Apple CEO Tim Cook insisted last week that everything was great with his company despite its first quarterly revenue decline since 2003. He and Apple’s chief financial officer used the word “optimistic” 10 times during a conference call with analysts. Then the company’s share price pessimistically fell for eight consecutive market days — something that hasn’t happened to Apple in nearly 18 years.
Declaring victory didn’t work the first time, so Cook made a trip to Jim Cramer’s therapy couch on Monday to try to soothe investors. It’s unfair to compare Apple’s numbers to the 2014 debut of the iPhone 6, which was a tough act to follow, Cook said. He added: Everything is great. Look at how much money we’re making. The smartphone market has plenty of room to run. Customers love us so much. Then Cook attended a gala at the Metropolitan Museum of Art.
Here’s what Cook didn’t say: 1) Apple has been misjudging its own business, and that makes it tough to believe what executives say; and 2) The company failed to prepare investors for an inevitable slowdown in growth — even if that slowdown proves temporary. If one duty of public company executives is to underpromise and overdeliver, Apple has flopped in that job.
A lot of people will just mockingly file away articles like this under the “Apple is doomed!” moniker, but what these people don’t understand is that most of the stock market isn’t about whether or not Apple is doomed or not – it’s all about meeting expectations. You can suffer a massive loss, but if the loss is less than what you and the market predicted, your shares would go up. You could be doing incredibly well like Apple, but if you underdeliver, your shares will go down.
And this article makes a strong case Cook failed at underpromising.
The problem isn’t that Apples iPhones sales went down. It is by how much they went down. The entire market had their (final?) growth in 2015 and is now flat. But in a flat market Apples iPhone sales dropped by 17%.
Apple Watch isn’t delivering what Apple and analysts expected so Apple did what they never do…they dropped the price. Normally you got a better device at the same pricepoint, now they dropped the price.
MacBooks…Also down 10% which is a different story to their “we are growing in a shrinking market”. They are now actually shrinking at the same pace or faster than the market. And who can blame them. The new MacBook got 10% more battery and 10% more performance and nothing else…in a year! That isn’t exactly pushing Moores law forward, it is just a tiny specbump that will not push this product forward. The air is no longer getting outdated, it IS outdated.
lets not even talk about the MacPro that was announced with “can’t innovate? my *ss”.
Apple still makes very good products, but so do others. And those others have big names, marketshare, marketing AND (relatively and absolutely) better specs for less money.
But most importantly: Apple is losing it’s Halo effect, and that is what should actually worry them the most. They really need to start using those 100’s of billions they have in the bank to do something special if they want to keep the Halo effect going.
(but will Apple feel that urgency while they are still getting an extra billion in profits in the bank every week?)
As mentioned by others Apple is reaching the point where it has sold it’s products to a high percentage of the people who wanted them, and have now given very little reason for people who already have an item to upgrade it.
But this really seems to be bad in it’s computer lines.
It used to be that not only did Apple’s products have high standards but also had base designs that were the leading edge at the time of their release on the market.
Now-a-days you seemed to always be able to buy a more capable product elsewhere.
Example: Macs come with more than enough RAM for most uses, but other products out there let to expand your RAM to far larger sizes if you wanted or needed it.
Also a number of Macs come with faster than the standard SSD of most machines, but again you can get faster and larger SSDs for other products if you want or need them.
Then Macs come with GPUs in just the middle of the road in performance, other machines not only let you switch to very high performance GPUs if you want, some even let you add multiple GPUs for heavy number crunching.
Lately, Apple seems to be selling ‘Good Enough’ machines, but so does everyone else. Apple is not selling the machines people feel they MUST buy to get ahead of everyone else.
Edited 2016-05-04 12:03 UTC
There’s music also : https://blog.vellumatlanta.com/2016/05/04/apple-stole-my-music-no-se…
I don’t have anything to add to your post, but this particular “upgrade” really disappointed me. The processor upgrade is fine and all, but everyone was waiting for them to switch to thunderbolt 3 over USB-C, and well, they just didn’t…
The Macbook “upgrade” is just pointless – why even bother introducing it? Its basically exactly the same machine with a very minor, almost negligible speed bump. Its so underwhelming I don’t understand why they even bothered.
I have a Macbook. I am very happy with it. But quite a few people at my company won’t use it simply because there is no (good) way to plug it into their existing Thunderbolt displays, so they are sticking with Airs or Macbook Pros…
Switching to TB3 over USB-C seemed like a complete no brainer. I really am curious wtf happened…?
