Yet another sign of Apple's [AAPL] end times at the close of this week, as a controversial investor sues the firm to force it to give away some of the cash its made through grabbing 72 percent of handset profits and bringing the world's most successful post-PC devices to market. With problems like these it is surely clear to everyone that Apple has no upside?
The Apple turnaround story has been remarkable. With Steve Jobs at the helm the company managed to step back from the brink of extinction and become the world's most successful technology firm. However, like every folk tale, Apple's is reaching its zenith and the sun seems soon to set on the fruit-flavored company -- just look at these signs:
[ABOVE: Apple's future Cupertino HQ, c/o City of Cupertino.]
Apple has too much money
Surprising everyone, Apple's return from the brink saw it build up a cash pile to rival that of many countries -- it now has $137 billion in cash, sitting in banks across the planet.
It is perhaps a sign of how out of touch Apple's customers are with the nuts and bolts of the new world economy that while many on the outside of the rich man's circle would like to see its money used to cough up more in tax to the places it does business in; investors -- principally David Einhorn's Greenlight Capital -- would like to see the firm hand its cash over to shareholders.
You'd imagine that when a stock has climbed from $7 per share to its present levels investors would already feel pretty happy with the company's performance: they're not, they want more. And given the company has set a pattern across over a decade for stellar growth featuring ever-higher quarterly results records (including during its just gone quarter in which it earned more than any technology company in history), its no surprise investors are running scared.
I'm no stock market expert, but it seems to me that as the lemming-like Apple stock sell off continues, investors seem to want to both sell the company's shares, and also grab some of its cash from under the carpet as they scarper out the door.
That's yet another example of the many ways in which Wall Street is good for business, and yet another sign that Apple has reached its end time: It has too much money itself and doesn't really want to give it to affluent people who've already made their money simply by buying a few shares.
That's surely not playing ball.
How dare the company hope to do something more constructive with its cash than paying its tithe to the investment community? That's hubris at its worst. Pride before a fall.
[ABOVE: Apple sold its 25 billionth song via iTunes this week. This was that song. I'm sure lots of people like it, but I was a little disappointed myself.]
Apple keeps making money
In a press release presumably responding to Einhorn's attempt to take Apple's money because he made the giant contribution to success of buying a few pieces of paper (shares), the company admits it has too much cash -- it also goes one step further and points out that, despite its best efforts (or so it sounds) it unfortunately also banked an astonishing $23 billion profit in its just-gone quarter.
As you might expect, the company sounds almost apologetic as it makes this shameful confession. It knows that to maximize shareholder value, it should work really, really hard to, you know, lose money, just like current stock market darling, online shopkeeper, Amazon.
How might it make up for this terrible sin?
"By early last year, Apple’s cash balance had built to a point beyond what we needed to run our business and maintain flexibility to take advantage of strategic opportunities, so we announced a plan to return $45 billion to shareholders over three years. As of next week we will have executed $10 billion of that plan.
"We find ourselves in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone."
As you might expect, Apple is taking this shareholder rebellion seriously. The company admits to having been engaged in "active discussions" concerning handing over some more money to shareholders and promised to "thoroughly evaluate" Greenlight/Einhorn's proposals designed to "unlock the growing value of its balance sheet."
(Again, I'm no stock market expert, I'm just a trend watcher, but I think the Greenlight/Einhorn proposal to "unlock value" basically just means "give us some money". I'd welcome educated opinion on what it really means almost as much as I'd welcome some money myself. Not that I expect any. I'm not a shareholder in anything and work for a living.)
"We remain committed to having an ongoing dialogue with our shareholders to get perspectives around return of capital and driving shareholder value," is what Apple said.
You'd imagine that at this point Apple's executives might have taken their noses outside of the R&D labs for long enough to figure out what it is investors really want by now. To help them, there's a song below (it's by Pink Floyd).
It may also be instructive to take a look at Apple stock this morning. Following news that it is considering doling out a few more parcels of cash, its stock is up $13.52 at $468.22 (at time of writing).
While that's not the dizzy heights it once enjoyed, it seems possible the Apple death counter's clicked too fast -- investors appear pleased to ignore strong long-term growth prospects, significant company successes and strong market position, just so long as you show them the money.
Apple's going to make more money
Investors take note. Not only has Apple got more money than it needs, but it seems set to make more.
Growth like this just cannot be sustainable -- so you have to take the following three data points as yet another set of reasons the company faces calumny, extinction and collapse.
1. Apple and handset profits
A Canaccord Genuity study this week found that Apple took 72 percent of all handset profits worldwide while Samsung took 29 percent (a somewhat surprising total of 101 percent). It's OK though -- others, such as Nokia, BlackBerry and HTC shared the rest. Except that means they're losing cash or treading water. Incidentally, Apple makes that profit on 21.7 percent of sales. Could this be yet another portent of doom for the firm?
2. Apple and the enterprise
Apple's nothing but a blip in the enterprise, according to some enterprise evangelists, who will dismiss analyst firm, Forrester's claims that one-in-four enterprise employees want an iPad for work, while one-in-three want an iPhone.
The Apple enterprise blip seems quite convincing, until you recollect all the headlines in recent weeks declaring its doom. All those headlines can't be wrong, surely? All the same, these blip's are worth reporting:
- 58 percent of the 21 percent of information workers who already use a tablet use an iPad.
- And 26 percent of respondents want an iPad for their next work tablet, which is over twice the percentage who want an Android-powered thing.
- Nine percent of these people want a MacBook as their next enterprise machine.
3. Apple is Number One Post-PC maker
As reported yesterday, Apple's also become the world's number one PC maker (comprising iPads and Macs) with a 20 percent share of the market. Sure, that's bigger than its competitors, but tough love, people: Apple executives surely know they face stiff competition from Microsoft as that firm attempts to continue to woo enterprise users into paying cold hard cash for the next Windows upgrade.
[ABOVE: Apple executives in their Monday morning meeting this week -- not really, this is a few scenes from popular '70's BBC series, Dad's Army.]
I think together all these points summarize some very good reasons Apple faces its end times:
- It has too much money
- It is making too much money
- It is on track to make even more money.
It is tragic to see a company floundering in this way.
With a fifteen-year string of product successes and winning positions in multiple markets, it's pretty clear the company is doomed unless it can figure out how to maintain its phenomenal growth in a decade's time.
Perhaps, after giving shareholders some money the firm should buy back its stock and go quietly private in order to continue its inevitable decline in relative peace?
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