'Apple's best days behind it'... again

Apple Store Stanford Mall
Apple Store Stanford Mall (Image credit: iMore)

"There's no question that Apple's best days are behind it." — Toni Sacconaghi, Wall Street analyst"This, too, shall pass... The future of Apple is very bright." — Apple's chief executive, Timothy D. Cook"Why oh why didn't I buy Apple stock when it was below $100." — a friend, one year ago"Apple is DOOMED. Not buying at current prices." — same friend, today

Does it matter revenue was $50.6 billion-with-a-B, or profit was $10.5 billion-also-with-a-B? Nope. Not any more than Amazon profit matters by comparison.

Full disclosure:

  1. I'm a former Apple executive. For financial planning reasons, I still own Apple stock. I like to believe it doesn't alter my view about the industry — I call 'em as I see 'em. My heart wept a little when Apple opened the day after earnings, though.
  2. I'm NOT a financial advisor or planner. If you're buying, selling, holding, or whatever, talk to your financial advisor, not me. If I knew the secret to making money beyond hard work, I'd surely be doing it, not advising anyone how to do it.
  3. I'm also not a Wall Street analyst. I take pride in that, although it hasn't made me popular in parts of lower Manhattan. A Wall Street analyst's job is to make the stock move up or down — they don't care. The firms only care if customers aren't buying or selling; that's where they make their money.

So, are Apple's best days behind it?

Tony was fed the question but he bit down on it, hard. Before addressing what he or any financial analyst had to say post-earnings, I have some questions of my own to ask...

  1. Have they looked closely at Apple's product line?
  2. Do they understand the value Apple brings to customers?
  3. Have they taken a deep dive into the core things Apple does and figured out why Apple does them?
  4. Do they understand why Apple products are constantly ranked highest in consumer satisfaction?
  5. Does anyone think that loyalty is going anywhere, anytime soon?

Apple's product lines

Let's start with Mac. iMac, MacBook, MacBook Air, and MacBook Pro set the standard for design and quality in personal computing. Look no further than every review of every competing product noting remarkable similarities to Apple's lineup.

Next, iPhone and iPad. With each generation iOS devices continue to the change how we work, play, and interact in ways few other products can. Just a few years ago, if I attempted to describe the many ways iPhone is used today, and the capabilities it has, it would have seemed as probable a future as beaming up to the starship Enterprise (with apologies to Mr. Farnsworth. Kids ask your grandparents). iPad first created, and now defines, a product category that's been wildly successful by almost any normal measure. The entire tablet market is still best described as iPad, and everything else.

Then there are the platforms that run on those devices. OS X and iOS are the result of more than a decade of constant refinement and optimization for user experience. They weren't built for checklists or to run across a wide range of very different devices. They were built to increase the value of the specific devices they run on.

Services is the one everybody knocks. Apple can't get 'em right is a frequent narrative. Except services are one of Apple's fastest growing lines of business. Apple Music extends Apple's leadership in music; iCloud is a seamless experience that makes content available and up-to-date across devices; and Apple Pay is helping drive the adoption of contactless payments.

Apple's hardware, and software integration combined with iCloud is the most complete, optimized, end-to-end ecosystem on the market. It's also one of the fastest-growing personal cloud services.

Does that sound like a company whose best days are behind them? Not to me it doesn't.

Back to the future

Apple focuses on innovating a few great things that change the world first and make money second. Maybe that sounds silly or naïve, but I spent several years living on the other side of the lobby at 3 Infinite Loop, and I know the passion at Apple is real and not going away any time soon. Certainly not on Timothy D. Cook's watch.

That's not to say there aren't legitimate concerns to pay attention to.

As long as Apple's revenue and profit is primarily driven by a single product line, and that line matures and that market saturates, then sales will plateau and revenues and profit will decline.

The product I'm referring to, of course, is iPod. And what could possibly have come post-iPod to keep Apple growing and take the company to the next level?

I’ve covered the personal technology beat for more than two decades at places like Gartner, Jupiter Research and Altimeter Group. I’ve also had the fun of contributing my $.02 on the topic at Computerworld, Engadget, Macworld, SlashGear and now iMore. Most recently I spent a few years at Apple as Sr. Director of Worldwide Product Marketing. On Twitter I’m an unverified @gartenberg. I still own some Apple stock.

