This week Apple announced the first quarterly revenue decline since 2001. While that should have been a shock, it was completely expected, probably baked into the current stock price (which hasn’t suffered much since the numbers were released).
So, were Apple’s numbers great? Or, really lousy?
The answer is obvious. Both. Any other company on planet earth would love to have Apple’s financials. So, as numbers go, they’re great. Almost $49-billion in quarterly revenue (a slow quarter), and $9-billion in net income (profits). Can you name another company that did so well last quarter?
Well, compare those seemingly stellar numbers with Apple’s own financial results just one year ago and you might conclude that the recent results were lousy.
The difference between the two is in the realm of expectations. Apple gets castigated by technology media and Wall Street for not being able to figure out how to grow iPhone sales every year. Forever. The company is criticized because Apple Watch is a dud (relative to iPhone sales; yet such critics and analysts are not actually insightful enough to understand that Watch is an accessory, therefore cannot be a successor to iPhone, despite the level of success it has within the watch industry).
Yet, Apple generated more than $16-billion in operating cash flow, a new record for what is called the September quarter. Investors received more than $9-billion in dividend and share buybacks, part of nearly $190-billion that Apple has returned to shareholders in recent years.
The company sits on nearly $240-billion in cash but more than $75-billion in debt. Even with basic math that means the company still has more cash on hand than most developed countries.
A $75-billion debt doesn’t sound good until you compare it to a $240-billion cash hoard.
Some analysts point out that Apple’s fastest growing division is Services, now at more than $6-billion a quarter, but those numbers do not a services company make. Apple remains a hardware company, and the list of revenue streams and profits wouldn’t exist without the hardware sales.
Why are Apple’s quarterly numbers going down instead of up?
The reasons are many and varied but boil down to basics. First, the PC industry (Mac), the smartphone industry (iPhone), the tablet industry (iPad) are in an economic funk. Ditto for the smartwatch segment of the somewhat moribund watch industry (Apple Watch). That’s just for starters. Second, beyond the economic malaise in technology, the iPhone itself was a once-in-a-lifetime technology product not likely to be repeated until Apple perfects an implant that gives humanity perpetual youth and perfect health. The iPhone’s growth days are gone. Finally, Apple has failed to create a successor product; another gadget which could grow the same way the iPod, iPhone, and iPad did.
Apple’s malaise isn’t not life threatening. Yet. The company has reached a threshold where it can only sell so many Macs, iPhones, iPads, and Watch units each quarter because Apple prefers the premium end of each product segment.
What Apple, investors, and customers want and need is another hit product.