Does Apple really have an identity crisis? Nope

Does Apple really have an identity crisis? Nope

Summary: Since nearly everyone is hosed on Apple shares, the handwringing and conspiracy theories are ramping over the company's prospects.

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Apple's earnings season has quickly devolved into absurdity season as handwringing over everything from CEO Tim Cook's tenure to iPhone sales to whether the company is more hardware than software is in play.

Why? It's amazing what happens when Wall Street's hottest stock tumbles and drags mutual fund managers, retirement accounts, Apple fan boys, individual investors and a few others along with it. Oh the agony! Let's get real: Everyone owns Apple shares. Even if you hate the company, some index or mutual fund owns Apple so you do indirectly. The bell at Apple's peak was rung with all that $1 trillion market cap talk and then the company and its lack of product launches took over from there.

aapl04231310year
Apple shares over the last decade. Good times don't always last.

The worries about Apple are getting downright silly:

  • The Wall Street Journal chronicles Apple's hardware vs. software identity crisis: Apple doesn't worry about hardware and software and how it's valued, but Wall Street does. In fact, Apple does both and frankly the company was always valued as a tweener even as the stock hit its peak. Apple isn't Dell. And Apple isn't Microsoft. It integrates hardware and software and controls a great ecosystem. Funny how this identity thing wasn't an issue just a few months ago.
  • There's a campaign against Cook. First, the reports of this alleged campaign are mostly based on a whisper campaign by Doug Kass, an entertaining and insightful hedge fund manager. Spare me. If you think Cook is a poor choice, you try being the next act after Steve Jobs.
  • Nefarious forces are driving Apple shares lower. This argument is based on the idea that Wall Street somehow has it out for Apple. Exhibit A in this diabolical plan is Kass and his tweets about Cook. If you think Kass could really move institutional investors, I have a bridge to sell you.

So here's the reality: Everybody and their mom bought into the Apple story. When you buy a stock at its peak, you convince yourself that the good times will always last. A company with $156.5 billion in revenue in fiscal 2012 was supposed to hit an estimated $179.16 billion in fiscal 2013 revenue and then march on to $200.9 billion in fiscal 2014 without any hiccups. Along the way, Apple would reinvent TV and get another revenue pillar.

aapl042313a
A look at Piper Jaffray's expectations for Apple's March and June quarters.

It all sounds so plausible for Apple except for the supply and demand dynamics of the company's stock. Simply put, there is no one else to buy shares of Apple. Everyone is on board. No one can believe they bought a stock that's flailing. And now everyone is trapped assuming investors are still hanging on. Enter all the handwringing.

The scary part is that a lot of folks probably think today's dynamic with Apple shares is new. Cisco in the dot-com bubble had a similar issue. Financial history is littered with super star tech stocks that go pop — as Research in Motion/BlackBerry. From time to time, the market revalues a company's prospects and sometimes you're on the wrong side of the trade. 

Here's Cisco's ride from the dot-com bust to now. 

csco042313

What has changed about Apple amid this revaluation of shares? Nothing. Apple is a bit slow with its product launches, but has time. Apple also knows it has high expectations to hit so can't enter the market with crap (see Apple Maps). Apple is doing the rational thing: milking its existing products as it plots out its product roadmap. Keep in mind that the iPod launched in 2001, iTunes in 2003, iPhone in 2007 and the iPad in 2010. In other words, Apple is due for a new product line, but not way overdue.

In the end, it's worth asking who really has the identity crisis and patience problem. Here's a hint: It ain't Apple.

Topics: Apple, Hardware, iPhone, iPad, Mobility, Software

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44 comments
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  • Not so sure

    Hysteria is obviously misplaced ... but the nagging question remains: having reset expectations with the iPod, iPhone and iPad ... does APPL have another killer product?

    I'd say not.
    On some topics I love to be wrong ;-)
    jacksonjohn
    • Even the iPad is just a giant iPod/iPhone ...

      ... but that doesn't mean that Apple won't capture the imagination of consumers the next time around. Cooke may not be able to sell refrigerators to Eskimos like Jobs could - but he doesn't have to - as long as he plays to his own strengths.
      M Wagner
      • Disagree

        Cook appears to be an excellent manufacturing exec.
        APPL need innovative products ... and charisma.
        Cook doesn't fit the bill, on present showing.
        Hence the nervousness.
        jacksonjohn
        • AAPL not APPL!

          the stock code is AAPL not APPL.
          if you're trying to be sophisticated and throwing around stockcodes, at least get it right!
          maybe the price crashed because all the iSheep couldn't find the AAPL stock to buy! haha
          warboat
      • Apple Still Hiding Behind the Wizard's RDF Curtain!!!

