Bob O'Donnell

About the Author Bob O'Donnell

Bob O’Donnell is the founder and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.

Apple Inc. (AAPL) Enters ‘Middle Age’

Most reports from yesterday’s Apple Inc. (NASDAQ:AAPL) product launch event said that the first topic of the day was Tim Cook’s comments on the still-evolving Apple-FBI case. In fact, the very first thing that Apple showed was a tongue-in-cheek video segment that celebrated 40 years of Apple in 40 seconds, all through the use of Apple “catchwords” shown briefly on the screen. The reason, of course, is because the company will be celebrating its 40th anniversary on April 1 of this year.

Though most people glossed over the video, as I started to reflect on the day’s news for Apple, it struck me that the tiny video snippet was rather a propos. Not only did it acknowledge a significant chronological passing of time, it also quickly summarized what the company has achieved during that time. In addition, however, it suggested something else that its creators may not have intended—Apple is starting to age and mature.

Now, as someone who squarely falls into the “middle age” segment, I’m not implying that it’s a bad thing, by any stretch. It’s definitely not. It is, however, reflective of a different stage in the company’s life. Remember that this is a company whose youthful beginnings back in 1976 involved selling a board-based computer called the Apple 1 for the nifty price of $666.66 and supposedly solving some of its early financing problems through the sale of a VW bus.

As it approaches 40, however, Apple finds itself the largest company in the world measured by market capitalization, and in the challenging position of battling the FBI and US Department of Justice in federal courts over the potential release of encrypted data for a terrorism-related case. If that’s not a middle-age type adult problem to deal with, I don’t know what is.

To their credit, the company has achieved a great deal in those 40 years. As CEO Tim Cook proudly touted at yesterday’s event, there are now over 1 billion Apple devices being actively used around the world. Pretty incredible when you think about it.

But there are signs that the company’s youthful vigor is starting to fade. Look at the product announcements yesterday and you start to see what I mean. Though the iPhone SE and new 9.7” iPad Pro seem to be very solid products and worthwhile additions to the company’s product lines, no one is going to confuse them for major innovations. Instead, they are cautiously planned out, specialized offerings that reflect the market’s need for more refined product segmentation. In other words, they were built out of a mature reflection and analysis of the market—exactly what you’d expect from an “adult” company.

In fact, you could even make the argument that Apple is starting to lose some of its innovative edge as it ages. While many argue that Apple has a long history of “perfecting” other people’s ideas—such as taking the concept of an MP3 player and evolving it into the iPod—as a multi-decade observer of the company, I have very solid memories of Apple as a truly innovative business and doing many things first. It used to be companies like Microsoft or Dell who were the late-comers and tried to refine ideas that others had. Now, however, it’s starting to feel more and more like Apple is becoming a me too in many markets.

That’s not to say Apple doesn’t make great products—1 billion active users pretty clearly testify to the point that they do. But why is it, for example, that it was Microsoft who first introduced a revolutionary new product like HoloLens instead of Apple? I have no doubt that Apple will create some kind of interesting product in the augmented reality/virtual reality space at some point, but the longer they wait, the more they will seem like followers instead of technology leaders.

It’s not just the products themselves that seem to be aging either. The manner of delivering the message seems to be getting tired as well. Yesterday’s event could have been scripted out by any even reasonably-interested Apple follower. Other than pricing, virtually every aspect of every product discussed had been reported on previously—there were essentially no surprises whatsoever. Apple did tell a compelling story about its efforts around using renewable energy and recycling its products that not everyone has heard about, but again, this seemed to reflect a more “mature” company.

This trend of Apple news pre-releases seems to be getting worse and worse. Despite the company’s efforts to reign this in, most of the announcement events over the last few years have had relatively little “new” news. In fact, it’s getting so bad, you almost have to wonder if Apple is going to be able to keep their product launches as the critical kind of news-driving events that they used to always be.

Part of the problem, of course, is that Apple has become a victim of their own success. As great as it to now have over 1 million apps specifically designed for the iPad, for example, or 1 billion active devices, the need for maintaining “legacy” support for those devices and ecosystems could soon become a burden instead of an asset.

