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When Will Tim Cook Apologize to Apple Shareholders?

Apple (NASDAQ: AAPL  )  recently came under attack in China, and responded with an apology.

While CEO Tim Cook's in mea culpa mode, do you think he can spare one more for his shareholders?

I get the importance of Cook himself addressing concerns about Apple's warranty and return policies in China. This is Apple's second-largest market. It's too important to ignore, especially at a time when cheaper Android smartphones and tablets are starting to gain favor.

However, if Cook is vowing that Apple will improve its customer service in China, shouldn't he also be addressing the many negative developments that have stung Apple as an investment?

  • Apple reports its fiscal second quarter results in three weeks. Each of the nearly four dozen analysts modeling the tech giant's financials see a drop in profitability. This would be Apple's first year-over-year decline in earnings per share since 2003.
  • Wall Street has been whittling down Apple's profit targets for months, but an unwelcome milestone was crossed late last week when the consensus estimate for all of fiscal 2013 fell below the $44.15 a share it rang up in fiscal 2012. You have to go back more than a decade to find the last time that Apple's earnings per share slipped over the course of an entire fiscal year.
  • Apple's stock has fallen in back-to-back quarters. You have to go back to the tail end of 2008 to find the last time that that happened, and we were in a global economic funk at the time. If Apple closes lower this quarter -- and it's already off to a bad start with yesterday's 3% decline -- it would be the first time that investors have seen that since early 2003.
  • Shares of Apple are still trading higher during the Cook era at Apple, but it's fallen short on the bottom line in half of those six reports, including two of the past three. The same consumer tech bellwether rarely disappointed during Steve Jobs' tenure.

It's too late to apologize
Some will argue that none of this is Apple's fault. Apple doesn't need to apologize, apologists will suggest. It's not Apple's fault that analysts aren't sticking closer to the company's guidance. Apple doesn't control the market's whims. Even Apple's fiscal shortcomings are more about what Google (NASDAQ: GOOGL  ) has done right with Android than anything that Apple has necessarily done wrong with iOS. It's no accident Google's share price has crossed over $800.

The game has changed, and there was little that Apple could've done to avoid its fate in having to sacrifice near-term margins for the sake of market share.

However, Cook's apology in China was about a failure to communicate the company's warranty practices in a market that accounts for 15% of Apple's sales. Hasn't Apple done a lousy job of communicating here, too?

Even under the threat of a proxy fight earlier this year, Apple couldn't justify why it doesn't beef up its yield to replace tiring growth investors with dividend-chasing income investors.

It has now been four months since Cook teased about TV as an area of "intense interest" at Apple -- and he did so on national television. Well? Google's holding contests to give away high-tech Glass and chatting about its fleet of self-driving cars. Where's Apple in the realm of wearable computing?

Apple has been quiet for too long. Secrecy ahead of a major rollout is understandable, but Apple no longer has the luxury of guarding its future as if it's Willy Wonka shielding his whimsical factory. Samsung's bar-raising Galaxy S4 hits the market in a few weeks, and the world wants to know why it should wait for Apple's smartphone response.

Apologizing and communicating more effectively in China were the right things to do. Now it's time to repatriate that attitude.

Got Apple? Get smart.
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (12) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 02, 2013, at 8:19 PM, Winnie2013 wrote:

    Samsung as in iCopy...

    Copied iPhone

    Copied iPad

    Copied mac air

    Copied Passbook app

    Copied iPad mini

    And coming soon....

    OS copied from both Apple and Android

    Good luck getting service done on a Samsung phone after a Flash Crash....and when the OS gets no more support from Google.

    Apple's growth from 32 billion to 160 billion from 2008/2012 is not sustainable. But just small growth and free cash flow that exceeds ANY company is worth more than a P/E of 10.

    Remember Amazon has little earnings but its P/E applied to Apple would translate to a stock price for Apple of $133,667 a share.

    Now there's something to write an article about.

  • Report this Comment On April 02, 2013, at 8:54 PM, garysund wrote:

    I think investors would be happy if apple at least raised the dividend. That would be a sign that things are doing OK. So much negative press and apple being silent does not make a apple investor at ease. Maybe the plan is to blow away everyone in three weeks with a super earnings reports. If that does not happen then as investors we had better prepare for another major drop in the stock price.