        Not to be unkind, but Apple still thinks they found a Steve Jobs replacement in Sir Jony Ive - Invented Everything, Steve Just Took the Credit!

        Far from the truth and the only real genius left at Apple was recently fired. That being the other genius from NeXT Computing they got when Steve got hired back at Apple. None other than the genius behind OS X using NeXTStep OS as the GUI for it's user interface. The only thing these two Apple misfits didn't get when working on OS X and iOS was a new file system to replace (not just run on top of it) aging archaic old HFS+!

        Like 'Tide' Detergent..... with it's perennial ""NEW Improved"" different color label on the box, Apple is just hoping you all won't notice that it's the same old legacy API's and Frameworks devoid of 'Pervasive Multi-Threading" system wide task management running on all Apple's devices today. It's their Archiles Heel coming back to haunt them over not ever doing what they should have done long ago; KILL BACKWARDS COMPATIBILITY w/ IT'S LEGACY APPLE MAC SYSTEM API'S!!! ....and the gangrene is finally showing up as it's inability to run Pervasive Multi-threading, Multi-Tasking, Multi-Screen Features it's competitors have had for ages.

        Instead..... Apple settled for their "Preemptive Task Management". Which is just a provocative term for suspending one task to run another. It's all they have for iOS, since they chose not to license ZFS from Sun, after the CEO announced Apple would be taking a license to it. Steve just couldn't stand the fact they couldn't just rename it the iFile System as their own creation! .......now that Old Legacy Archilles Heel is coming back to kick them in the arse, in the not too distant future. Along with the fact they kept the wrong guy in firing Scott Forestall and Sir Jony 'come lately' Ive - invented everything and Steve & Scott just took all the credit! ;-P ....nothing new under the sun, that Apple claim they Re-Invented or Invented it in the first place!!!
        KronJohn
        • lipstick OS

          Kronjohn, you call it like it is, a pig with lipstick.
          ZFS would have brought it into the 21st century, but they killed that idea.
          Hell, we don't need R&D, we have a massive PR department!
          we still have Apple.com stating that OSX is the world's most advanced desktop OS and that iOS is the world's most advanced mobile OS.
          That's enough to fool the isheep, but any developer will simply laugh at it.
          Apple doesn't have an identity crisis, it has a systematic crisis where pride overrides common sense and Apple's aversion to license good technological standards and instead invent their own protocol and standards so they don't have to pay for it and allow them to patent their own half baked technologies and not share.
          This results in their pig with lipstick technology.
          warboat
  • Apple's game plan

    Now that Steve Jobs is gone, I'm just hoping for a MacBook Pro like-powered tablet that is Wacom 'penabled'. Artists need that kind of machine, not a consumerist iPad. Until they see that particular light Samsung will continue to encroach among aesthetically driven camps.
    johojo
    • Modbook Pro

      If you really were interested in a MacBook Pro like tablet, then you would probably know about the Modbook pro.

      http://www.modbook.com/modbookpro

      But with your last sentence being very anecdotal and –if we are using anecdotes–wrong from what I've seen, I think you are more likely just posting from boredom.
      JScottA44
    • Wacom type tablet

      You know Wacom themselves sell such a tablet, exactly for that kind of market. But.... it just doesn't sell that much
      danbi
  • A very good piece, Larry!

    My only concern about Cooke is that he is not Steve Jobs and he does not own a significant portion of the company - MEANING, the Board could throw him out tomorrow - no matter how good he really is!

    Steve Ballmer will not share that fate. He is simply too entrenched at Microsoft - only Gates could fire Ballmer.

    At this point, only the Apple Board could scuttle Apple. Hopefully, for all, they won't!
    M Wagner
  • Not so fair on the shareholders ...

    "In other words, Apple is due for a new product line, but not way overdue. In the end, it's worth asking who really has the identity crisis and patience problem. Here's a hint: It ain't Apple."

    I think this is the key to your article, and the problem.

    No, it may not be overdue; but as the last few launches have been tinkering with the product line, shareholders are understandably nervous. Apple's success is predicated on it's ability to be truly innovative, and an innovative launch IS overdue.

    In addition, YOU don't know any more than I do whether the next launch will knock socks off or not; so you are in no position to reassure shareholders.

    On the face of it, if you were responsible for investing millions of a pension fund, and you'd bought a chunk of Apple, you'd be pretty stupid NOT to nervous right now.
    Heenan73
    • If you are responsible investor

      You will not invest on dynamic stocks like Apple's
      danbi
      • AAPL is the number one pyramid scheme on the market

        this stock pays stuff all dividends for a highly profitable company.
        It is just a speculative stock trading like a commodity stock and should be treated as such.
        If you do not have a plan to sell AAPL, you are the fodder in this zero sum game.
        warboat
  • The problem with your argument is...

    that it is based on a complete ignoring of the facts.

