Tim Cook: What's Good For the US Dollar Is Bad For Apple

theodp writes: For years," Charles Erwin Wilson famously said back in the day, "I thought what was good for our country was good for General Motors, and vice versa." That was then. This is now. The Washington Post reports that a strong U.S. dollar is the biggest threat to Apple's business around the world. "The dollar has shot up about 22 percent against a trade-weighted basket of other currencies since the middle of 2014," explains Matt O'Brien. "And in Apple's case, that's meant what would have been $100 of foreign sales in September 2014 was just $85 by the end of 2015. That's not good when you get two-thirds of your revenue overseas." Apple blamed the strength of the dollar compared to other currencies for costing it $5 billion in revenue, "For perspective, that difference is the size of an average Fortune 500 company," quipped CEO Tim Cook.

Comments

Apple complaining about financial engineering

[Anonymous Coward]

Oh wait, you're serious, let me laugh even harder.

Hardly a new concept

[RogueyWon]

Having a strong currency is not always entirely in the national good. Sure, it's generally better than a weak currency (which is often a sign of political instability and a lack of international confidence in a country's prospects), but it does cause its own kind of problems. In particular, it can hurt exporters, as it costs overseas customers more to buy their goods.

The strength of the Deutsche Mark was often problematic for German industry. That's one of the reasons why Germany has been so enthusiastic about adopting the Euro, which gives it a significantly "weaker" currency than it would have otherwise, and locks it into currency parity with most of the rest of its regional bloc.

Re:Hardly a new concept

[Fire_Wraith]

Yes - a strong currency is good for the consumers buying imported goods. It's bad for companies trying to export goods to overseas. Devaluing the currency is one of the measures that a country trying to kickstart its economy might take, to increase exports and tourism, and to boost domestic consumption by making imports more expensive. This is also why you see accusations of currency manipulation when the ratio is deliberately kept low for long periods of time, since market forces will tend to push towards a stable equilibrium of currency price.

Apple is in an interesting position here since it's both an importer and exporter, but it sounds like the balance of those accounts is still negative to Apple when the dollar is strong. It's probably a little more complex than that too, since you've got both the Yuan-Dollar and Dollar-Other currency (Euro, Pound, etc) ratios to consider.

Cautious

[Thanshin]

I'll be cautious and save my answer for the next time we discuss these same news in a couple of days.

Okay! Let me shed a tear for Apple!

[Chas]

Any second now I'll be able to dredge up some sympathy for them.

Any...

second...

now...

Ah crap.

*Pokes self in eye*

There! Is that close enough to tears?

Fuck Apple.

No

[Rik Sweeney]

Tim, iPhone sales are down for two reasons

1. The smart phone market is over-saturated.
2. Every bugger that wants an iPhone, has an iPhone.

Stop trying to claim that things like sotck market fluctuations, El Nino, IS or Zika are to blame.

Apple, an American company?

[Anonymous Coward]

They produce all their products overseas, they sell most of their products overseas, and they hide all their money overseas.

What part of this company is American anyway?

Re:Apple, an American company?

[__aaclcg7560]

What part of this company is American anyway?

"Designed in Cupertino"

Richest company in the world

[kilfarsnar]

Somehow I don't have sympathy when the richest company in the world complains that they're not making as much money as before.

Re:Richest company in the world

[jabuzz]

I would add especially when they hoard those profits overseas and don't pay taxes on them.

Re:Manufacturing costs also fall

[monkeyxpress]

Further Apple doesn't bring its foreign profits home anyway, so what does it care how much its earnings would be in USD? It has Irish bank accounts rammed full of iPhone money (that the nice Irish govt didn't charge them tax on either), while constantly moaning that it can't bring any of that into USD unless Uncle Sam gives a big tax discount.

To confuse the Apple Troll mods, I'll add that Google is just as bad, and recently got exposed for doing a 'deal' with the UK govt to contribute a little bit towards us plebs.

Re: Seriously? Just move the $$ offshore

[bill_mcgonigle]

more like a prelude to doing an inversion with Apple Ireland. Should've been the McIntosh. I hear that Apple, an Irish company, will keep a nice R&D facility in the Republic of California.

Re:Manufacturing costs also fall

[BronsCon]

It has Irish bank accounts rammed full of iPhone money

And that's why a strong US dollar hurts them; it's not just lost revenue on future sales, its lost value of past revenue.

while constantly moaning that it can't bring any of that into USD unless Uncle Sam gives a big tax discount.

And good ol' Uncle Sam's response was to bolster the local economy and boost the value of the US dollar, basically saying "it's better to pay taxes when the exchange rate is high than play stupid games until it tanks".

I don't say it often, but when I do, I mean it: The US Government made the right call. I'm sure Apple has lost more value in the money they've kept overseas by now than they'd have paid in taxes, hopefully that is a lesson learned.

Re:Laughing my ass off.

[jcr]

XServe died because it was useless and nobody was buying.

Incorrect. Xserve was a great product line and it made money, but it just wasn't big enough for Apple to keep around.

-jcr

Re:Manufacturing costs also fall

[serviscope_minor]

just like people do.

No actually people don't. Many people aren't in fact sociopaths and are happy to simply earn a normal living and pay taxes in the normal way without attempting to jump through vast hoops with offshore accounts and etc to avoid contributing to society.

Many people actually understand that civilsation is built on taxes and can think beyond MINE MINE MINE MINE.

Re:Manufacturing costs also fall

[Rhipf]

just like people do.

No actually people don't. Many people aren't in fact sociopaths and are happy to simply earn a normal living and pay taxes in the normal way without attempting to jump through vast hoops with offshore accounts and etc to avoid contributing to society.

Many people actually understand that civilsation is built on taxes and can think beyond MINE MINE MINE MINE.

You're missing the point here. People are those that are rich enough to also hide their money overseas to avoid taxes. The rest of us are just consumers (i.e. not people). 8-)

Re:Manufacturing costs also fall

[Aighearach]

You uncover a key flaw in Cook's reasoning; if they're not bringing those foreign dollars home, then they've no reason to convert them to dollars, and this isn't money they're losing at all. It is just the imaginary "if we brought it home" ticker in his office that is showing a reduced high score.

Re: Manufacturing costs also fall

[j-beda]

What did the government do? Devalue the Canadian dollar against the US dollar. Bastards, all.

While there may have been some policy factors that have directly influenced the Canadian dollar value, they have been very small in comparison to the impact that resource prices (I'm looking at you, Barrel of Oil) have had. The failure to diversify the economy away from such a heavy resource weighting has been a shortcoming of every government since confederation both provincially and federally.