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A company makes a smart decision to pause sales in order to ensure they're not selling their products at a loss due to the drop on the value of rubies.... One

A company makes a smart decision to pause sales in order to ensure they're not selling their products at a loss due to the drop on the value of rubies.... One shouldn't expect otherwise.

acchow 12y ago
Apple could purchase FX swaps and charge customers a "FX fluctuation surcharge". That's better than shutting down the store...
- joezydeco 12y ago
  Or they could charge customers in Euro and let the customers' banks handle the F/X rate.
  - toyg 12y ago
    I would expect that to have legal implications, commerce in foreign currency is usually regulated in different ways.
    - toomuchtodo 12y ago
      Possibly? I buy quite a bit of services from SaaS companies in foreign countries as a US citizen with my American Express, am charged in CAD and EUR without issue (converted to USD on my bill).
      - shapov 12y ago
        In Russia specifically it is illegal to advertise a price in any currency other than the Ruble.
        joezydeco 12y ago
        Good point. Thanks for clarifying that.
    - justincormack 12y ago
      I saw comments that pricing in foreign currencies in retail is not allowed in Russia.
      - blawson 12y ago
        I think that's the case. From the UK's gov.uk site[0]: "It is illegal to pay directly for general transactions with dollars or Euros." [0] https://www.gov.uk/foreign-travel-advice/russia/money https://www.gov.uk/foreign-travel-advice/russia/money
    - ghshephard 12y ago
      Depends on the country - when I buy stuff in Dubai with a credit card, the clerk will frequently ask me if I wish to pay the bill in AED or USD.
      - 0x0 12y ago
        I thought the option to pay in your credit card's native currency abroad was basically just a scam where the shop makes up a ridiculous exchange rate on the spot to overcharge you.
        saryant 12y ago
        It's a complete scam. It's called "Direct Currency Conversion" and it's a essentially the payment processor and merchant hoping the consumer doesn't know what's going on. Amex disallows on their network but Visa and Mastercard do not. Unfortunately, Amex also has forex fees on most of their cards.
        wavefunction 12y ago
        It may be a scam for most cards, but I work for a company that does multi-currency cards that settle in the currency of your choice and our exchange rates are better than anything offered by anyone else in the card space. Just a bit more than interbank ForEX rates.
        foobarqux 12y ago
        I wondered why this didn't exist but I guess it turns out it does. Where can I get one?
        saryant 12y ago
        What does that have to do with DCC though? Maybe I'm missing something but that doesn't sound like it has anything to do with DCC. Any card with no forex fee is offering you a rate at just above the interbank rate if you avoid DCC.
        12y ago
  - prostoalex 12y ago
    This would cover the currency rate the day of transaction but would not protect them against losses during the time that it would take the transaction to clear.
- tjradcliffe 12y ago
  That presumes they have some idea of the short-term forward volatility of the rubble, which no one does right now. Otherwise they have no idea what the surcharge ought to be. Furthermore, setting up such things is not cost-free, and if the high-volatility situation is temporary (which is very likely) it could well be that it isn't worth the cost, complexity and risk.
  - martinko 12y ago
    >Otherwise they have no idea what the surcharge ought to be. Nonsense. The surcharge is the difference between the spot rate and the futures rate with which they hedge. They can easily predict (to a reasonable degree) the volume they need to hedge by estimating their market.
  - acchow 12y ago
    > That presumes they have some idea of the short-term forward volatility of the rubble, which no one does right now The derivatives market still exists and you can null out future FX risk by paying whatever the derivatives market is charging for it now and passing that cost onto consumers.
  - Kadin 12y ago
    You base the surcharge on what the swap costs. The cost of the swap takes into account the market's idea of what the ruble is going to do vs. the dollar. Basically, you make the customer buy insurance against the ruble losing value against the dollar. It's like charging a subprime borrower PMI.
    - achamayou 12y ago
      But you still need to find someone willing to sell you (enough of) the swaps in question. And that may not be easy.
  - CamperBob2 12y ago
    That presumes they have some idea of the short-term forward volatility of the rubble My guess is that your typo isn't too far from the truth. Everything we've seen lately with regard to falling oil prices is geared towards attacking the Putin regime. Eventually the Russian people will find themselves living in a North Korean-style pariah state... or else they'll wake up and take drastic action to keep that from happening. Either way the medium-term outlook for the ruble is pretty much toast.
