Tim Cook, the CEO of Apple Inc. (NASDAQ:AAPL) reassured investors regarding the company’s business in China amid the increasing concerns regarding the country’s weakening economy that led to a global market sell off.
Cook said he receives updates regarding Apple’s performance in China every day, and the company continues to experience strong growth in the country even if its economy is slowing.
Apple business continues to grow in China
In an e-mail to CNBC’s Jim Cramer, Cook said, “I can tell you that we have continued to experience strong growth for our business in China through July and September. Growth in iPhone activations has actually accelerated over the past few weeks.”
Cook added that the company’s App Store in China recorded its best performance of the year during the past two weeks.
“Obviously, I can’t predict the future but our performance so far this quarter is reassuring. I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge,” added Cook.
Market observers commented that Cook’s move was “unusual.” In fact, Cook acknowledged that they rarely provide comments on the movements of Apple’s stock or provide mid-quarter updates regarding the company’s performance.
During the early morning trading today, the stock price of Apple dropped 13% to $92 per share while the broader stock market in the United States is experiencing a selloff. After two hours, the stock recovered and traded as much as $108.80 per share, and eventually ended the trading session at $103.12 per share, down by 2.5%. The stock price of Apple declined 17% over the past month.
FBR analyst Daniel Ives commented, “The fact that (Cook) publicly gave some positive signs around what Apple is seeing out of China during this market meltdown is a huge sigh of relief for investors who have started to have nightmares about what China can become over the coming years for Apple.”
On the other hand, Cowen & Company analyst Timothy Arcuri said, “I am concerned about a slowdown in Apple’s demand from China and I think they haven’t even seen the extent of it yet.”
Cook probably violated SEC fair disclosure rules
Some lawyers commented that Cook probably violated the fair disclosure rules of the Securities and Exchange Commission (SEC) after providing a mid-quarter update on Apple’s performance through a private e-mail to Cramer.
Thomas Gorman, a partner at law firm Dorsey & Whitney said, “The SEC will undoubtedly want to take a look at this.”
On the other hand, Bill Singer, a lawyer and owner of BrokerAndBroker.com believes that the SEC will likely investigate Cook’s conduct.
“I certainly could see, in some circumstances, where the SEC would want to review the conduct and think it is a violation of Reg FD. It constitutes a disclosure giving certain individuals the benefit before it was percolated by the rest of the public, during a fast-moving, extraordinary market,” said Singer.
Source: Market Watch, Reuters
