On August 24, 2011, Tim Cook took over from Steve Jobs as the permanent CEO of Apple. He’s been in charge ever since.
So how’s he doing after five years?
Apple’s earnings report for the quarter ended June 30 beat Wall Street’s expectations, sending the stock up about 7% after hours. Apple is still the most valuable company in the world, and earns more profit in a quarter than most other tech companies earn in a year.
At the same time, Apple’s revenue has started shrinking. Its most important product, the iPhone, is shrinking. All its other business lines, save one, are shrinking. And the company hasn’t had a new hit product since Cook took over.
Let’s go to the charts….
First, let's take a look at the stock price since Cook took over. It's up over 90%. That's a little better than the S&P 500, which is up 84% in the same time period. But in the five or so years before he took over, Apple stock rose a historic 460%, doing way better than the S&P.
Also, Apple now pays a dividend. It did not before Cook took over. But Apple's cash hoard has also grown by about 3x since then, and now stands at over $230 billion.
Cook should also be commended for turning Apple into a company with a strong public conscience. He's made a huge commitment to turn Apple into an carbon-neutral company with actions like building massive solar plants, and has taken a public stance on social issues like gay rights. Steve Jobs never took those kinds of stands.
But as far as the business itself goes, revenue growth has steadily fallen in the last five years, and went negative starting last quarter.
Here's the big reason why: iPhone shipments. They started declining year-on-year back in the fourth quarter of 2015 and have been negative on an annualized basis ever since.
The iPad was supposed to be the next PC. It didn't work out that way. Unit sales have been shrinking on an annualized basis since 2014. This quarter continued the trend, although revenues were up thanks to the higher-priced iPad Pro.
Then, there's the Mac. Not much going on here compared with Apple's other big hardware businesses, and sales are down on an annualized basis for the last three quarters. To be fair, the broader PC industry is in a state of decline.
Here's Apple's revenue makeup by product. It's barely changed. The company is still the iPhone company. Tim Cook has failed to create a major new business in five years.
Cook does talk a lot about 'services' -- things like the App Store, iCloud, and Apple Music. This quarter, he said it was on track to be as big as a Fortune 100 company. And that's the only segment that's consistently growing. But its not exploding. It's pretty much riding the iPhone's installed base, which jumps by tens of millions of new phones every quarter.
By the way, see that decline in 'Other products' revenue growth? That's the segment that includes the Apple Watch -- the only major new hardware product introduced since Cook took over. It's been completely immaterial to Apple's business, and appears to be on the decline.
One of Cook's biggest successes has been getting Apple more entrenched in China. Revenues from China increased dramatically toward the end of 2014. But they started dropping again this year, and fell behind European revenues this quarter.
And now, the most important and interesting slide of the bunch. This shows Apple's spending on research and development by quarter since Cook took over.
Interestingly, R&D spend as percentage of revenue has increased pretty sharply in the last couple of quarters.
Another way of looking at it: R&D spending keeps increasing even as revenue is no longer increasing.
Whatever it is, Tim Cook needs a hit to prove he can grow new businesses, not just maintain existing ones. And investors are just going to have to take it on faith that Apple can deliver one. How long will they wait?
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