Apple was known as a technology-engineering powerhouse under Steve Jobs.
Now it’s a financial-engineering prop house.
Since August 2011, when Tim Cook took over the reins of the company, Apple has not released a new product line.
Yes, there have been updates galore to Jobs’ products, but not one gizmo that we didn’t know we needed until it was unveiled.
Cook is the financial engineer who gets on the earnings call to announce enhanced stock buybacks and 7-for-1 stock splits. Talking to Wall Street was something Jobs always avoided.
And the indefatigable Apple always prided itself on never allowing itself to become old and gray like archrival Microsoft.
Well, Tim, look in the mirror: You are a dividend play for Carl Icahn, David Einhorn and other hedgies looking to unlock capital from your balance sheet.
Buying back stock isn’t the solution for what ails Apple, even if it is a good financial move.
Apple’s peers — Amazon, Google and Facebook — have been spending billions buying up companies that make drones and virtual-reality headsets and messaging apps.
And all have higher multiples than Apple.
Apple’s financial moves may very well be the best ones, temporarily at least.
But a technology company buying back its own stock is essentially buying back time it has lost by not being innovative enough.
Perhaps it’s being used as a tool to smooth out the fact that Apple’s growth has slowed as its new-product development has stalled.
Jobs would have rather run through hot coals than buy back stock or pay a dividend.
He wanted his stock to go up because his company made the best damn products we never “Imagined” we needed. (“Imagine” was a big Jobs tag line.)
Pretty much nobody imagined the current state of affairs at Apple’s Cupertino, Calif., campus.
The company was always run by engineers and geeks, and financial types had very little sway.
Fast forward: Although Apple has succumbed to pressure and bought back gobs of stock (it had to), it still has tons of cash.
Yet, for some reason, the company refuses to make any large-scale acquisitions to compensate for the fact that it’s clearly lagging in product development.
The financial engineering doesn’t stop at buybacks and stock splits.
Apple, which maintains a balance of more than $100 billion in cash on hand at all times, will also being paying Wall Street bankers.
Cook will be selling more debt to pay for his announced buyback because Apple prefers to keep its dollars offshore, safely tucked away in tax havens.
Today’s Apple feels much more corporate — like it’s run by bean-counter types in order to cover up a dead spot in its innovation cycle. (For instance, the “Think Different” company has completely missed the social media explosion.)
As Peter Oppenheimer, Apple’s CFO, prepares for retirement, he has stage-managed a loud ovation from Wall Street and has the company focused on financial-engineering its way to strong returns.
At the same time, Apple’s technological creativity has ground to a halt.
It needs to get its mojo back — or risk becoming an old technology company.