  • Report this Comment On April 02, 2013, at 9:21 PM, twolf2919 wrote:

    Apple has anything to apologize to investors to. Real investors have done just fine investing in Apple. It's only the traders have gotten "stung" by AAPL's recent decline.

    With respect to being less secretive with regards to upcoming products - and comparing it with Google promoting its Glass and self-driving vehicles, I can only shake my head at your naiveté: Google makes its money on SEARCH and can afford to flaunt its little gadget prototypes as it does not expect to profit from them. Apple makes all its profits on these little gadgets, so it cannot afford to pre-announce products and potentially lose the first-mover advantage (one of which is getting higher margin for your products, establishing an eco-system before competition can come to market, etc.)

  • Report this Comment On April 02, 2013, at 9:47 PM, bbrriilliiaanntt wrote:

    I am up many 100's of %…Thank You Tim!!!!

  • Report this Comment On April 02, 2013, at 10:27 PM, EquityBull wrote:

    Tim Cook should be fired, period. Look at how Elon Musk defended Tesla when a reporter slammed their product. He got right out in front of that loud and vocal. Jobs would be doing the same if people were attacking his company. Cook should be replaced with a communicative CEO like Musk.

    Cook does not realize that Wall Street bleeds to Main Street. The negativity will affect sales, growth, branding, perception, etc. he is too clueless to understand this. He belongs running the supply chain which as of recent, he has not been doing so good at that (iMac, ipad mini, iPhone 5 shortages during crucial Q4)

  • Report this Comment On April 02, 2013, at 10:48 PM, Morgana wrote:

    Excellent post, Winnie!

    Tim Cook should NOT follow everyone else in apologies NOR in defenses and, above all, NOT in products. People who do not trust Apple should not invest in apple. I started at $91 a share. Thank you, MF--Motley Fool. Thank you, Apple. Oh, and more thanks for the great products I am always using from Apple.

    Seems to me that Wall Street is angry because Apple does not play the Wall Street game. Tsk. Tsk.

  • Report this Comment On April 02, 2013, at 11:07 PM, thunderboltnova wrote:

    No need for Cook to apologize, Apple needs the 100 billion to stay alive. Sure he can say they're working on making innovative products like the I-TV...but that only buys him time and all Ponzi schemes eventually come to end.

  • Report this Comment On April 03, 2013, at 12:05 AM, Jon408 wrote:

    Ponzi scheme? Do you know what a Ponzi scheme actually is? Wikipedia is great; try it.

  • Report this Comment On April 03, 2013, at 2:37 AM, bobyk3 wrote:

    As long as Apple can release an upgraded iPhone and a lower cost iPhone, we are ok. It needs to be followed by a new thing - iTV or an iWatch.

  • Report this Comment On April 03, 2013, at 4:35 AM, singaporenick wrote:

    This is a very weak article and fails to understand Apple the company completely.They do not pander to the whims of analysts and nor should they.Their proftability continues to be excellent and just becasue analaysts with their own agenda or market bears try to talk the stock down,does not mean the company shouls take notice of these analaysts,or of naive articles like this

  • Report this Comment On April 04, 2013, at 11:09 PM, Firecook wrote:

    I tire of Tim Cooks little games about how he is thinking of returning value, or how he thinks tv is interesting, and then sadly ignores the shareholders as Rome burns. He has been in the ivory tower for to many years.

  • Report this Comment On April 05, 2013, at 7:04 AM, Firecook wrote:

    What Tim truly costs Apple. Whether you are a trader, or you are long this is what Tim costs you everyday, gone are the days of consumers waiting on products or data, Amazon is a great example consumers want speed and ease, it's no different with a company like Apple in regards to their products, consumers don't want to be teased about products nor do they want to wait, Google is another example they are constantly displaying the Google Glasses, they are not hiding their products for months or years, I think this worked up until a few years ago, but now that theory is dead, because while you tease consumers with your product someone else like Samsung will release theirs and leave you sitting there with your theory of teasing , the best example I know of teasing occurred when in 2008 there was a presidential candidate who was begged by his party to run, he teased the general public and his party for months, by the the time he jumped in the race it was to late, nobody cared about begging him to run anymore, his time was gone, he lost what every company and politician need, momentum, and as everyday goes by Tim costs Apple momentum, and that as we all know is very hard to get back.

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