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Apple Inc. (AAPL): You Really Thought It Would Keep Growing Forever?

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LONDON — So you’ve all read the headlines, saying that Apple Inc. (NASDAQ:AAPL) 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 Inc. (NASDAQ:AAPL) 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.

Apple Inc. (AAPL)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 Inc. (NASDAQ:AAPL)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.

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