Apple is to be investigated by an investor rights law firm for potential securities fraud following yesterday's revised Q1 2019 earnings guidance for the company, it emerged on Wednesday.

Apple Store Sanlitun, Beijing, China
Bernstein Liebhard LLP, which calls itself "a nationally acclaimed investor rights law firm," announced on its website that it was investigating the fraud claims on behalf of Apple shareholders, based on "allegations that Apple and/or its executives may have issued materially misleading business information to the investing public."

The firm's complaint with Apple focuses on comments about China made by CEO Tim Cook in his November Q4 2018 earnings call, compared to what he told investors yesterday.

In his letter on Wednesday, Cook revealed that Apple expected to end the quarter with $84 billion in revenue, which is down more than 7 percent from the $89 billion to $93 billion forecast the company predicted at the end of the last fiscal quarter 2018.

Cook put the revised guidance down to "lower than anticipated iPhone revenue, primarily in Greater China, [which] accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline."

The statement contrasts with Cook's comments on China during Apple's November Q4 2018 earnings call, in which he told investors that "our business in China was very strong last quarter. We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there."

Essentially, Bernstein Liebhard claims that the difference between the two statements represents "materially misleading business information" that has subsequently "damaged investors." It remains unclear how those allegations will stand up to scrutiny in a law court, however.

Following Cook's earnings call yesterday, Apple's stock fell almost $12 per share, or over 7.5 percent, during aftermarket trading hours. The downgrade also sent shares in other companies with exposure to China tumbling over fears that the slowdown could affect other markets.

Cook said that the timing of the iPhone XS, XS Max, and XR launch compared to the timing of the iPhone X launch last year were set to impact year-over-year comparisons, as would the strength of the U.S. dollar. Cook also said that customers taking advantage of "significantly reduced pricing for iPhone battery replacements" was also a factor that led to fewer upgrades in 2018.

Top Rated Comments

Bearxor Avatar
38 months ago
Following Cook's earnings call yesterday, Apple's stock fell to almost $12 per share, or over 7.5 percent, during aftermarket trading hours.
It didn’t fall TO $12. It fell $12.
Score: 9 Votes (Like | Disagree)
djcerla Avatar
38 months ago
"Furthermore, Bernstein Liebhard LLP is reportedly providing Apple a crystal ball for future, more accurate predictions".
[doublepost=1546515278][/doublepost]
There will be a bunch of law firms jumping on the bandwagon. They smell blood in the water.
A losing bandwagon, that is.

Guidance is not a guaranteed result by any means, and the firm correctly warned investors about the revenue miss well before earnings, also confirming an all-time record EPS for the quarter.
Score: 6 Votes (Like | Disagree)
philvid2 Avatar
38 months ago
I don’t think it is that clear that the case is merit less.

Cook in November:
“our business in China was very strong [Q4]. We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there”

Cook now:
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China ... China’s economy began to slow in the second half of 2018 (includes Apple’s Q4). The government-reported GDP growth during the September quarter was the second lowest in the last 25 years.”

I guess the argument is that Apple knew, or ought to have known, of China’s economic conditions by the November statement, and that making such a positive statement was misleading given that Apple knew of the economy slowing down.
Score: 6 Votes (Like | Disagree)
Millah Avatar
38 months ago
The thing is, the law firm is correct. In the space of two months, Tim Cook has given two completely different versions of events to Apple's investors. In November he basically says the future is bright in China, business grew 16%. This is good news for investors, hence they would be investing more in Apple businesses in China. Now, a month later, Tim Cook say's the complete opposite, that growth in Greater China has been slow and it is something they knew about. If that was the case he should have given a more cautious investor outlook speech back in November. The fact he didn't clearly shows Apple mislead it's investors.

The FTC could also investigate because the very positive speech in November would have increased Apples stock value immensely, meaning a few people would have made a few extra billion. Then a month later to announce to investors that things have not worked out, which would naturally have an affect on Apples stock, critics could argue that it is stock market manipulation, something which is against the law.

Apple would have known way in advance if there was a possibility of China's growth slowing or not, that is why companies such as Apple pay economists the huge sums they do to be able to predict a countries economic growth or slowdown.
Cooks comments were for the quarter he was commenting on. It was not a future forecast. He has every right to comment with enthusiasm that the reported quarter had double digit growth in China. It did not provide any forward looking statements. And if he did, I’m almost positive that forward looking statements are always marked with an asterisk.

