Apple: The slaying of a tech hero

By Zachary Karabell
January 25, 2013

Apple’s quarterly results this week drew a flood of reactions – almost all negative. Given how well the company did under almost any absolute measure, this is odd, though, for Wall Street, not necessarily surprising.

But the arc of Apple’s rise and temporary fall tells a more troubling story about our current inability to maintain positive momentum about any aspect of our culture. We slay our heroes with casual abandon. Then we wring our hands about the absence of positive catalysts in our world today.

Apple’s stock, already in relative free fall from an all-time high of more than $700 a share, plunged nearly 12 percent on the news. The company has now lost 35 percent of its value in four months – which represents an astonishing $235 billion. This decline alone is larger than all but three companies in the S&P 500, and larger than the gross domestic product of more than 140 countries.

That equity collapse was echoed by deeply pessimistic analysis of the company in the financial and tech media. Jim Cramer of CNBC railed against the post-Steve Jobs management under chief executive officer Tim Cook for failing to communicate a compelling vision. Others were less kind, dismissing the company as having no pipeline, no vision and little growth. “I think this is a broken company,” said noted investor Jeffrey Gundlach.

Apple matters on multiple levels: it is still (barely) the world’s largest company by market cap; it has been cited as a beacon of American innovation, led by a rare visionary, Steve Jobs, who resurrected the company he’d founded in the decade before his death; its products have been more than just hardware devices – consumers view them as a talisman, defining identities and allowing people to manifest their personal and professional lives as they chose. In the past few years, its stock price has been a proxy for that enthusiasm.

So what happened? What’s most stunning about Apple’s stunning and sudden fall is that it is unfolding in the context of still stunning actual results. Not only has the company not ceased growing, it is expanding at an astonishing clip. Its revenue in the fourth quarter of 2012 was $54.5 billion compared to $46.33 billion a year ago – which is a rise of 18 percent. Eighteen percent in a world economy that is barely growing 3 percent. It sold 47 million iPhones in the quarter compared to 37 million a year ago, and 23 million iPads compared to 15 million a year ago.

Yes, Apple earnings were flat, and stock market mavens point ominously to declining margins and shrinking earnings as telltale signs of trouble. But that isn’t a sign of shrinking market share – which has been nearly fatal for former leaders such as Blackberry and Nokia. No, Apple increased its global share of smartphone sales in a market that is hardly robust – as Samsung, Apple’s main competitor revealed as well. And issues of tight margins and spending more money to produce and market the same products are hardly Apple-specific and often given a pass by investors for companies such as Amazon or LinkedIn.

Still, Apple is not just another story of the bizarre way that Wall Street can value a company. It is that, but it’s more as well. It seems like only yesterday that Apple was being hailed as the great company of our age, with its dying founder lionized in a best-selling biography as a genius not just of our time but of any time. It seems like only yesterday because it basically was only yesterday.

And before its recent image travails, Apple’s sharp ascent was equally stunning – written off as dead by the late 1990s, it emerged as the tech innovator par excellence by the mid-2000s, invested with every virtue. Now, it is regarded as a has-been, hocking commoditized phones that any Chinese manufacturer can produce and tablets that every company in the world seems to be making, led by a CEO whose expertise is rationalizing the supply-chain. Hardly the stuff of dreams.

It’s fair to say that Apple was never as transformative a social and technological force as myth would have it. And the slaying of heroes is hardly unique to our era. But the speed of lionizing and then annihilating is enough to take your breath away. It’s the cultural equivalent of creative destruction. But unlike the economic version, it’s hard to see where the creative element creeps in.

It is true that Apple functions in a ruthlessly competitive industry that is both fickle and short-term. Phones and tablets are ever-more essential but command about the same consumer loyalty as fashion: Cool one day, tired the next – even if you are a juggernaut like Apple.

Perhaps the market and the media are simply accelerating an inevitable process. You only get to be on top for a while, before the buzz and the business move elsewhere. In that sense, Apple is just an oversized corporate ingénue, with its brief moment fading and someone else soon to take its place, before the cycle begins again.

