galaxy tab

Tech companies are liars: Samsung edition

April 11, 2014
Obsession
Mobile Web
April 11, 2014

Here’s an open secret about tech companies that many investors fail to appreciate: As long as they’re not breaking the law, they’ll “disclose” whatever numbers about their business—users, units shipped, etc.—cast them in the most favorable light. And sometimes, those numbers don’t reflect reality at all.

The latest example emerged from the ongoing patent trial between Apple and Samsung, which continues to offer up a bonanza of dirty laundry about both companies.

It concerns a vague comment made by a Samsung executive in January 2011 that led Strategy Analytics to conclude that Samsung had sold two million of Galaxy Tab—its rival to the iPad—in the first six weeks it was available.

Asked on an earnings call about the number later, Samsung vice president Lee Young-hee dodged the question completely with a vague, elaborate, jargon-rich answer.

It turns out, however, that it actually took Samsung an entire year just to sell one million Galaxy Tabs—not the widely reported two million—according to Forbes. In other words, Samsung guided analysts toward an erroneous figure, and then let it stand instead of correcting it.

This isn’t a small deception. It made it look like Apple’s share of the tablet market fell dramatically—from 95% to 75% in just two weeks. Multiple outlets immediately ran with that figure, kicking off a trend of reporting that presumed that, as happened with phones, Apple would soon cede control of the tablet market.

And that’s a public company. Among those that are privately held, there’s even less incentive to report accurate data. Even when they’re pre-IPO, companies are under no legal obligation to clarify their comments. For example, when a new service claims to have “millions of users” do they mean people who logged in once or never came back? Or do they mean the more industry-standard “monthly active users,” which Facebook discloses in all its quarterly reports?

It shouldn’t surprise us that companies want to paint themselves in the most flattering light. But it’s important to remember that these numbers frequently make it into credulous reports on the performance of their business, and are thereafter passed on as accepted fact. Unless something is made explicit in a forum in which there are legal consequences for getting it wrong, you simply can’t trust the numbers coming out of most tech companies.

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