Apples revenue guidance for this quarter had already included the concerns reported yesterday. If I remember correctly, Apples guidance was lower than analysts were expecting/hoping. The problem that required the letter yesterday is the magnitude of these concerns being far greater than previously expected 60 days ago.

I don’t recall Tim Cook making any statement that “growth is off the charts in China with no end in sight! We’re going to kill it next quarter!”
Score: 5 Votes (Like | Disagree)
H3LL5P4WN Avatar
38 months ago
So... Apple admits that sales weren't on the educated guess mark from a quarter ago, and this is somehow fraud?

Since when is telling the truth, or correcting a statement to be more truthful, fraud?
Score: 4 Votes (Like | Disagree)
Ramchi Avatar
38 months ago
If people visit MR, they shouldn't be surprised to see this coming. Most of it common sense. Stock Market is always considered a regulated gambling, people making money out of it must learn to live with losses as well. Investors can't be that much stupid not to see potential earnings drop after Apple stopped revealing iPhone numbers...
Score: 4 Votes (Like | Disagree)

Popular Stories

airtag in hand

Apple AirTag Linked to Increasing Number of Car Thefts, Canadian Police Report

Friday December 3, 2021 7:10 am PST by
Apple's AirTags are being used in an increasing number of targeted car thefts in Canada, according to local police. Outlined in a news release from York Regional Police, investigators have identified a new method being used by thieves to track down and steal high-end vehicles that takes advantage of the AirTag's location tracking capabilities. While the method of stealing the cars is largely ...
apple top apps games 2020

Apple Reveals the Most Downloaded iOS Apps and Games of 2021

Thursday December 2, 2021 12:05 am PST by
Along with naming its editorial picks for the top apps and games of 2021, Apple today shared charts for the most downloaded free and paid apps and games in the United States across 2021. The number one most downloaded free iPhone app was TikTok, followed by YouTube, Instagram, Snapchat, and Facebook. The top paid iPhone apps included Procreate Pocket, HotSchedules, The Wonder Weeks, and Touch...
m3 feature black

Macs With 'M3' Chips Expected to Use TSMC's 3nm Chip Technology With Test Production Reportedly Underway

Thursday December 2, 2021 7:36 am PST by
Apple's chipmaking partner TSMC has kicked off pilot production of chips built on its 3nm process, known as N3, according to Taiwanese supply chain publication DigiTimes. The report, citing unnamed industry sources, claims that TSMC will move the process to volume production by the fourth quarter of 2022 and start shipping 3nm chips to customers like Apple and Intel in the first quarter of...
telsa cyberwhistle

Elon Musk Urges Customers to Buy 'Tesla Cyberwhistle' Instead of Apple Polishing Cloth

Wednesday December 1, 2021 4:01 am PST by
Tesla CEO Elon Musk has encouraged customers to buy the "Cyberwhistle" for $50 instead of Apple's much-discussed Polishing Cloth. The product page, which Musk shared on Twitter on Tuesday evening, offers a limited edition stainless steel whistle with the same distinctive design of the Tesla Cybertruck:Inspired by Cybertruck, the limited-edition Cyberwhistle is a premium collectible made from ...
app store awards 2021

Apple Picks the 2021 App Store Award Winners, Highlighting the Best Apps of the Year

Thursday December 2, 2021 12:01 am PST by
Apple today shared its 2021 App Store Award winners, highlighting the 15 best apps and games selected by Apple's global App Store editorial team. The top apps were chosen for their quality, innovative technology, creative design, and positive cultural impact. "The developers who won App Store Awards in 2021 harnessed their own drive and vision to deliver the best apps and games of the year --...
MBA Mock White Front Blue

2022 MacBook Air Getting Major Display Upgrade With One Drawback

Friday December 3, 2021 3:01 am PST by
Apple's next-generation MacBook Air is reportedly set to bring over many of the new MacBook Pro's features, with one noticeable omission, according to recent reports. The latest MacBook Pro models feature a mini-LED "Liquid Retina XDR" display with deep blacks and support for up to 1,600 nits peak brightness. The display also features Apple's "ProMotion" technology, which is capable of...