Does Apple owe it to shareholders to rush out a new product category?

Does Apple owe it to shareholders to rush out a new product category?

We’re almost a quarter way through 2014, and it seems some Apple shareholders have ants in their pants. They’re impatient and want to see what Tim Cook’s team is going to do in a new product category, be it an iWatch, Apple television, or something else entirely. I guess it isn’t enough for Apple to be so utterly dominant in mobile computing, an industry trend that will keep chugging along for the next decade?

Let’s do a quick review of what Cook has actually said about new product categories this year. On the last conference call (January 2014), analyst Gene Munster asked, and Tim Cook offered up a very clear answer. Here’s a snippet of the relevant part of the transcript

Gene Munster: In the previous quarters, you’ve talked about specifically product categories multiple, and that’s different than variations of existing products. And that would be by the end of 2014. I just want to be clear that’s still on track, and consistent with some of the expenses that we talked about earlier in the call?

Tim Cook: Yes, absolutely. No change.

Later, in February Cook was interviewed by the Wall Street Journal, and when pushed to give up some detail about what’s coming, all he would say is that any “reasonable person” would consider what they’re working on to be a new category. This muddied the waters just enough to cast some doubt on the company’s efforts. Perhaps Cook thinks some people, who are less reasonable, will say Apple’s new stuff isn’t really new but instead a spin on some existing product?

So here we are at the end of March. Apple’s stock price is actually down a bit so far in 2014 while Microsoft, Google and the broader market indices are trading higher. I take a long term perspective on stocks, but most people don’t. So I get the frustration. But we have to remember that Cook said that a new product category would roll out this year, not this spring. Give the guy a break. We’re still very early into the year.

Here’s a quote from Cook’s answer to Gene Munster on the last conference call that I think does a nice job of summing up Apple’s thinking.

Tim Cook: I would just say, Innovation is deeply embedded in everybody here, and there’s still so much of the world that is full of very complex products, etc. We have zero issue coming up with things we want to do that we think we can disrupt in a major way. The challenge is always to focus to the very few that deserve all of our energy. And we’ve always done that, and we’re continuing to do that.

The key to what he said, I believe, lies in the phrase “very complex products”. Apple has always been amazing at taking complicated things and making them super simple. Maybe that’s what the new health initiative is all about? Maybe they have other big ideas we don’t know about yet. Either way, I agree with the company rolling out products when they are ready, not when they feel pressure from Wall Street.

The very best CEOs do not act because of Wall Street. They just act on business opportunities and Wall Street reacts. I want Apple to keep doing what it’s always done.

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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Does Apple owe it to shareholders to rush out a new product category?

36 Comments

One word answer to the article title: No.
But I do feel it was a mistake to move every product update and/or new release toward the end of the year, as Apple did a couple of years ago.
They gain a compacted bombardment of info just prior to the holiday shopping season, which likely helps sales for that period. Understandable...to a point.
Unfortunately it sort of excludes Apple and it's products from the media and public eye, for the most part, for to much of the time thereafter.
And that just leaves everything to the rumor mills, until Apple finally gets around to making official announcements again. Spreading out each product line announcement at different times of the year again would be better for the company.
Just my 2¢

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Agreed, there should even not bother being predictable time line in my opinion, just release things when they're ready and want to, and just hold a press event or something like that whenever everything's ready.

I agree. I usually buy a new iPhone every year, iPad every two years (sometimes every year), and a new computer every four years. This year I was up on all three so needless to say, the iPad got left out until about a month ago. It's still a lot easier when the iPad was rolling in March or April and the iPhone in September or October. Easier on my marriage too.

Thanks for sparing me the time and writing the most proper answer to this 'situation'.
No one is forcing Apple to rush anything, they known better than anyone that a breath of fresh air is needed in their annual refresh business and they should have injected some of that excitement a year ago. If they're still not ready to release a new product (a major revolution takes time to prepare) then they should shuffle their dates a bit, blow the cobwebs away, surprise someone (in a positive way, not "so little for so much again" with premium priced hardware), introduce a few additional things (that weren't completely expected for so long) in past devices everyone is already familiar with. They're so scared of messing up the tried/tested formula that instead of interesting I see bland & boring catching up, it's even hard to justify the attention they get nowadays.

