Business | Opinion
Apple needs to be more transparent
Now that wasn't so hard, was it? Shares in Apple rallied yesterday on the admission that the group's co-founder and chief executive Steve Jobs is ill.
- Financial Times
- Published: 23:58 January 6, 2009
Now that wasn't so hard, was it? Shares in Apple rallied yesterday on the admission that the group's co-founder and chief executive Steve Jobs is ill. The diagnosis - a hormone imbalance causing hitherto mysterious weight loss - is less serious than many had feared.
Jobs, who suffered from pancreatic cancer in 2004, will continue leading the company he has transformed. Wild rumours, swirling since the announcement three weeks ago that he would not make his annual keynote speech at industry conference Macworld, have now been quashed.
The episode might be dismissed as a seasonal storm in teacup. Stock watchers will have already noted that no company insiders were selling shares.
The group's decade-long renaissance has been built with the help of an adept consumer relations team. Using secrecy, a slow drip of information and considerable panache, Jobs launched a series of slick music players, computers and phones with great success.
Yet intrigue is no way to deal with investors. Apple's original explanation for Jobs' absence from Macworld was a strategic shift in communications strategy.
The changing storyline is a reminder of the uncertainty created by the company's approach to releasing information. Take the SEC's investigation into stock options accounting, dropped last year. Jobs was cleared of any wrongdoing But Apple's evolving official position on the extent of his knowledge of the affair did not inspire confidence.
For a company still trading on 19 times prospective earnings in spite of a difficult outlook for consumer spending and questions over the succession, greater clarity seems advisable. Jobs may be at the helm for years to come, but it would be reassuring to know how the company might prosper without him.
Restructuring will be a common theme this year and Lenovo is making an early strike. This marks at least the third restructuring for the Chinese personal computer maker, which acquired IBM's PC arm in 2005.
Lenovo paid generously for its landmark acquisition and is now at the mercy of faltering top-line growth and squeezed profit margins. In the second quarter, to the end of September, net profits fell by four-fifths on the year before. Lenovo's shares are down by two-thirds in the past 12 months.
The PC maker is cutting staff and reshuffling management, according to local press reports. Lenovo never really delivered on the supposedly potent cocktail of a world-renowned brand (IBM) and cheap cost base - not least because you do not need to be Chinese to make computers there.
Indeed, Lenovo fares poorly among its peer group. Credit Suisse estimates this year's operating profit margins will clock in at 1.7 per cent compared with 2.5 per cent for Taiwan's Acer and 5.8 per cent for Dell.
Lenovo's chief advantages are its $1.5 billion of net cash, or almost 60 per cent of market capitalisation, and a strong position in China, where it claims a 29 per cent market share.
That matters given second quarter trends, where sales fell on a sequential basis in every other part of the globe and only greater China and the Americas were profitable.
But neither advantage is forever. Losses would eat into the cash pile while the likes of Dell, which tends to be more nimble on pricing, provide ever fiercer competition in China.
Radical restructuring, meanwhile, is tricky for political reasons. Reports of 200 redundancies in Beijing hardly suggest a radical transformation of a company with 24,000 employees.
On nearly 15 times this year's earnings, Lenovo trades at a fat premium to its peers - a gap that early accounts of restructuring fail to justify.
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