If you’re a publicly traded company on today’s Wall Street, you’re going to need to cater to an audience I somewhat disparagingly call “growth nerds.” These are investors that know the signs of a business that is on a better-than-linear revenue trajectory, and will throw their money at you if you can show them that. There’s nothing wrong with this, it’s just the nature of speculation.
There’s another audience on Wall Street, people an organizations that are looking for long-term, slow growth, or reliable dividends. I’ve heard this called “blue chip” or “value stocks”, and these tend to be big, established corporations. Tech companies today are in a unique place: there’s still a lot of growth and instability in companies like Twitter and Uber, but there’s also a lot of stable, value stocks like Oracle and Google. Where I’m going with this is the obsession with “peak iPhone.” Here’s John Gruber on the topic:
[G]iven that you can almost draw a straight line connecting the other four points in the chart, I’m not willing to call it a peak yet. But even if we see a return to growth, it might take several years before we see another Q2 with over 60 million units sold.
I’m a developer that works on Apple platforms and I don’t care if Apple grows in the sense of number of units sold or average selling price or any of those revenue-based growth metrics. If you want to bet on quarter over quarter growth, Android and the web are better for that, at least in part because of Apple’s average selling price. Apple doesn’t need to grow their phone business in my opinion, they need to keep their phones the best in the industry so that users of their products remain engaged. If you want a compelling reason to believe that Apple is a better value stock (and by corollary a safer technological bet) than Google in the long run, look at the metrics around user engagement and purchases within apps. (These metrics are a couple years old, if you find more up-to-date numbers please share them).
Overall, Google Play continues to post huge global download gains and command 60% higher than iOS App Store downloads in Q3 2014. […] In Q3 2014, iOS App Store’s revenue was around 60% higher than Google Play’s.
My point here is that Google’s incentives are better oriented to Wall Street’s growth nerds that’ll appreciate the quantifiable metrics of downloads and taps, and Apple’s strategy has historically been oriented towards capturing a professionals, particularly creatives, and increasingly enterprise clients. I think part of what makes the “peak iPhone” concern so loud
is that Apple has been attracting the growth-stock crowd since iPhone’s explosive success. And now that iPhone’s growth phase is at least slowing down, we’re going to see a change in message from Apple, and I think the cautious phrasing of this message from Tim Cook
Creating value for shareholders by developing great products and services that enrich people’s lives will always be our top priority and the key factor driving our investment and capital allocation decisions.
Namely, that the one “top” priority is creating value for shareholders by creating value for consumers. Of course, creating value for shareholders is often at odds with creating value for consumers in the short term. And while it’s somewhat cliche to say this, but I do get a sense of ethical upstandingness and authenticity from Tim Cook. Considering Apple and Wall Street’s increasingly divergent goals, I recommend considering Chuq Von Rospach‘s recent hypothesis:
Apple announced its dividend and stock buyback programs about 3 years ago. In that time, the number of shares outstanding for the company has dropped almost 15%. That’s a much bigger number than I expected to find.
And that got me thinking… What if Apple has decided to buy a company? But rather than go out and buy a company where integration with Apple’s technology and culture might create their own set of problems, what if Apple decided to buy itself back from Wall Street? What if Apple is planning to go private?
Highly speculative, which is exactly the type of behavior that got Apple here in the first place.