Edited 2016-05-04 15:55 UTC
I wonder if it’s because USB C is more standard? That’d be unlike Apple, however it seems the only logical reason. Thunderbolt has yet to really see the uptake that both Intel and Apple hoped for, outside of Apple’s own market.
But TB3 is USB-C, at least in every way that matters. Anything you can plug into a USB-C port you can plug into a TB3 port. Its the same connector and supports the same cables and protocols. Every USB device now made for the Macbook should work on a hypothetical TB3 Macbook. The main difference is it would also support Thunderbolt 3 devices and can use active cables to achieve 40GBps throughput (it only gets 20Gbps using existing passive USB-C cables, but even that is a huge improvement over the current USB-C bandwidth)
That said, I don’t personally miss thunderbolt on my Macbook, I don’t have a Thunderbolt display and bought a monitor that works properly over HDMI for it. The main issue with the existing USB-C port is primarily that it cannot be used to drive a Thunderbolt display – lots of people have these and not being able to use them limits the appeal of the Macbook quite a bit.
Dell, Razer, and a few other laptop makers are already shipping machines with it. Apple seriously missed the boat here.
This is the exact reason I have stuck with my 11″ MBA. While I love the form factor of the ultralight / ultraportable, when I sit down at my home base, I want it all to be big. I’m not ultraporting at that point and want the real estate.
They could but then again it’s Apple trying to accustom users that they don’t really need anything more than what comes on a tablet like device.
It will not happen now but sometime in future their standard and pro line will all be tablet like with iOS based OS.
For nearly every business there is a point where your products and services reach saturation, where your new customers match leaving customers.
Apple had many years of growth, the iMac/powerbook once that was peaking they introduced the iPod when that began to peak the iPhone. Now the iPad and Apple Watch and Apple TV never did big changes. So what is up to figure out what will be next for Apple. If apple doesn’t have any big hits. They are not doomed but will remain steady for a long time.
Agree same with organisms – you can’t grow forever. The most relevant comparison to Apple is IBM who has stagnated for decades while still remaining viable. Apple is facing the commodification of phones into a low margin business where efficient Asian manufacturing excels. IBM sold its laptop and disk drive business for that reason and concentrates on software services now. But the service business has few economies of scale its just marking up labor so there is a limit to profitability as well availability of workers for growth.
It would seem to me, however, that at a certain point, a business will inevitably slow down for a time. Constant “revolution” is not always a good thing. Sometimes what people have is good enough for a while.
If I were in charge of Apple, I’d be taking this time to seriously ponder where the company could go from here. The phone and tablet markets are saturated. The PC market (and I’m including Apple computers in this) is shrinking as smart phones and tablets become more capable. The Apple Watch was a rush job, and a solution in search of a problem really. So okay, they’ve slowed down. Look on this, I’d say, not as a disaster but as a time to do some soul searching (if we can apply that term to a business collectively) and really come up with something people are going to desire.
At present, I for one have no idea what that is. My iPhone 6S plus works fine, and I’ll be happy with it for several years to come. It’s a reliable product (far more reliable than any Androids I’ve tried) and it does the things it does darn near perfectly. I feel the same about their other products that I own, and I can’t see myself ever wanting an Apple watch. So now it’s time for Apple to challenge me, and those like me who don’t need continuous progress in what we have: come up with something that will really enhance our productivity. Slow down and do some serious, genuine innovation like they used to do.
I don’t know about the “underpromise and overdeliver” concept, but it’s clear that when it comes to overpromising Tim Cook is Grand Master material. Just consider this snippet from his interview with Jim Cramer for CNBC Mad Money (http://www.macrumors.com/2016/05/02/cook-mad-money-great-innovation…):
“We’ve got great innovation in the pipeline. New iPhones that will incentivize you and other people that have iPhones today to upgrade to new iPhones.”
Let’s ignore for a moment the minus several million points for using the word “incentivize” when anything from “encourage” to “motivate” and even “inspire” would have made him sound less of a dick, because the real problem for the investors is that his master plan boils down to selling the same (okay, slightly better) thing to the same people. Over and over. Sure, it may “just work” but that not as good as genuine, long term growth.
But wait, there’s more, because apparently the man was really on a roll (or on something anyway):
“We are going to give you things you can’t live without that you just don’t know you need today. That has always been the objective of Apple. To do things that really enrich people’s lives. That you look back on and you wonder how did I live without this.”
Now, my question is: how could anyone say stuff like that and manage to keep a straight face? Heck, even listening to this nonsense without bursting with laughter would be impossible for me — but probably that’s because I’m no CEO material, I guess.
RT.
