Right off the bat I would like to apologize to Shakespeare purists for yet again twisting the Immortal Bards famous lines from Julius Caesar. But, as they say, if the shoe fits…
After the closing bell last night, Apple (AAPL) reported earnings for the March quarter that blew away all sell-side and the majority of investors’ pessimistic expectations. The company reported earnings that were $1.50 a share better and revenues that were almost $2 billion higher that Street estimates. In addition, the company boosted its buyback by $30 billion and increased its dividend by 8% to $3.29 a share. If that were not enough, AAPL decided to split its stock 7:1, leading to speculation that the shares might now be eligible for entry into the Dow.
Lots of others have detailed out the whats and whys of AAPL’s results, so I am going to move on to Tim Cook and his tenure as CEO so far.
Let’s begin with the following words from Tim Cook at the shareholder meeting on Feb. 14. “When we work on making our devices accessible by the blind,” Cook said, “I don’t consider the bloody ROI.” He said that the same thing about environmental issues, worker safety and other areas where Apple is a leader. “If you want me to do things only for ROI reasons, you should get out of this stock.”
While I am as green as they come, as a shareholder and a fiduciary to my limited partners, individually managed accounts and subscribers, I am paid to maximize returns. If Tim feels that we, as shareholders, should not be given an idea of what the ROI is on the company’s efforts to go green and/or work on projects that are to the benefit of the society in general, then maybe he should consider taking the company private and that way he will be free to spend on whatever his heart desires. I will be glad to tender my stock at a couple of thousand dollars/share to TC. As will a majority of shareholders, I am sure.
I am not saying AAPL should not spend money on making the world a better place, but what I am saying, maybe even demanding, it that as a shareholder it is my right to know what dollars go into what projects for the greater good. I realize that a lot of these projects do not have a direct ROI and I can live with that completely and happily. But what I object to is Cook’s arrogance at asking shareholders to get out of the stock if we don’t agree with him. That’s arrogance that he has not earned at all, nor does he have any right to use that sort of tone with any shareholder. Steve Jobs was also known to be arrogant, but he had earned that right by far. Tim Cook is no Steve Jobs.
I hope he is able to show he might be at some point in the future, but I’m not holding my breath. This brings me to my next beef with Cook, which is a total lack of innovation under his tenure. Yes, I know all about the product tweaks and enhancements, but we have nothing in the form of a totally new product category altogether. I am well aware of Steve Jobs’ obsession with putting out the best possible product and timing be damned. To an extent, I agree totally. But this lack of a new product category can come back to haunt the company and you and I as shareholders down the road.
Cook has fallen into the classic overpromise underdeliver (OPUD) mode ,as far as new products are concerned, when he should actually be going with the underpromise overdeliver (UPOD) model. He has been saying for over a year that the company is working on the next whiz-bang product. Where is it, Tim? We are more than a quarter into 2014 and while we were told that the year was filled with new product rollouts, where are they? (Just to be fair, this quarter’s financials were reported using the UPOD point of view.)
Yes, I am aware about the larger-screen? Is that something new? Don’t think so.
I am aware of phablets. Is that new? Nope.
Now on the flip side, Cook does manage to develop and release even one new product category then all will be forgiven this time around. If he does not, we should all be calling for a new CEO. Innovation is a huge factor in tech land and if you fall behind and fail to deliver, be it on an iWatch or iTv or iWhatever, it could be painful to all of us in the future. Furthermore, I am willing to give Cook a pass this time around because he did deliver in terms of increased buyback and increased dividend, which is a way to enhance shareholder return, despite the fact that it was not his sole decision. After all is said and done, the split is meaningless as we all know, although it might lead to increased mom and pop participation and an entry into the Dow, which the index funds will then have to buy.
So, in summation, while I am a huge fan of Apple as a company (call me an AAPL fan boy if you like), Cook has yet to win me over. Oh yes, let’s not forget that we, as shareholders, are paying him hundreds of millions of dollars of our money in compensation, making him the world’s highest paid CEO. So, if he tells us to stop being shareholders because we don’t happen to agree with him on certain matters, maybe we should tell him to stop being CEO of our company in return. Maybe Ms. Ahrendts is stepping in as head of global retail next week at an opportune time for her and for us shareholders as well.