The Apple-Beats Disaster

The deal makes no sense, and casts a pall on Tim Cook's leadership.

May 29, 2014 at 4:00PM


This story originally written by Pascal-Emmanuel Gobry at CITEworld. Sign up for our free newsletter here.

As countless observers of the business world have noted, the world's great companies all seem to decline after their founder or early leader leaves. Sony has been listless since its iconic founder Akio Morita left in 1994. Since Bill Gates left his day-to-day role at Microsoft, the company's stock price has been flat and it has lost its edge. GM has been on a secular decline since it has lost its legendary CEO Alfred P. Sloan. The examples are countless.

Whenever the iconic leader leaves, the same story is trotted out: The founder has left such a mark on the company's culture that that culture will continue to carry it toward excellence. The next CEO, often a company man, along with the founder's excellent handpicked leadership team, who know the founder's values, will carry them on, and the company's success will continue.

The story always seems to repeat.

In the case of Apple (NASDAQ:AAPL) and Tim Cook, everyone wanted to believe it would be different this time. It's easy to love Apple, with its amazing products and its astonishing business success. And because of Steve Jobs' untimely departure, we all felt robbed of many years of astonishing products.

So we told ourselves the reassuring story about Apple's future. It still has its design visionary Jony Ive. Apple has a famously long product pipeline, so many Jobs-stamped products are to come. Apple's values of focus on a handful of product and design excellence are too deeply ingrained to go away. Steve Jobs seemed to break every rule and win by doing it, and if anybody could do that even from the grave, it would be him.

Apple is "is a fractal design," wrote über-Apple blogger and fan John Gruber after Jobs' resignation as CEO. "The company itself is Apple-like. The same thought, care, and painstaking attention to detail that Steve Jobs brought to questions like 'How should a computer work?', 'How should a phone work?', 'How should we buy music and apps in the digital age?' He also brought to the most important question: 'How should a company that creates such things function?' Jobs's greatest creation isn't any Apple product. It is Apple itself."

It's time to stop kidding ourselves.

For all his outstanding talent and his great personal likability, Tim Cook has revealed himself as what we knew him to be in our heart of hearts all along: A suit MBA. He is the Steve Ballmer to Jobs's Bill Gates, and the consequences, in terms of the company's inventiveness and long-term future, will be the same for Apple.

The reason we now know this to be indisputably true is because Apple just spent $3 billion to buy the Beats headphones company, a deal that makes no sense whatsoever.

Sorry. I won't even give you the Devil's advocate. I won't even give you the "to-be-sures." This deal stinks, but more importantly it reveals that Apple as we've known and loved it is gone, forever.

Let's start with technology. This should be quick, because Beats doesn't have any. By the unanimous standard of everyone who knows about such things, its headphones are good-ish. They're not bad, but there's nothing "revolutionary" about them (unlike the Parrot Zik, an excellent product that it really would have made sense for Apple to buy, for much cheaper). Exactly the same can be said about its streaming service. It's good. It's also not insanely great compared to any other music streaming service, including anything Apple could build in-house. 

I don't have anything against Beats: It's a phenomenal business success, it's a great branding story, they cracked open an excellent opportunity. I would be very proud to be involved with that company.

It just makes no sense whatsoever for Apple to buy it.

Beats is a branding success: It has found a way to make its brand very appealing to teenagers. That's a very hard thing to accomplish, and it is highly respectable. But Beats's most valuable asset isn't its technology, or its people, or its product -- it is its brand.

Apple already has a brand. It's the best brand in the Universe, built over painstaking decades by the greatest marketing genius in living memory. It makes absolutely no sense for Apple to own another brand. And if Apple plans on retiring the Beats brand, it makes absolutely no sense to buy Beats and then destroy its only valuable asset.

It just makes no sense.

It's the most un-Apple-like thing Apple has done since... since... since the last time it was run by a man not named Steve Jobs.

The times, they are a-changin'.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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