So, Apple has the least ammount of growth between smartphone makers, lost its huge lead in the tablet market, iOS is starting to lag behind Windows Phone in several emerging markets such as Brazil and Mexico, Apples response to those markets (the 5C) end up being a flop, and you start your article with " I guess it isn’t enough for Apple to be so utterly dominant in mobile computing"??

Yes, Apple is arguably dominant in several markets, but "so utterly dominant" is a gross exaggeration that hurts the message of the whole article.

The 5c was second in some markets and third in every other one. How is that a flop? They don't need to do anything if it isn't good for the company. The only reason other companies are being noticed is because they have so many products out there they think they are making money but in reality they lose money because they are putting so much money into new products they get no revenue or profit.

Tim Cook himself admited it was a flop with his "turned out to be different than we thought" remark. Besides, you're using US market numbers, not global numbers, abroad the picture was very different.

First and foremost, he did not say the 5c was a flop or anywhere close, just that it represented a smaller mix of iPhone sold than expected - but wouldn't you want more 5s's to be sold anyway? The 5c brought a lot of interesting trends to light.
Second, the 5c has greater penetration of markets than Apple had with the 4s under the 5. To me, that sounds like a win - plus, were only a single year into the cycle - we don't know how it will perform at other levels of Apple's pipeline.

Apple has 60% of the profit in the mobile market. Think about it. They have 10% of the global market share and 60% of the profit. Let that marinate.

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I take issue with your assertions. Are you comparing Apple's mobile marketshare to Samsung? Microsoft? HTC? Three completely different examples and there are about a dozen other different ones too. My point is that Apple has the most mature smartphone OS around and yet they are still growing. If you break down product lines by year over year sales, sure you will find a quarter in a region with low or no growth but you can also say that about every single Apple competitor including Samsung. I think when you average all of the sales data together, Apple still comes out the clear winner and still growing. Even their 5C "flop" beat all other smartphone competition. I'm not sure how that isn't "utterly dominant".

Growth alone is meaningless, everybody is growing because the market is still expanding, but Apple is the one growing the least. Again, iOS has just been surpassed by Windows Phone, let alone Android, and bumped to third place in several markets including the main markets in Latin America and in Italy, which shows that Apple has no idea of how to deal with those markets. One might argue that Apple does not care about those markets, which are less profitable, a point I would concede if Apple had not just created a plastic phone with last years components.

Then pick one method of measurement. You just said growth is meaningless so don't tell me Apple is growing the least because according to you it's meaningless. What about market share? Usage? Profits? Mindshare? No one company dominates in all those categories everywhere but Apple does dominate where it seems to matter. Market share might be the only exception but where and what pricing tiers also play a role in the marketshare discussion.

About market share, the statistics presented below by philips9179 speak for themselves. As for usage the same statistics apply. You're looking at the US and thinking that the whole world behaves the same way, but Apple depends on the rest of the world to keep growing, and its doing a very poor job there. Profits is the only measurement where Apple dominates, and although profit is very important, you can sell just a few very expensive Rolls Royces a year, be very profitable, but that won't make Rolls Royce "utterly dominant" in the auto market. As for mindshare, a lot of people desire a Ferrari, or even an Audi, but will settle for a Toyota because that's what they can afford. That makes Toyota dominat, not Ferrari or Audi.

Again, Apple was surpassed by Windows Phone in Latin America and Italy, and its a growing trend. I'm not even talking about Android and Samsung with its myriad of devices, but Nokia and *Windows Phone*, really, which most people agreed that was dead in the water until last year, a has-been, too-little-too-late. Does Nokia makes better devices than Apple? Arguably no, but Nokia understands developing countries and growing markets, and Apple does not. We have all seen this movie before, in the end Apple will have no one but itself to blame.

We have seen all this before but you know what we're seeing now...Apple is gaining marketshare in PCs too. So all of the Windows vs. Mac marketshare they lost in the 90s they are beginning to reclaim. They are gaining marketshare faster in PC than MS is gaining in smartphones. But of course that's easy to do when you sell so few PCs (like Apple) or phones (like MS). You keep bringing up these cherry-picked examples of growth for MS but I can tell you about Apple's explosive growth in Japan and India. They grew 400% in India! And no one is mentioning China which is poised to outgrow every other Apple market except for US. But those aren't even Apple's target customers. They do high-end and this article is about shareholders and they only care about one metric, future growth.

