On the precipice?

Apple_on_precipiceApple recently announced its Q1-15 financial results. By every measure, the iDevice manufacturer had an epic quarter to begin the new fiscal year.

In the quarter, the company sold over 74 million iPhones, 21 million iPads, and 5.5 million Macs, and booked $74.6 billion in revenue.

In addition, Apple added almost $34 billion to its cash and securities stash, which now amounts to some $178 billion. Staggering numbers by any measure.

So it was, with eyebrows raised, that I read a curious article by Apple doubter, Joe Wilcox, in which he opines that the company is on the precipice of failure. Say what…?

The Apple Death Knell Counter

Just to provide a bit of context, as long as Apple has existed, tech writers, stock analysts, fund managers, and industry pundits have predicted the demise of the company.M-O-logo

In fact, the editorial staff at the Mac Observer have been maintaining the Apple Death Knell Counter, an ongoing collection of silly predictions of Apple’s downfall over the years.

It’s an interesting historical record, and good for a few laughs, to boot. I didn’t see Mr. Wilcox’s name among the death knell scribes. Having read a number of his articles over the years, however, I certainly think he deserves consideration.

A rotting core?

So is Mr. Wilcox just another troll, or does he make valid points? Let’s start with the name of his article, “Apple’s core is rotting.” With a title this trite, things do not bode well. The whole Apple-rotting-core thing has been done to death. (Search on Google for “Apple rotting core articles,” and you’ll see what I mean.)

rotten-apple-coreBut, ok, maybe we’re jumping to conclusions. Surely, the estimable tech writer has some valid points, so let’s suspend disbelief for awhile longer.

Atop the pinnacle of success, Apple stands at the precipice of failure. The scrappy innovator is gone, replaced by the, ah, Establishment cofounder Steve Jobs and his renegades challenged with years of guerrilla tactics. Apple has in this decade achieved huge success. But managing success is challenging, if your business model is innovation. The two objectives often work cross-purposes.

With stilted prose and unfortunate typos, his thesis gets off to a rough start. He seems to be saying that Apple, because of its success, is no longer innovative.

I guess it’s illogical to think that a successful company, with significantly more capital to invest in research and development, could be more innovative. Not only illogical, according to Mr. Wilcox, it’s Apple’s success that is the problem:

The fruit logo company is a juggernaut, and that’s the long-term problem…Apple has moved from [disrupter to incumbent], where holding onto loyal, high-end customers matters more than innovation for all…That company is gone, standing as Goliath—no longer David—seeking to preserve the status quo rather than adopt new rules of engagement that disrupt the Establishment…Successful companies, particularly those that are publicly traded and which come to dominate a category of products used by a large number of businesses or consumers, are less inclined to take risks. Incumbents don’t want to tip over the cash cart, while upstarts have less to lose and can risk more.

Maintaining the cash cow

See, Apple is so concerned about maintaining its cash cows—the iPhone, iPad, and Mac—that’s it’s not innovating anymore. Success, Mr. Wilcox would have you believe, is the antithesis of risk-tasking, ergo Apple is doomed.cash-hand

If you agree with Mr. Wilcox, Apple didn’t innovate in 2014.

Larger screen iPhones are not innovation. Apple Pay is not innovation. Apple Watch is not innovation. Health and HomeKit are not innovation. CarPlay is not innovation. The iMac 5K is not innovation.

In 2015, Apple will undoubtedly introduce new Macs, iPhones, iPads, and new versions of iOS and Mac OS. Yes, the company will continue to maintain and grow its popular products. That’s only to be expected.

But does Apple have a few new tricks up its sleeve this year?

What innovation looks like

If Apple’s past 20 years is any indication—and I believe it is—innovation is alive and well at Apple, and we’ll see some remarkable hardware and software products in 2015.

up_close_watchLet’s take the Apple Watch, for example. This intriguing wearable, which seems to integrate both technology and fashion, is a new category for Apple, as was the original iMac in 1994, the iPod in 2001, the iPhone in 2007, and the iPad in 2010.

Like those devices, which were widely panned when first announced, until we get our hands on the Apple Watch, we won’t precisely know just how ground-breaking it is—all the refinements, tweaks, and, yes, innovations, that Apple has engineered into it. From this remarkable demo, however, we get a good sense of it.

All that aside, there is one thing I’m certain about. When Mr. Wilcox drones on about Apple being on the precipice of disaster, it’s time to buy more Apple stock.

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