Unless you were in a cave, by now you have heard that Apple had a disappointing Quarterly Earnings Report. Most companies would kill for $8.8B in pure profit and would die to sell 26M of anything, but let’s face it Apple is held to a higher standard. More importantly, Apple’s management holds itself to a higher standard. It was clear from the conference call that Tim Cook was not pleased with their results.
Cook pointed the obligatory finger at the Macro. But Europe has been screwed up for years. The dollar strengthened more in the December Q than June. Why was it more of a problem this Q? He also suggested rumors of an iPhone5 may have affected sales. So, let’s think this thru. Last year iPhone sales slowed in the September quarter – 3 months before the October release. This year sales slowed a full 6 months before the next release. At that pace, by 2014, no iPhones will be sold as people will be waiting on the next one.
The PC industry has taught us that there will always be a better computer the week after you buy yours. Most now buy the highest performance computer affordable at the time and move on. I had a friend buy the iPad2 the week before the iPad3 was released. I had to convince her to take it back and exchange it for the iPad3. Not everybody has to have the latest and greatest. That being said, I can buy a 3 month delay due to a new model on the horizon – but I’m not buying 6 months.
Before you tune me out and start blasting me in the comments, let me say that I am an Apple shareholder. I believe that their product pipeline is stacked with new amazing products and that the stock will be much higher in 6 months. However, I am simply not prepared to give Apple a pass on the quarter. In my opinion, if people are delaying a purchase 6 months out – the current product is flawed. When the iPhone4S was initially released it was a big let down. The trend had already shifted to larger screens and 4G connectivity. The iPhone4S had neither. When the phone recorded record sales all was forgiven.
The sales may have been a smoke screen that was exposed this quarter. Mobile phones are growing at a phenomenal rate. Millions of people are rolling off contracts every quarter. Just by inertia alone – Apple will sell 10s of millions of phones per quarter. Additionally, an earlier release in China pulled-in sales. The 4S was available in January. Much sooner than prior releases.
Did the sales success mask a problem? Don’t dismiss it so quickly. Research in Motion, Nokia and Motorola all fell into this trap at the peak of their success.
I had the following exchange with a buddy today.
There is no doubt in my mind Apple is working on the next blockbuster product. I have confidence the team will deliver even without Steve Jobs being there to wave his magic wand. In my opinion the Steve Jobs “wouldn’t have done this or that” meme is getting old. The company can’t release a TV commercial without someone saying Steve Jobs wouldn’t have approved that.
Replacing a genius has to be an almost impossible task. Fortunately, I am not expecting Tim Cook to do the impossible. I am expecting him to do exactly what he did before he became CEO – that’s be best Operational Executive on the planet. It is his job to keep the trains running while the creative team does its magic. Having your A1 product lose its luster after 6 months is just not acceptable.
Disclosure: Long Apple.