How is it trolling if I only presented facts? I think people are seriously overusing this "troll" thing, to the point that no one can question anything about Apple without being accused of being a troll.

They may have been "facts" based on some kind of spin but throwing a bunch of stuff out with nothing to back it up it makes it hard to look at your comment otherwise especially when all it does is slam Apple without anything constructive added to the conversation. I think people are seriously overusing the comment section of a post to slam the hell out of the product covered by the site. Trust me, if anyone has anything to be mad at is me at blackberry but you won't see me on crackberry wearing out everything negative there and trust me, there's plenty to wear out. And before I hear the standard Apple fanboy crap, I use android too and like it.

My comment was very clearly directed at part of the article which said Apple was utterly dominant in the mobile market, which I disagree and explained why. I did not slam Apple, I disagreed with a part of the article, and I own seven Apple products, that's why I read iMore. Everybody has a bias, and that's fine a long as you post real arguments and not just opinions. I posted arguments to support my opinions, and this is in no way or form trolling.

You, on the other hand, mean to censure my comments, not because you disagree with them since you did not present any counter arguments, but just because they were not what you would qualify as pro-Apple. That is a fascist view of what a comment section should be, a constructive place to present our views.

Censure and fascist are big words and are far far from what's going here. Putting that aside for the moment all I'm saying is back it up. You have yet to provide any measurable back up for your argument even in all the other replies to everyone else. If any thing you tried to double talk your way through it without providing anything. It's really easy to sit there and say "Pizza sucks!" And when people reply all you can come up with is "because people say so." And when asked what's people all you can reply then is "me." Okay where are the rest of the people? Where's the survey that was done? Where are the sales numbers that back that up? Come on, just give me something and I will be willing to leave it alone.

What a ridiculous, drivel-filled comment, basically a copy and paste of the "apple is doomed", intellectually lazy and dishonest talking points. It's not really worth addressing, but I'll do so for the benefit of others.

"So, Apple has the least ammount of growth between smartphone makers.."

First, this is a blatantly untrue statement. They had more growth than MANY manufacturers. Secondly, when you're selling such a massive amounts of phones, you're not going to "grow" as easily as someone who is selling a tiny amount. ie, Microsoft has around 1% of the smartphone market- they can get 1.3% and show more "growth" than Apple, even if the unit sales are not even in the same universe. This is an absolutely ridiculous metric for success. But even saying that, Apple's YoY growth is nothing to scoff at, and they're growing massively in countries like China.

" iOS is starting to lag behind Windows Phone in several emerging markets such as Brazil and Mexico"

So? Microsoft sells bargain bin, $50 pay as you go phones. My mom has one. They're shit. Apple isn't even competing in that market, so the fact that Microsoft might be selling more of those is irrelevant. Macs also "lag" behind Windows $300 laptops. Apple doesn't give a shit, because they don't compete in that space, and there's no profit there. "Marketshare" in that context is pretty irrelevant, since Apple scoops up most of the profits. Also, strange you're obsessing over Mexico and Brazil. Apple has never focused on cheap product, and its strange that you now suddenly consider this a "failure".

"lost its huge lead in the tablet market,"

That's complete bullshit. iPad is by FAR outselling every other tablet. Again, the fact that a ton of shitty, $50-$100 tablets are being sold in China , etc does not mean that Apple has "lost its lead". Cheap shit will always sell to a certain extent. If I sold a billion $1 tablets tomorrow that people barely even used, does that mean Apple will be finished? It would definitely eviscerate their "market share", right? Again, such a ridiculous metric. Not only are iPads selling more than anything else, they have by FAR the highest usage #s- which means people use and love them. Usage #s for Android tablets are in the toilet, but apparently that is irrelevant to people like you.

"Apples response to those markets (the 5C) end up being a flop"

Another lie- the 5C is nowhere near a "flop". It outsold all blackberries, all windows phones, and the best selling Android phone (S4). Oh right, it's a "flop" because it was outsold by the 5S, Apple's flagship phone. What a ridiculous perspective you have, devoid of all reasonable context and objectivity. I'm sure any company would kill to have a "flop" like the 5C.

