Steve Jobs tells Apple employees and investors to "hang in there"

Although the market as a whole has taken a beating lately, the rollercoaster ride has been particularly harsh on Apple stockholders, who've seen their shares fall from a high of $202 earlier this year to just over $130 today. Of course, among the hardest hit was Steve himself, who has over 5M shares of the company -- which is why he may have sent out an email today advising employees to "hang in there." Calling the past week "a remarkable last few days," Jobs pointed to Apple's product pipeline, people, strategy and -- perhaps most importantly -- $18B of straight cash in the bank as reasons to have faith, and said that factors "larger than ourselves" were taking their toll on the stock price. That may be so, but it's still pretty unlike Jobs to comment on things like this -- we suppose taking a $377M hit on paper would probably cause us to say a few things as well.

[Totalfixation @ Jan 28th 2008 9:13PM]

Should the dvd log be blu ray or something?

[Totalfixation @ Jan 28th 2008 9:13PM]

logo*

[Ben @ Jan 28th 2008 11:29PM]

oh please you mean HD DVD right?

[Barry @ Jan 28th 2008 9:23PM]

Everyone and their grandmother unlocking their iphone, underwhelming MacBook Air, underwhelming movie rentals, and itunes competitors aplenty. The smart people are selling. Apple had better get a nice chunk of wireless spectrum at the auction and run with it. Free wifi everywhere for iphone owners = Steve gets his face on Rushmore.

[DT @ Jan 28th 2008 9:31PM]

Everything you listed has nearly nothing to do with Apple's bottom line:
MBA is not meant to be a mass-market computer that will light the world on fire.
AppleTV rentals/sales are meant to be break-even just to drive hardware sales
Ditto for iTunes competitors. The more the merrier...guess what MP3 player people are going to play those files on?
iPhone unlockers: Who cares, Apple already sold them the iPhone. So they miss out on the revenue-sharing. They wouldn't have gotten the sale OR the revenue if the buyer couldn't unlock it! Phones sold to unlockers are icing on the cake, revenue-wise.

[V3LOCIP3D3 @ Jan 28th 2008 9:44PM]

DB tell that to the investors.

and since you are one, of course you're going to tell everyone nothing is happening.

obviously even the smallest signs of apple losing their edge will cause people to pull out their money, and Barry just gave a bunch. Jobbs has profits, but he's kind of a jackass CEO, so when Apple isn't profiting endlessly, shareholders don't trust jobbs to invest back in the business. And if he doesn't have legitimate ideas up his sleeve, he's not going to want to invest much. And neither would I.

[Barry @ Jan 28th 2008 9:44PM]

"Everything you listed has nearly nothing to do with Apple's bottom line:"

Notice we're talking about share price and not bottom line here.

Share prices are based on the perception of the buyer. If the buyer is optimistic about where the company is headed, they're willing to buy/pay a higher price. If they're not, they sell, short, or refuse to buy. So when Apple disappoints and makes people think they're not in touch, they see their share price fall.

People unlocking their phones and taking them to different carriers absolutely hurts Apple. Apple is getting far more from their rev share with AT&T than they get from the price of the phone, and they're basing their forecasts on very few people unlocking. As it turns out, people are unlocking in LARGE numbers. This is hurting Apple's outlook a lot. Bad outlook = share prices go down.

[L. M. Lloyd @ Jan 28th 2008 10:20PM]

DT, do you get paid for spewing this crap?

You say:

"MBA is not meant to be a mass-market computer that will light the world on fire."

You're kidding right? By that criteria no Apple computer is "meant to be a mass-market computer," so why continue to make them? Notebooks are Apple's best-selling models, and the part of the computer market where they have the best market share. If the new notebook isn't supposed to aid that market, then why are they selling it?

You say:

"AppleTV rentals/sales are meant to be break-even just to drive hardware sales."

Care to back that up with any facts? Both Variety and Hollywood reporter say that Apple is getting 30% of that rental fee, which is more than Blockbuster gets. That sounds like a bit more than "break-even" to me, and just about everyone else in the entertainment industry.

