MDJ has previously noted that CNBC, the financial news network partnership between NBC Universal and Dow Jones (now owned by News Corp.), has such strong ratings among financial professionals that, for all intents and purposes, it sets the narrative about breaking financial news. When CNBC gets it wrong, Apple (and to varying degrees, Apple’s customers) have to fight first just to set the record straight. Our coverage of a particularly egregious episode a year and a half ago was reprinted by Macworld.com, if you’d like to read it.
Today’s live coverage of Apple’s latest record-breaking quarterly results only eneded about an hour ago as we post this (we live-tweeted the conference call, if you’d like to see our real-time updates from it). In all fairness, Silicon Valley reporter Jim Goldman did much better than 18 months ago, and in fact improved not long after that particularly bad day.
Nonetheless, it’s dismaying how eagerly the network’s on-air talent appear to be to spout misinformation, such as bogus “facts” that someone at CNBC should have used an earpiece to correct as soon as they were put on the air.
Fortunately, you don’t have to take our word for it. CNBC is wired enough that the two segments in question are already available online, starting with this segment from the top of the show featuring Apple’s results and a report from Jim Goldman.
Goldman acquits himself well here, but even as he does so, the onscreen graphics starting at 1:16 into the video says “APPLE FORECAST DISAPPOINTS.” This is an all-too-familiar story, as our January 2008 story points out. This time, none of the on-air talent actually said that Apple’s forecast was “disappointing” in that it was, as it always is, below Wall Street’s earlier estimates—but the on-screen graphics said the same thing. We can’t begin to guess how many financial professionals have CNBC on but muted during calls like this, and they didn’t hear the correct words on the air—they saw only the incorrect graphics.
The anchor crew did address the topic, as you can see in the video starting at 3:05, saying that everyone anticipated Apple would produce guidance below what Wall Street was estimating, and that was exactly what happened. Pete Najarian was very positive on Apple’s performance, despite an unfortunate desire to rename Apple’s products to suit his needs. He repeatedly referred to the “iTouch.” (If we get to rename things that other people named, we’re calling Najarian “Loud Bald Guy with Unfortunate Ponytail.”)
It was Karen Finerman of Metropolitan Capital who forfeited her credibility at the 3:46 mark:
I don’t even know why they [Apple] bother to give guidance. The only thing we know about their guidance is that that’s not going to be the number. We don’t know what it is. [Interruption: “They’re going to beat that conservative guidance.”] Most likely, they’re going to beat it. We know that’s not going to be the number. I don’t even know why they bother. It’s an exercise in… [crosstalk, “underpromise!”] but they do it so often now that the one time where they actually don’t, it’s going to be a disaster.
No one corrected Finerman, even though at the top of the show, anchor Melissa Lee correctly stated that everyone expected Apple to report guidance like this. Everyone also knows why, as we said in January 2008:
Peter Oppenheimer revealed several quarters ago that Apple issues guidance that the company is “relatively certain it can meet.” Apple’s guidance is not the center of an expectations interval, much less the high end of that: it’s the low end, and has been for years, and Apple has not been hiding this for some time. Apple gets punished so badly in the stock market any time it doesn’t meet its own guidance that, out of a surplus of sanity that’s clearly not about to affect Wall Street, the company simply stopped issuing guidance that it wasn’t nearly certain it could meet. The estimates of financial analysts are always higher, because they’re projecting actual results, not lower boundaries.
This was well known a year and a half ago. Peter Oppenheimer actually repeated the same thing in today’s conference call (our transcript, from about 22 minutes into the call answering a question about why some of the Q4 guidance was lower than the analyst had expected):
We give you guidance that we have reasonable confidence in achieving, so no change in our thinking.
Everyone expected it because it’s an extremely well-known issue—except to the highly paid financial professionals that CNBC puts behind the trader’s desk to explain it to everyone else.