toyg 12y ago
Indeed. If anything, all online vendors should be scrambling to review their pricing right now. I would expect more complex industries (where you can't just take a zero off the price overnight) might be grinding to a halt while waiting for the situation to stabilise.
antr 12y ago
Certainly Apple is adjusting their prices, having said that, a company like Apple, with most of their revenues coming from non-USD currencies, I'm certain that they hedge a large portion of their non-USD revenues/gross margin. The extreme volatility in Russia calls for a revision in product prices, sales forecasting, and fx hedges.
- umsm 12y ago
  > most of their revenues coming from non-USD currencies Is this true? Why are all major product releases in the US if most of their revenue is coming from overseas?
  - schwap 12y ago
    The US is probably their largest individual market.
    - NicoJuicy 12y ago
      I thought China overtook US (an article on 18 october after googling it)
      - saryant 12y ago
        For phones, yes. It's not clear if China is Apple's largest market overall though.
      - adventured 12y ago
        Those articles all say that the pre-orders will surpass the US market's equivalent pre-orders. I can't find anything making it official that on an annualized basis China has officially passed the US for iPhone sales. Last year Tim Cook was stating that it would occur soon. Apple's US unit volume is close to 50 million per year. For 2014, Chinese consumers are expected to buy close to 300 million smart phones, and Apple has close to 15% of that market. So I'd say it's a pretty tight race currently. Apple has a big problem in China however, they're getting squeezed substantially by the domestics (Xiaomi etc). In the US that's not happening, and Apple has held on to their strong ~45% market share. http://www.ibtimes.com/iphone-6-preorders-china-set-surpass-us-apples-biggest-smartphone-market-1703983 http://www.ibtimes.com/iphone-6-preorders-china-set-surpass-... "China could soon surpass the U.S. as the biggest market for Apple Inc.'s iPhone. A report on China's Tencent Monday said Chinese consumers preordered 20 million iPhone 6 and 6 Plus smartphones in the first weekend they were available for preorder. "If those numbers turn into sales when the iPhone is released Oct. 17, China will have doubled the 10 million phones sold in the first weekend in the U.S., setting it on the path to be the world's biggest market for iPhones."
JumpCrisscross 12y ago
Putin has an annual press conference coming up soon. Many anticipate a softening of his stance on Ukraine, in a bid for loosening sanctions. I am more fearful of him introducing ham-fisted capital controls. Apple may be similarly cautious.
- legohead 12y ago
  I wonder if Putin will soften anything after Obama signs new sanctions this week and we start giving millions to Ukraine...
- foobarqux 12y ago
  Shouldn't we all be afraid of the opposite, namely war, like with Japan 1941? After all, one of the major reasons for trying to retain control of Ukraine was for the energy resources and pipelines; the rout in oil has shown how important energy is to the Russian economy and I would expect that losing control of Ukrainian energy assets would permanently impair the Russian economy.
  - lmm 12y ago
    War is the worst case scenario for everyone. I don't think even Putin would leap straight there, though if you think it's a possibility then yes it's a bigger thing to fear than capital controls. If the Russian economy is already overdependent on oil money, they should be looking to diversify, not to acquire more energy assets.
    - fred89 12y ago
      https://en.wikipedia.org/wiki/Russo-Georgian_War https://en.wikipedia.org/wiki/Russo-Georgian_War
colechristensen 12y ago
The mind boggles wondering how a company could lose money selling _digital copies_ of media and software.
- djrogers 12y ago
  That's a small(ish) percentage of Apple's overall sales, even in the US where they have the most digital products to sell. Hardware (iPhone, iPad, Mac, in that order) make up the vast majority of Apple's sales revenue.
- qq66 12y ago
  A company loses money when its costs exceed its revenues. If Apple has to pay Warner Brothers a sum contractually specified in dollars for each copy of "Pump Up the Volume" that it sells, it could easily lose money if the rouble falls more quickly than they can adjust prices.
vegabook 12y ago
Except that AAPL and others will almost certainly have rolling hedges and be essentially unaffacted by this move until they purchase new stock for payment after hedge horizon and/or larger than the hedge size (unlikely since demand will have contracted). This is therefore most likely simply a decision by AAPL not to want to sell product "off market" even if their margins would be safe, or a pure treasury profit directive (benefiting from their hedges directly and not using them to subsidise Russian purchasers).
- prostoalex 12y ago
  Counterparty risk might be a tad too high at this point. Ruble is not that prevalent for any major players to sell options against, and a local player might have liquidity issues.
  - deleted 12y ago
    [deleted]