Apple is indeed utterly dominant in the key areas that matter (premium device sales, profit share, profits, revenue, usage #s, customer satisfaction, education penetration, corporate penetration, product quality, critical reviews, performance, ecosystem usage, appstore downloads, developer support, etc etc). But you've already come to your conclusion of "Apple is failing", so you need to work backwards to "prove" that conclusion, which means avoiding the big picture, cherry-picking "facts", being deceitful, or just plain wrong. Well done.

The point of the article is indeed valid, which is the ridiculousness of analysts giving "advice" to Apple- when they're been wrong about the company at every single juncture, and when they're still utterly incapable of grasping the philosophies that have made Apple successful. Apple has been "advised" to do X or Y throughout its entire history, which it has always ignored- charting its own path, and leading to more incredible success each time. That simple point seems to have flown over your head. Apple is the healthiest its ever been right now in its entire history, and I'm sorry that you don't have the perspective to see that.

"Another lie- the 5C is nowhere near a "flop". It outsold all blackberries, all windows phones, and the best selling Android phone (S4)"

Did Apple release figures on this? Any market/geographic distribution? Im just curious.

What can I say- once in a while (you know, every few hundred posts I read) I feel the need to counter the FUD. And pointing out why it's FUD takes a few words.

And no, Apple has not released exact figures out this, which is why "it's a flop" assertions are so ridiculous. But there were some checks I read that strongly suggest it's doing very well, and has outsold the S4 during the same timeframe. There's no evidence at all to suggest "flop".

"It's not really worth addressing, but I'll do so for the benefit of others."

Oh, my hero, we all benefit greatly from your wisdom. I did not disagree with the article, and all my points are valid, but as with anything, can be analised from different points of view. I never said Apple was failing, you wished to see that, and did it all by yourself. Next time, please try to be less vitriolic and more constructive.

I leave you with a MacRumors article, about the "so utterly dominant" remark:

http://www.macrumors.com/2013/08/07/android-dominates-nearly-80-of-smart...

Just continue to have good margins. New products or not.

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Personally, I'd rather see tweeks that we all keep begging for be done with the great product line already available than pump out new products just to have new products or attempt to satisfy speculators. Apple usually waits for different technologies to be made by the "rush it out half-baked" companies and then makes them better and more seamless.

Absolutely not.

It's imminently clear that the company's goal isn't "wowing investors with big profits" but instead continuing their inexorable march toward constant and continuous growth.

Let's hope there's some cool stuff to see along the way.

I agree with the super macho donkey wrestler. Apple doesn't play by the schedule of others or industry trends like netbooks. If they make a wearable then it should make sense from a functionality perspective first not a rush to market. Lets not forget that Tim Cook is a marathoner and I'd like to believe that any wearable from Apple will have to be valuable to him as a user and will get increasingly better over the first 3-4 product cycles.

Agreed Chris. But wouldn't you agree that apple completely missed the boat with iTunes Radio, and spotify. Because as soon as apple (or just before I can't remember the timing lol) announced iTunes Radio, spotify (to thier credit) announced that free mobile streaming would be avalible on mobile and tablets, and how long have spotify been around for?!?!?! because of that itunes sales have completely tanked???

Surely apple must realise that music streaming is a bit of a cash cow?!?!?!

"I guess it isn’t enough for Apple to be so utterly dominant in mobile computing, an industry trend that will keep chugging along for the next decade?"

That would be a point were Apple's market share nosediving. WP is passing them in Europe already. Apple feel a bit too good about themselves. That is what always brings companies down. Apple is following the exact same path, now, that Nokia did some years back. It will be interesting to watch...

What a stupid post. The "Apple is following the exact same path as beleaguered company X" line has been repeated as long as I can remember with Apple. Any sane, reasonable individual can see there's not a shred of commonality in terms of Apple VS Nokia.

Yeah, it will be "interesting to watch" for people who don't have an agenda. For people like you, Apple is "failing" no matter what happens.

It's simple the iPad was released THREE YEARS after the iPhone. Why? because they used the time to get people using and used to iOS. They got people used to the idea of using the iPhone for email, internet browsing, apps. They got people used to using iTunes to sync and change settings on the device. They built on all of that and they released it when it was the right time. Now compare the success of the iPad in really revolutionizing the definition of "Tablet devices". So I trust Apple to know when the time is right for a product not analysts, shareholders or anyone else.

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