New Apple looks like the old Microsoft
By Jeff Macke January 28, 2014 Breakout
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Apple (AAPL) is getting old. Saying so isn’t an attack or a form of downgrading the stock here. The stock is down huge today and many smart folks think it’s a decent trade, especially if it gets all the way down to $500. Regardless of what shares do over the near term, in the big picture Apple is in an old familiar places and the story is getting stale. Analysts and investors went into the release hoping to see an upside surprise just like the Apple of old. What they saw instead was the new Apple, or put another way, the old Microsoft (MSFT).
To be sure Apple’s still a great company. Apple sold $57.6 billion worth of product and booked net income of $13.1 billion, or $14.50 a share. They ground out better than expected profits and have more than $155 billion in cash and sold a mountain of iPads. According to CEO Tim Cook the company would have done better on revenues if not for “foreign exchange headwinds, the year-over-year decline in iPod sales, and the higher revenue deferral rates from iOS devices and Macs that we discussed last quarter.”
Cook also complained about supply constraints for the iPhone 5S and iPad. It’s an odd beef for a CEO lauded for his ability to make the trains run on time when Apple was being run by product genius Steve Jobs.
The red flag in Cook’s statement is that he considers flagging iPod sales a surprising headwind. iPods are the best MP3 players on the market but the days of changing the form factor of commodity products isn’t as profitable a niche as inventing new categories the way Apple did in its glory days. iPods are a nice cash-cow business with no hopes for exciting innovation on the horizon; a chilling glimpse into the future of the company.
“We’ve never been about making the most,” Cook explained to analysts asking about flagging growth, “we’re about making the best.” Apple already makes the most money being the best consumer phone maker in the world. The reason the stock is down today is because greedy investors want to see what the company will be making next.
