Follow-up on a Record 14 Weeks

February 4, 2017

By Jeff Johnson, Developer of Underpass

This is a follow-up on my recent articles A Record 14 Weeks and Slow Week? I'll talk about several points:

"Fake News"

Some people have criticized my use of the term "fake news". I accept this criticism. I may have been a bit overzealous in trying to draw attention to an issue that had been overlooked. I apologize for that.

8%

I mentioned that 14 weeks is 8% longer than 13 weeks. Is it fair to deduct 8% from the FY2017 Q1 results? My claim is that it's a fair place to start. You have to start with a fair comparison. 14 weeks against 13 weeks is not a fair comparison. Weekly averages are a fair comparison. Once you have a fair starting point, then you can discuss mitigating factors. We have to start with the numerical fact that the weekly averages are down, not up. The burden of proof is then on Apple to explain why the down quarter was not as bad as it seems. The burden of proof should not be on us to explain why a 14-week aggregate is a misleading stat.

Earnings Call

I read the conference call transcript on iMore. There was only one short mention of the extra week, in a question from Toni Sacconaghi. I was under the impression that the iMore transcript was supposed to be complete. From comments I've read subsequently, I'm starting to think that the transcript was incomplete. Apparently there is a complete transcript on Seeking Alpha, but it requires an account in order to read all of the pages. I have no interest in signing up for an account, because I'm not a professional analyst, a member of the news media, or even an AAPL stockholder. I'm just a software developer.

If there was a longer discussion of the extra week during the conference call, I didn't see it, and I think it's safe to say that most people didn't see it. The press release from Apple a half hour before the conference call did not mention the extra week. Naturally, the press all ran with the press release. And after the conference call, I did not see any of the press correct themselves. So if there was a more nuanced discussion of the year-year comparison, that information did not reach the public. The headlines were an all-time record quarter, Apple is doing great, the critics were wrong, etc.

Macs

My primary interest in Apple earnings is with respect to the Mac, my platform of choice. The release dates of the iPhone relative to Q1 are irrelevant for Mac sales. The unadjusted aggregates for Q1 show a year-year increase of 1% Mac unit sales and 7% Mac revenue. The weekly averages show a decrease of 6% Mac unit sales and a slight decrease in Mac revenue, close to flat. Perhaps the truth is somewhere in between. But there's not much room in between to avoid an annual decrease in Mac unit sales.

The aggregate 14-week totals are being cited publicly to justify some controversial product decisions. For instance, a lot of people are unhappy with the new MacBook Pro. If the story is that Mac unit sales are down instead of up, that puts an entirely different spin on the MacBook Pro. This is why it's important to make a fair comparison between quarters.