Ultimately, I have no doubt that Apple will continue to build great product and services that reflect the company’s heritage of extreme user-friendliness. As the company enters “middle age,” however, it may want to ponder exactly how it can bring some freshness and vigor back into its products and the manner with which it tells its stories. Building off a string of greatest hits can work for a while, but all great artists eventually need to explore new ground if they want to evolve and improve. When they do, the best ones often create some of their greatest work.

Don’t be late to the party – Click Here to see what 52 Wall Street Analysts say about AAPL.

 

  • Henry_3_Dogg

    30 years ago Apple released the Mac SE.

    It was an updated version of the existing Mac / Mac Plus range to bring it up to date so that it fitted in with the capabilities of the Mac II better.

    Did you deduce that Apple was entering middle age then too?

  • Henry_3_Dogg

    “But why is it, for example, that it was Microsoft who first introduced a revolutionary new product like HoloLens instead of Apple?”

    HoloLens is a technology demonstrator, not a great product. Like Google Glass. Designed to wow a few people, but with little chance of success in the market place.

    For Google, Glass was just flamboyance. It is, after all, a company that exists to manage publicity.

    Microsoft, on the other hand, has been senile for years. Look at Windows Vista and Windows 8.

    HoloLens is a sad old man going for his last spin on an absurdly oversized motorbike.

  • Henry_3_Dogg

    “I have very solid memories of Apple as a truly innovative business and doing many things first.”

    You’re right and you’re wrong. Probably you’ve failed to check your dictionary to understand what innovative means. Innovation includes improvements to existing concepts.

    Apple took great ideas, the MP3 player, WIMP, the smartphone the tablet computer, and reinvented them into products so much better than had existed before, that they defined the category that people remember.

    But see how long a list you can come up with of Apple doing something completely new. They exist. But they’re not the things that Apple is famous for, and it’s doing more of them now, than it did in the past.

    HealthKit and CareKit for instance.

    But unlike HoloLens and Google Glass, HealthKit is already massively successful.

    And CareKit was launched quietly on Monday. Did you even notice?

    Or the colour temperature correcting screen to go with their colour temperature correcting flash. Did you notice that on Monday?

    • turbovega

      Anybody remember the Newton or the Lisa? Not smashing successes. I think there is a halo effect going on and people remember the successes and forget the failures. I like the stock because of the ecosystem, strength of the brand, the profit margins and the solid cash flow. The Apple watch may yet be a success too, but it may take several years to catch on. I don’t know if Titan will ever produce anything good or be the right thing to do, but Apple pursuing the automotive space with its expertise does not seem like a wrong move when the automakers themselves are moving their cars in the direction of being mobility platforms and seeking greater integration with IOT.

      • henry3dogg

        I’ve got 2 Newtons. A 130 and a 2000. They both still work. With a Nokia modem in a card slot and local Apple operated PoPs, they gave me worldwide mobile email in the mid to late 90s.

        The Apple watch is already a success. It’s the biggest selling smart watch and it makes a profit.

        Apple is the ideal company to disrupt the personal transportation market.

        Last week we had some fool demonstrating that Apple couldn’t do automotive because the capital costs were too high and because Tesla already had it sewn up. He couldn’t see the absurdity in this.

        • turbovega

          I totally agree with you and laugh whenever I see stories that say Apple’s best days are behind them.

  • Henry_3_Dogg

    “…the need for maintaining “legacy” support for those devices and ecosystems could soon become a burden instead of an asset”

    Legacy support is always a burden, but there are as many new Android device models released weekly, as the total number of supported iOS device models existing.

    That comment really is pushing FUDS to new levels of absurdity.

  • ralphpetrillo

    Apple has $ 225 billion in cash, a strong product line, and a 40% profit line on $ 215 billon in sales or a little over $ 80 billion a year in profit. They added Apple Pay which is a huge success, Apple TV is about to take off. Every time Apple goes sideways , so many negative articles come out on Apple. Almost to silly to talk about. If sales stay flat, they will add approximately $ 400 billion in cash flow over the next five years. They are purchasing shares back, pays a nice dividend. I see 195 within 12 months. That is conservative if the repatriation tax is lifted.