Over the course of the past 20 years or so there are very few Apple products that I do not own or have not owned. If it’s got an Apple logo on it and uses electricity, I’ve used it, tried it, and probably bought it.
Last month Apple announced yet another record setting quarter with iPhones, revenue, and profits. Then, uncharacteristically, Apple projected falling sales and profits. Not iPhone specifically, but the company as a whole was projected to have its first year-over-year quarterly decline in many years.
Why? I have an opinion and its boring.
Growth Is Hard Work
Even projecting falling revenue and profits going into a new year does not mean Chicken Little was right. Apple is in no danger. AAPL? Maybe. But Apple Inc is doing just fine and if Mac, iPhone, and iPad sales just struggle along at the same levels as the past few years the world’s richest technology company will become richer.
Here’s the problem. Revenue and profit growth drives stock price growth. Apple does not have a product that is growing by leaps and bounds. Alright, add Watch to that list, but even if Apple sold 20-million Watch units a year at an average of $400 each that’s still not a $10-billion annualized business, which would only be a 5-percent increase which isn’t much if you’re selling $250-billion in gadgets every year.
Growth is what fuels the stock. So, why are Google, Amazon, and even Microsoft’s stocks growing? Risk. Google, now called Alphabet, is a one-trick pony company that makes money the old fashioned way. Advertising. That’s it. Nothing else.
Amazon? AMZN seems to do better when the company does not make money, and that goal is achieved with regularity. MSFT did great as soon as former CEO Steve Ballmer stopped showing up for work, but the company still struggles with diversification efforts, and still relies on an old fashioned way to profit. Windows and Office.
What of Apple?
Apple is a hardware company so divulging new product initiatives gives a tip, nod, and heads up to the competition so whatever Apple is working on in the famed product pipeline suffers from the company’s Veil of Secrecy (which is not exactly the same as the Reality Distortion Field, but there are similarities). Apple cannot tell the world what it is working on or will launch next and that impacts AAPL.
On the other side of the secrecy coin is Samsung, a notorious gadget maker which launches new products based on little more than an idea of what Apple might be working on.
From that perspective, Apple’s product future looks boring. Thinner, lighter, faster, more powerful iPhones, iPads, and Macs. Same old. Same old. Watch isn’t a product line but is more of an accessory to iPhone. That will change, but reality deals with today. Apple TV? The promise is greater than the reality.
What’s coming down the pipeline other than the aforementioned thinner, lighter, faster, more powerful?
Apple Television? That’s a non-starter for everyone, including Gene Munster who made a modest living from predicting that an Apple-branded television was due next quarter. Apple Streaming TV Service? That seems to have been mothballed, too. CEO Tim Cook ignored my letter telling him to buy the whole television and movie industry.
Who does not want a better-than-Tesla, self-driving, fully autonomous, powered-by-the-sun (and the moon) electronic car with an Apple logo on it? Great idea, right? Members of the technorati elite politburo will will contract carpal tunnel syndrome writing about Apple Car, but unfortunately the math of Car does not move the growth needle much. AT 60-thousand dollars each, 100,000 such vehicles would generate annual revenue of less than Watch probably does now.
What else has Apple got? An entry-level iPhone 5se or 6se (depending upon which rumor you believe won’t come true)? Products based on HomeKit and HealthKit do not seem to have caught anyone’s eye yet, so I can come to just a few conclusions for Apple’s near future. It’s boring. I hate to say it, but Apple should not be a boring company. It has a lustrous history full of intrigue, riches and glory, near death experiences, and a rebirth from the ashes. But the product line looks boring.