All Excuses Aside, Apple's Major Problem Is Tim Cook
All Excuses Aside, Apple's Major Problem Is Tim Cook
11/15/2015 @ 9:30AM
Yes, I have heard all the good guys (long only crowd)
make excuses for Apple’s terrible performance this year to date.
Yes, the market cap is too big. (It’s getting bigger for
the likes of Amazon, Google/Alphabet, Microsoft et al despite being “too” big
as well.) That argument holds no water given what other companies have done
this year and despite their own giant market caps. No market cap monitors
anywhere you look.
Yes, investors don’t understand Apple. (Maybe that’s one
of the issues with Apple and an Apple-specific issue.)
Yes, they have this, that and the other coming down the
pipeline. (So do other companies–no competitor is standing still.)
Yes, Tim Cook and Eddy Cue and Jony Ive said that this is
Apple’s year like they said last year was and the year before (all the while
selling tens of million in stock options, if not hundreds of millions).
Yes, wait until next year for an Apple TV set (now
forgotten).
Yes, wait until a few years for the iCar.
Yes, wait for China sales to kick in and then wait for
India to pick up (they are picking up already–China sales up 90% YoY and India
probably 2x that).
Foreign exchange is an issue–just wait till that headwind
turns into a tailwind. (FX is an issue for everyone and with the Fed on a rate
raising “jihad,” that FX problem/issue could worsen before getting better.)
Wait until Angela Ahrendts kicks in her magic.
(Seriously? She got paid almost $75 million just for her first year alone and
thus far, there has been nary a peep about what she has done in return for the
company since May 2014 when she joined Apple except for the fact that she has
been furiously selling her stock.)
Investors are mistakenly classifying Apple as a hardware
company. (Then it’s the job of Apple’s management to clear the mistake.)
Q3 results were very good. (They were very good only
given the amount of fear-mongering and negativity that went on ahead of the
results.)
No one will deny that this has been a rocky year with
very volatile markets, so I thought it would be a good idea to look at a few
companies best associated with Apple from a cutting edge of technology, market
cap and brand name awareness point of view, and compare price performance for
2015.
I thought we would take a look at various important price
points starting with price to start the year, price at the height of the China
scare aka “world is ending”, pre-Q3 earnings price, post-Q3 earnings price and
price as of last Friday’s (11/13/15) close.
Let’s start with Facebook, led by Mark Zuckerberg, CEO
and founder. The company began the year at $78/share, went down to $72/share in
our last crash in August, was trading at $104/share the day before Q3 earnings
were released, popped to $110 the next day and closed at $104 this past Friday.
(Market cap of Facebook is $294 billion.)
Let’s look at Microsoft with Satya Nadella as the head
honcho, aka “Mr. Softee No More,” next. The shares began the year at $47 per
share, fell to $40 per share in the August crash, were at $48 per share pre-Q3
earnings, shot up to $53/share the next day and closed on Friday at $53/share.
(Market cap is $422 billion.)
Next up is Google/Alphabet, led by Sundar Pichai/ Larry
Page/Sergey Brin as the top triumvirate, which began the year at $530 per
share, was available for $594 at the August crash lows, traded at $681/share
pre-Q3 earnings, popped to $719/share post the report and closed Friday at
$735/share. (Market cap of Alphabet is $509 billion.)
Take Amazon, led by CEO and founder, Jeff Bezos, which
began the year at $309/share, was buyable at $451/share in the August
melt-down, at $564/share pre-Q3 earnings, $599/share the day after and
$642/share this past Friday. (Amazon market cap is $301 billion.)
Then we have Apple, led by Tim Cook. Apple began the year
at $109/share, hit a low of $92/share in the August crash, was at $115/share
prior to Q3 (Apple FQ4) earnings, $119/share the day after and closed on Friday
at $112/share. Yes, I know we got those whopping dividends the last three
quarters. (Market cap is $626 billion.)
Heck let’s even compare Priceline led by Darren Huston
(who?), which has got absolutely hammered since its own Q3 earnings. The
company began the year at $1142/share, hit a low of $1151/share in the August
melt-down, made a huge run to $1450/share prior to Q3 earnings, hammered down
to $1311/share the next day and closed Friday at $1298/share. (Market cap is
$65 billion.)
The Nasdaq is the final one we will look at and began the
year at 4727, hit a low of 4506 in the August crash, and closed at 4928 on
Friday.
So what do Jeff Bezos, Mark Zuckerberg, Larry Page &
Sergey Brin have that Tim Cook does not? Let me count the ways for you:
All the guys are absolute tech geniuses, including Tim
Cook, but with one exception: Tim Cook is not a Wall Street-friendly CEO and
does not and cannot impress Wall Street. Jeff Bezos is a master at convincing
Wall Street that his “build it and they will come” is the way to go and
analysts and shareholders have been absolutely lapping it up. Even Zuck, young
as he is, is able to convince shareholders and the Street of his “vision.” Of
course he has help from Sheryl Sandberg who is no shrinking violet either.
Finally, Google/Alphabet has Ruth Porat as the CFO who is someone who has
actually been a Wall Street CEO and thus knows exactly what will get
shareholders/Wall Street analysts tripping over themselves to buy/issue reports
with strong buys and buys with higher and higher price targets.
The others under-promise and over-deliver aka UPOD while
thus far Tim Cook has done the opposite-OPUD.
The others have made brilliant hires in the last year or
so while Tim Cook has hired Angela Ahrendts (see above) who has certainly been
very, very busy-selling her stock. Google got Ruth Porat and recently promoted
Sundar Pichai. Microsoft appointed Satya Nadella as the head honcho after
stumbling and bumbling through the Steve Ballmer “hoot and holler” years. All
these hires are seen as very shareholder- and Wall Street-friendly and that is
what Tim Cook has been unable/unwilling to do. Of course, Tim Cook did give us
Angela Ahrendts lest we forget.
Of the above, Google/Alphabet, Facebook and Amazon still
have active founders while Apple, Microsoft and Priceline do not–and the
results are there for all to see. Of course, Steve Jobs’ pre-mature passing was
a blow to not just Apple but to fans of technology globally and certainly no fault
of Tim Cook. However, an employee of a company (like Tim Cook, Darren Huston et
al) just cannot be as passionate about repaying the faith shareholders are
showing the company (by being shareholders the first place) as a founder will
be. Especially not “ employees” that are being paid hundreds of millions of
dollars to run a company and that compensation is not 100% tied to share
performance. My take is if they make shareholders money the top managers make
money. If not, then not/naught for them as well.
All the above companies have had issues with a stronger
greenback, China slowdown (heck, Facebook and Google don’t even operate
directly in China) if there is one, a schizophrenic stock market here at home
thanks to our Federal Reserve crusade, but have still managed to perform very
well to say the least.
Look, Tim Cook might be an absolute Mahatma Gandhi of a
human being but he does not seem to be the right person to lead the biggest and
one of the most technological savvy companies in the world.
Can you imagine where Apple would be were it not for the
biggest share buyback in corporate history?
I shudder to think.
So, until things change at Apple or Tim Cook changes or
shows us something meaningful or maybe makes a meaningful Wall Street-savvy
hire, share performance of the biggest and probably one of the top global
brands in the world more than likely could/will continue to underperform.
Meanwhile Tim Cook and company will continue cashing in their tens of millions
and hundreds of million worth of options that get vested and we shareholders
will continue to stand by and watch passively.
Well, yours truly has chosen not to stand by nor watch
passively.
Until the next article, “may the trade always be in your
favor.”
Comments
Post a Comment