Editor’s note: This article was first published in March 2013. The market picture it gives is from that time: analysts’ price targets, Apple shares 40% below their highs, Apple’s cash pile, Samsung as top smartphone seller, and the quarterly figures for Apple and Google from early 2013.
Nobody is indispensable in a company… or are they? I am sure that what is happening at Apple will one day be taught as an example in business and management schools.
Last year, analysts were falling over themselves to raise their price targets for Apple, and some outlandish figures were thrown around. This year it is as if they were competing to see who can give Apple the lowest price, and many of the same people who now put the target at $420 used to put it above $800. Apple was never as dazzlingly brilliant as they said back then, and it is not in such bad shape now.
Just a year ago, this company could do no wrong. Everything it did, it did perfectly, and it was taken for granted that it would keep climbing forever. Nothing could go wrong with Steve Jobs, a marketing wizard able to turn a simple iPhone into a Picasso for technology lovers.
Has Apple changed that much? Is its future so bleak that its shares deserve to fall 40% from their highs while Google heads in the opposite direction? Is the company hiding something from us? There are three reasons why Apple might be getting this punishment, and probably only one of them is the real one.
1. $100 billion in cash.
Apple is the most solvent company in the world, to the point that many investors do not like the idea of it having so much cash. Its fight with David Einhorn of Greenlight Capital, who demanded that Apple use that money to pay bigger dividends, led Einhorn to sow doubts in the market, and many shareholders sold the stock. Other investors watched the shares fall and ended up selling as well. (Read: Warren Buffett advises buying Apple now)
2. Apple’s growth rate has collapsed.
This is another reason Apple has fallen. Only a year ago people talked about Apple’s potential, since it would take the iPhone even to countries where many people still did not have a phone. Now they say Apple’s growth is very limited. Some even say Apple is about to collapse, and that its terrible results prove it. (We will see shortly that this is not the case.)
3. Apple no longer has a genius at selling products or a wizard at running a company. Apple has no magic without Steve Jobs. And the truth is, that is where the problem lies.
Steve Jobs was famous for his ability to distort reality about Apple and its products. It was not an iPhone; it was the genius’s latest creation. Nor was it the presentation of an iPad; it was a long-awaited event. Since Jobs has been gone, an iPhone is just a phone, and the launches of its new products are simply presentations like those of any other company.
With Steve Jobs, Apple had no competitors, only would-be imitators of its works of art. Tech websites say Samsung is killing Apple’s products, and that only happens because Steve Jobs is not there to give his ten reasons why Samsung is a flop next to the iPhone. Jobs had that ability.
Some figures that would knock down the other points
Last quarter Apple sold 48 million iPhones, a record for the company. Apple’s revenue was $54.5 billion and its net profit $13.1 billion. With these figures, Apple is worth at least 35% more than its current share price.
Its biggest rival on the stock market, Google, had revenue of $14.2 billion, only $1.3 billion more than Apple’s profit. In other words, Google still has a long way to go to catch up with Apple, so the gap between the two companies, and the opposite direction of their share prices, makes no sense at first glance.
Of course, the market expected Apple to post double-digit growth again, and its results, although excellent, fell short of expectations.
Over to the rumour mill
Various leaks have claimed that Apple is cutting its orders for iPhones and iPads, and these rumours warn that the slowdown in the company’s business will continue. Tim Cook, Apple’s current CEO, tried to deny the rumours and nobody paid any attention, something that never happened with Steve Jobs. In fact, back then there were hardly any leaks at all.
As for the competition, the truth is that Samsung is now the world’s number one smartphone seller, ahead of Apple. Then again, Samsung does not have a single phone model that outsells Apple’s iPhone. That could be interpreted in many ways.
Final conclusion: some people cannot be replaced when they leave. They have qualities that cannot be imitated, let alone matched. Steve Jobs proved it when he left Apple the first time, as the company did not take off until he came back. Now it is happening again, except that this time Jobs is not coming back.
Further reading
Featured image: Kindly granted by Valery Marchive (LeMagIT), CC BY-SA 2.0, via Wikimedia Commons.