You say:

"Ditto for iTunes competitors."

Once again, care to back that up? Every independent source reports that Apple is getting between 30% to 40% depending on label. IF they lose that business to Amazon, that is a lot of money lost.

And lastly you say the funniest:

"iPhone unlockers: Who cares, Apple already sold them the iPhone."

Apple loses about $500 a year for every person who unlocks their iPhone instead of using it on their exclusive carrier who gives them revenue sharing on every subscription. If the 1 million unlocked iPhone estimate floating around is true, that would be $500 million in lost revenue, every year! You really think that doesn't hurt their bottom line?

You sound to me like someone desperately trying to convince everyone the company is ok, so you don't lose any more on your stock.

[w00t @ Jan 28th 2008 10:45PM]

"Apple loses about $500 a year for every person who unlocks their iPhone instead of using it on their exclusive carrier who gives them revenue sharing on every subscription."

It's really frustrating when people claim such things result in 'lost' money. They have not lost any money. They might not have earned as much, but NONE is lost.

For example, if I set up my computer to download a $10 album then delete it again a million times, the label could not accurately claim they just lost $10,000,000. (Well all know they try, but you see my point, it's obviously accurate. I probably wouldn't have even bought the first copy!)

I'm willing to bet most unlockers would not have been paying 'official SIM' customers if they couldn't unlock. For a start a huge chunk of them *cant* because they don't live in a country where they can actually subscribe!
Others are stuck in contracts or refuse to change provider.

All of these people have paid for hardware which apple have profited on, and many would not have paid for the phone if it could not be unlocked. That sounds a hell of a lot more like money earned not money lost!

[Zak @ Jan 29th 2008 1:14AM]

Take a basic accounting class, it's called an opportunity cost.

[nikster @ Jan 29th 2008 12:11AM]

Apple is not losing money on unlocked phones - most of them go where locked phones are not available.

However, Apple could have sold 3x the number of phones they've sold so far if they'd just sell it world-wide, and unlocked. They'd be an instant player in the mobile phone market. As it is, they had a big success considering they did almost everything in their might to prevent interested customers from getting an iPhone.

The locking scheme is a major reason why investors might want to dump AAPL. It's the iPhone killer, home made by Apple.

In a way, it shows that with all its glorious products and mind-boggling design, Apple still has the ability to shoot itself in the foot - with a double-barreled shotgun. In a way this is what Apple does. Other companies would quickly learn, and make unlocked phones available. Adjust. Not Apple. Apple will 'think different' through good times and bad. Investors don't like that very much - I don't like that very much, and I am an investor. Small fry but nonetheless, it's my money on the line.

[DT @ Jan 29th 2008 12:13AM]

@L.M. Lloyd:

MBA: Apple sold 2.3 million computers last quarter alone. That's an awful lot. Maybe not mass market, but hey, Porsche isn't mass market either. The MBA is a niche product and everyone knows it. If Apple sells 100k per quarter that's a tidy sum they would otherwise be handing to Sony, et al. If it's not for you, great, Apple has 2 other laptop lines, so they aren't losing any customers there either.

See w00t's response for the iPhone "losing" money. Those weren't Apple's customers anyway, so it's a bonus sale. Might be a problem for AT&T over time, but not Apple.

As for iTunes driving hardware sales, here is a direct quote from their quarterly conference call:

Q: iTunes Rentals goals? Drive hardware sales or profit by itself?
A: ...Goal for iTunes store has been to run it above break-even and use it to drive hardware sales.

And keep in mind that no matter how hard I pump this stock (I could be on every message board on the internet), it moves 45 million+ shares a DAY, and nothing I can say will ever move it. I've made more money on this stock than in my *real* job (even with this decline), so I really don't care if you think I'm personally invested in it.

[L. M. Lloyd @ Jan 29th 2008 12:31AM]

To both w00t and DT.

