Criticism over Ternus' reading a script during earnings is pathetic

"We don't have any fundamentally different changes that we're planning right now, nor would we talk about it anyway" is all the proof some armchair critics need to see that earnings are scripted by every CEO, anywhere, where it needs to be, and not when it doesn't.

If you want to criticize Apple over its illegal union busting, you go right ahead. Or how it treats its suppliers, that's fair game and something Apple should be ashamed of.

But turning on John Ternus for reading a script during his first earnings call is unbelievable and ridiculous. According to critics including Bloomberg, Ternus timidly took cover "behind a carefully written script as analysts peppered him with questions."

That's ludicrous. If you listened to the call for five minutes, when Ternus got a good question not just asking him to spill future product plans, you can see that it wasn't.

"Apple investors and fans hoping to get an insight into the philosophy of new Chief Executive Officer John Ternus on Monday were left sorely disappointed," says the report.

Sure.

Or then there's Fortune, which says much the same kind of things. It even concludes that "the honeymoon is over" for Ternus. Ridiculous.

How this really works

If you are an Apple fan who really did join this earnings call for insight, philosophy, or a karaoke session, you would pretty swiftly have learned the truth. Earnings calls, for any firm, are divided into roughly two halves, beginning first with a boring recitation of Securities and Exchange Commission filing figures that were already online.

Should you manage to make it through that to the second half, you are invariably treated to analysts asking questions that neither Apple nor any other company will ever answer. Bizarrely, after one analyst has asked such a question, you always get at least one more asking precisely the same thing.

In case you're wondering, the count of variations on "we do not comment on unreleased products" was five this time around.

So if instead of tedium you wanted insight or philosophy, you need to find a better call to join. Although as it happens, Ternus did use his first earnings one to enthuse in pretty specific detail about the philosophy of why he believes Apple is the "greatest company in the world."

Scripted and not scripted

Apple investors who joined the call, and most especially any journalist writing about any part of it, already know the form. Which very specifically means that they know this part: the opening remarks are scripted.

Always. From every company.

This is not supposition. This is not something new. Apple is a $5 trillion company reporting on its legal financial filings with the SEC.

You do not get that stuff wrong, you do not rely on memory, and you do not throw in some ad-libbed wisecracks.

So John Ternus doubtlessly read that part from a script, exactly as Tim Cook did every quarter for about 15 years, and as Steve Jobs famously read from a teleprompter in shareholder meetings. The CEO recites figures and when necessary, tries to put some spin on them to make everything sound brilliant.

You bet your life that this section is carefully written. And vetted by a horde of lawyers.

If there's anything more likely to shake the stock market than Apple's CEO saying the wrong thing, it's people doing their best to find something to criticize.

Pretending that this is new, that it isn't what every CEO does for every earnings call is disingenuous, to say the very least.

But then there's this. The allegation from multiple critics is this line that Ternus took cover "behind a carefully written script as analysts peppered him with questions."

No. He did not.

That is willfully conflating the two separate halves of the earnings call.

The opening remarks were scripted, but the complete answers to analysts following that weren't, even if there were a few canned and legally vetted responses to the dumber questions that they wouldn't answer in detail anyway. Doubtlessly Ternus and chief financial officer Kevan Parekh discussed everything in advance, and it wouldn't be a surprise if they'd kept some figures ready to trot out.

But once the analysts began asking what they asked, Ternus was not taking cover behind a script because there wasn't one.

After he finished reading his script, Tim Cook famously had a way of diverting questions by beginning his replies with some variation on "the way I see it is..." He would then basically ignore the actual question and make a statement instead.

Ternus did exactly that, and did so exactly as you'd expect, for exactly the same reasons. There is no SEC requirement for firms to have earnings calls like this, nor any real conditions on what they include, but Apple always takes an hour and zero seconds, and is always happy to run out the clock dodging questions about this or that.

Except there was one difference this time. Cook would often repeat some line or other about how Apple doesn't give guidance beyond a certain point, but Ternus went straight to the point.

Asked about whether the touchscreen MacBook Pro meant Apple would combine the Mac and the iPad, first Ternus gave the party line about being proud of both devices.

But then he ended his answer with a line that no carefully-worded financial earnings report script would have had.

"We don't have any fundamentally different changes that we're planning right now," he said, "nor would we talk about it anyway."

No one who listened to the call missed that. No one who listened to the call actually expected this earnings call to be a sideshow with Ternus revealing Apple's secret plans. The critics didn't miss it either, but chose to ignore it.

So pretending that it would be something no earnings call ever would be, is scrabbling for reasons to criticize. Pretending that it is somehow wrong to read your earning report from a script, is scraping the barrel.

Source: Read original article