SAN FRANCISCO — Last week, Jim Cramer,
the boisterous host of CNBC’s “Mad Money,” had a company called
Skyworks Solutions on his show. The company, a chip supplier for Apple, said its sales were strong in China, but its stock plummeted afterward anyway, following the global markets into the red.
And that gave Mr. Cramer an idea: What would Timothy D. Cook, Apple’s chief executive, say about iPhone sales in China, a crucial component to Apple’s future growth?
He
sent the question to Mr. Cook by email Sunday evening. His letter read:
“Dear Tim, Just trying to do my best to cover Apple, as always, and I
keep running up against ‘China fears’ and ‘China worries.’ We are in a
tough moment in the market, and any clarity I might be able to get
before Squawk on the Street at 9 Eastern would really help.”
Mr. Cook, who is known for being an early riser, sent his reply around 8 a.m. on Monday — 5 a.m. in California, where he lives.
“I get updates on our performance in China every day, including this
morning, and I can tell you that we have continued to experience strong
growth for our business in China through July and August,” Mr. Cook said
in the email to Mr. Cramer. “Obviously I can’t predict the future, but our performance so far this quarter is reassuring.”
The
email gave Apple a short-term reprieve, helping lift its stock from 10
percent down to positive territory. Apple ended the day down 2.5
percent. The email also spoke to the amount pressure that companies —
even blue-chip brands like Apple — face in the recent market turmoil.
Jan
Dawson, an independent technology analyst for Jackdaw Research, said
Apple’s stock had taken a beating largely because of growing concerns
about China. A simple solution was to send signals of positive
performance in China to Mr. Cramer, he said.
“I’m
sure Cook was well aware that Cramer would share it with his viewers
and it would therefore quickly become public,” Mr. Dawson said. “Apple
stock has certainly risen sharply since the email was made public, so
it’s arguable that it worked.”
Mr. Cramer said he was surprised to get a response. In March, the Apple chief called in to "Mad Money"
to congratulate Mr. Cramer on the 10th anniversary of the show. Beyond
that, Mr. Cramer said he had not cultivated a personal relationship with
Mr. Cook, though the TV host noted he had long been an advocate for
holding on to the Cupertino, Calif., company’s stock. Mr. Cramer is the
co-manager of a charitable trust portfolio, Action Alerts Plus, which
holds shares of Apple.
“I’ve
been a stalwart in saying, ‘Don’t trade Apple,’ ” he said. “I think
it’s a mistake to trade it. I think you should own it.”
China
has become an increasingly important market for Apple. The company’s
growth has slowed over the last few years in mature markets like the
United States and parts of Europe, where the smartphone market has
become saturated. China, however, remains a huge untapped market where
plenty of people are still buying smartphones for the first time.
Apple has long laid the groundwork to reap big sales in China and revenue growth from the region has steadily gained momentum. The company in late 2013 struck an important deal
to sell iPhones through China Mobile, the world’s largest phone
carrier. Apple is also expanding its operations in the region, planning
to increase its number of stores to 40 by mid-2016.
Some
analysts have raised questions about whether Apple, the most valuable
company in the world by market capitalization, can maintain its overall
torrid pace of growth. Shares in the company are up about 45 percent in
the last two years. But in the last six months, the stock has fallen
over 18 percent.
Mr.
Cook also wrote to Mr. Cramer that he continued to believe “that China
represents an unprecedented opportunity over the long term.”
On
Monday, some regulatory experts raised concerns about whether Mr.
Cook’s email to Mr. Cramer had violated the Securities and Exchange
Commission’s fair disclosure regulations. The rules, commonly known as
Reg F.D., require companies to share material information to all
investors at the same time.
In
previous financial earnings calls, Apple had said it was bullish about
its strong, long-term growth in China. But the S.E.C. has signaled that
reaffirmation of financial guidance, in some contexts, could even lead
to a full-disclosure violation, according to Thomas A. Sporkin, a
partner for Buckley Sandler and a former S.E.C. enforcement official. In
2005, the commission charged the Flowserve Corporation,
a manufacturer, with violating Reg F.D. for reiterating its guidance to
a group of analysts before sharing the same information with the
public.
Mr.
Cook’s reaffirmation to Mr. Cramer of Apple’s performance in China was
softer and more generalized than when Flowserve shared specific numbers,
Mr. Sporkin said. But he added that it was unclear whether Mr. Cramer
could have a different interpretation of the email based on his
relationship with Mr. Cook.
Apple,
CNBC and the S.E.C. declined to comment. In response to questions
raised about potential violations of the S.E.C.’s disclosure rules, Mr.
Cramer would only say: “I got what I got. I got an email from Tim Cook.”
Bill
Singer, a regulatory lawyer, said he expected the S.E.C. to investigate
the context of the email and provide guidelines as to whether companies
can disclose financial information this way to selected news reporters.
“I
can see here that Cook is literally dancing on the edge of a razor,” he
said. “At the end of the day it’s one of the largest companies in the
world telling one reporter via a private email that our ongoing quarter
is actually going to surprise people, and I consider that material.”
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