Apple is just eating itself. This is may be the shortest comment on what is happening in the company, after its shares fell below $400. May be some readers will remember the fantasy of the expectation of Apple to go over $1000. It was a very soon moment when such prognoses appeared on market. In fact this can happen someday, because the inflationary pressure of FED activity will inevitably move much real assets up. But then may be IBM will also be over $1000, as well as British Petroleum… But measured in current dollars, it is simply a fantasy to expect a $1000 per Apple’s share.
At current moment in fact it is not the shares’ price the main problem. The main problem is the frozen business model that is creating nothing new, that is not developing, and in fact is simply consuming the inertia of Steve Jobs’ leadership. Apple is becoming a schoolbook instance of the importance of the leader in the business. If you have red something by Ayn Rand you will understand with no much words. But in short, the business it is not the legal base, the company name, the technology or even the markets. The business is the leader of the business. A man that can see the future, that can create a vision and make consumers believe in his product.
With no such a man, the business simply cannot exist. And it is not only with Apple. It is also with the previous Apple that almost bankrupted after the kick out of Steve Jobs from his own company. It is also with Dell that went down without Michael Dell.
Apple is a company of 3 products and its modifications. But these are the leader-products that not only take market share, but they create markets. And as the economy theory says, the creator of the market wins the most of the profits, being the first to sell, and selling expensive.
But what when the leader is gone? No new products, no new ideas, no new sources of generous profits?
The answer is very simple. A time of inertia comes, after that problematic quarters, then even losses, and so on. Apple has enormous reserves in cash, technologies, markets and professionals. But has no a strong and effective leader to organize all this in a working system. So the business is going down and consuming the already existing reserves. I.e. it is eating itself.
We were expecting the Apple TV and something like an iWatch. But nothing appeared. Do you know why? Very simple is the answer – because there is no one to hold the responsibility. There is no leader to decide and take the risk. Like any other corporation Apple is becoming a nest of bureaucrats that do not like the risk and care only of their own positions and bonuses. And keeping a position in safe means no any risk. You can be fired only if you make a mistake. With no taking risks there will be no mistakes, and no firing. But with no risk there is no business.
Apple cannot keep its old profits, based on the old market of tablets and smartphones that is becoming overflooded with competition. The prices and profits in such areas logically fall. It needs new products and new vision. I.e. it needs a new leader.
And there is no such one on horizon.
April 27th 2013