A company makes a smart decision to pause sales in order to ensure they're not selling their products at a loss due to the drop on the value of rubies.... One shouldn't expect otherwise.

acchow 12y ago

Apple could purchase FX swaps and charge customers a "FX fluctuation surcharge". That's better than shutting down the store...

joezydeco 12y ago
Or they could charge customers in Euro and let the customers' banks handle the F/X rate.
- toyg 12y ago
  I would expect that to have legal implications, commerce in foreign currency is usually regulated in different ways.
  - toomuchtodo 12y ago
    Possibly? I buy quite a bit of services from SaaS companies in foreign countries as a US citizen with my American Express, am charged in CAD and EUR without issue (converted to USD on my bill).
    - shapov 12y ago
      In Russia specifically it is illegal to advertise a price in any currency other than the Ruble.
      - joezydeco 12y ago
        Good point. Thanks for clarifying that.
  - justincormack 12y ago
    I saw comments that pricing in foreign currencies in retail is not allowed in Russia.
    - blawson 12y ago
      I think that's the case. From the UK's gov.uk site[0]: "It is illegal to pay directly for general transactions with dollars or Euros." [0] https://www.gov.uk/foreign-travel-advice/russia/money https://www.gov.uk/foreign-travel-advice/russia/money
  - ghshephard 12y ago
    Depends on the country - when I buy stuff in Dubai with a credit card, the clerk will frequently ask me if I wish to pay the bill in AED or USD.
    - 0x0 12y ago
      I thought the option to pay in your credit card's native currency abroad was basically just a scam where the shop makes up a ridiculous exchange rate on the spot to overcharge you.
      - saryant 12y ago
        It's a complete scam. It's called "Direct Currency Conversion" and it's a essentially the payment processor and merchant hoping the consumer doesn't know what's going on. Amex disallows on their network but Visa and Mastercard do not. Unfortunately, Amex also has forex fees on most of their cards.
        wavefunction 12y ago
        It may be a scam for most cards, but I work for a company that does multi-currency cards that settle in the currency of your choice and our exchange rates are better than anything offered by anyone else in the card space. Just a bit more than interbank ForEX rates.
        foobarqux 12y ago
        I wondered why this didn't exist but I guess it turns out it does. Where can I get one?
        saryant 12y ago
        What does that have to do with DCC though? Maybe I'm missing something but that doesn't sound like it has anything to do with DCC. Any card with no forex fee is offering you a rate at just above the interbank rate if you avoid DCC.
        12y ago
- prostoalex 12y ago
  This would cover the currency rate the day of transaction but would not protect them against losses during the time that it would take the transaction to clear.
tjradcliffe 12y ago
That presumes they have some idea of the short-term forward volatility of the rubble, which no one does right now. Otherwise they have no idea what the surcharge ought to be. Furthermore, setting up such things is not cost-free, and if the high-volatility situation is temporary (which is very likely) it could well be that it isn't worth the cost, complexity and risk.
- martinko 12y ago
  >Otherwise they have no idea what the surcharge ought to be. Nonsense. The surcharge is the difference between the spot rate and the futures rate with which they hedge. They can easily predict (to a reasonable degree) the volume they need to hedge by estimating their market.
- acchow 12y ago
  > That presumes they have some idea of the short-term forward volatility of the rubble, which no one does right now The derivatives market still exists and you can null out future FX risk by paying whatever the derivatives market is charging for it now and passing that cost onto consumers.
- Kadin 12y ago
  You base the surcharge on what the swap costs. The cost of the swap takes into account the market's idea of what the ruble is going to do vs. the dollar. Basically, you make the customer buy insurance against the ruble losing value against the dollar. It's like charging a subprime borrower PMI.
  - achamayou 12y ago
    But you still need to find someone willing to sell you (enough of) the swaps in question. And that may not be easy.
- CamperBob2 12y ago
  That presumes they have some idea of the short-term forward volatility of the rubble My guess is that your typo isn't too far from the truth. Everything we've seen lately with regard to falling oil prices is geared towards attacking the Putin regime. Eventually the Russian people will find themselves living in a North Korean-style pariah state... or else they'll wake up and take drastic action to keep that from happening. Either way the medium-term outlook for the ruble is pretty much toast.