No, actually you are quite wrong on the iPhone. For people who obviously think you know quite a bit about trading stocks, I can't believe you don't have this one right. If Apple says they are going to sell X number of units this year, at Y amount for the unit + Z amount for the subscription, the value of the stock goes up based on that revenue projection, and then it turns out that a quarter of those units are only bringing in Y, and no Z, then that is a loss of projected revenue, which causes the value of the stock to be reevaluated. For all intents and purposes, that is projected revenue they lost. They sold a unit, and are getting half the projected revenue from that unit. That is lost revenue, just as much as it would be if someone walked out of the store with an iPhone without paying for it.

As far as the "but all of those are from territories where there isn't a partner service provider," I have two things to say.

1: That is absolute and complete supposition, supported by nothing but guesswork.

2: Even if it were true, given the pathetic sales numbers of the iPhone outside of the US (less than half a million activated iPhone service plans in the entire world outside of the US) 1 million unlocked phones out there make it very, very, very hard for Apple to sign any new service providers to their terms in any new territories. Why sign a special deal with Apple, that requires you to share profits no less, to get an exclusive deal on a phone hundreds of thousands of your subscribers already have?

[DT @ Jan 29th 2008 12:43AM]

@L. M. Lloyd, once again:

No, you are mistaken. Using your example, if Apple expects to earn X*(Y+Z), then units that are sold and NOT under a profit-sharing arrangement are just another variable, Q. If Apple manages to sell an iPhone to a Tmobile subscriber, they never would have realized subscription profit from that customer anyway. Sure, it would be fine and dandy if every potential iPhone buyer would switch service to the carrier who Apple has an agreement with, but that's not going to happen. So it is just icing on the cake. For someone who has managed to use a computer to get online and post your opinion, I'm surprised you can't see that.

Oh, and for the "pathetic 500,000" iPhones sold outside the US...I bless you that you should one day sell half a million of anything, let alone a $500 item with an estimated 100% profit margin.

[Miles @ Jan 29th 2008 2:05AM]

You guys are stupid.
The Macbook Air isn't a laptop, it's a Ultra Mobile PC.
Comparing it to laptops in terms of power and price is unfair.
It'd be like comparing a Molex to a Rolex.
Macbook Air is the most powerful and cheapest UMPC out there. You can't find a better one.
Not to mention it has an amazing interface (multi-touch).

Why WOULDN'T you buy one?

[L. M. Lloyd @ Jan 29th 2008 2:40AM]

Oh, and by the way, you give me the $50 million for the ad budget, and guarantee me half the press coverage the iPhone got, and is still getting, and I could sell 500,000 boxes of Swarovski-encrusted dog feces! If you really want to rationalize things away by saying it is better than some guy can do in his basement, then feel free, but no matter how you want to spin it, 500,000 phones in the European market is a joke. Nokia sells three times that every single day.

As far as revenue goes, no, at no point did Apple say "we are going to sell 10 million phones, but only realize full revenue on 7.5 million of those (which is how it would work out at the current rate of unlocking), assuming they can get anywhere near 10 million. Investors are now realizing that Apple isn't going to see nearly as much revenue from the iPhone as they predicted they would. You can squabble all you want about whether you consider that revenue lost or not, but the fact of the matter is no amount of semantic bickering is going to replace $1.25 billion yearly shortfall between what investors expected Apple to make off of 10 million iPhones, and what Apple would really make off of 10 million iPhones at the current rate of unlocking.

[Notung @ Jan 29th 2008 6:33AM]

Well, the thing is that you guys know a lot about Apple business, and nothing they are doing escapes your scrutiny, and it is starting to look predictable (apart from boring).

As much predictable it'll get less speculation will be in place, so for many investors it will be less appealing, therefore only people believing in their bottom line will get in the stock... so doubling value in a year will be out of the question, and the Steve guys will see a limit in the multiples (PER and xEBITDA, and so on) and in the end, Apple stock will have a peace and quiet chart as many others.

That of course will change in MacWorld 2112 when Steve's grandson announces teletransporation (patent pending) and the stock will rocket up the charts and all of your relatives alive at the moment will be filthy rich

Men, Apple TV sucks!

