Memo to Apple: Stop Trying to Fix What Ain’t Broke
With all its money, why are things seemingly and increasingly so screwed up? Answers below.
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I always marvel at how Apple AAPL 0.00%↑ can have so much cash yet so many things seemingly somewhat suddenly don’t work right...
No, not the constant bugs every time they push a new iOS upgrade. (Though, every time – really?)
Or the fact that for the first time in nearly 20 years of owning an iPhone the screen on my latest, bought a year ago, scratched within the first few weeks of owning it. (I mean – really?)
Or even how for some reason, seemingly almost every time I receive a call on my AirPods, which are supposed to easily sync between all of my devices, I’m constantly saying, “hang on, hang on” until they connect. It’s the old, “They can put a man on the moon” but they can’t get AirPods to seamlessly and consistently connect when a call comes in. (Seriously, Apple – really?)
And I won’t even mention how the “S” key on my nearly new Magic Keyboard somehow chipped.
Don’t Get Me Wrong...
I like being in the Apple ecosystem. And I’m already so steeped in it, as my setup above shows, I’m not going anywhere.
Plus, my M3 MacBook Pro is the single best computer I’ve ever owned. Having no fan revving like the whole thing is ready for takeoff with dozens and dozens of windows open – before everything freezes – is worth the price of admission.
Beyond that, over the past year or two, in Apple’s quest to make things better, it feels like things have gotten worse.
Suddenly, thanks to Apple Intelligence – which I never asked for – I’m told which emails are top priority. (No - they’re not and even if they were, stop nagging! After trial and error I found the culprit and turned it off.)
Here’s the Thing...
As a non-techie regular user who wouldn’t know how to engineer himself out of a box, I genuinely like new technology – but only if it works. The more layers required to figure something out, the more... it has lost me.
That’s the irony... In the old days that was the beauty of Apple: It was simple, elegant and easy to use.
That’s why it was embraced by so many right-brained creatives, like me, because it didn’t take a left-brained engineering degree and an instruction manual to figure it out.
Now? With no compelling need to get a new iPhone every year, every other year or even every third year, thanks to technology being so good, it’s almost as if Siri can’t even answer its own questions...assuming it heard you the first time. Don’t even get me started on using Siri with my Apple Watch...
Back to the Original Question..
So, with all that money, why does it seem like things suddenly aren’t right?
The answer, as one friend who is short Apple explains...
Apple is spending most of its FCF and more on stock buybacks (last quarter almost $24 billion) and dividends ($4 billion). This is why net cash has been declining.
You can see it clearly in the chart below that shows cash vs. shares outstanding.
Of looking at it another and perhaps easier way, here’s the growth in R&D...
And this is before taking into account any further issues with China – either having its products being pushed out of China entirely and/or having to move its manufacturing out of China.
A Game of Chess
I recently laid out the risks of being pushed out of China here and here. As I pointed out, it appears that Apple is like a pawn in a bigger game of chess between the U.S. and China... with China making the moves that count most for Apple.
The second part has to do with the role China plays in manufacturing Apple’s products. Apple doesn’t quantify how much of its production is in China, but it’s believed to be the bulk of it, especially since China leads the list of nations Apple highlights in its 10-K...
Which gets us back to my friend and the question du jour: “Your question,” he asks, “is why given all the money, Apple cannot execute on new products? It is rarely about the money”…
…and everything about the execution.
Pleasing Wall Street, no doubt, has become a higher priority for Apple than pleasing customers. After all, if Apple put customers first, my AirPods would connect, my screen wouldn’t scratch and maybe, just maybe, they wouldn’t be constantly trying to fix – and in turn break – what ain’t broke.
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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I have no position in any stock mentioned in this report.
Feel free to contact me at herb@herbgreenberg.com.