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Comment by xpose2000 | Hacker News Reader

xpose2000

It feels like Apple is now on the defensive by announcing a buyback initiative and a higher dividend. They realized their growth peaked from insane highs and they have no new product to give it another boost in the short term. Very smart move.

However, I will say that they really need a killer new product by 2015, which is when their stock buyback initiative ends. Repurposing the iOS in various form factors such as the iPhone, iPod, and iPad has run its course.

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What do you mean by "they really need a killer new product"?

They're the most profitable company in the world. What pressure are they under?

> They're the most profitable company in the world. What pressure are they under?

The pressure is probably focused on remaining the most profitable company in the world.

I think he's predicting a Microsoft-like fate, where the indisputable de-facto of a market segment eventually stagnates and then is disrupted.

their profit is irrelevant. public companies are always under pressure to increase growth.

Immense pressure. I can think of no other company that has the amount of pressure of Apple to follow up their iPhone/iTouch/iPad cash cow.

I’d say that Motorola, HTC, Nokia, and Blackberry are under quite a lot of pressure to remain relevant. That means that new products need to be popular — otherwise, the companies will have to pivot, or face being bought for its (IP) parts.

Pressure 1) Their stock price has gone from a high of just over 700 to a recent low of just under 400. Stock is a form of compensation to employees. They don't need explosive growth but they must stop the bleeding to get their employees better compensation.

Pressure 2) They're seeing increased competition and they will not remain an dominant player if they don't continue to innovate.

The issue is that they don't have a big moat like Google, Facebook and Amazon do. Competitors are nipping at their heels(the big decline in margin from a year ago shows it) and one bad iteration of their products is enough to turn the tide against them.

Big moat? Apple has more money than any other company. Facebook is losing users in droves and every day there's a new article on HN on how to get Google out of your life. Of the companies you mentioned Amazon is the only one with bright prospects.

I would not use Facebook and Amazon when comparing margins and profit. Both of these two companies aren't even in the same universe right now with Apple. Google is the only company that can play with Apple and Microsoft.

Last time I checked, Amazon posted in Q4 of 2012 around $90M (Million) in net income while Facebook did about $60M in Q1 of 2013 compared to Apple's $9.5B (Billion!!) in net income.

What drive me absolutely crazy is the fact that it would take Amazon/Facebook well over a decade to even come close to what Apple makes in three months.

Moat? Itunes, OSX, Objective-C, App store, iCloud, even the brand. These are all moats of varying strengths.

Dividends and share buybacks are not defensive moves.

For Apple it is. “We acknowledge that our growth rate has slowed,” Tim Cook.

Because the market they created is now saturated, with Apple dominating the profits.

I agree. Correct me if I'm wrong, but aren't share buybacks exactly what you'd do if you believed your stock was undervalued?

Exactly. It's company-sponsored arbitrage.

If markets, according to company insiders, are not behaving rationally (AAPL P/E is amazingly 9.21, compared to ~15 for MSFT and ~24 for GOOG), then buying when you think it's cheap is a wise move.

Cliche at this point, but got to be said.

"The market can stay irrational longer than you can stay solvent." John Maynard Keynes, (attributed) English economist (1883 - 1946)

That's probably true if you don't have >$100B in the bank

…and generate tens of billions in free cash flow per year!

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