[DT @ Jan 28th 2008 9:29PM]

I am one of those investors, and I'm sorely tempted to get on a plane and SCREAM for Apple to do something with that $18B pile of cash h at the next shareholder's meeting. Apple right now is doing ZILCH to restore investor confidence (this email is a laugh and certainly doesn't do anything concrete). They need to do one of the following:

Announce a dividend
Announce a buyback plan
Announce plans to purchase a company or two

If they just insist on sitting on that mountain of cash, people are going to have legitimate questions about what Apple plans to do for the next few years. You want to restore investor confidence? Do SOMETHING that investors can be comfortable with! Do something that shows Apple is making bold moves in their existing market or moving into new ones! Sitting around and waiting for marketshare growth is not showing enough aggression.

[thegrey @ Jan 28th 2008 9:36PM]

18B will make more money in Apple's bank account vs. any dividend.
18B will do nothing in terms of buy back.

18B is being used to to buy small and important companies, pay for talent, open up new stores, R&D etc.

PS. Microsoft does all those things you want...

[who? @ Jan 28th 2008 9:52PM]

You are right that Apple needs to do something, because the reason people are selling isn't because the macbook air is a niche product, it's because the short term investors recognized Apple was not going to generate additional money for them. The huge drop you've seen is not investors thinking Apple is worthless, it's investors thinking, I've gotten as much as I can out of Apple for now. For the long term investor, Apple is a great company, and now's your chance to invest for less. For the short term investor (those who are selling right now) there isn't a game changing product to drive the price crazy over the next year (and Apple's stock price was bloated anyway, in my opinion) so they are going to sell and find a company who may have produce huge gains within the year. Timeframe is extremely important when investing.

[Spyvie @ Jan 28th 2008 11:55PM]

iPhone bubble correction

[Richy @ Jan 29th 2008 4:41AM]

Nice bit of short termism there, DT. That's what's wrong with the Markets today.

[PynkFloydd @ Jan 29th 2008 4:41PM]

Traditionally, a large company buying out a smaller company usually drives the larger company's stock price down. People usually view the small company getting a boost (which shoots the small company's price up) and the large company overpaying for a company that's not going to expand their profits much. Textbook example is AMD with ATI. At this point, Apple buying a company would probably drive the price down.

Most of Apple's stock price was investor speculation (or hope based on previous successes). If you look at the financials, the price is way overvalued. The price was only driven because of the hope that the middle class would maintain steadily loyal and Apple would feed that addiction. Since iPod sales growth has slowed and iPhone sales aren't expanding (as reported from their recent financials), stock price is adjusting to what investors are expecting in future results.

Apple's core customer is the middle class and they seem to be the hardest hit as of recently by the poor economy. You're going to see a LOT more slowed Apple growth in the future. It has nothing to do with Apple instilling investor confidence. This is just economics playing out and winning against speculation and blind investing.

[Mark @ Jan 28th 2008 9:30PM]

Steve may have a plan B.....

[Ellianth @ Jan 28th 2008 9:33PM]

Does it involve kool-aid?

Nice photo engadget.

[Student Driver @ Jan 29th 2008 12:28PM]

I'm just amazed that SJ recognized that *anything* is bigger than himself, let alone a set of them influencing the share price. How, umm, "humble" of him...

[zombie @ Jan 28th 2008 9:32PM]

what else would you expect with the release of a (mostly) useless macbook air? hopefully in a gen or 2 it will become something useful

[JAmerican @ Jan 28th 2008 9:33PM]

LMFAO! One of the Funniest Pictures ever!

[JAmerican @ Jan 28th 2008 9:34PM]

Seriously, he wouldn't have to say that if he released the Air as an EEE competitor.

[holycow @ Jan 28th 2008 9:33PM]

Apple's shares just got as light as the AIR, obviously it had to let go of some stuff!

