It's Time To Seriously Consider Whether Tim Cook Has Mismanaged Apple
Apple reports earnings on Wednesday when the market closes.
Investors are not expecting anything spectacular. This table from Piper Jaffray analyst Gene Munster sums up analyst forecasts.
As you can see, everyone is expecting low single digit growth. :Piper Jaffray
Analysts are now saying that Apple is a "second half" story. They say the new products are coming at the end of the year, and those are going to boost sales, and reposition Apple as a ground-breaking, innovative company, not a company that is just iterating on its current line of products.It didn't have to be this way, and really, it shouldn't be this way.
Apple should have seen this drop in growth coming, and been better prepared. It should have either diversified its existing product line, or it should have released new product categories to offset the declines in its current products.
This chart shows Apple's declining sales growth:
Cook has been given the benefit of the doubt about leading Apple during this growth decline, but it's time to start seriously asking if he has been mismanaging Apple.
Cook promised new products were coming across 2014, but now it looks like they're only coming in the second half of the year.
By the time new products from Apple hit, we could be looking at a run of quarters with sales growth in low single digits. Apple's growth shouldn't have gone to zero before Cook started rolling out new products. He should have been managing the business to address the coming decline.
The reason the iPhone business has fallen off is fairly straight forward. Apple sells a phone with a small screen that is expensive relative to its competition.
Cook, and his management team, are aware of this problem. An internal presentation at Apple last year showed that people wanted low-cost, big screen iPhones:ScreenshotHere's another slide from that presentation:
Really, Tim Cook shouldn't have needed a presentation to figure out that people like big, low-cost phones.
Samsung started making a bigger phone in 2011. It wasn't a good phone, but it showed enough promise that Samsung made its next phone bigger, and the one after that bigger, until it landed around 5-inches as the screen size that its users loved.
Apple prides itself on making the "best" most innovative products. To be innovative, you need a vision for what consumers want. Missing on screen size means you've missed out on what consumers want.
That falls entirely on Cook.
When analysts talk to Cook on tomorrow's earnings call, it's time to ask some hard questions. Why didn't he diversify the iPhone line? What is wrong with the iPad business? Why aren't there new products until the end of the year?
More than anything, it's time to question why growth has gone to almost nothing, and what Cook is doing to address it.