Are Apple's good days behind it?
The inquiry as to who will be the next CEO may not hold much value.
The data reveals a bleak picture for Apple's future.
There is a possibility that Apple comes up with the next industry revolutionizing product, however, it is more realistic to expect that the competition will beat Apple to it
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When can you know something special is coming to an end? Without touching the boundaries of philosophy, a self-evident rule can be stated: everything comes to an end, eventually. However, around the peak of all great rides, it does seem that the fun would never end. This is true for all stimuli that evoke euphoria, be that in the form of a feeling of amazement by, for example, the launch of the first iPhone, or the continually increasing share price of AAPL stock.
Nonetheless, to those that study profits for a living, there are clear symptoms of the end of the peak, and these are of the utmost importance in investing.
Tim Cook recently suggested that he is unlikely to be Apple's CEO, a decade from now, and surely, it must have had the most ambitious in the ranks of the organization's top management team (TMT), thinking about their next chess move, their 'bishop takes queen' move, if you will. But whoever ends up holding the reins of the, presently, $2+ Trillion behemoth, is he or she likely to be in charge of something. . . well. . that is worth what it once was? Or, put another way, is Apple likely to remain 'extraordinary' in the future?
Well, what would a cyclical analyst say? Or an Economic historian?
Examining the data and trends in Apple products' sales, one thing stands out clearly; while its annual revenue has been increasing, its YoY increase in revenue, and sale volumes, of its key products, has declined substantially.
We previously presented analysis regarding the iPhone and the smartphone industry (See: Are the Big Guys, Losing the Smartphone Market? 10 Years of Data Analyzed, The "Creative Destruction" Process, What Is It and What It Means for Tech Stocks: The Main Problem With the Big Smartphone Manufacturers Signals the End of an Era)
The key products of Apple have declining YoY sales trends . . . all key products have a declining YoY sales trend; of course, with a team of 'generalist type strategists,' the company surely is aware of the problem.
Most likely, Apple (as explained in: The "Creative Destruction" Process) knows that it cannot change the trends. Due to a number of factors discussed in the reports linked above, Apple cannot compete long-term with the emerging Chinese tech giants.
The only solution to this ailment for Apple is to tap into its creativity and ingenuity, to inject some more life into itself to prolong the inevitable decline. However, to believe that the next big technological innovation is going to come from Apple is, well . . . unsophisticated reasoning, one that discounts the inventiveness and the resourcefulness of the Chinese tech giants. In terms of the smartphone market, in summary, the writing is on the wall; Apple cannot beat the emerging Chinese tech companies. And further market penetration by Apple in the smartphone space is unlikely.
With the launch of the headphones, Apple is attempting to 'milk' its market, and, of course, we'll see this 'milking' till the bitter end; nonetheless, innovation, genuine innovation, we have not seen in the recent periods. Yes, there is talk of an Apple car, or a 'computational product related to cars', which could be classified as product development or market development, there are still questions regarding what or how successful this new product is likely to be, challenging competition like Tesla, for example, which has a more than a decade of a head start. Nevertheless, this condition does tell a story; the story is that Apple's inability to create the next version of the personal communication device; this roadblock leading to the Apple car project.
It might be argued that this is incorrect reasoning, and with the company's 'loose lips sink ships mentality,' they might be working on the next big thing, and we just might not know this. Well, besides the information mosaic and what it tells us, our analysis reveals that Apple has lost its engineering competitive advantage to the Chinese manufacturers. If we expect a personal-communication, industry revolutionizing product, like the first iPhone, in the next 3 years, it is more probable that it would come from a non-US-based company, even if it is first launched in the US.
So, amalgamating all the information in the above-linked reports, and the discussion presented in this report, what remarks can we give regarding Apple's next CEO? Balancing the probabilities, we can state with some degree of confidence that the next CEO of Apple is likely to be the one that inherits a quickly declining company.
One that is struggling to find its place amongst the emerging competition of the 'three-headed Chinese Dragon.' This is an inevitability stated by Schumpeter, an inevitability of the 'creative destruction process.' Therefore, the next CEO will, more likely, not inherit a Kincsem or a Seabiscuit in its prime, but an ailing ol' horse, which the new jockey would know, is no match for the competition.
Of course, we wouldn't like that; we all want the American Titan to persist in dominance and affirm its supremacy over the competition, especially the competition that does not act ethically regarding data privacy and protection.
The likelihood of that is . . . well . . . bleak. There shall always remain the possibility of a Rocky-like comeback by Apple; nonetheless, we aren't counting on it, considering the insights that the data reveals (see above-linked reports).
This is a topic that will have some degree of contention. For example, if someone postulated during the peak of Blackberry's reign that the end, or severe decline, is near, they would have faced the opposing pressures. Indeed, analysts that did were called negative pessimists. But we all saw what happened. Companies can seem to be at their peak, until they are not. Those that have the foresight and the ability to gauge the symptoms of a coming decline can find them in the data.
In conclusion, who the next CEO is, is a question that does not hold much value, in our view. The next CEO is very likely to see a sharp decline in all aspects of factors of value, with the possibility of being the last, or the second last CEO of Apple, as we know it today. Focusing on the personalities in the run to be the next CEO and conducting personality and background evaluations to understand the company's direction is an exercise in futility, in our view.
No one person is likely to present new strategic options to the board, out of their hat. Resources implemented to examine the weaknesses of the competition and how Apple might still hold some degree of competitive advantage in some areas in the future, would yield a higher return in understanding the future scenarios.