[webon @ Jan 28th 2008 9:34PM]

factors "larger than ourselves" were taking their toll:

AIR

May be all this will Blow over eventually

[Flashpoint @ Jan 28th 2008 9:35PM]

that's the gayest picture I've ever seen.

[a ham sandwich @ Jan 28th 2008 9:35PM]

yeah. i think they'll be ok. lol

[Matthew @ Jan 28th 2008 9:39PM]

If Steve's hoping that helicopter has a truckload of Macbook Airs on their way to come save the day he's got another think coming.

[producerism @ Jan 28th 2008 9:44PM]

the fact I just installed OSx86 on my new PC, without shelling out a single dime for apple software, or hardware probably didn't help either.

[freakscene @ Jan 28th 2008 10:58PM]

If you want to install OS X on your vanilla PC, great, more power to you. But don't boast that you didn't "pay a dime" for Apple software, because you're saying that you pirated OS X. It's cheap, and you couldn't even man up enough to buy a copy of Leopard? That's nothing to brag about.

[producerism @ Jan 29th 2008 6:02AM]

actually, they don't offer a pc-version of OSX. So even if I wanted to, (which I don't) I couldn't buy it. To STFU Kthanxbye.

[rockintom @ Jan 29th 2008 8:50AM]

Hooray, you stole OSX. You're amazing!

[producerism @ Jan 29th 2008 6:09PM]

thanks, I was thinking you guys were too stupid to notice how amazing I am, fanboys.

[daniel @ Jan 28th 2008 9:46PM]

That picture looks wrong in so many different ways.

[mel @ Jan 28th 2008 9:47PM]

ahhh, all you fools saying apple hasn't done anything. let's talk about the revolutionary zune. when can i spend 10,000 bucks on a microsoft table? how about we keep releasing pathetic upgrades to the office suite that nobody wants to use. i know, everyone has intranets, let's just release a new version of sharepoint with two new features and charge $120 per seat. oh oh ohhhhh, let's brag about microsoft vista selling WORSE than XP in the same timeframe, even though there are an estimated THREE TIMES as many machines running windows as there were then. that should send the stocks flying. Microsoft had better push out halo 4 REAL SOON. maybe they can make Master Chief the official MS mascot... you know, like Mairo.

[Guzzie @ Jan 28th 2008 9:59PM]

I didn't realize this article was about Microsoft.

[Ruben @ Jan 28th 2008 10:11PM]

I can tell you which OS Vista isn't selling worse against, but then you might cry.

The Microsoft stock took a hit consistent with what every company faced during these hard times. Apples didn't. Thats why Apple is sending out memos and Microsoft isnt.

[josejuan05 @ Jan 28th 2008 10:52PM]

I agree about the Zune, Vista, and Surface, but the new Office really is a great new step forward. The ribbon interface really is innovative.

[jfingas @ Jan 28th 2008 9:55PM]

Wasn't this taken from AppleInsider?

They certainly had it first...

[daniel @ Jan 29th 2008 3:10AM]

Try clicking the "Read" button.

[jfingas @ Jan 29th 2008 7:04AM]

Only there wasn't a "Read" button at first -- in other words, Engadget took the story without initial credit.

[Shannin @ Jan 28th 2008 9:55PM]

maybe this means MBP updates tomorrow...
maybe not.

[ReggieXuk @ Jan 28th 2008 9:56PM]

LMFAO @ that picture

I think Apple need to find new ways to revolutionize computers and devices, other than aiming for the worlds smallest something all the time. I LIKED it, but they can't go on giving things "cool" names and new revisions forever.

PS. I'm not saying that is the reason for their stock dropping in value, i know nothing about stock

[roole @ Jan 28th 2008 10:29PM]

At least, you're honest, when you say "I know nothing about stock."

It's laughable (in a gadget blog) to see people hyperventilating about "OMG $18B in cash" or "dammit, pay dividends" or "hell, do an acquisition" or "why isn't there a stock split" etc etc as though they are, and are addressing, financial experts. (And, presuming to tell a guy like Peter Oppenheimer how to be a CFO.)