But the cultural message embedded in tearing Apple down is more pernicious than doing the same to a fading starlet. Beneath the furor, Apple continues to do its business exceedingly well and continues to give people what they need and want. For now, it is largely media and Wall Street that are writing Apple’s obituary – not customers.

The message may prove to be correct, or it may not, but the complete lack of perspective about how hard it is to create something of worth compared to how easy it is to tear something down does not send a constructive signal or engender the better angels of our nature.

Apple was always likely to decline from its heights. But not because it failed, simply because others succeeded. In the story of Apple, and how we tell it, we have a metaphor for the story of the United States in recent years: a tendency to see the end, and then hasten it. Apple’s success was an example of what the United States can do brilliantly. The recent reaction to it shows that we can also excel at self-immolation.

Better to nurture the former instincts. The other will lead nowhere, and fast.

PHOTO: A customer is helped by an Apple employee while looking over the iPad mini after the device went on sale at Apple’s retail store in Palo Alto, California November 2, 2012. REUTERS/Robert Galbraith

10 comments

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Apple overhyping overpriced trinkets is not a positive catalyst in our world today

Posted by dang1 | Report as abusive

“Apple continues to do its business exceedingly well and continues to give people what they need and want.”

What the doomsayers ignore is that it was only their own reading of the tea leaves that was “behind the curve” during Apple’s” unprecedented ascent. That is why they have proven overly eager to “jump ship” to avoid being “caught” doing the same thing on the way down.

But Apple is NOT on “the way down”. It is simply unable to maintain an unprecedented rate of financial growth. Well, duh? These people are shooting themselves in the foot, but they are also thus creating a unique opportunity for safe profit at a time this is exceeding rare.

Posted by OneOfTheSheep | Report as abusive

What’s happening with Apple’s stock is simply a correction in the way the more sophisticated investors perceive the company’s potential for growth. They’ve embraced a more realistic view.
This has little to do with the company’s actual performance, which is pretty good.
In other words, the question to be asked is not why the stock is going down, but what were people thinking when they bought it at unrealistic prices.

Posted by reality-again | Report as abusive

Just watch CNBC, they spend about 1/5 of time talking about Apple and mostly negative. I just don’t understand why they like to say Sammy is killing Apple? Sammy has more carriers (twice of Apple), and infrastructure in emerging market is extensive. According to Sammy’s latest numbers, their mobile revenues only grew 4% sequentially. This is mind boggling that they only grew so little during the holiday quarter. Yet media was pumping how Sammy is taking over Apple.

Apple’s problem is that they are pretty much saturated in high end market. They need to be more agile. One model change a year is not going to help. They can build 3 tier iPhone strategy, high-end, mid range, and low end (for non contract type market). Apple needs to excite geeks and pros by high end iPhones and offset the gross margin squeeze due to the low-end model. Sammy introduced 38 phones last year. If anything, Apple is being beat by Sammy’s agility.

Posted by boxerconan | Report as abusive

As often “Quoted” by the News Media ” If it BLEEDS, it Leads”
Yes Fame is fleeting and yes Apple has enjoyed it’s 15 minutes of Fame….

Now it’s Samsungs TURN to feel the Warmth/Glare of the spotlights !!!

Perhaps this is a Blessing for Apple so it can RE-FOCUS on innovating excellent products, bring it’s manufacturing back to the U.S.A. and someday re-ignite the publics/shareholders excitement.

Hey Apple!!!! Remember…. the CUSTOMER and attention to GREAT customer Service is # 1 on your TO DO list.

Posted by Pangaea7 | Report as abusive

Whatever the reasons for Wall Street’s downward reassessment of Apple, the foundation that Apple was built on has been neglected and has eroded beyond repair.

Apple succeeded mainly by the support of the graphic professionals & enterprises that it used to serve so well with solid workstations and reliable notebooks. This is what made Apple a big success.