  • Apple is merely shifting gears. Sales became saturated after all the record sales and now there's a lull. But you watch. It's coming just around the corner. You ain't seen nothing yet!
  • As Carl Icahn said: “It is our belief that large institutional investors, Wall Street analysts and news media alike continue to misunderstand Apple and generally fail to value Apple’s net cash separately from its business, fail to adjust earnings to reflect Apple’s real cash tax rate, fail to recognize the growth prospects of Apple entering new categories, and fail to recognize that Apple will maintain pricing and margins, despite significant evidence to the contrary. Collectively, these failures have caused Apple’s earnings multiple to stay irrationally discounted, in our view.” He's sooooo right! Those Wall Street analysts are playing a dangerous game with one of their biggest US asset!! And that's my view!
  • And he bailed on Apple too...
  • What do you expect from someone used to gutting companies when he can´t gut them.
  • He bailed because he isn't in Apple for the innovation, the advancement, etc. He is in it for the cash. If Wall St. is going to continue to undervalue his investment, he can achieve his goals (to make the most money possible in the shortest time) better than waiting for Wall St. to get on board. Or, better stated, are Apple's better investment days behind it if Wall St. continues to undervalue Apple, Inc? "It is for [him], sister. Look, [he] ain't in this for [Apple's] revolution, and [he's] not in it for [Tim Cook]. [He] expect to be well paid. [He's] in it for the money." Bailing and having faith are not the same thing.
  • Kinda strange to use a man who recently liquidated all of his Apple shares as an example of how Apple is doing OK.
    Maybe you can find some quotes from the emperor of Japan after Pearl Harbor.
  • Not really. Here is what he said. "We no longer have a position in Apple," Icahn told CNBC's "Power Lunch," noting Apple is a "great company" and CEO Tim Cook is "doing a great job." Icahn previously owned a little less than a percent of the tech giant's outstanding shares, which were down more than 3 percent midafternoon Thursday after falling more than 6 percent Wednesday. He said he made roughly $2 billion on Apple, a stock he continued to tout as "cheap" despite his reservations.
  • Bravo! The first well written and insightful article sir. This is what I've been waiting to see from you. The only part I do disagree with is that Apple still has a long way to go on services. They are doing better but Apple Music still shows they have room to improve. I used Apple Music from day one and it had major problems. It did improve over time but is still not something I would expect from Apple. It's interface is confusing and when you are just trying to listen to your music in your phone, irritatingly to complex. Sent from the iMore App
  • Confusing interface? You literally press "My Music" at the bottom right corner if you want to listen to music on your phone...
  • It’s really quite amazing. No one gets up in the morning with the hope of reading that Microsoft has filed for bankruptcy. No one gets down their knees at night and prays that Google or Amazon will cease to exist by morning’s light. Yet this is actually the case with how a lot of people hate Apple Inc. You read it all over the place, on every tech blog, on news sites, on financial sites, everywhere. You even see it right here on iMore from commenters who have never had any contact with an Apple product but choose to vent their hatred and vitriol for the company. I personally have never seen such a thing in my life and it makes the Ford/Chevy/Dodge gearhead wars look like a Sunday School class.
  • I too am baffled why people root against Apple. Competition makes all companies products better. Sent from the iMore App
  • The fascinating thing is... Windows Mobile is more or less a flop, but does not get a 1/10000 the hate Apple does for simply having a normal quarter.
  • It's just that no one cares about Windows Mobile. Apple is a big target. Any article that claims certain demise of Apple always gets clicks.
  • Apple is just boring. I dont care how much money they make. As a consumer they are a stagnant boring company offering nothing new anymore. Fortunately for Apple and investors, millions of consumers do not mind this fact and just want something "that works" and will surrender all personal thought. They have pretty much turned into their 80s tv commercial.
  • Surrender all personal thought? If I'm understanding what you mean by that, then my response is this: Maybe people don't want to waste their personal thought on how their tools work, and use those tools to focus their personal thought on things in life that really matter. And if I misread what you meant by that, then, sorry... :)
  • Just works? Is that why Apple has so many versions and betas for iOS 9 yet they still have bugs and bricked phones by poor updates? Quality in software has gone way down since iOS 7. Posted from my Nexus 6P
  • Are you God?
  • Boring? They just recently released the 12,9 iPad Pro and Pencil which is for creative people quite heavensent.
  • Yeah but you can't change the icons like you can on Android...... /s
