While Tim Cook and the rest of the Apple board may be content for Apple to take its time in launching new product categories, investors may be less patient, warns BTIG analyst Walter Piecyk. He also argued that neither the Mac Pro nor a rumored larger-screen iPhone 6 would meet market expectations of innovation.
When we upgraded the stock in March, we assumed Apple could announce a new product that would generate $5 billion of revenue in Fiscal 2014. That new product never materialized. We can’t say we are not concerned. For example, when Apple announced the new Mac Pro at WWDC in June, Phil Schiller proudly boasted, “Can’t innovate, my ass”. If that is what the company considers to be innovative then there should be some concern for EPS growth.
In the investment note, Piecyk cautions that Tim Cook could face renewed investor scrutiny if he doesn’t deliver …
The company has set a high standard for itself in delivering products that change people’s lives. The bottom line is that if Apple can’t deliver products, Tim Cook may have to pay the price. This is a public company. The shareholders own the company and they want profit growth. Making great products is a noble goal but if it doesn’t grow the business despite the massive market opportunity that exists that would be a larger strategy problem.
Piecyk appears happy with the direction Apple is rumored to be taking with new product categories – name-checking our own Mark Gurman in citing a sensor-focused iWatch as “a potentially mammoth opportunity” – his complaint focusing on the time it is taking to bring new products to market.
Piecyk also questions Apple’s strategy of focusing only on high-end products, suggesting that the company was leaving money on the table by not offering a cheaper phone, with the 5c clearly having missed the mark.
Management is free to make the choice to focus only on the high-end, but that strategy delivered no growth in net income for the past five quarters and it looks like it will be six based on the March guidance and seven and eight quarters in a row depending on when new products are launched.
The criticism illustrates in stark terms the difference between a company with a long-term vision, and investors focused on shorter-term gains. Apple has made no secret of its strategy, and the time it takes between major new product innovations – yes, even in Steve Jobs’ day – is there for anyone to see.
The iPod launched in 2001. It was six years before the launch of the iPhone in 2007. Three more years before the iPad in 2010. There has never been a time when Apple was inventing major new products on an annual basis.
I should stress that I’m not taking issue here with Piecyk. He is accurately and eloquently describing the mentality of the market; it’s that mentality I’m arguing against. It simply strikes me as perverse to invest in a company which has become massively successful by following a clear strategy of making very few products very well, and then to complain that it is not making more and cheaper products.
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The investor mentality sucks butt.
If we would leave innovations to investors, we would all still be using typewriters…
Heh, this is true
Yes, but we would use innovative typewriters with integrated reading lamps and backlit keyboards.
Tim Cook never promised a new product category in January of 2014 or in 2013 for that matter. He said there will be new products across 2014. Well 2014 just started. If Apple still hasn’t introduced something new 9 months from now then let’s talk. Otherwise these Wall Street analysts can f-k off as far as I’m concerned.
so true, especially the last part :)
Jepp, hopefully Apple focuses on product quality and not on time. It’s much better to have great product sometime later than having a useless one too early.
I bet Apple are absolutely bricking themselves about threats from investors.
With as much money as they have, investors still can’t get enough. Greed. Can anyone explain why they would need investors anymore?
Number of years between iPod and iPhone: 6 years.
Number of years between iPad and now: 4 years.
I would like to see what creative and useful things these analysts produce that benefit the world. Nothing – comes to mind quite readily.
Well, you can actually read in the article with what that Piecyk-monkey comes up with:
Piecyk also questions Apple’s strategy of focusing only on high-end products, suggesting that the company was leaving money on the table by not offering a cheaper phone, with the 5c clearly having missed the mark.
Innovation for Piecyk is a cheaper iPhone 5c. I think that says it all…
The main problem with the whole market environment is not the companies, but the analysts. If an analyst said a company expects to ship/sell 500 million widgets in a given quarter but the company only sells/ships 475 million widgets (which is more than the prior quarter) then the entire news media labels this as a “disappointment”. Stock in said company plummets based on non expert analysts’ predictions.
You just described to a ‘T’ why a stock buy back is a good idea for Apple. Less idiots hinging on the words of analysts who couldn’t predict accurately when the will take a dump.
“we assumed Apple could announce a new product that would generate $5 billion of revenue”
Firstly, you know what people say about assuming?
Secondly, why do investors seem to think any company can keep coming out with miraculous and innovate products every 5 minutes? Expectations are way too high and not at all realistic.
Like Steve Jobs said when he announced the iPhone, you’re lucky if you get to work on one such device in a lifetime (not one each year, quarter, month…)
These analysts need a reality check.
