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Watchers Wonder if Apple Has Lost Its Magic

Watchers Wonder if Apple Has Lost Its Magic

By Agence France-Presse | Updated: 28 April 2016 14:43 IST

Is Apple facing a rare, simple pause in growth in a tough global economy or has it lost its magic for dreaming up must-have new gadgets like the iPhone?

The question was front-of-mind Wednesday on Wall Street, where shares in the California-based company fell more than six percent to $97.82 by the official close of trading on the Nasdaq exchange.

The drop erased the equivalent of $40 billion (roughly Rs. 2,65,856 crores) in market capitalization and came after Apple Tuesday reported its first year-over-year quarterly revenue drop in 13 years.

Apple also forecast that the current quarter would be difficult.

Revenue was down during the first three months of this year due to the first drop in iPhone sales since the release of the world-changing handsets in 2007.

Sales of iPhones have been the engine for Apple earnings for a while.

(Also see: Apple Upbeat on iPhone SE Demand but Some Asian Retailers, Suppliers Less Cheery)

Cruising on a flagship?
FBN Securities said in a note to analysts that it was "concerned" that since taking over as chief executive in 2011, Tim Cook has not delivered "any real transformative products."

An Apple Watch that made its debut last year was seen as the company's first foray into a new product category under Cook. Apple has not revealed sales figures for its smartwatch, but Cook said on an earnings call that they "met expectations" during the quarter.

(Also see: As iPhone Sales Slump, Apple Bets on Services From Apps to Music)

Given the absence of official sales figures, observers are left to speculate how Apple Watch is doing in the market. The fact that Apple Watch synchs to iPhones has raised doubts it could be a stand-alone hit instead of an accessory.

Apple Pay, the service that lets iPhones act as digital wallets, is viewed through a similarly dependent lens.

Apple has long been a ripe target for rumors, with recent speculation including talk that the company is working on self-driving cars and virtual reality.

"The car entry would be years away and it would not at all be clear if Apple would succeed - especially considering Tesla's recent success with its Model 3," FBN said in its note.

Tesla has been swamped with orders even though release of the car is a year away.

Seeking a new Steve Jobs
"The pace of innovation has completely slowed down at Apple," said Global Equities analyst Trip Chowdhry.

"The projects that Tim Cook is talking about are taking so much time... by the time they are ready they are already obsolete."

Chowdhry depicted Apple as a company that was in fine shape except for a bedeviling lack of vision and passion at the top, pointing a finger at Cook, chief financial officer Luca Maestri, and senior vice president of retail and online stores Angela Ahrendts.

"Get rid of these three people, and Apple will come back to its past glory," the analyst said.

Apple has thus far delivered on the vision of Steve Jobs, and a new visionary who is at least as passionate as the iconic figure is needed to fix the company, Chowdhry reasoned. He recommended former Apple executive Jon Rubinstein for the job.

Former Apple manager Guy Kawasaki, who helped launch the Macintosh computer in the 1980s said in a CNBC television interview that the company needs to get back to making products people "lust" for.

(Also see: Something Is Rotten in the State of Apple)

Kawasaki gave the example of iPhones that boast improvements from prior generations but don't stand apart from predecessors in big ways.

"We need a product that leaps to the next curve," Kawasaki said.

"I don't think that is simply making the iPhone smaller or the iPad bigger."

He said that Jobs and his famous "reality distortion field" could dazzle people with product upgrades, but without him such modifications have not come across as revolutionary.

Meanwhile, many analysts have taken to counseling investors to be patient.

"Just wait until 2017, when comparisons will be easier," advised FBN, noting that earnings will then be up against those reported this year instead of a year in which a hot-selling iPhone 6 debuted.

The coming iPhone 7 could be a "game changer" according to RBC Capital Markets. Analysts also pointed out that with more than a billion Apple devices being used around the world, Apple is positioned to rake in money selling content, products and services to users.

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