toyg 12y ago

Indeed. If anything, all online vendors should be scrambling to review their pricing right now. I would expect more complex industries (where you can't just take a zero off the price overnight) might be grinding to a halt while waiting for the situation to stabilise.

antr 12y ago

Certainly Apple is adjusting their prices, having said that, a company like Apple, with most of their revenues coming from non-USD currencies, I'm certain that they hedge a large portion of their non-USD revenues/gross margin. The extreme volatility in Russia calls for a revision in product prices, sales forecasting, and fx hedges.

umsm 12y ago
> most of their revenues coming from non-USD currencies Is this true? Why are all major product releases in the US if most of their revenue is coming from overseas?
- schwap 12y ago
  The US is probably their largest individual market.
  - NicoJuicy 12y ago
    I thought China overtook US (an article on 18 october after googling it)
    - saryant 12y ago
      For phones, yes. It's not clear if China is Apple's largest market overall though.
    - adventured 12y ago
      Those articles all say that the pre-orders will surpass the US market's equivalent pre-orders. I can't find anything making it official that on an annualized basis China has officially passed the US for iPhone sales. Last year Tim Cook was stating that it would occur soon. Apple's US unit volume is close to 50 million per year. For 2014, Chinese consumers are expected to buy close to 300 million smart phones, and Apple has close to 15% of that market. So I'd say it's a pretty tight race currently. Apple has a big problem in China however, they're getting squeezed substantially by the domestics (Xiaomi etc). In the US that's not happening, and Apple has held on to their strong ~45% market share. http://www.ibtimes.com/iphone-6-preorders-china-set-surpass-us-apples-biggest-smartphone-market-1703983 http://www.ibtimes.com/iphone-6-preorders-china-set-surpass-... "China could soon surpass the U.S. as the biggest market for Apple Inc.'s iPhone. A report on China's Tencent Monday said Chinese consumers preordered 20 million iPhone 6 and 6 Plus smartphones in the first weekend they were available for preorder. "If those numbers turn into sales when the iPhone is released Oct. 17, China will have doubled the 10 million phones sold in the first weekend in the U.S., setting it on the path to be the world's biggest market for iPhones."

JumpCrisscross 12y ago

Putin has an annual press conference coming up soon. Many anticipate a softening of his stance on Ukraine, in a bid for loosening sanctions. I am more fearful of him introducing ham-fisted capital controls. Apple may be similarly cautious.

legohead 12y ago
I wonder if Putin will soften anything after Obama signs new sanctions this week and we start giving millions to Ukraine...
foobarqux 12y ago
Shouldn't we all be afraid of the opposite, namely war, like with Japan 1941? After all, one of the major reasons for trying to retain control of Ukraine was for the energy resources and pipelines; the rout in oil has shown how important energy is to the Russian economy and I would expect that losing control of Ukrainian energy assets would permanently impair the Russian economy.
- lmm 12y ago
  War is the worst case scenario for everyone. I don't think even Putin would leap straight there, though if you think it's a possibility then yes it's a bigger thing to fear than capital controls. If the Russian economy is already overdependent on oil money, they should be looking to diversify, not to acquire more energy assets.
  - fred89 12y ago
    https://en.wikipedia.org/wiki/Russo-Georgian_War https://en.wikipedia.org/wiki/Russo-Georgian_War

colechristensen 12y ago

The mind boggles wondering how a company could lose money selling _digital copies_ of media and software.

djrogers 12y ago
That's a small(ish) percentage of Apple's overall sales, even in the US where they have the most digital products to sell. Hardware (iPhone, iPad, Mac, in that order) make up the vast majority of Apple's sales revenue.
qq66 12y ago
A company loses money when its costs exceed its revenues. If Apple has to pay Warner Brothers a sum contractually specified in dollars for each copy of "Pump Up the Volume" that it sells, it could easily lose money if the rouble falls more quickly than they can adjust prices.

vegabook 12y ago

Except that AAPL and others will almost certainly have rolling hedges and be essentially unaffacted by this move until they purchase new stock for payment after hedge horizon and/or larger than the hedge size (unlikely since demand will have contracted). This is therefore most likely simply a decision by AAPL not to want to sell product "off market" even if their margins would be safe, or a pure treasury profit directive (benefiting from their hedges directly and not using them to subsidise Russian purchasers).

prostoalex 12y ago
Counterparty risk might be a tad too high at this point. Ruble is not that prevalent for any major players to sell options against, and a local player might have liquidity issues.
- deleted 12y ago
  [deleted]