How is Apple doing? If you read the pundits, critics, and members of the local chapter of Nattering Nabobs of Negativism, Apple is in decline. Are there numbers that support such assertions? Yes and no.
There are facts of life which must be considered. What goes up must come down. What goes around comes around. Those who do not learn from history are doomed to repeat it. Those are soft axioms of life and apply to technology companies, but I see some facts in Apple that should be cause for concern.
American history from the late 1920s into the 1930s was not a pretty picture. The nation suffered following a Great Depression and citizens were fearful of the future. President Franklin D. Roosevelt responded accordingly:
So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
Roosevelt went on to move the U.S. forward, through war, and into prosperity. I don’t want to equate the Great Depression with anything going on at Apple in 2018, but back in the 1920s there were signs of impending disaster. Kimberly Amadeo:
The first warning was a bubble in the stock market. Wise investors could have started taking profits in the summer of 1929. In October, the 1929 stock market crash kicked off the Depression. The Fed used contractionary monetary policy to protect the value of the dollar, then based on the gold standard. Instead, that created massive deflation. As prices dropped, many manufacturers went out of business. The Dust Bowl contributed to famine and homelessness, helping to drive the unemployment rate to 25 percent, and housing prices down 31 percent. The cycle was finally resolved by massive government spending on social programs and World War II
What do we have today? A tremendous amount of government and personal debt and a stock market at record levels. There are similarities between history and the present.
What does this have to do with Apple? After all, the iPhone maker sits on a few hundred billion dollars in cash, all products rake in massive profits, and the company has about 1-billion highly satisfied customers. One can argue that Apple has been like the stock market of late, and churning forward in reflection of the economy.
I see a few problems and we may be witnessing some of the prelude to the future now as the market falters (corrections and profit taking) and government spending reaches new levels. Apple remains at record revenue and profit levels, right? Even iPhone grew 13-percent, no mean feat for a company with a few hundred billion dollars in annual revenue.
On the surface, Apple appears to be in churn mode whereby revenue increases come from price increases amid a strong base of customers but without much growth in any product market, save Watch and Services, both of which grown into the customer base not grow the customer base. iPhone sales have hit a plateau. So has the Mac. iPad sales have faltered in recent years, picked up recently, but remain below previous levels. Watch, Apple TV, AirPods, Apple Music, Beats, and others– all profitable– are growing into the customer base instead of expanding the customer base.
In fact, not much is growing anywhere in the major technology segments where Apple competes. Smartphone sales are down. Personal computer sales are down. Tablet sales are down. Apple’s customer base is not growing as it has in the past few decades.
Has the post-PC era, the mobile era, already reached a peak? If so, and there is reason to believe that is the case– based upon Apple’s mostly flat sales in recent years; Samsung’s woes, and failed attempts by any technology company to invent the next great thing– what does that say of the near future?
Apple has enough cash and a substantial customer base to ride out some rough economic storms which appear to be gathering in clouds over the U.S. and elsewhere (out of control debt, uncertainty in government), but as the warning signs become more visible will Apple’s well heeled customer base apply a more conservative approach to gadget purchases? Yes. And that could trigger an economic relapse into unhealthy cycles of the past.
Is there a solution?
Sure. Spend like there is no tomorrow. Or, maybe exercise more caution and delay purchases. Or, maybe do nothing and put to the test that what goes up, must come down, or, become one of those who ignores the lessons of history as a precursor of tomorrow.
My recommendation? Well, I just ordered Apple’s new HomePod. Regardless of how the chips of tomorrow fall, my music collection will sound better than ever. Assuming I can afford Apple Music, of course.