    *Sure, Apple sells fewer iPods than it used to; it still sells more than any other media player.
    *Apple continues to see an increase in iPhone sales each year.
    *Apple continues to see an increase in iPad sales (when combining the full-sized model with the Mini)
    *Apple consistently saw an increase in Mac sales -- even when other brands were seeing decreases -- until last quarter where its reduction in sales was still far lower than any other brand's. Where most other brands lost between 15%-30% year-over-year sales, Apple lost a mere 7.5%.

    So, "people just aren't interested in Apple anymore," is patently false.
    Vulpinemac
    • I believe above comment was aimed at LRD's below

      It just fits.
      Vulpinemac
    • Apples increases

      have mainly come from opening in new markets rather than increasing volume in existing markets.
      In existing markets, Apple is losing to Android and in particular, Samsung.
      Mac sales in existing markets have dropped greater than windows machines.
      warboat
  • Everyone and their mom?

    I assure you, not everyone bought Apple stock. If I had, you would have seen a collapse of epic proportions for when it comes to stocks, I have the touch of death. I have, in fact, bought shares of stocks in companies I hated just to watch with glee as they immediately lost 50% or more of their value. It would have been fun to do it to Apple too...but I haven't had play money for that sort of thing in recent years. Or perhaps, as you say, a mutual fund I belong to recently bought Apple stock...yeah, that would explain everything! Bwaahaahaa!
    jvitous
  • Apple's problem? It just works - or does it

    If you stay on the envisioned highway you sail right along
    and everything just works.

    But if you try to leave the rubber room of Apple's
    envisioned workflow you're toast. You can't get
    get from A (Apple) to B (every day ad hoc business
    process). This is the reason Windows still owns the
    business desktop. We don't need HD glitz for bureaucrats
    to surf the internet. Ironically if you want to watch blu ray
    at home on your iMac forget it. You have to buy in iTunes and
    then pay for storing you music and movies in iCloud. That's like
    buying your home over and over again by paying property taxes
    into perpetuity. Might as well subscribe to Rhapsody instead or
    simple rent your residence.

    There is also the great divide between iOS and
    OSX, two eco systems as far as business users
    are concerned. But as a software developer they're
    co-dependent. If the Windows 8 continuum were
    cheaper by 30% (i.e. Surface tablet) Apple stock
    would be in a free fall now.

    And total integration of the Apple eco system is
    not only a strength but it's fatal weakness. Why?
    Because in order to maintain the glitz as the vision
    evolved all the tightly integrated hardware must
    evolve with it. And that spells planned obsolescence
    and a need for periodic quantum upgrades to the
    end to end hardware du jour. Connectors are changing
    on iOS devices so the pull in accessories have to be
    upgraded as well. You pay a premium for the glitz
    at every quantum and pay again to take the jumps.

    And the object oriented technology under the hood
    of OS X is two decades old. While Windows still doesn't
    have the glitz Microsoft has been quietly funding the
    research into functional programming and other technologies
    instead of concentrating on the glitz. That labor is finally
    going to pay off with the Window 8 continuum and beyond.

    As a software developer I run Windows, OS X and Linux on
    my desktop. Actually the Linux box isn't my desk but on
    an adjacent desk. I love the look and feel of OS X. And
    I can charge a premium for Apple development. And I
    run my music hobby recordings on OS X because up until Windows 8
    the OS X audio drivers were superior to Windows. But
    the hardware is not. But Windows 8 audio drivers have
    closed the gap. The only advantage now of the iMac
    is the visual glitz. But as soon as the Window 8 Pro Surface
    price comes down I'm switching back to Windows and going
    to dump my iPhone for a Windows phone. That's probably
    still a year or two away. If I were an investor I would
    short apple stock in that window. The blip is about to
    pass IMO.
    jwebsmall
    • What a load

      Noone has to buy into cloud storage for anything. There are these things called external hard disks, you know, and some of them even exists in external RAIDED NASes. Strangely enough, they work with Macs! And you can even put your media library on one.
      Non-Euclidean
    • Apple hardware is still the best

      There is nothing like iMac mini or the new Apple monitor. Apple trackpad is the only device that actually renders the mouse obsolete, but not the Apple multi touch mouse naturally. The OS X experience, with Apple track pad especially, makes me question the very fundamentals of the Windows 8 design. Apple definitely has time.

      BTW, there are lots of simple ideas to pick up. For example, the whole tablet brouhaha is based on the fact that it is hard to hit a tiny control with a finger. What if Apple just adds a switch that turns the cursor on and off? Cursor on - the screen is like a track pad, cursor off - it is a touch screen. Next, merge iOS and OS X UI. Next, choose what to do - kill Microsoft or continue to charge premium.
      gak@...