WASHINGTON, January 28, 2014 – After yesterday’s generally disappointing market close—for bulls, anyway—Apple (AAPL) reported okay numbers for its most recent quarter. But this increasingly tarnished Wall Street darling failed to “beat” analysts’ estimates and also failed to offer exciting guidance for its current fiscal year. The result? In after-hours trading, the stock was pancaked, losing nearly ten percent in wild, nearly universal selling and, presumably, shorting.
After opening this morning near to the $500 per share level, the stock is still off as of noon today to the tune of -8 percent or so from yesterday’s official closing price—the one last-minute traders received before those after-hours shares were transformed into Apple sauce.
With its dynamic fearless leader, CEO and Chair Steve Jobs now tragically but permanently gone from the helm, Wall Streeters increasingly fear that Apple will stumble badly once again, just as it when Jobs’ first successor, former CEO John Scully, induced the company’s board to jettison its mercurial leader not long after the initially wobbly Macintosh computer platform was released to the market.
With all the technical and computer science skills you might expect from a former Coca-Cola (KO) exec, Scully and his business heads lost the Apple magic and commoditized the Mac while failing to modernize its OS in any substantial way. Scully’s successors continued in fail mode.
By the time Jobs was invited back, along with the NExT operating system that the company really wanted, Apple had virtually been written off and was clearly entering the kind of corporate death spiral now being experienced by J. C. Penney (JCP) and Sears (SHLD), both onetime department store giants that are likely to be consigned to Jurassic Park well before 2020 rolls around.
Jobs promptly did the right thing. Expected to be a token, he muscled his way back inside the corporate structure and radically transformed his old, dying company back into the innovative tech giant he’d always intended it to be.
But again, as we’ve said, Jobs is gone again, never to return. It’s clear also that his marketing brilliance—his legendary “reality distortion zone”—has also disappeared, at least for now.
His successor, Tim Cooke, is light-years more skillful than either Scully or his dimwitted successors could ever have hoped to be. Further, Jobs is said to have left Cooke with a product roadmap good for roughly five more years.
But Cooke’s predominant skill set is that of a supply chain wizard, a different kind of wizardry entirely than the kind that invents tasty, gumdrop computers and other devices with touchable, caress-able and loveable form factors individuals with no computing background whatsoever find disarmingly easy to use, at least most of the time.
It remains to be seen what kind of magic Cooke can work on the product front. Most analysts are finding his performance in this arena to be underwhelming, a judgment only confirmed by last night’s modestly underwhelming numbers.
But are analysts being unfair, reverting back to their old bad habit of writing Apple off no matter what the company does? That might be the case. While Apple’s rumored “iWatch” remains under wraps, that might be the best place for it currently.
Samsung’s early version of this product has not yet proven to be a must-have product by a long shot, so maybe Apple is biding its time. Or perhaps, the company has quietly decided to shelve the product, at least for now, perhaps remember what happened with its ten-year-premature and much-ridiculed Apple Newton handheld device.
More likely, something is happening—painfully slowly—on the other rumored product front, the so-called Apple “iTV.” Once again, that entire industry is tanking, profit-wise, anyway, with early 3-D TVs in total failure mode, with old CRT TVs now largely replaced, and with flat screen TVs in and of themselves largely commoditized, save for the high-end stuff, which will in turn become commoditized.
If Apple TV, however, is still on the drawing boards, it’s likely clear that the device will need to wrap a Macintosh computer and an iPad interface into a product that also includes a multi-tiered broadband modem along with a self-contained and programmable set top box capable of accessing and recording existing TV and entertainment program sources, streaming sources and, perhaps, original material generated by friendly Disney Studio and TV moguls at least for starters.
If such a product is at least on the drawing boards, one could expect that any product introduction delays have much more to do with hostility from networks, cable companies, broadband providers, modem producers, and set top box makers. All of them know full well they could see themselves obliterated by a product that contains all their features, and more—like home security and home appliance local and remote control. So it’s natural they’d do everything in their power to stall off the inevitable.
But if and when it comes, Apple’s iTV—currently a hybrid form of vaporware—could upend the entire entertainment industry much the way that iTunes and the iPhone flattened once dominant companies in their respective fields. So all this might account for Apple’s continuing hoarding of cash. It’ll take an awful lot of simoleans to crush several industries at once, and the cautious Cooke is clearly cognizant of that fact.
Of course, whatever plans Apple has or doesn’t have are now complicated by that crafty buccaneer, Carl Icahn. To the best of our knowledge, Icahn has never innovated anything except the lining of his own pockets with other people’s money, a magic act for which he’s become a renowned master magician.
Using bluster, threats, and trading tactics all meant to “enhance shareholder value” (especially his own), Icahn innovates with bullying moves that are meant to strip out cash from any given company he’s chosen to attack and move it to his own personal bank vault. In the case of Apple, he wants bigger dividends and more massive buybacks to enhance his own shareholder value, since, allegedly, he’s been steadily accumulating Apple stock in an attempt to gain some measure of influence over its board.
There’s no doubt in the Maven’s mind that Icahn was ultimately driven mad by contemplating the very existence of Apple’s monstrous but likely prudent cash hoard—always a tempting target for any corporate raider. Why would he not want to help himself to some of that mega-pile of Benjamins?
But Icahn has broken new ground in his Apple attack, using Twitter to instant message every one of his alleged moves. Yesterday, he tweeted that he’d acquired yet another $500 million of Apple shares. Hooray, Carl. How do you like the value of your new holdings this afternoon?
Likely, Icahn had already acquired the shares. There was no timeframe in his latest tweet, nor does he ever have to disclose when he allegedly purchased the shares.
But a predator like Icahn is no dope. Perhaps he acquired some of those shares late last week even as he began to sell calls or buy puts against his AAPL holdings after January options expiration. If so, his latest tweet was a call to all AAPL-loving retail holders to drive the stock up even as he was hedging his bets. The whole ongoing AAPL-Twitter game Icahn has been playing seems illegal to us, as it’s clearly meant to manipulate the stock price in plain sight.
But then again, why would anyone in the SEC want to call Icahn on this practice? They might want a high-paying job from him when they decide to leave government service, one of the prime reasons why regulation of today’s markets is DOA where the little guy’s investments are involved.
In other words, there’s an awful lot going on under the hood of AAPL. The company’s not out of business. More innovation is coming. But, between industry and regulatory blockades and Carl Icahn’s Jolly Roger, Apple stock will remain smithereened until the rest of the story finally begins to see the light.
Disclaimer: The author does not currently own shares of AAPL.