  • I've seen this type of comment before, to which I always reply, "okay, so you tell me which computer hardware company is exciting if Apple is so boring?" See I suspect folks like you are comparing Apple to Google thinking it's a fair comparison. It's not. Apple and Google, while they compete in many ways, couldn't be more different as far as the core business. Google makes money on advertising, like over 90% of their revenue. All that money is what they then use to play with, and have lots of "hobby" projects, from self driving cars, to robots, to AI, to lego phone concepts (that will never see the light of day), to curing death, etc.... Those things are great, and exciting, but using that as an example to say Apple is boring is a false comparison. Totally different companies because 90% or more of Apple's revenues come from selling physical hardware. Apple used to be called Apple Computer for a reason...because it's primarily a computer company. That's where the money comes from. So if you want to be fair, and maybe you are, you'd have to compare Apple to HP, Sony, Dell, Samsung, LG, HTC, Motorola, etc. Those companies make and sell physical computing devices. The only reason Apple gets confused with Google is because unlike some of those companies, Apple makes it's own OS and maintains it's own app store and media service, but those things are just there to sell more hardware, where the real money is made. So tell us which of the companies that make and sell consumer computing tech are more exciting than Apple? Samsung? Meh, maybe, they keep rehashing the same old stuff too in comparison, and took them a year or more to get something innovative like Touch ID right on their phones. Sony, LG, HTC? They all got nothing... those companies are boring. No Apple is the only exciting consumer tech company there is, the only one that has legions of fans lining up around buildings to get the first of a new thing. By claiming they don't offer anything new anymore, tell me which of the consumer tech companies are? They all sell the same stuff, usually much worse and more boring.
    Maybe what you really want to say is something more general (and more fair) - "consumer computing tech today is just boring".
  • Why do some people even care about Apple's financial situation? Unless they're not going bankrupt I don't see why someone would be interested in market share, company value or gossip about investors. That's reserved for fanboys and/or shareholders.
  • A well thought out and complete;y biased article. #1) Big Shock! #2) who cares?
  • The funny thing is. Apples worst quarter is most other companies best quarter. Meaning that a bad quarter fir Apple is 10 billion profit instead of 20 billion. So obviously doesn't mean much Sent from the iMore App
  • The problem is not that apple didn't make enough winst, the problem is that neo-liberalism needs growing, that's all that matters, also this already killed many IT companies with profit.
    But it's normal that ones a market is saturated, the sales cant grow any longer. It's not only apple but all companies have now this issue. So, I don't see any reason for the current panic.
    Or which feature have products from other companies which apple product miss?
  • The Apple that Steve Jobs built is slowly running out of steam. Apple has been coasting along on his glory for some time now, but it seems Apple is slowly returning to the pre Jobs era. Confusing, overlapping product lines are again plaguing the Mac laptop line, and lack of anything really exciting are all problems with Apple. With Apple's R&D budget, there is no excuse for "S" models. Redesign the whole thing every year.
  • They are in a transfer-time but still they put out great products.
  • Excuse? No. Reason? Yes. Apple does have a relationship with third-party accessory partners - and yes, even if they redesigned the bloody things every year for some reason, those partners would still update their accessories every year - and there's a bit of understanding that it's healthier for the accessory industry if there's more stability in the designs. Also, if this crap gets redone every year, there's a lot higher possibility of them being hideous, but on the flip side, we've suffered with the in my opinion nauseating iPhone 6 design for a year and a half now.
  • I'd almost venture the though that it is not Apple PRODUCTS that make it great - what makes them great is that Apple provides an excellent combination of hard- and software in each device they sell PLUS they provide an environment in which these devices can cooperate. In that it is I think unique - at least in the amount that their devices can cooperate and provide excellent service to their owner.
    A lot of critics fail to see that. They fail to see that the whole range of devices can be combined. Example? I have a 6+ and a 15" MBPr. Nothing in between. I don't need it. My phone is for talking, messaging, news and every now and again a game. Serious conversations, mail, programming are the domain of my MBP. I tried adding an iPad to the fray but that did not add any value for me. If I look at my wife I see a different usage pattern where an iPad is fitted in mainly as a movie player and ebook reader. Many critics fail to look at an Apple products in the context of the whole product line. Review an Apple watch on its own and it is likely that its value is apparent to you. Review a MacbookPro on its own and it may seem overpriced. Look at it from the usability perspective and together with iOS devices and it is apparent that setting up, getting it to work and letting multiple devices cooperate is fairly easy in comparison to other systems.
    Using multiple Apple devices in their ecosystem together and the equation all of a sudden is completely different. That is the strength of Apple. They are not selling devices. They are selling customer satisfaction.
  • Don't forget customer service after the sale. I'm an Android guy and I can still agree with what you're saying and add to that customer service.
  • Samsung and Updates, do I need to say more?
  • Heck, you could've just said, "updates." and then dropped the mic. :)
  • Apple's best days are definitely behind them - for now. This is easy to see if you understand business at all. It's cyclical. You need innovation and talent to drag yourself out of the mud. When you do this successfully you create superstar momentum that lasts. Apple's riding that momentum right now. But as a public company, you are always a slave to the board and the investors and that's where the ugly cyclical component comes in. There's nothing you can do about it. Apple's saving grace - for now - is that the competition isn't that great. No different than how Blackberry rode their momentum for a long time until Apple knocked them out with a better product offering. It's just business.