Quarter after quarter, Apple Inc. (NASDAQ:AAPL) publishes exact numbers for device unit sales and revenue, unlike its more cunning adversaries in the mobile Internet wars, Google Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT). Apparently Apple Inc. (NASDAQ:AAPL)’s management naively believe that their greater transparency will earn them respect for corporate responsibility. When will they ever learn?
An opportunity to look bad
Apple Inc. (NASDAQ:AAPL)’s openness about device sales doesn’t even have the beneficial effect of quelling rumors about sales in future quarters.
Quite the opposite. When was the last time you heard a rumor about Motorola smart phone sales? You probably won’t, since there’s no point in speculating about something the public will never know.
The main effect of Apple Inc. (NASDAQ:AAPL)’s device sales numbers seems to be to provide Apple Inc. (NASDAQ:AAPL) with the opportunity to make itself look bad, as when last quarter’s iPhone sales of 47.8 million came in below the “consensus” Wall Street estimate of 50 million, according to ibtimes.com and bgr.com. Clearly, Apple Inc. (NASDAQ:AAPL) could learn a lot from its competitors. Let’s take a look at how the other guys report device shipments.
Google and the art of ambiguity
Google, of course, never mentions Android device sales and may not have specific sales data from its manufacturing partners, who often don’t publish sales data. Instead, Google management talk about Android activations, as Larry Page did recently in a blog post, when he announced that Google had activated 750 million Android devices.
What constitutes “activated devices?” I’m not exactly sure, but I’m pretty sure it doesn’t mean “Android devices in current use,” as was assumed by the author of a recent CNNMoney article. The reason is that there has to be some attrition of Android devices as older devices get lost, broken, or simply thrown away. For both the Android and iOS device populations (the number of devices that are in current use), I’ve been assuming that the attrition rate is about 10% of total shipments or activations, but this number could be too conservative, especially for older Android devices that aren’t upgradable to new Android versions such as Ice Cream Sandwich or Jelly Bean.
Furthermore, depending on how activation is defined, there could be multiple activations of the same device. For instance, an older Android device is given or sold to someone else. The original owner wisely does a factory reset to wipe out all personal data. The new owner is asked to link the device to the new owner’s Google account, and the device has now been “activated” twice.
This scenario correlates with the best explanation of “activation” I’ve found, an article “Android Activations and How They Break Down” on the site androidguys.com, in which the author states:
“. . . a ROM flash doesn’t count as an activation as long as you keep the same Google account running on it. If you sell, give or lend it (an Android device) to someone else who uses a different Google account, it does count as an activation.”
In this scenario there appears to be no limit to the number of times a device can be “activated,” but even this author wasn’t entirely sure how activation works.
Does Google know how many Android devices are in actual use worldwide, as opposed to the number that have been “activated?” I’m pretty sure they have a good idea. Google has plenty of opportunities to collect mobile device usage data from Google Play and its sites such as YouTube.
But Google wisely refrains from sharing this information.
Microsoft and the art of obfuscation
Whereas Google may indulge in the subtle art of ambiguity, Microsoft goes all out for obfuscation and denial, at least for subjects that might reflect negatively on the company. Lately, obfuscation and denial have characterized just about anything to do with its Windows on ARM initiatives, Windows RT and Windows Phone.
Unlike Google, Microsoft does sell their Phone and Windows licenses, so they must know exactly how many licenses have been sold to OEMs or directly to consumers.
Microsoft has never published sales figures for the Windows Phone. All Microsoft would say in their latest earnings report was that Q4 2012 WP8 sales were four times Q4 2011. This sounds impressive, but it’s actually contradicted by Gartner Research data, which shows Windows Phone 8 sales to end users of 6.185 million for Q4 2012 and 2.76 million for Q4 2011. If the 4x factor is correct, it could only have come about by front loading the manufacturing partners with more WP8 licenses than they could actually use in the quarter.
Even the sales numbers for Windows 8, which qualifies as a mobile operating system by virtue of various Windows 8 tablets and convertibles, are coming under greater scrutiny as HP’s quarterly report for the November 2012 through January 2013 period is digested. Analysts may have regarded the news as good for HP, but it was bad for Microsoft. HP’s consumer PC sales revenue declined by 13% y/y for the quarter. This was very unusual for a new Windows OS release, and Microsoft couldn’t claim “limited availability” as an excuse, since Windows 8 had been on store shelves and on PCs since the end of October.
It now appears that Microsoft adopted the same strategy for Windows 8 as for WP8 of front-loading Windows 8 license sales through discounts to consumers and OEMs. If this is the case, Windows 8 sales in succeeding quarters could drop precipitously.
But if the good news for Windows 8 and Windows Phone 8 was somewhat contrived, there was no way to contrive good news for Windows/RT. IDC reported only 900,000 Surface RT devices sold in Q4 2012, and the latest estimate from Bloomberg is for a mere 200,000 for the current quarter, even as Surface Pro sells twice as many. As I predicted, Surface Pro is cannibalizing Surface RT sales, despite being heavier, bulkier, and costlier. Of course, Microsoft has been utterly silent on the subject of Windows RT and Surface RT sales.
Get with it Apple
The table below summarizes the change in share prices of Apple Inc. (NASDAQ:AAPL), Google and Microsoft since their respective earnings reports for calendar Q4 2012 were released.
Not all of Apple’s share price change can be attributed to Apple Inc. (NASDAQ:AAPL)’s greater transparency regarding device sales, but clearly it has some negative effect. Transparency, like familiarity, appears to breed contempt where investors are concerned.
The article Does Apple’s Transparency Breed Contempt? originally appeared on Fool.com and is written by Mark Hibben.
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