LONDON -- So you've all read the headlines, saying that Apple (AAPL +2.65%) has lost its bite. It can't do TV. It can't do mapping. It can't do without Jobs. Its head is lost in the iCloud. It's all out there and worse, as the world's biggest company enters its death spiral. I've read those articles, too. I enjoyed them. There's a little bit of schadenfreude in everybody. Bah, Apple sucks! Feel better now? Right. Good. Then let's be sensible here. Yes, Apple's latest results were a bit rotten by its pristine standards. But they're not the end of the world. They're certainly not the end of Apple.
I mean, what did you expect? Did you think Apple would keep growing forever? As analyst Tony Sacconaghi at Sanford Bernstein pointed out, if it had maintained its sales growth for another five years, its annual revenues would have equalled the GDP of Australia. It had already overtaken Sweden, with its population of 9.5 million. That rate of growth was barely credible. It wasn't healthy. The slowdown had to come, and now it has.
Newton's Apple
The news was expected, but still dominated the business headlines. Apple's profits have just fallen for the first time in a decade, plunging 18% to 6.3 billion pounds in the first three months of 2013, as gravity finally asserted itself. Yet in many respects, it continued to defy Newtonian laws, with sales rising 11.3% to 28.6 billion pounds. It also shifted 19.5 million iPads in the quarter, up from 11.8 million, while revenues rose 11% year on year to 28.5 billion pounds. Sales were up, margins down. The share price barely shifted on the day, yet at $406, it is 43% down on last September's peak of $700. Investors who bought at the height of Apple mania will be feeling crabby today, but it's tomorrow that counts.
Cook's books
If you're as rich as Apple, with its $137 billion cash mountain, you can buy your way out of trouble, and that's what it's done. It has promised to smear shareholders with an extra $55 billion over the next three years ($100 billion in total), mostly in the form of share repurchases. It also hiked the dividend 15% to $3.05 per share. Less impressively, in my eyes, it tried to thrill us by promising an as-yet-unnamed "exciting new product category" in the autumn. Could it be watches? Could it be TV? We'll have to wait and see. But that leaves plenty of scope for disappointment. With Jobs done, Apple will struggle to get its groove back. Chief executive Tim Cook is a solid supply chain specialist -- he's not a world-changing visionary. Just look what happened to the much-hyped Apple TV, or iPanel, as it may (or may not) be called. Um, nothing. The doubters are likely to be back in force when nearest rival Samsung releases its latest results, which are expected to show it winning the battle of the smartphones.
Core investment
The bad news is out there. You've read it, you've secretly enjoyed it (there is something satisfying about the way the wheel of fortune spins). But let's get serious here. Apple is a vast business. It throws off billions of dollars. More of that money is finding its way into shareholders' pockets, through buybacks and dividends. Yes, iPhone 5 was a squib, but there's always iPhone 6. And, yes, it may struggle to deliver that exciting new product category. But it is still the company to beat, while Samsung remains the cut-price upstart. The Chinese might think Apple is arrogant, but they can't get enough of its iPads. Despite the profits drop, Apple is shifting more iMacs, iPhones, and iPads than ever. Better still, you can buy it at nine times its (massive) earnings and pocket a 3% yield, with more to follow. This isn't the growth monster of yore, but an established company in the throes of transforming itself into an income machine. Maybe that's what the "i" stood for all along.
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