Apple says economy is “depressed”…
While some people continue to debate whether or not we’re actually in a recession, Apple (AAPL) went a step further in the 10Q it filed yesterday, using stark new language to describe the state of the economy in its risk factors section:
The Company’s operations and performance depend significantly on worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly in many countries and regions, including without limitation the United States, and may remain depressed for the foreseeable future. For example, some of the factors that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for the Company’s products and services and on the Company’s financial condition and operating results.”
I’ve highlighted the key words in this disclosure. Just to put this into perspective, this is how Apple handled the economy risk factor in the Q it filed back on May 1:
The Company’s operations and performance depend significantly on worldwide economic conditions. War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers.
Keep in mind that the words that companies use in their SEC filings are chosen very carefully, and this is probably particularly true for Apple, which is especially cautious about everything that gets out, as we’ve seen with the all the discussion this week on Steve Jobs’ health. The last time Apple used the word depressed in any of its filings was back in December 2003, when it used the word to describe its own sales, so it’s hard to chalk this up to an accidental insertion.
In Monday’s conference call, economic conditions came up briefly in a question from Sanford Bernstein analyst Toni Sacconaghi that was answered by CFO Peter Oppenheimer:
Toni, we’re going to leave economic commentary to others but we didn’t see any obvious impact to the business in the June quarter, and I talked a little bit about in my prepared remarks just how we did at the company level but also in the U.S., in our retail stores with our iPods and our education unit, which had the best June quarter in our history. We’re certainly aware of the economic environment and we’ve considered it among other factors in preparing our guidance.
Perhaps Oppenehimer was thinking nobody would catch what’s clearly economic commentary in the Q.
RSS
July 24th, 2008 at 11:47 am
Strictly speaking, Apple’s assertion there is simply this:
“Worldwide levels of consumer spending are depressed.”
Note that that assertion is not the same as saying that “The US economy is in a recession” and certainly not the same as saying “The US Economy is in a depression” — which I suppose you are implying with your salacious language about Apple going a “step further” than asserting the economy is in a recession. No one is going to say spending is “recessed”, now would they?
Apple lawyers may know that GDP consists of more than just the “consumer spending” component, though I think it’s clear Apple is not trying to do the job of the Bureau of Economic Analysis here.
And maybe the line is just poorly written and they did mean to say worldwide economic conditions are currently “depressed”. That is STILL nowhere near the same as claiming any economy, much less the US economy in particular, is in a “depression” or a recession — which are very specific technical terms in economics.
Lawyers are supremely careful when they write these things. If you’re going to try to play their game, you ought to be careful reading these things.
July 24th, 2008 at 11:54 am
I’m well aware that the lawyers and other folks involved in writing these filings are very careful and try to be equally careful. Of course, reading SEC filings is an art, as opposed to a science and it’s certainly easy to have a different opinion.
Others can choose to dismiss what’s clearly new wording in the Q as being insignificant. Maybe it is. Maybe it isn’t. But my experience reading the filings is that things don’t wind up there accidentally. That kind of thing might happen during a conference call or an analysts’ meeting, but not usually in the filings.
July 24th, 2008 at 2:29 pm
Waaah!!!
The economy is bad.
Someone like Apple has no excuse, IMHO.
They should take it as an opportunity to expand markets overseas and to use the exchange rate to their advantage.
“War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers.”
Sounds more like excuses than an actual business plan. And Public Health Issues, get real!!!
Albert Einstein
QMAXX Stock Screener
July 24th, 2008 at 4:43 pm
Michelle, Kevin’s point is right on the money. To my reading, Apple clearly stated that *consumer spending* is depressed, not the economy. With all due respect, I think you saw “economic conditions” and “depressed” in the same sentence and jumped at the chance to post a traffic-driving article, without taking a step back and reading the sentence carefully.
July 24th, 2008 at 8:49 pm
Since this post attracted soooooo much traffic due to my dastardly plan, perhaps I need to reiterate what this site is about: it is about the things that companies bury in their routine SEC filings. Anyone who reads SEC filings regularly knows that there’s lots of repetition in these filings from quarter to quarter and year to year. That’s partly by design and partly to discourage people from digging in and reading. The best stuff in the filings is whatever is new and that’s why various services exist — I happen to use 10KWizard’s Compare Wizard feature — to find the new information.
Interpreting this new information will always be a judgement call. And in my judgement, based on reading SEC filings day in and day out, this was a very unique disclosure and clearly markedly different from earlier disclosures Apple has made about the economy. Maybe it is a head fake on their part. Or maybe their attorneys are ultra cautious. But to chalk it up as accidental shows a lack of understanding of SEC filings.
July 26th, 2008 at 11:52 am
Nah, do you reckon? Gee thanks Apple, I had no idea! duh!
JT
http://www.FireMe.To/udi
July 26th, 2008 at 12:04 pm
i agree with the comments here in saying all in all this is pretty unremarkable.
the odd part of this for me is implied assertion that Apple is the be all to end all source for economic news. i’m sure if you follow your 401ks and IRAs it will paint a pretty good picture enough.
July 26th, 2008 at 12:34 pm
A head fake? Are you serious?
And to say “But to chalk it up as accidental shows a lack of understanding of SEC fillings” is what is known as straw man argument. No one chalked it up to an accident. You’re just setting something up that’s easy to knock down. Congratulations. You destroyed that argument that no one was pushing.
You’re judgement was “it’s a unique disclosure and (redundancy removed) …” Yuo’re headline is “Apple says economy is depressed.”
That is all.
July 26th, 2008 at 1:55 pm
In current New York Times coverage, a headline reads “Can Hank Paulson Defuse This Crisis?” and the writers note “Even Mr. Paulson, for all his Wall Street experience and market savvy, occasionally appears flummoxed by the scale and complexity of the current crisis.” See http://www.nytimes.com/2008/07/27/business/economy/27hank.html#
One certainly doesn’t have to dig through Apple’s Q to figure out things aren’t looking so good. I agree with Kevin, too, but it doesn’t really matter whether the language is new, and therefore “a very unique disclosure.” It hardly qualifies as a disclosure at all! I’m gratified simply to see Apple has mastered the obvious… Seems to me this is a semantic tempest in a Q-shaped teapot.
July 26th, 2008 at 4:53 pm
ronald does not understand the psychology and other related factors behind consumer spending.
July 26th, 2008 at 9:02 pm
The value that this site provides is the filtration through the standard “BS” that exists within corporate filings. This requires that Michelle et al “identify” what is not only outside the norm of the usual filings, but to identify what deserves mention on the site as well. To ask that she not comment on her postings is essentially asking the site to be turned into a corporate filing search engine.
To put it in perspective, I could watch CSPAN all day (God help me…) to find out the “juice” of what’s up on capitol hill, but I would rather watch 15 minutes of to save my time and sanity. I could use a search engine as well, but I would rather rely on a name/reporter I trust to bring me the relevant news.
July 27th, 2008 at 1:07 am
Kevin, denial is not just a river in Egypt. You sound so confident, I bet you have more than 100K in just one bank account!
July 27th, 2008 at 2:51 pm
Thanks a ton Apple!!! Lol.