Apple Agrees to Pay $490M to Settle Lawsuit Alleging That Tim Cook Defrauded Shareholders

Apple has agreed to pay $490 million to settle a class action lawsuit alleging that Apple CEO Tim Cook defrauded shareholders by concealing falling demand for iPhones in China, according to Reuters, which cited a court filing today. The proposed settlement requires approval by U.S. District Judge Yvonne Gonzalez Rogers in California.

Tim Cook iPhone 11 Pro
On a November 1, 2018 earnings call with analysts, Cook said Apple was facing pressure in emerging markets where local currencies were weakening, such as Turkey, India, Brazil, and Russia, but he did not include China in the list:

The emerging markets that we're seeing pressure in are markets like Turkey, India, Brazil, Russia. These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see.

Cook went on to say the following about China on the call:

In relation to China specifically, I would not put China in that category. Our business in China was very strong last quarter. We grew 16%, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there. Our other products category was also stronger, in fact, a bit stronger than even the overall company number.

A few months later, in January 2019, Cook shared a letter to investors indicating that Apple's revenue for the fourth quarter of 2018 would be around $84 billion, lower than its original guidance of between $89 billion and $93 billion in the quarter. Apple ended up reporting revenue of $84.3 billion in the quarter on January 29, 2019.

Apple's share price dropped around 25% between November 1, 2018 and January 31, 2019.

In his letter, Cook said the Greater China region's slowing economy was largely to blame for Apple's revenue shortfall in the quarter:

While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.

The letter added that lower-than-anticipated iPhone revenue, primarily in Greater China, accounted for the entire revenue shortfall:

Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline.

Investors alleged that Cook knew that iPhone demand was falling in China at the time of the November 2018 earnings call, but failed to disclose it. Apple has denied these allegations and has not admitted to any wrongdoing. Apple only agreed to the proposed settlement to avoid additional costs and time involved with litigation, the filing says.

Top Rated Comments

User 6502 Avatar
4 weeks ago
Cook has to go, he is destroying Apple.
Score: 48 Votes (Like | Disagree)
ChromeAce Avatar
4 weeks ago
Perhaps because at Apple, China dictates not only what Jon Stewart can say… but also what Tim can say.
Score: 35 Votes (Like | Disagree)
turbineseaplane Avatar
4 weeks ago
Rich people shuffling money around

Lawyers are the only ones truly happy here
Score: 32 Votes (Like | Disagree)
madmin Avatar
4 weeks ago
I know lawyers aren't cheap but saying your paying 490 million dollars to avoid costs is a joke

call it what it is: Insider Shielding
Score: 26 Votes (Like | Disagree)
satchmo Avatar
4 weeks ago
Isn't the $490m paid, essentially going to come out of shareholder value again?

Maybe Tim should personally pay that off instead of Apple.
Score: 25 Votes (Like | Disagree)
sw1tcher Avatar
4 weeks ago
In the end, the cost will be passed on to those buying Apple products. Guess we'll be seeing Macs with 8GB memory for a little longer. ?
Score: 23 Votes (Like | Disagree)

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