Just about every time Apple releases a quarterly earnings report, the web lights up with all kinds of analysis, speculation—and curious memes.
The company’s Q3-16 earnings report, released last week, was no different. Apple again posted ginormous numbers: revenue of $42.4 billion, and net income of $7.8 billion.
In addition, the company grew its service revenue by 19%, and sold 42 million iPhones and 10 million iPads.
Nonetheless, take this headline: Apple is trapped inside a shrinking universe. Business Insider, the publisher, rarely seems to wax positive when it comes to Apple. Other examples of their pithy prose include:
And Business Insider isn’t alone. There are other sites that regularly criticize Apple—MarketWatch, Forbes, and Bloomberg, to name a few. Some folks have even written whole books trashing the company.
Now, I’m not saying that people shouldn’t be critical of Apple. The company and its management isn’t perfect.
However, Apple is far from being trapped in anything—other than continued enormous success, in my humble opinion.
So what is going on with Apple? Why are its revenues dropping? Apple is transforming, plain and simple. And big change takes time.
Signs of transformation
Even as the most recent quarter showed year-over-year declines in sales of flagship products, there are signs that Apple is weathering the storm quite well.
Since I’ve written about Apple a number of times before, I’ll only briefly state that the company continues to make a lot of money and still has well over $200 billion dollars of cash and securities in its war chest.
Those stats simply do not indicate an unhealthy company.
Apple is investing more in research and development than it ever has, and that number continues to grow quarter-over-quarter.
Many tech journals are cautiously optimistic and wisely analytical, placing Apple’s condition in the proper perspective. For example:
When asked at the earning conference call about Apple’s increase in research and development, here’s what Tim Cook had to say:
On the R&D growth, we do continue to invest significantly in R&D. The growth rates are still large on a year over year basis, and Luca can share the exact ones, but I think the recent quarter was in the mid-twenties for R&D. The balance of the company, we’re managing more flattish from a year over year point of view. The products that are in R&D, there is quite a bit of investment in there for products and services that are not currently shipping or derivations of what is currently shipping. So I don’t want to talk about the exact split of it, but you can look at the growth rate and conclude that there is a lot of stuff that we’re doing beyond the current product.
Expanding in breadth and depth
So, from Cook’s statement, we know there’s “a lot of stuff” in the pipeline, but that’s all he’s saying.
Apple continues strategic acquisitions, and, unlike many other tech companies, hasn’t announced any layoffs in years.
It appears the company is also getting into the energy business, having recently secured permission from the Federal Energy Regulatory Commission to sell energy, capacity and other services.
In addition, we’ve seen lots of speculation that Apple is getting into the car business. What shape that will ultimately take is anyone’s guess, but the latest rumors have Apple building an operating system for cars. The putative “carOS” would certainly be in keeping with the company’s other operating systems: iOS, macOS, tvOS, and watchOS.
Who knows what other magic tricks are up Apple’s sleeve? If you’re an analyst, journalist, or aficionado who follows Apple, you can look at the company and ask “what have you done lately?”
And that’s one thing that the company has proved over and over again. The company sweats the details. It takes the time to get something right before it releases it to the market.
Not perfect, but right. Take, for example, the Apple Watch.
The tech press has found a lot to like about the initial version of the Apple Watch. But critics have also picked it apart:
It requires you to have an iPhone.
Battery life sucks.
It’s slow, particularly third-party apps.
The user interface is difficult to use on the move.
Notifications are limited, so I have to pull out my phone anyway.
Using Siri is haphazard.
It’s a solution in search of a problem.
And on and on.
But here’s my take on the Apple Watch, which I’ve been wearing for about a year now.
On a micro level, it’s an extremely well-made device, very durable, and it has been very useful for me. I’ve gotten to the point where the first thing I do every morning is strap it on. It keeps track of my activity, sends me news stories, provides reminders, notifies me of important incoming email, and even let’s me take a phone call, when my iPhone is in the other room.
On a macro level—and this illustrates the point I’m trying to make about Apple—the Watch is a fully realized Version One product. Even though it came almost two years “late,” within a year it has become the best-selling smartwatch on the market.
An independent research company named Wristly has found, through numerous surveys, that 94% of Watch owners are either extremely satisfied or satisfied with the device.
Despite the naysayers, and the curious Apple memes, this is what Apple does. It delights the vast majority of its customers with excellent products delivered only when ready.
And that’s what Apple will continue to do.