Doomed, Doomed I Tell You

It’s quarterly results time for Apple and thanks goodness they’ve turned in a negative result for the first time for 13 years.

Revenues have dropped, iPhone sales are down, Mac sales are down, iPad sales are down.

About time too!

It had to happen.

No company can sustain the level of growth Apple have seen over the past 13 years. It was never a question of if Apple would ever stop growing revenues, more a question of when.

And it looks like that time is now.

So they are doomed then?

Well not really.

They made $10 billion profit last quarter on revenues of over $50 billion or as Jason Snell puts it over on sixcolors.com:

It was a bad quarter in which Apple made $10.5 billion in profit. That makes it Apple’s 10th most profitable quarter of all time — it’s just that Apple’s five previous financial quarters were all better. If you ignored Apple’s staggering calendar-year 2015, in which it made $54 billion in profit, it was actually pretty great. The last time Apple made less money in a quarter was only a year and a half ago. Seasonally speaking, it’s Apple’s third most profitable second quarter of all time. Unfortunately, 2015 was more profitable, as was 2012.

In fact, I’d highly recommend you take a look at the full article to get a sense of perspective on the numbers quoted (and assumed) from the recent earnings call. The summary is worth repeating:

So in other words, if you like profits and strong sales, Apple has that. They’re not not what they were last year — and that’s not a great sign for Wall Street. But don’t let someone tell you that Apple’s in trouble, or that it lost money, or that iPhone sales are cratering, because none of that is true. What is true is that after many years of growth, some of it staggeringly inflationary growth, Apple didn’t grow this quarter. If you’re an investor, that may be quite painful. If you’re a user of Apple’s products, it probably won’t affect you much at all.

Well said Jason.

Of course the stock will tank, but I’m glad the period of unsustainable growth is over — for now.

We’ve yet to see what effects the products in the pipeline for this year (and next) will do to Apple’s numbers.

  • The MacBook Pros and Mac Pro’s are due for a major refresh.
  • Apple TV will probably have a big update over the next 12 months with support for 4K and I would expect 4K content to make an appearance on the iTunes Store.
  • Apple Music (their first subscription service — my emphasis) is going from strength to strength as well as their services businesses overall.
  • The Apple Watch is due for an update in the next 12 months, with a new hardware specs and a revision to watchOS.
  • The iPhone will go through its usual refresh cycle in the Autumn with a new design and some extra features we didn’t know we needed.

And they are only the existing products we know about.

Plus we have the push into untapped markets such as India and further inroads into China.

We have announcements in a couple of months at WWDC and we have the as yet unannounced Apple Car — imagine what revenues that might generate.

Oh, and they are sitting on $233 billion in cash in the bank.

Doomed they are certainly not.

But I hope now that the growth has paused (quoting Tim Cook), the financial analysts will stop looking at Apple’s growth potential and focus more on the company as it is.

A company not reliant on producing blockbuster smash hit year after year (although I’m confident they’ll continue doing this), but a mature stable company with stellar products, a proven track record and a customer base of over a billion satisfied customers.

No longer a company on the brink of collapse like in the 90’s, but an amazing performer like no other.

They won’t of course, they’ll continue to look at Apple and wonder when they are going to fail. They wonder when the house of cards will all come tumbling down.

I know I’m not a financial analyst, but I just don’t get the pessimism from Wall Street — it boggles my mind.

For full disclosure, I do have a small amount of Apple stock which I obtained several years ago. Not enough to allow me to retire on, but it’s been interesting to follow the ups and downs of the stock price. These days I just let it sit there and see what happens!


Originally published at My Own Reality.

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