NEW YORK (Reuters) – Apple Inc APPL.O beats Goldman Sachs Group Inc ( GS.N ) analysts on Friday in a relatively rare public dust-up between a blue chip the Wall Street company and its client.
The Apple logo appears at an event at their headquarters in Cupertino, California, USA September 10, 2019. REUTERS / Stephen Lam
Disagreement came after Goldman Sachs analyst Rod Hall criticized Apple's accounting practices for tech giant's new TV + product, and says in a research note that it could lead to lower gross margins and profits.
In response, Apple said it did not "expect the introduction of Apple TV +, including accounting for the service, to have a material impact on our financial performance."
A Goldman spokeswoman declined to comment or comment with the analyst available for interview. Apple also declined to comment on the Goldman relationship beyond its commentary on the note.
While research departments at major Wall Street banks have Chinese walls that distinguish them from other functions, the rare public dispute is a difficult moment between the two companies.
Goldman Sachs has issued more bond issues for Apple over the last decade than any other investment bank, worth around $ 44 billion, according to financial data provider Refinitiv.
Goldman Sachs also advised Apple on mergers and acquisitions as recently as two months ago, leading it through a $ 1 billion deal to acquire the majority of Intel's smartphone modem business, according to Refinitive.
And just last month, the two worked to launch both companies' first credit card – the Apple Card.
Each bank formally separates its equity research and investment banking divisions because of laws passed at the beginning of the 2000s that aimed to protect equity analysts' independence from investment bankers, who often cover the same companies with different agendas.
Business customers generally respect the independence of the research department. When they don't, it gets a lot of attention.
In May last year, Tesla CEO Elon Musk refused to answer analysts' questions about the company's capital requirements, calling the questions "dull" and "not cool" during a conference call to discuss Tesla's performance. Later, he criticized several analysts directly for negative conversations.
At the beginning of the fiscal year, Apple shifted where it stands for the value and cost of free services – such as Apple Maps – and moved it to its service segment. Previously, this was accounted for under the individual products.
In the note, Goldman & # 39; s Hall said that Apple would probably treat TV + subscriptions in a similar way by outlining it as a discounted package of a free service along with a hardware purchase. Hall said it would cause Apple investors to see lower average selling prices for iPhones and other Apple devices, but faster growth in the company's service segment.
Many Apple investors have come to focus on growth in the service segment as the global smartphone market has stagnated, with Apple shares rising this year despite declines this year in iPhone sales over the past two quarters.
Reporting by Elizabeth Dilts in New York and Stephen Nellis in San Francisco; Further reporting from Greg Roumeliotis in New York; Editing by Daniel Wallis