
Investor update on quarterly guidance - avalexandrov
https://www.apple.com/newsroom/2020/02/investor-update-on-quarterly-guidance/
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huherto
I am surprised the stock market is holding up while the virus can have a big
impact in world trade. Any guesses ?

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Afforess
The trump trade policies (specifically, the China tariffs) have reduced the
exposure of many US firms to Chinese goods. A lot of factories shifted to
Vietnam and other SE Asian countries. Europe is already showing early red
flags in their stock indexes, due to their closer ties to China.

If COVID-19 spreads further throughout SE Asia unchecked, expect the SP500 to
catch up with reality in a hurry.

~~~
jetrink
Would it be better or worse for China if the disease spread to countries that
compete with it economically? If it helps China at all, would China be able to
resist the temptation to allow infected individuals to travel to those
countries?

~~~
killjoywashere
Well, I suppose in terms of comparative advantage, misery loves company, so
better. In terms of absolute number of people with rice in their bowl on any
given day, I suspect worse.

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JonathanFly
Given the economic effect of health hazards of viruses like this on big
companies like Apple, I wonder if Apple itself couldn't justify investing into
research for treatments and vaccines as a hedge against supply line damage.
Makes sense purely in terms of business, doesn't it?

Near as I can tell, most of the vaccine development (outside of China) is
being funded by charities right now. Drug companies were burned by Ebola
investments and are not interesting in working on COVID-19. But if Apple
thought they could speed up recovery by even a short time with careful
investment here they'd more than make their money back.

>"One would think that the industry has the reserves to jump at this
challenge. But none of the four top vaccine companies has shown significant
interest," says Dr Ellen 't Hoen, director at medicines law and policy at
University Medical Center Groningen in Amsterdam.

>Also speaking at last week's Aspen Institute event, Dr Anthony Fauci,
director of the US National Institute of Allergy and Infectious Diseases, said
no major pharmaceutical company has come forward to say it would manufacture a
vaccine for Covid-19. He called it "very difficult and very frustrating".

>"Companies that have the skill to be able to do it are not going to just sit
around and have a warm facility, ready to go for when you need it," Dr Fauci
said.

>For Covid-19, charitable donations are being used to spark pharma companies
into action to find a vaccine.
[https://www.bbc.com/news/business-51454859](https://www.bbc.com/news/business-51454859)

~~~
breck
> I wonder if Apple itself couldn't justify investing into research for
> treatments and vaccines as a hedge against supply line damage. Makes sense
> purely in terms of business, doesn't it?

I would say they already do by building the best laptops, tablets and
smartphones in the world, increasing the productivity of the biomedical
researchers who use their products.

In addition, their investments in Apple Watch and Apple Health long term I
think are the future of healthcare. In 30 years I'd expect everyone will have
the equivalent of their own doctor's office/diagnostic lab in their home.
There won't be counterproductive mass-runs on hospitals because most things
will be diagnosed at home. I think you can draw a pretty direct line from
where Apple Watch is today to that future.

> Drug companies were burned by Ebola investments are not interesting in
> working on COVID-19.

I'd guess there are hundreds of companies working on COVID-19 vaccines. Here's
an interesting one that was sent to me last week:
[https://news.ycombinator.com/item?id=22313320](https://news.ycombinator.com/item?id=22313320)

~~~
JonathanFly
>I'd guess there are hundreds of companies working on COVID-19 vaccines.
Here's an interesting one that was sent to me last week:
[https://news.ycombinator.com/item?id=22313320](https://news.ycombinator.com/item?id=22313320)

Yes, the BBC articles mentions they are mostly smaller companies funded by
things like the Bill and Melinda Gates Foundation. This feels like a
coordination problem given the size of the economic damage from stuff like
this.

Ideally it would be governments picking up the slack, but if we are so
inefficiently allocating money to vaccines that have such big impacts on
Apple's supply lines, there's a business case for them hedging with
investments of their own.

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dano
The Chinese New Year, Jan 17 through Feb 8, is also a period where less
manufacturing activity normally occurs. Why I know this? I had to plan our
inventory and sales logistics around this period every year for seven years.
We would order production so that it would be completed and shipped to us
prior to Chinese New Year, or start production immediately after. We never
wanted production to occur across the three week down period.

