The tension between Apple’s customers and shareholders

“Apple has been a phenomenally successful company over the past 15 years, releasing three new product lines which revolutionized the markets they entered and drove enormous growth and profits for the company,” Jan Dawson writes for Tech.pinions. “Shareholders have benefited enormously too, as revenues and share price have risen largely in tandem over that period. During the period from 2000-2012, Apple pleased two constituencies equally well: shareholders and customers. Producing compelling products pleased the customers who bought them in huge numbers and the growth those customers drove pleased shareholders too. “Especially as Apple introduced the iPhone, growth exploded, profits increased even faster, and shareholders made out like bandits.”

“But over the last two years we’ve seen a de-coupling of the previously closely aligned interests of customers and shareholders,” Dawson writes. “As growth has slowed, and the stock price has followed, Apple is faced with a critical decision: whether to start doing things that will make sense financially in the short term even if they’re not what’s best for its customers and for Apple’s long term success. So far, Apple has dealt with this situation exclusively through financial mechanics, with stock buy-backs, dividends and now a stock split. These actions have boosted the share price even in the absence of massive growth, major new product categories or other drivers in the core business. But unless it keeps increasing the size of buybacks and dividends, there’s only so much Apple can do to appease shareholders hungry for the kind of exceptional growth the iPhone drove.”

“Apple’s challenge over the coming months is to demonstrate what it’s doing to secure the long term performance of the company. That will start with WWDC in a couple of weeks and continue with the new product categories launched there and/or later in the year,” Dawson writes. “If Apple gets it right, the interests of shareholders and consumers should be brought back into balance, resolving the tension. If it doesn’t, the tension will just continue to increase and with it, the temptation to do something Apple shouldn’t.”

Much more in the full article – recommended – here.

MacDailyNews Take: And, if you’re both, as are many Apple shareholders, then you likely have quite the lovely internal conflict.

18 Comments

  1. I’m both. I have no internal conflict. Apple and AAPL have both be very, very good to me. My initial shares of AAPL will have a split-adjusted cost basis of less than $1/share in a few days, and all of my digital goodies are working just fine, thankyouverymuch.

  2. I agree. If Apple keeps making compelling products at a reasonable interval, everything will be fine. I’ll bet a pole of every individual share holder would reveal that a large number are very happy. Some big institutional share holders might not be, but they shouldn’t be as unhappy with Apple as they are with the analcysts and hedge fund managers that have done more to hurt AAPL than the management team or the BOD.

    1. Two kinds of Apple shareholders, investors and gamblers. The gamblers are unhappy, the investors seem just fine. Since Apple doesn’t need the capital markets to raise money anymore, it would seem happy customers are more vital to Apples long term prospects than a bunch of bitchy gamblers. They should take the aforementioned pole and sit on it.

  3. What apple should have done, and I think was Steve Jobs intent, was to keep amassing more and more money on hand, and hold out, steady as she goes, ignoring the prime morons on Wall Street, and let the stock eventually decline, whilst the company itself actually continues to grow, due it maintaining a pleasant relationship with its most loyal customer base – not those idiots who go after the “ooh, shiny” that buy android and sets with their largely useless bells and whistles. After the stock declines enough, they could then simply buy back it all back and delist, taking the company entirely private… Now, they are motivated to drive the stock price down through splits to gain the mom and pop investor, which are more likely to take a long term position, and have to cater to the increasing value. Oh well. I know all the professional investors who read this site will call me stupid and much worse, but it doesn’t matter now as it is now all academic. That course – if it was indeed job’s intent or not – is less likely now. I just hope that Apple can manage to at least continue to put their customers first enough to maintain their greatness.

    1. What you say is impossible as the investors elect the Board who hire the CEO

      i.e if Jobs did as you suggest i.e make the stock whither the shareholders via the Board will just remove him as CEO like the first time.

      1) It’s an illusion that Jobs wasn’t interested in shareholders. Although he didn’t do buybacks, dividends etc he said that thats because the shareholders are happy with the companies performance under his rule (which was true, you could double your money in a few years then with aapl)

      2) Also in Jobs time the company had a fraction of the giant 150 b plus cash stockpile it has now. Who knows what Jobs would have done seeing all that money.

  4. “But over the last two years we’ve seen a de-coupling of the previously closely aligned interests of customers and shareholders,”

    Nonsense. What we’ve seen over the last eighteen months or so is a decoupling of the value of AAPL from the reality of how Apple is performing.

    Apple is making money at an incredible rate, but the analysts have been trying to paint that as some sort of failure, desperately trying to find some sort of dark cloud to obscure the silver lining.

    There is no tension between Apple’s customers and shareholders. Apple looks after them both very well and hasn’t changed it’s values or the way it operates. Apple takes a long term view, but Wall Street is so blinded by theoretical issues and short term trends that they completely miss what’s actually happening and how things are being put into place for a great future.

  5. I don’t see tension, or lack of “balance.” If you are only an Apple customer, you don’t care about things like AAPL dividends and stock buybacks. As an AAPL investor, I do care about those things. However, the part of Apple this is “creative” and “operational” is not directly affected by the part of Apple that handles the financial aspects running Apple.

  6. What a ridiculous commentary and mindset. It is so ludicrous to expect the kind of stock growth Apple has experienced on a continual ongoing basis. Apple makes great products and is a company in the business for the long term. Stockholders should understand and realize that Apple does what it does best in a long-term fashion. Look how long it took them to displace Microsoft and become the dominant power that they are. Leave them alone let them continue to create a quality brand and amazing products and profits will follow. The mindset of this commentary is based on sheer and utter greed at any cost with no vision or interest for the future at Apple and what they can do long-term. If an extended vision of a successful company does not benefit you personally, step back and think about people behind you like your children, their children and other family members who may benefit as opposed to getting rich for yourself overnight. Leave Apple alone and let them do what they do best which is the creation of amazing products which eventually pay immense dividends to shareholders.

  7. Apple is perhaps the most foresighted company in the realm of human efficiency that I have heard of. Maybe you could argue Ford for introducing “a car every one of my workers can afford to buy.’

    Steve Jobs laid out the concepts of widespread electronic equipment and software to be easily used by the populace to allow communication of all types, way back in the 80s as seen in some of the visionary tapes from the 80s as seen mostly after his death.

    Steve then achieved what he sought and laid down the Apple University for carrying on the method to achieve beyond what they had already done at Apple.

    Apple is hardly done with innovating and we know that for a fact. Getting it right is NOT easy, witness MS and Samsung lately.

  8. As a shareholder and customer from way back in the day:

    Don’t spend a nickel on the washed up producer/thief (Iovine) and the washed up rapper/thief (Andre Romelle Young- aka Dr Dre) that sell crappy phones and a me too online music service. I’d rather see the money dumped into an incinerator and burned.

    There is no there there.

    1. I was thinking maybe all this $3.2B purchase talk was a ploy to get Samsung to rush in and steal it away from Apple for something like $12B to say they got “there” first. I’m still hoping…

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