(Of course it’s possible they are just trying to manipulate stock prices)
I actually side with the analysts on this one. One thing that Steve Jobs had that Tim Cook didn’t was the ability to control the market. When iPod/iPhone/iPad came out, the market was reacting to Apple. Now, even if Apple released the smart watch tomorrow, you can no longer say the market is reacting to it as Samsung and Sony have already put one out, albeit they suck. Still, the only true company defining product is the much rumored apple tv but that’ll probably never come out.
I don’t mind the rate of innovation as I realize new product categories don’t materialize overnight, but Tim Cook’s aversion to analysts and shareholders alike is the reason why the stock continually tanks. Don’t blame analysts on this one. All this secrecy with Apple doesn’t play well when your results are not holding through. Time for them to change the strategy. Throw them a bone, get them something to be excited about. So far, Tim Cook has done nothing to show us we should trust him at the helm at Apple. Again, even if the iWatch comes out tomorrow, there’s no guarantee that it’ll turn the results over. Look at how badly Apple missed on the iPhone 5C.
Uh, how badly did they miss on the 5C? It doing badly is a MYTH. Try looking at the actual numbers. It sold remarkably well, as a matter of fact.
Hard to know myth or fact. what i do know is that supply chain strongly suggested Apple had to reshift focus on factories from creating iphone 5cs to iphone 5Ses. Additionally, rumors also suggest a problem with the China mobile deal was how Apple wanted China Mobile to carry a lot of iPhone 5Cs, which were not popular in China.
The very fact that Apple had shortages of 5S and had to later shift a factory making 5C to 5S tells me that Apple really screwed up. The longer consumers are without supply, the higher the chance of them of buying something else. Also, it wouldn’t have so much 5C in the channel inventory.
Being first means nothing. The iPhone wasn’t first.. wasn’t second or 3rd.. yet it changed the market from a form factor/abilities point of view.. Just because Samsung has a smart watch.. pfffff.. means nothing.
Agreed.
And there were music players before the iPod.
And tablets before the iPad.
First means nothing.
we can argue this until the cows come home, but if you ask an ordinary american, they would think iPods and iPads are the first of its kind. The difference is Samsung is a household name now. They have the power to change that.
And how exactly will Samsung change that? When their smartwatch has hardly been acquired in the millions upon millions we see during Apple launches? (new categories)..People are interested in a product that is RIGHT rather than FIRST…Apple has managed to bring out the right product at the right time not a rushed product early! I like the fact that Apple is taking its time to master a product before launching it..This is how they have always been and I would hate for them to change that for the sake of the market. Great time to be a consumer of apple technology, not so good time to be an AAPL shareholder unless you are in for the long haul.
Well clearly we can see a pattern here, Apple hints or analysts predict with some new product that Apple may be developing, while apple waits for this rumours to grow in larger proportions, Samsung and others rush in to drop a product in line with the rumours. While Apple analyses there products and come up with a better one from their side and succeed.
Why would an investor wanting FAST CASH NOW put their money in a long game player like Apple? Damn hucksters.
Sounds like a bunch of pencilnecks that need to STFU and let the company work. After all, the people who do run the company do so because they know how. In business there are two kinds of people: The competent and capable ones who work, and then there’s investors.
The mile high view from the real world is what that is.
What we need is for Apple to release an innovative and new Calm Down Juice just for these “investors”. The investors are not who Apple is making products for. The make products for the customers. It’s the customers who buy the products at a price that is profitable for Apple. That makes Apple a more valuable company, which produces the return on the investments. The moment Apple starts shipping new products just to make these idiot investors happy is when they will start to fail in a major way. I’m not worried that Apple has been slower to ship new products. I prefer instead that they release great products instead of “new” ones. If we get great and new in the same product, that’s awesome too!
buy Apple stock now while it’s low. these people will be eating their hats when Apple redefines another market.
Apple investors need to shut the hell up.
“…when Apple announced the new Mac Pro at WWDC in June, Phil Schiller proudly boasted, ‘Can’t innovate, my ass’. If that is what the company considers to be innovative then there should be some concern for EPS growth.”
What’s tragic is that the investor uses the words “innovative” and “earnings” interchangeably. Apple is rightly claiming that the Mac Pro is an innovative piece of hardware design. They never said that it would sell 20 million units per quarter and be the next mainstream hit.
The real strategic blunder would be trying to please myopic investors who think home runs need to come every 2 years. Apple has experienced exponential growth for the past 15 years by releasing disruptive, high-quality, high-end products when they’re ready. People dish out money BECAUSE Apple takes the time to put out great stuff – never because they are first to market.
“never because they are first to market.”
now that is arguable.
Perhaps (i’d like to see the argument), but consider Apple’s major product launches in recent history.
There were portable music plays before the iPod, the iPod was a refinement
There were smartphones before the iPhone, the iPhone was a refinement
There were tablet computers before the iPad, the iPad was a refinement
Those products that largely responsible for propelling Apple to the heights they are today, and none were first to market, they were just quite exceptional in their design and function compared the products that came before them. Going forward we’re looking at the same scenario with a potential smart watch and smart television, at least in the fact they Apple’s offerings will be not be the first to market. But if you uses history as an indication, the expectation is that Apple’s offerings will excel in their design.
