Think different on Apple iPhone supply chain rumors

There's a lot of attention being given to fund managers, analysts and institutional investors and their current bearishness on Apple [AAPL] stock on strength of worries concerning iPhone sales. But should we really listen to these people?

Think Different

After all, these are the same people whom complicity or implicitly managed to drive the global economy into crisis. People we the people had to bail out because, if you let the results be your guide, they didn't really know what they were doing.

Cast high in their ivory towers to look down on the world through an opaque lens. Masters of a reality they understand through spreadsheets and market share reports, dabbling in a futures market that negatively impacts food prices.

One analyst's downgrade can wipe millions off of a company's stock; and, in the case of Apple, that downshift can impact the S&P 500, sending already tottering global economies into a further downshift.

The thing is, at present we're seeing huge volatility in Apple stock on strength of market rumors -- sure, these rumors start with the Wall Street Journal, but the reaction to them seems extreme.

In effect, market behaviour at present reminds me of an old joke about the people record labels used to send out to watch bands with a view to signing new artists, A&R men.

Group Think

The culture of A&R used to be one in which you got to the top of your profession by signing one hit act, and failing to sign anyone else -- though you had to be there to see the others, to show you had your finger on the pulse. Those at the top got there not through spotting acts, but by spotting one huge act and making excuses not to sign another, even if that act turned out to be Oasis or The Rolling Stones.

The joke: "There are two A&R men at a gig, one turns to the other and says, "What do you think?""

This used to be amusing in music industry circles in the olden days, but what it really reflected was how most people in the industry felt that A&R men didn't really have the chutzpah to follow gut feeling, didn't really have an intuitive grasp of the music they were watching, and didn't really have the confidence to make up their own minds -- they adopted a "group think" approach to what was going on.

That's the same sort of people we're watching enter panic mode right now. Based on a single market rumor, they're running scared on Apple stock, which is up, down, and all around as things "recalibrate".  (It stands at $506.09 per share at time of writing).

They don't really know what's going on. They never did understand Apple's success; all they see are the numbers. They're the people who've regularly declared Apple dead; the people who didn’t comprehend the impact of the iPod halo (bar Needham's Charles Wolf, who did); way back in 2007, they didn't even understand why Apple had introduced "a phone". 

They believe a PC is just a PC; they don't see differentiation, all they see is profit and loss, a mediocre dictatorship of numbers that inevitably leads to commodification, because (in theory at least) it's more profitable. They don't drive the wheel of human evolution forward, their whole reason to exist is based on making money on the back of its progression.

Panic at the disco

Those people. People who right now, with a few exceptions, are responding to the WSJ report by looking to what all the other people like them are doing and doing the same. Because they don't want to do something different and for it to be wrong -- they do what everyone else is doing, because if they do turn out to be wrong they can point to each other and say that’s what "market intelligence" (ie. each other) told them to do.

They adore the concept of being a square peg in a round hole, but they tend to be suspicious of those that are; they aren't the crazy ones, that's somebody else's job.

I'm looking at the situation and it perplexes me.

After all, what do we know? There's been no profit warning; there's no doubt the devices are selling well, and while some critics can't help but point their fingers at the firm and ask where it's future innovation's coming from, the company's track record says perhaps we should reserve judgement until it reports its results later this month, and enters major new product cycles mid-year.

Some are now saying the whole Apple-iPhone-sales-fall-gate (which seems unlikely to catch on as a term) is some attempt at stock manipulation. That's not unheard of, but if this has taken place through the medium of the Wall Street Journal then you have to wonder if regulators might step in to vet the sources, the claims and the intention of the original reports.

Another question that might be worth addressing is aimed at just how come we face a situation in which iPhone sales have a global impact on the world's financial markets? Is it actually appropriate that a technology firm -- one based entirely on intellectual product -- should become the world's most valuable stock? Are smartphones effectively more valuable to the planet than food?

I'd ask "those people" for an answer, but they probably wouldn't know -- though perhaps I wouldn't like their answer, if they did.

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