Hand held devices, iPhones & iPads, are transient fads, toys, just like fashionable attires, with their in and out of fashion cycles. Great for quick profits, but unsustainable for the long run.

Around 2005 Apple’s workstations & notebooks quality & reliability began to fail, and Apple’s response to frustrated costumers was inadequate and arrogant. Apple was too bussy on their latest iToys.

Professionals had to struggle, and still do, to find the causes & solutions with faulty expensive Apple products without any help from Apple.

Former Apple die-hards have been quietly & quickly switching over to superior PC’s and for 1/4 the cost of overpriced and inferior Apple lemons.

Even if Apple was able to refocus and regain confidence in reliability and with competitive pricing, it has left too sour an experience to bring back its former loyal customers.

Posted by EthicsIntl | Report as abusive

I think all of this noise about Apple’s share value is just that; noise. They did not suddenly become this lurching, awkward copycat making less than good products because Steve Jobs died and the iPhone 5 doesn’t chop your carrots, have a built in helicopter rotor, and tie ties for you.

The assertion one of the commenters made about people switching to PCs is laughable. The PC environment is not stable enough to do what needs doing. Maybe in audio, I know a lot of people use things like Pro-Tools. Outside of audio, Mac still dominates. My best friend is a successful freelance designer/photographer and uses Mac with the Adobe suite because it’s far more stable on Mac than it ever was on his PC. The company I worked for recently bought their ad department graphic designer an iMac for the same reason and he’s produced great work on it. These are anecdotes, but then again, so are the absurd assertions that creative industries are fleeing Mac in droves.

It is true that the smartphone and tablet market is super volatile, but I think it’s a good thing for Apple to be involved in it. They are forced to be agile and innovative. Also, while it may be volatile, the so-called “iToy” market is not going anywhere. People who can’t afford full blown computers are using tablets and the like. When the day comes that tablet sized computers will be able to run advanced programs like Adobe and so on (it will come), Apple needs to be ready and be able to provide the same stable experience that’s made it popular among people who want to get creative things done.

This post coming from someone who went from PC to Linux and, after hating Apple for a while, started using a MacPro and will never go back to anything else.

Posted by ShiroiKarasu | Report as abusive

Computers and computer toys and even the things that these toys can do, do not account for the majority of our economy. Computers cannot build things and grow food and defend the country. At best they are tools and as such they are failures. Apples, PCs or whatever, they are junk. Now, most americans would never know this since they are not bright enough.

Posted by brotherkenny4 | Report as abusive

Steve Jobs was driven to make money, to make money no matter what, and he pursued this from the very first business deal he made, which was dishonest. Look around and note that millions of people think that having the latest Apple product is one of the most important aspects of their lives. This tomfoolery is a coup that Apple created. All of this excitement about Mr. Jobs is misplaced. Greed is not a virtue, even when it gets joined to a powerful intellect.

Posted by Cleveland2012 | Report as abusive

Look at Amazon. Just think about how it’s possible for a company to lose money over consecutive financial quarters and still be the darling of Wallstreet.

Now cast an eye toward Apple. They’re consistently making money. They have done so for the past five years and have done so with real, physically crafted products. They’ve been innovative for so long that any slight iteration on an existing product is considered a sign of a company that has lost its innovative spirit with the passing of its founder (has the trusty PC been as ridiculed over the years for its slight design terations or spec improvements? Nope. But neither have cars or planes or trains). Not to mention that the fact that the company has already upended the music business, mobile telecommunications business and kickstarted the post pc (they coined it) era with the iPhone and iPad. They’ve redifined what a mobile device is capable of leaving competitors scrambling and at least one doing its very best to emulate it from the ground up leading to much deserved lawsuits. All this from a company that has lost billions of share value because they “missed” some Wallstreet analysts imagined forecasts which they pulled out of their asses.

Wtf?

Posted by Reagyluke | Report as abusive