It’s been nearly two years since Steve Jobs died.
Since then, Apple has been challenged by Congress over controversial labor practices at its sprawling contract factories in China and dubious tax maneuvers designed to stash cash overseas. At home, Apple has waged an all-out proxy-war against arch-rival Google, which has developed the world’s leading smart phone operating system, called Android. Since the iPad was released in 2010, there have been few new major consumer product breakthroughs from Apple.
Meanwhile, South Korean tech giant Samsung has started to chip away at Apple’s dominance in the high-end smartphone market, thanks to its reliance on Google’s Android mobile operating system. Since last summer, Apple’s share price has declined by 30% as investors and consumers alike have waited for the company to introduce another breakthrough product. Consumers are wondering if the company’s ability to radically innovate died along with its longtime leader, the late, revered Steve Jobs.
One year ago, I asked if Apple was starting to lose its shine. I was beset by Apple fanboys who thought I was nuts. One later, Apple shares have fallen by 30%, wiping out billions in shareholder value. And we’re still waiting for Apple’s next breakthrough product. What if Apple, the greatest U.S. business success story of the past decade, has finally lost its mojo?
If Apple is a company in decline, well, we should all be so virile in our dotage. On Tuesday, the Cupertino, Calif.–based tech juggernaut reported that it sold a mind-boggling 31 million iPhones last quarter, handily beating Wall Street expectations. The strong iPhone results sent Apple shares up 5% in after-hours trading — and provided a strong demonstration of the company’s ongoing tech market mastery.
“Apple had a very solid quarter,” said Scott Kessler, head of technology research at S&P Capital IQ. That’s an understatement. The sheer volume of Apple’s business is staggering. “We are especially proud of our record June quarter iPhone sales of over 31 million and the strong growth in revenue from iTunes, Software and Services,” said Tim Cook, Apple’s CEO. The company also sold 14.6 million iPads, but that figure fell short of Wall Street expectations, in part because consumers are waiting for a new Apple tablet device to be announced.
“The iPhone number should provide some comfort to investors who were worried about smartphone demand. That’s one of the reasons the stock is up,” Shannon Cross of Cross Research told Reuters. Over the past three months, Apple earned profit of $6.9 billion on revenue of $35.3 billion. For the next quarter, Apple predicted revenue of $34 billion to $37 billion, somewhat below Wall Street’s average estimate of $37 billion, but generally within range.
On the post-earnings conference call with analysts, Apple executives didn’t provide many details about new products, in keeping with their custom. The tech world has been rife with speculation that Apple will release a new TV-connected device, or possibly a wearable computing gadget to compete with Google Glass, supposedly by the holiday season. Apple shareholders and consumers alike have been waiting to see what the Silicon Valley icon does next. “We are on track to have a very busy fall,” Apple CFO Peter Oppenheimer told Wall Street analysts.
In the meantime, Apple’s cheerleaders are playing a waiting game. “It’s not been a particularly pleasant couple of months,” says Kessler, whose firm has been bullish on Apple stock over the past year. Apple’s stock swoon has wiped out tens of billions of dollars in shareholder value. Kessler says Apple is changing from a high-growth company to a more mature “steady-Eddie” type firm. In one of the more reliable parts of the business, Apple generated $4 billion from its iTunes music and media system in the past quarter.
But high-growth or steady-Eddie, the undeniable fact remains that Apple is a monster of American business. The company sold approximately 40 million high-priced gadgets over the past three months. Think about that. Apple’s CEO Tim Cook, a cool operational wizard, has been streamlining the company’s business to ensure that iPhones and iPads don’t sit in warehouses waiting to be sold. Apple is sitting on nearly $150 billion in cash and short-term securities.
Earlier this year, Apple lost the title of world’s largest firm by market capitalization, a distinction that once again belongs to energy giant ExxonMobil. Pundits will probably continue to say Apple has lost its mojo because the company hasn’t released a new breakthrough device since Jobs died. But by Apple’s standards, losing your mojo means making $7 billion in profit on $35 billion in sales. In three months. Not bad.