Where do you even begin when trying to engage in a rational discussion with the creeps on Wall Street.
Apple posted the best quarter of their life yet the stock lost about $50 dollars. Apple made money but Wall Street punished the stock. Therein lies the disconnect between the money coming in from the retail side and the stock prices.
The stock market is a ponzi scheme. You can’t get out more than you put in. Let Bill Gates try unloading all his stock. He can’t. Remember, Wall Street doesn’t have a printing press.
So, why do you think Carl Ichan wants APPLE to borrow 150 billion. So he can have the stock price ‘LOCKED” so he can sell it off some at some inflated price.
Now here’s the kicker; so read carefully.
The stock price won’t fall. Bingo!!!!
By borrowing the money, the ponzi scheme is legitimized. That is, you can get out what you didn’t put in. But the down side to this is that Apple would be on the hook for 150 billion.
You think Carl would still be a stock holder? HELL NO! He’ll cash out and haul ***.
“Get bent, you worthless morons,” threatens Apple fan.
I too am frustrated Apple has not come out with more new products. However, I am not disappointed that Apple has not adopted many companies strategies to throw tons of half baked products at the market and see what happens. It’s nice to have fewer products with an emphasis on those products working properly.
A friend of mine bragged about how quickly his computer started up from being completely off. I told him my fifteen retina probably was just as quick but I had never timed it. I told him it wasn’t a concern since my computer never blue screens and needs a restart after crashing. It’s windows users who need to worry about that kind of thing and that’s why this measure of speed was so important to him. He said nothing!
With no better place to comment, I have to say that stock analysts have both poor hindsight and foresight. Apple had a monster year in 2010, going from a Dec 25, 2010 EPS of 6.43, to Dec 31, 2011 EPS of 13.87. One can choose to look at a two year EPS rise of 4.5%, or a three year rise of 125%, but the face remains that 51 million phones were sold in the last quarter. That is like saying that every person on England bought an iPhone last quarter. These are huge numbers. I own Apple stock, and took today’s drop to purchase more. Now saying this as both an user, and an owner, Apple please focus upon making the products you have rock solid. I do not care about new products. What I care about is making sure that no one is complaining about the products they have. Ensure developer relations are rock solid. Ensure iCloud “just works.” Develop a solution to the photo storage mess. Please continue to wow me with what I have, and as a user I shall keep buying. As an investor, Apple please buy a billion shares today. As a side note, today is a “show day” here in Myrtle Beach. Yes, with no snow. My 5yo is home, with an iPad in hand, asking for of all things, a “Car Wash Game.” Who knew, there indeed are iOS Car Wash games to please his fancy. I am spoiling my boy.
AAPL investors hopefully have a passion for quality electronic devices. Anyone who thinks the new Mac Pro isn’t innovative is a moron.
investors are usually people with lots of money, impatient to become even richer (aggressive investors).
Some others will want to invest their money somewhere safe so that they have investment security.
Insightful investors might be what you are describing…
The latter two categories may be the “good” investors in a company, because they’re more prone to listen to (or offer) good leadership.
WTF…..What do these people want?
I love investing but I can say without a doubt it’s better for 99% these companies to stay the course and not give into the pressures of wall st.
Hopefully Tim Cook is smart/wise enough to understand that.
Wasn’t there an article some time back about the Apple board also expression some concern about the “pace of innovation” or something along those lines? It may not just be Wall Street.
Personally, I think greedy mentalities like this are not in the best interests of quality product development because I think it de-emphasizes the due time and focus it takes to carefully research and develop a meaningful, polished product in favor of putting something out for the sake of padding some numbers on a spreadsheet.
The time is ripe… iWatch will certainly not be the next BIG thing. Maybe nobody can predict what’s next? Let’s hope at least ;)
If Analysts knew what are “mammoth” opportunities they’d be out doing it instead of playing armchair quarterback. Unless you’re bringing some really interesting tech to wearables the market is already becoming saturated with bland products.
Greedy / impatient investors are usually the worst influence in any company.
Apple has a reputation for releasing “things that work”. Maybe it’ll take them a year or two longer, but when they release something, that something will have been thoroughly thought out and not just another box on the shelf. That being true or not (I’d say true), they have BRANDED that image very well. For Gods sake, practically all other companies (try to) IMITATE them.
Mr Piecyk’s warning seems like a sideways attempt by impatient investors to force their hand on the situation.
If they want quicker release cycles, they can go invest in Samsung.
Being an engineer myself (product + software), and being faced with this situation *constantly*, I’d advise the investors to shut up and let the engineers do their work. They are equally aware that they must release new and updated products to stay profitable. And new and revolutionary products need good thinking behind them.
