Tim Cook: Overall Virtual Malaise In Every Country In The World

The inane debate about a Global Slowdown is over.  Tim Cook uttered the above words and drove a stake through the heart of the it’s “only commodities” meme.  Apple whiffed on revenues and guided revenues 14% lower year over year for the next quarter.  Tim cited broad macro weakness and a recent slowdown in China as the cause.

I am not hear to tell you to short Apple’s stock.  If Apple is seeing this kind of slowdown then you will have bigger problems in your portfolio over the next year.  The somber tone of tonight’s earnings call reminded me of Cisco’s quarter in 2001 where they whiffed and guided lower.  John Chambers was the king of tech then and had a good read on macro as he sold his gear into most global geographies.  Chambers called out a sudden and abrupt synchronized global slowdown the likes of which he had never seen before for his company.  His warnings, much like Tim’s tonight, ushered in the official bear market.  Cisco’s stock had peaked months before in March of 2000.  The US equity markets did not bottom until 21 months later.  Anyone still holding onto the growth theme then was considered a stubborn idiot.

If you don’t respect this datapoint for its true implications then I can’t help you because you are blind or lack experience.  Does this mean the market collapses tomorrow?…no but what it does mean is that the slowdown is real and is spreading fast to the broader economy.

As a side note the quarter was worse than it appeared.  The company had a non-recurring IP licensing award that was included in revenues and added 40 bp to Gross Margins.  Additionally they stuffed the channel to the tune of 3.3 million units in the quarter which also artificially boosted the reported revenue number.  The quarter was not good.  IMHO Gross Margins have peaked for Apple and have nowhere to go but down as the smart phone market has reached saturation and growth slows.