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It's a wonder

My responses to questions from Juliette Garside of The Guardian newspaper:

Q: Will noise from Icahn distract the Cook from focussing on product?

A: Investors may think that they can influence management but they do so only when companies are in distress. It’s only then that shareholders can affect some change with their votes as they have a common purpose. The voice of investors carries little weight or distraction when a company is successful. At first glance it seems that Icahn thinks he can unlock value in Apple by getting management to accelerate share buybacks. That’s a modest goal and not one which needs to distract managers.

Q: What will do most for the share price – a buyback or a blockbuster new device?

A: Neither. What will do most for the share price is a change in the perception that Apple is not going to survive as a going concern. At this point of time, as at all other points of time in the past, no activity by Apple has been seen as sufficient for its survival. Apple has always been priced as a company that is in a perpetual state of free-fall. It’s a consequence of being dependent on breakthrough products for its survival. No matter how many breakthroughs it makes, the assumption is (and has always been) that there will never be another. When Apple was the Apple II company, its end was imminent because the Apple II had an easily foreseen demise. When Apple was a Mac company its end was imminent because the Mac was predictably going to decline. Repeat for iPod, iPhone and iPad. It’s a wonder that the company is worth anything at all.

  • davidovich

    Great summary. And some day, maybe some day, analysts will start to understand that Apple is simply not — or not simply — “a hardware company.”

  • Eric

    A perpetual state of free fall could be seen as a successful orbit. Maybe that is what Apple is attempting?

  • flowney

    The gambler’s fallacy is a powerfully explanatory concept in this context. According to researchers studying human behavior, even trained professional statisticians sometimes fall for it. Perhaps there is something inherent in human nature that makes us suckers for this fallacy.
    That said, a sizable proportion of this doom-saying is instead attributable to conflicted interests. Take a look at the client lists of commentators. Apple will not be on most of them. Hence, the commentator has a vested interest in dissing Apple and promoting, even indirectly, their clients.
    Of course all this assumes that the audience (that’s us) is eager to have someone (anyone) do their thinking for them. Results in the marketplace seem to contradict the efficacy of this prejudiced jawboning and the gullibility of the audience.
    Yet, someone continues to grease the palms of these pundits. Who’s the real fool here?