Wonder what people would say if investors would expect similar ground-breaking new product categories that change the way people use technology each year from other companies.
The Mac was born. 27 years passed before the introduction of the iPod. Then 6 years passed until iPhone. The iPad wasn’t half as revolutionary as the iPhone, but still had a huge impact on the market. Apple won’t release new product categories just to please some shareholders. They will whenever it makes sense to do so.
The market analysts, Piecyk and the “investor mentality” is a load of “you know what”! They have no idea how to run a world class company. I own quite a bit of Apple stock and I watch them achieve the goals they set out to achieve over and over again. It drives me nuts to watch the share price go down and down when they are making more and more money and beating record after record. In the mean time Google farts and their stock price goes through the roof. It’s crazy.
Just because other people think they can run Apple better than Apple doesn’t make them an expert. These analyst idiots have no idea how to run the most successful company on the planet but they want to criticize Apple and tell them what they should and shouldn’t be doing. Lets remember that Apple is the company Steve Jobs built and left in the hands of Tim Cook personally and they give fair and consistent guidance every quarter. Apple has not given us any reason to doubt them yet, so why start now?!? Let’s be cautiously optimistic until we have reason to believe otherwise.
I totally agree with Ben Lovejoy “It simply strikes me as perverse to invest in a company which has become massively successful by following a clear strategy of making very few products very well, and then to complain that it is not making more and cheaper products.”
http://9to5mac.com/2014/01/28/investors-wont-wait-forever-for-new-apple-product-categories-warns-analyst/#more-308120
Why can’t Cook just say ‘fuck you’ to these people? Then the stock plunges, then Apple can buy itself back. It’s not like investors are useful for the company.
I sent him a nice tweet… @WaltBTIG
Fair enough re long-term and short-term strategy and goals for the company. Question…How many years of no earnings growth to speak of coupled with only product refreshes are we allowed to question Apple’s long-term strategy then? Clearly more than two years since you still don’t question their long-term strategy.
With six years between iPod and iPhone, and three between iPhone and iPad, 4.5 would seem a reasonable average …
Apple isn’t necessarily in the business of making new, innovative products. They are in the business of innovating how people use and interact with the sucky products that others have developed and had only marginal success with. Nest another company in this same mold.
There were other smart phones before the iPhone, but they sucked. Everyone who makes a smartphone today owes the category’s success (and their own within that category) to Apple.
“Nest WAS another company in this same mold.”
Stock holders (traders) are as bad as a union. Unions bring companies down as do shareholders that think this way. If Apple gave in and ‘innovated’ at their pace Apple would be hurting. Apple knows what they are doing… So STFU.
The butthurt is strong in the replies to this article.
Piecyk and his kind; the same “experts” that lead the market to a meltdown; have never produced anything except for the mess people are still in; Apple have a game plan. Hope they stick to it. to hell Piecyk and his kind
People fail to realize how important stocks are to Apple. Apple is a public traded company, as such, they are beholden to their owners to make money. One thing analysts and fans of apple can agree on is apple’s biggest strenght is innovation. What they can’t agree on is a timeline. Stockholders don’t like to be kept in the dark and while apple has a track record of success, they DON’T have one under Tim Cook. They need reassurances. This isn’t out of the ordinary. If you go to your favorite restaurant everyday and they suddenly changed their chef, you’d be hardpressed to trust in the new chef to make good food.
Whats important here is stock prices matter a lot when it comes to retaining employees and financing. What you may not realize is we may have a situation that happened to Microsoft as in Tim Cook is our Steve Ballmer. Not a visionary, but a business man. Not an adept one at that since Tim Cook can’t seem to get the supply chain nor his company’s finances in tact.
If the stock market was a person it would have been committed to the psych ward long ago.
Icann is representative of the mentality that pervades the market. Instead of allowing Apple to use its cash for R&D and to pay good wages to the best talent, he wants to extract that cash to the stockholders who will not use the money for the benefit of Apple. This mentality is a major reason this country struggles to compete on the world stage.
This whole article is gold – well said!
p.s. The giant Apple store picture is from: http://www.apple.com/retail/stanford/
When Apple starts taking the advice of analysts, it’s time to sell the stock. This buffoon, Piecyk, clearly has no understanding of Apple or how it operates. Why did he think March was the magical date for that long-anticipated game-changer? And, exactly what does he think that amazing new product should be? The Mac Pro is a shining example of innovation, but apparently Piecyk wants it to sell 55 million units a quarter to be considered such. Tim Cook is steering a steady ship and would be wise to allow the geniuses at Apple do what they do best: Take their time creating wonderful products.
Old adage: Married in haste, repenting in leisure. It still holds true. Be patient Mr. Piecyk.