Yeah, every time I hear Cook talk I think that he should just keep his mouth shut and let someone else do the pr. He comes out sounding like an idiot every time. Not saying he is an idiot (though he’s definitely not brilliant) just that he sounds foolish.
How is what he said any different to the idealistic nonsense in any Apple marketing campaign? The only problem is that the wrong person is saying them.
I’ll do even better. How is it any different than the nonsense in any marketing campaign? It’s just that, somehow, Cook has a way of tripping over it and making it sound more nonsensical.
The guy has no charisma. And unfortunately Apple depends on a charismatic salesman.
That “great innovation in the pipeline” is something that he keeps repeating but that actually means “great innovation for Apple”, not “great innovation in general”.
Does anyone remember that Tim Cook was talking about new products in new categories 2 or 3 years ago? There was speculation about Watch/TV/Car but in the end it turned out to be a Watch (when Android Wear had reached V2) and ApplePay and Apple Music.
or as Cook later specified:
‘According to Cook, Apple believes that it can use its skills building software, hardware, and services to create “great products” in categories that Apple does not participate in today. “We’re pretty confident about that,” said Cook.’
Cook also made it clear that Apple is never first, but tries to be best. They don’t seem best to me lately which they really should be given their pricepoints and marketimage
Someone is loving the dropping apple share prices.
The largest owner of apple “Vanguard group” has heavily increased their numbers of shares in the company since the downturn. As of 05/01/2016 the number of shares in apple owned by vanguard has ballooned to over 300 million shares (Mkt Idx+500 Idx Inv of Vanguard) It has also been increasing it’s ownership of tesla motors for some reason.
Edit:typo
Edited 2016-05-04 15:47 UTC
Of course. If you’re an investor or potential investor, now’s the time to grab all you can.
It is also a great time for Apple to buy back a lot of stock.
They now have a market cap of about 500 billion with about 200 billion in actual cash and 10 billion of cash coming in per quarter. I am no financial expert, but that sounds like 500-200=300, 300/(10*4) = 1/7 which is VERY low for a tech company and normally means “buy”
Vanguard have been selling AAPL shares. They reduced their holding by 1.6 M shares to 323 Million in Dec 2015 and are still unloading.
Virtually all the major funds are selling down their AAPL stock.
Carl Icahn recently sold all 46 Million of his AAPL shares.
Index funds such as Vanguard simply buy or sell stocks several times per year to maintain the market weighting relative to an index. They have zero interest in the fundamentals or future prospects of any of the stocks they are buying.
Whenever you have to repeatedly come out and say you’re Optimistic about something, you’re probably not Optimistic about it.
It’s also why public companies tend to be so universally hated. As CEO, you not only have to make sure that the public company you run is solvent, you have to meet whatever arbitrary expectations some Gordon Gekko type of guy has, otherwise the stock goes down and talks about CEO replacement start to circulate.
So, all those nonsensial and sometimes antisocial moves that are baffling to us on the outside, make perfect sense from the CEO’s perspective.
Edited 2016-05-04 17:57 UTC
A touch of humility gives you some perspective sometimes, Apple.
I have a work-issued Mac laptop which is now several years old. I might ask for a new one at some point, but the reality is the specification of the new ones is either pretty much the same, or actually worse, in particular for ports.
I have one of the original PowerPC G4 Mac Minis, currently running FreeBSD. At the time I bought it, it was on a par with contemporary PCs in terms of CPU and memory, and was a fraction of the volume, noise and power consumption. It was a pretty decent system. I’d actually like a new one, but the current offerings are terrible on all counts. The current ones are actually much worse than the ones from a few years back.
The same situation for the desktop workstations. The current one is inflexible and not what I’d want from a workstation.
For all three categories, I could be quite easily be persuaded to spend some decent money on a brand new system. But right now, they simply aren’t offering anything compelling. If they made the effort to make some hardware that was on a par or better than regular PC hardware, in more than just the looks department, then they would have a repeat customer in me. As it is, it’s over a decade since I gave them any money.
Their miss-steps aren’t just on the hardware side. I develop software using OpenGL. On Linux and Windows, I can plug in a current or even a card from a few years back and with the current drivers, I get OpenGL 4.5 with all the features and decent performance. On Mac hardware, I get a mediocre GPU with not much memory, but I’m always limited to at most OpenGL 3.3 or 4.1, with awful performance. While they do their own proprietary thing with “metal”, they leave all the OpenGL developers with nothing. It’s not like anyone with an investment in portable OpenGL code is going to bother with it. They could have easily supported both and kept everyone happy.
Yeah, it is baffling that a company, with such deep pockets, has stagnated so much in some key technologies.