I strongly suspect that large company logistics team, and certainly an expert
like Tim Cook, already have this contingency in place. However, since CV has
extended beyond the New Years time frame, those contingency plans will start
to break down.

~~~
totalZero
One problem Apple faces is getting factory workers who went to their hometowns
back to the factories. Apple had actually planned to ramp up production
starting in the end of February. So this interruption is a larger hit than you
might expect at this time of year.

[https://www.reuters.com/article/us-apple-
iphone/coronavirus-...](https://www.reuters.com/article/us-apple-
iphone/coronavirus-outbreak-may-disrupt-apples-iphone-production-ramp-up-
plans-nikkei-idUSKBN1ZR0J6)

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crazygringo
This doesn't seem to have affected the stock price today, including in after-
hours trading. So either it's been gradually priced-in, or...

...is this actually expected to affect Apple once the year is over? Presumably
people will just wait a couple months to buy a new phone, and below-average
sales now will be matched by a wave of above-average sales afterwards?

The need to upgrade your phone doesn't go away. And wouldn't all cell phone
manufacturers be similarly hit these days? So it's not like switching brands
away from Apple is more of an option?

Just curious... happy for someone to correct me if I'm making wrong
assumptions here.

~~~
tsmith
> This doesn't seem to have affected the stock price today

The market is closed today (Presidents Day). We won't find out the effect
until tomorrow.

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largehotcoffee
What other companies do you expect will be impacted in a similar way?

~~~
oflannabhra
I’d expect anything that is manufactured in China to be in a similar
situation.

POs have already extended out significantly (some of our parts have more than
doubled). Those estimates are at best guesses, I would be surprised if they
don’t continue to slip.

Manufacturing supply chains are at incredibly low levels.

The second reason (slow sales in China) would really only affect things that
are there, obviously.

~~~
spectramax
Totally. Regardless of whether its China or some other place on earth, almost
complete centralization of manufacturing supply chain from teddy bears to cold
rolled steel and everything in the middle; we're gonna have a bad time. Now if
that said country offers nothing in return in terms of fairness, flat-out bans
foreign business from competing, subsidizing national corporations in return
for citizen information, ruled by an authoritarian regime with fascist
underpinnings, and has a public health emergency; boy we're headed towards a
recession until the rest of the world equips with multiple points of failure
in their supply chain. I am sure this small dip will lead to unoptimization of
local optima and leads us into a stronger future where there is fair
competition, stronger supply chain, and efficient international trade.

I am sorry to bring up political aspects, but I hope it only portrays the
objective state of the situation without any prejudicial color.

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georgebarnett
The best part of this is watching very smart people discover that their highly
optimised spreadsheets aren’t anti-fragile.

~~~
georgebarnett
Interestingly, a literal rerun of the hard drive motor shortage due to
flooding in Thailand a few years back.

~~~
totalZero
That shortage took many quarters to work itself out.

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dang-its-dumb
I've heard that our quest for incessant optimization in warehousing and
inventory management means this pandemic is catching everyone flat-footed.

The McKinsey consultants of the world have pushed for more and more "turns"
(how many times your inventory turns over completely in a warehouse - most
orgs aim for 3+ turns a year) and minimizing your "cash to cash" cycle (you
pay for manufactured inventory, you need too turn it BACK to cash QUICKLY -
don't have it sitting on warehouse shelves)

Now we don't have enough slack in the supply chain. Doesn't really matter much
(except economically) for iPhones etc - but means a lot when you're running
JIT (just-in-time) inventory management for things like hand sanitizer or
medical masks.

~~~
dangus
Then again, all those people who can’t buy these products now due to temporary
shortage aren’t going to just _forget_ that they wanted to buy a new iPhone.

I believe there was a similar reason for the auto industry to come back so
strongly after the 2008 financial crisis. All those people who held off on car
purchases in hard times exited the crisis with aging vehicles that needed to
be replaced.

I would think that this sort of shortage would harm a consumables company like
Coca-Cola a lot more than an “appliance” company like Apple, Toyota, or
Whirlpool.

~~~
totalZero
Sure they will.

Consumers in China who wanted a new iPhone would probably rather stay at home
than go out to buy a discretionary consumer device like an iPhone. Many will
have less income with which to get by, meaning they wouldn't be able to afford
an iPhone even if they were willing to go buy one. And with Apple stores
closed in China, it's kind of tough to buy an iPhone there.

Meanwhile, people who really need a smartphone elsewhere will take this
opportunity to buy a different phone.

Economic shocks have long-lasting aftereffects. Don't assume that the result
of this hit to iPhone production is simply a phase shift of Apple's product
cycle and consumer demand. For example, Apple will probably take cash away
from its next stock buyback in order to cover the upfront costs of this hit to
its revenue. And they may not be able to provide the kind of pricing and
incentives that they were planning to provide before the virus hit.

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discordance
Wouldn’t it be great if 2019 was the last time we got new stuff?

~~~
anonuser123456
Uhhh no. The innovation cycle will be the only thing keeping us alive in +4C
world we've locked ourselves into.

