AMITIAE - Sunday 27 January 2013

Why would Wall Street want Apple as a Broken Company (1): The Chicken in the Barrel

apple and chopsticks


By Graham K. Rogers


Apple is not a broken company: far from it; although reading reports in some sources, one could be forgiven for thinking that Cupertino was about to put up the shutters. There are some who think that it is Wall Street that is broken and their short term gains are more important than long-term company health. There may be another answer: that Wall Street, aided and abetted by its pimps in the press, know exactly what they are doing and the target is to force the share price down to such a level that corporate raiders can take over and split Apple up.

Apple has been in the news a lot in the last few days with the aftermath of its quarterly financial report when once again, the shares took a beating, dropping some 12% (although by Sunday news appeared that there was also a deliberate dump of 800,000 shares in the last second of trading). To some this was not a surprise, although to Apple follower like me this is a disappointment. Apple was constructed to last as a company by its former CEO, Steve Jobs, but the chickens in the barrel are doing their best to destroy it.

Let me explain that "chicken in the barrel" metaphor. When I studied in the USA in the mid-1980s, one of my friends was an intelligent (and feisty) black from Chicago. Marcus was a little older than me and I had much respect for some of his views. He was critical of some white attitudes, but also of attitudes of some blacks, who (he suggested) reacted like chickens in a barrel to other blacks who sought to improve their lot: as soon as they get near the top, the other chickens pull them down. I have been able to apply the idea to many other situations since that time.

In the 1990s, Apple was a broken company. Its former CEO, Steve Jobs was in the wilderness with a couple of companies in his back pocket that were great on technical skills, but needed a big break. Pixar had that with Toy Story, NeXt was taken over by Apple, whose CEO Gil Amelio was thought to be ready to sell off the company and give the money back to the shareholders (Apple watchers will understand that reference).

However, like Churchill returning to the Admiralty ("Winnie's back"), Jobs rejuvenated Apple: instead of CEOs looking to maximise profit, Jobs focussed on the product. With the team he created, a new series of Macintosh computers appeared that were both stylistically and technically innovative. Behind the scenes work was being done on turning the NeXt operating system into OS X, one of the main reasons for the takeover of Jobs' company. Apple had run out of steam.

The next few years saw continuing product innovation with the iPod, the materials that the Macs were made of, and the development of OS X plus related software. Then in January 2007 the iPhone was announced. I am proud to say I was there and still have the notebook in which I took down all the information.

Not all who were there were able to grasp the significance of the iPhone: the touchscreen iPod was well received; the reaction to the mobile phone was ecstatic; but the breakthrough Internet communication device received muted response, although this was the key to the success of the iPhone and subsequently the iPad as the apps were developed.

Some in the computer industry were dismissive, most notably Steve Ballmer of Microsoft, and the CEO of Nokia. Others also tried to ignore the iPhone and in the lead up to the release to customers, some in the press - few of whom had actually seen or handled the device - were mealy mouthed about what the iPhone was and what it would do: bad news spreads faster than good.

Nonetheless, sales of the device took off and (for the moment at least) most critics were silenced although there are always one or two who can always find something negative to say about Apple. The share prices rose, new products arrived and as these did, so some of the processes for manufacturing were improved. It is these innovations that are often missed by the mainstream commentators and the sycophantic bloggers who hang on every word (and often copy them too).

My Apple handler the week of the iPhone announcement was delighted that the Apple shares he bought went past the $200 barrier. With the new products and the track Apple was on share prices reached their highest range in 2011 and 2012. Some analysts were predicting highs of $1,000 or more. But by this time, the chickens had had enough.

A series of negative reports began to appear, beginning with the New York Times supposed exposé of worker problems in China, that had been revealed some months before in Wired and were given a new life by the untrue stories from Mike Daisey who claimed that the same standards do not apply to performance and Art: I guess in the way that a photograph can not be compared to a Picasso, that may be true, but not when the New York Times bases parts of its investigation on your lies.

iPhone4s When the iPhone 4S was launched, many reports were negative, dismissing the device as a made-over iPhone 4 and missing some of the real changes below the surface, like the A5 processor (itself a prediction of Apple's own chip design and manufacturing intentions), the 8MP camera and its new lens, 1080HD video, a 64 GB version, Retina display; along with this the new iOS version provided some significant changes to the way the iPhone worked and included the beta Siri.

This was just not enough for many; and with the death of Steve Jobs the day after the announcement of the iPhone 4S, more and more negatives began to appear. It did not matter what Apple did: for some everything was broken but a number of themes began to appear. The main ones followed the ideas that, Tim Cook was the wrong man for CEO; Scott Forestall or Jony Ive should be Chairman; Apple has lost its way; Apple has stopped innovating; and Apple has stopped growing.

There are others, but these (or adaptations) seem to be the main points that Wall Street, certain analysts and the bloggers out for a few quick hits, focus on.

In Part Two, I analyse the specific points and include a number of comment of my own.

In Part Three, I speculate as to some reasons why Wall Street might put Apple under attack

Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs.



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