There is nothing at all baffling. Apple is now just another giant bloated corporate bureaucracy like IBM in the 1980s.
Apple have a staggering 800 engineers working on a single minor bit of hardware – the iPhone camera – they probably need a dozen at most.
Apple is not as big as many people think, if anything I see one of the problems as not having enough personnel on certain projects.
Last year, Apple introduced, after years of whining from bloggers and pundits, their first “big-screen” iPhone, the iPhone 6, and sold a crap-ton of them. Prior to that, iPhone sales had experienced a bit of a lowering in anticipation of that 6 launch.
So they sold that crap-ton of phones and now those people are in the middle of their 2-year contract with those devices. Remember that the automatic-upgrade programs that allow users to exchange their devices for a new one on an annual basis did not come about until the launch of the iPhone 6S. I don’t think any figures have been released on how many users have switched to these auto-upgrade programs, if there have I’m sure we’ll hear about it.
So, here we are, beyond a year after the launch of the super-successful iPhone 6 launch, with hundreds of millions of people who bought them right in the middle of their 2-year contracts, and sales of the iPhone 6S have not “met expectations”. Is this any big enormous surprise? Not to me, because as I said, there is a HUGE amount of iPhone users who are not eligible from their carriers to upgrade yet. I am one of those. I am fine with my iPhone 6 and will wait to see what Apple comes up with for the iPhone 7 and upgrade then. I am sure there are millions of other people who are going to do the same. The iPhone 6 was a HUGE deal, Apple’s first big-screen phone, and everyone bought one, so it is to be expected that there will be a drop in sales after that.
I’m not an economist, so I don’t understand why it’s not enough that a company is making money hand over fist. Why does it need to make more each quarter than the quarter before? Even when you continue to make more and more money it is perceived as bad if the rate at which your revenue increases is slowing down?
Is this sustainable? On a small island with 10 companies could they all show growth each quarter? How about a planet with thousands of companies?
Feel free to give me an economics lesson.
Probably can’t afford the latest gold toilet. Or maybe the price of kopi luak went up.
The expectation is that with population growth so does consumption.
Of course, anyone that has ever used a petri dish for nefarious purposes understands that finite spaces imply finite growth potential.
Companies don’t need to make money hand over fist at all. Most companies are already satisfied if they make enough money to cover all of their cost and preferably have a small surplus to build up some reserve for balancing a future bad year.
Publicly traded companies (stock) are a whole different story though. As soon as a company is starting to trade publicly the people buying those stocks have to decide how much they want to pay for those stocks. This amount is based on what they expect from that company not only now but also in the future. So if this value would be determined at 100 Euro there wouldn’t be any reason for this stock to ever become > 100 Euro if the company performs exactly as expected. So if a company is expected to earn 10 billion per quarter and does that the stock stays stable because the price of that stock was already based on 10 billion coming in every quarter. If the company was expected to grow by 1 billion every quarter and eventually stay stable at 10 billion that is another kind of expectation.
So you can see that for a stock to grow or shrink there has to be 1 of 2 situations:
1) The company does not perform as expected (once). The stock goes up or down a bit.
2) It becomes clear that the expectation was wrong. The stock goes up or down a lot.
And of course buying a stock for 100 is useless if you expect to sell it for 100 a few years later. The company that sells stock will also have to make expenses for dividends to give people a reason to buy stock that isn’t expected to change in price. This dividend should be > inflation.
Then the money should go to highways, and to coral reef and beach restoration, but Apple [and Microsoft and Google] probably dummy at those tasks.
Some times, at some economic fields the conditions do indeed appear to healthy growth. But THERE ARE NOT UNIVERSAL ‘MAGICIANS’. Leave that to TYRANTS PACKS, or CRIMINAL ORGANIZATIONS [Sort of the same].
Collect YOUR winnings and GO inverting at something else where you HAVE EXPERIENCE on. Or hire the Institution with the generational experience to do it in your behalf, and the behalf of the Society you live within.
Tyrants by the millions everywhere there are. Few of them dominate the art of the PACK-ing. Any examples?
I have thought for a few years now that Apple should focus on the next big thing rather than endless minor revisions of phones and tablets.
I would like to see them make a high quality 3-D printer that ‘just works’ or a bridge between a high end desktop and supercomputer (like the old ‘minicomputer’ such as VAX etc).The Mac Pro is a little too lightweight for serious scientific research.
Edited 2016-05-06 09:44 UTC
A major understatement. The Mac Pro supports a maximum of 64GB RAM and dual FirePro D700 graphics.
Dell make Windows rack workstations with dual 22-core Xeons, up to 1TB ECC RAM and up to 8 hard drives