recovered some, which was helped by Cook’s zero-COVID-driven epiphany that he should diversify the company’s supply chain across other countries, which he did in India and Vietnam, reportedly.

Perhaps he has learned, but he should have heeded our warnings in the first place.

 

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Tags: Apple, China, shareholder activism, Tim Cook