About 15 minutes later, Goldman was back with his only big mistake of the day, one that’s unfortunate but understandable. It’s about 7:20 into this video:
In a conference call update, Goldman referenced his own tweet that said, as seen on-screen, “cnbcfastmoney: Apple CFO: Half Macs Sold in Quarter Were To People Who Never Owned Mac Before”. The tweet was timestamped “half a minute ago from web”. Goldman said:
This is an interesting factoid: half the Macs sold during the company’s quarter, especially through its retail stores, better than 470,000 of these, were sold to first-time Apple buyers. This is a very important fact because what it does is it speaks to Apple’s ability to expand the marketplace, to expand its market share. And this is a trend that we have seen developing over the past several quarters, that these Apple stores have become a magic bullet now, its own sort of halo effect, to generate more of the “Mac faithful” if you will. Once they go in and they buy a Mac, then the question is, do they buy an iPod? Did they already buy an iPod or an iPhone? And now they’re buing a new computer and switching to Apple? This is very good news [on] a trend that’s developing nicely.
It is a “very important fact” in the sense that it’s not a fact at all. Here’s what Apple’s chief financial officer Peter Oppenheimer said about nine minutes into the call, reading from his prepared statement (our transcription):
Our stores sold 492,000 Macs, compared to 476,000 Macs in the year-ago quarter, and about half the Macs sold in our stores during the June quarter were to customers who never owned a Mac before.
It was in the middle of an update all about retail, so there should have been no confusion: Oppenheimer said, clearly, that half of Macs sold through the retail stores were to customers who had never owned a Mac before. Goldman translated that into half of all Macs, but “especially” in the retail channel. Apple only knows if customers had Macs before if it asks them and they answer, and that only happens at retail stores, not through other distribution partners.
What’s more, Oppenheimer was probably a little loose with his own wording. The metric Apple has used for the past several years is not “never owned a Mac before,” but something the company has called “new to Mac,” a phrase that Apple has used historically to mean people who were not using a Mac computer at the location for which they bought their new Mac (MDJ 2007.04.27). Apple’s gaining a lot of switchers, but there is no evidence that half of all Mac sales are to “new to Mac” customers. CNBC’s on-screen “BREAKING NEWS” graphic said exactly the opposite: “APPLE: HALF OF MAC SALES IN QTR. TO NEW MAC USERS”
In a later segment in the Fast Money show, the traders behind that anchor desk just went completely off the rails.
Tim Seymour, billed as “founder and Managing Partner at Seygem Asset Management, asked:
Hey, Jim, I’m hearing some rumors about the iTouch adding a camera and a microphone to basically bring this to the point where people don’t need a home phone—they’re taking it to that next step. There’s a lot of talk about that. People are looking for the next exciting thing from Apple. What do you think?
This is where you can actually feel sorry for Goldman, who has to make this look sensible (CNBC has already fired talent from this show, this year, for insulting the other talent on the air). Goldman referenced Wired’s rumor report that a future iPod Touch will have a camera and a microphone, making videoconferencing possible over WiFi without an iPhone and without requiring a cellular connection—perhaps a sticking point with Apple’s carrier partners who don’t want to carry that much data over their cell networks.
But how, exactly, do you get from “handheld device that can videoconference only over WiFi” to “no longer need a home phone line?” Live TV is known for non-sequitors, but that’s got to be one of the all-time great ones, at least about technology. “We’ve heard Apple is about to add push notifications to thousands of iPhone and iPod apps, so people will finally be able to get rid of their street addresses. What do you think?”
We want to be clear that CNBC’s performance today is worlds ahead of where it was 18 months ago. You can speculate all you want about future products, or how important a “halo” effect is (or how important each of Apple’s handheld devices is to feeding into that effect), or the importance of enterprise sales of iPhones that really shouldn’t surprise anyone but it proves tough to shake people off the false “businesses and government agencies don’t buy Apple products” idea. Expert opinion is welcome—but for the love of dogcow, can you please start with a foundation of facts?
It’s better than it was. It needs to get better still.
(In the spirit of openness, it seems only right that we correct one of our own mistakes. During the call, we live-tweeted Goldman’s voice from the teevee saying that for the first time, iPhone revenue has eclipsed iPod revenue. We did not hear, and did not report, that Goldman credited Andy Zaky with this insight, or we would have attributed it appropriately. Our apologies to all concerned for our mistake.)