The Market Wants Apple to Unveil a Time Machine
If you want a brilliant lesson in focus and discipline, watch Tim Cook right now. Some investors are dissatisfied with Apple. I think it's more a case of their being dissatisfied with their own lives and expecting that Apple's next product will fix everything. The constant refrain is that Apple has not introduced a disruptive product since Steve Jobs passed away. It's as if they want Apple to unveil a happiness device and they won't be happy until it does.
Some people are saying that Tim Cook just ain't up to it, that he's no Steve Jobs. One commenter on a popular Apple rumor site made a multi-point list of Tim Cook's failings: 1) missed earnings for several quarters, 2) a volatile stock price, 3) quality control problems, 4) lack of new advertising, 5) bad product reviews, 6) lack of an iMac or iPad mini with a retina display, and 7) complaints that the company is getting stale and top execs are fleeing.
What the naysayers are overlooking or ignoring is that one could have made a list for Steve Jobs that would look remarkably similar:
- Missed earnings: Apple posted a $247 million quarterly loss (in 2001, four years after Jobs took over — and the stock went UP in after-hours trading).
- Volatile stock: In 2008, under Jobs, the stock price dropped by more than 50%.
- Bad quality control: MobileMe, antenna-gate
- No advertising innovation: The "I'm a Mac/"I'm a PC" campaign ran for three and a half years without a refresh. Nothing on the scale of "Think different" was created by Jobs more than a decade after that iconic campaign.
- Bad product reviews: One word: Ping. Also, Consumer Reports issued a "does not recommend" on the iPhone 4 (in 2010).
- No iPad mini at all.
- Executive exodus: In 2008, Tony Fadell, senior vice president of the iPod division, stepped down. His wife, the VP of HR at Apple, also left. In 2004, Apple's CFO, Fred Anderson, left the company. Apple's General Counsel, Nancy Regina Heinen, left in 2006. (In 2007, the SEC filed charges alleging that she let Apple backdate large option grants and altered corporate records to hide the actions. She settled with the SEC without admitting or denying the charges.) Sounds to me like Tim Cook isn't the only one who's had to deal with shuffling in the top ranks.
So Tim Cook has not introduced any disruptive new products in his first year. But bear in mind that four years elapsed from the time Steve Jobs took back the reins until the iPod was introduced. Six years elapsed between the introduction of the iPod and the iPhone. Six years without a disruption under Steve Jobs. During that time, we had to endure the unveiling of flops and iterations like the iPad Hi-Fi, leather iPod pouches, and the iPod Photo. Yes, Steve Jobs actually unveiled a leather iPod pouch on stage. That was an underwhelming day. Another three years went by without a disruption until the iPad was unveiled — and at the time, many didn't view it as a disruption at all. "It's just a bigger iPhone," they said, not understanding the gigantic implications of a bigger iPhone, in much the same way that they cannot now understand how a slightly smaller iPad will change everything.
We don't know what Apple has in store for us. Over the past 10 years, it reinvented the telephone, music players, the way we consume music, and mobile computing itself — actually, with the iPad, Apple invented mobile computing. Apple can ride the wave of those disruptions for a little while. It has changed the world. It is now selling the products that define that new world to the world. Even if it has nothing more up its sleeve than beautiful new iterations of its existing products, the fact remains that this is a company that last quarter had profits of more than $8 billion. Compare that with Amazon's performance: Amazon lost $247 million in its last quarter. Amazon's price-to-earnings ratio is now 2,767. Apple's is 13. And Apple's profits are growing substantially year over year.
There are other markets waiting to be disrupted, for sure. Television. Automobiles. Housing. Higher education (Apple is already on its way to transforming that with iBooks Author and the iPad). If Apple is to maintain the level of success it's achieved in the past 15 years, it may need to enter those industries in the next 15. And it probably will. But for now, Apple is like no other company on the planet, based simply on what it has achieved in the last six years. Tim Cook is capitalizing on the potential of those years of disruption, and is doing it masterfully.
The critics that are screaming right now are intellectually lazy. They're throwing temper tantrums instead of looking at the big picture. Like two-year-olds, they don't really know what they want. And they're not happy when they get it, anyway. Apple could unveil a new car and they'd say Apple's days are over because it's just bet its future on an industry it knows nothing about. Not unlike, say, Apple's entrance into the mobile phone industry. I bet that if Apple did unveil a time machine, they'd claim it wasn't fast enough.
Tim Cook is taking exactly the right approach, staying the course, despite distracting expectations swirling around him. Apple is a marvel of human achievement. Why waste the beautiful sight of it by casting your gaze on a group of misbehaving children who have never accomplished anything remotely close to it in concept or scale and don't have the faintest understanding of how something this remarkable operates and grows in the first place?
Disclosure: I am long AAPL.