Dispute in court
How a single set of Tim Cook cost Apple $490 million
Apple boss Tim Cook assessed the situation in China more optimistically in a call
© afp
CEO Tim Cook has made Apple the most valuable company in the world. So his word carries weight – especially with the shareholders. Now a statement by Cook from 2018 costs the company half a billion dollars.
These are delicate conversations: When the boss of a company like Apple informs shareholders about quarterly expectations, every word and every sentence is carefully considered. A current court hearing by the iPhone manufacturer clearly shows why this is the case.
A group of shareholders sued Apple over one of the phone calls. The accusation: Tim Cook deliberately glossed over the company’s economic development in the important Chinese market. In an out-of-court settlement, Apple has now agreed to pay $490 million to end the proceedings.
Apple: setback in China
Specifically, it is about a conversation with shareholders on November 1, 2018. As part of the quarterly report, Cook reported declining demand in markets such as Russia, India, Turkey and Brazil. Then came the sentence that now cost the company half a billion dollars: “I wouldn’t see China in this category,” emphasized Cook.
This was reassuring for shareholders. Despite strong domestic competition, China is one of Apple’s most important markets. Apple earned over $50 billion there in 2018, over 25 percent of its global sales.
But a short time later the shock came: Apple reduced its orders for the then current iPhone XS and revised its profit expectations downward by nine billion dollars – for the first time since the introduction of the iPhone. The reason given was China’s trade disputes with the Trump administration. The stock market reacted quickly to the correction: the company lost ten percent of its value in a single day and was suddenly worth almost $74 billion less. This loss is also the basis for the shareholders’ lawsuit.
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Apple denies guilt
Apple has not yet officially commented on the agreement. According to the comparison, the group still sees no misinformation among shareholders or even a breach of the law through false statements. Cook emphasized that the figures in the previous quarter were very good and that the initial sales of the then new iPhone XS showed no signs of a slowdown, the company argued in an attempt to avert the lawsuit. However, Judge Yvonne Gonzalez Rogers found the plaintiffs’ argument plausible that Apple had also clearly spoken about future purchases and could have foreseen a slowdown in the Chinese economy.
According to the documents, the company accepted the agreement in order to avoid further costs resulting from a lengthy procedure.
The collapse in the share price at the beginning of 2019 was just a snapshot anyway: At that time, Apple had just become the first publicly listed company to exceed a total value of one trillion dollars, before the value collapsed again to $750 billion. The price has long since recovered from this: last summer, the group broke the three trillion dollar market value mark for the first time – four times the value at the time.