Fresh from his triumph in Washington D.C., Apple (AAPL) CEO Tim Cook took the stage yesterday at All Things D's D11 Conference and assured an increasingly skeptical world that his company hadn't lost its step creatively. "We have some incredible plans that we've been working on for a while," Cook said with a combination of mystery and evasion. "We have several more game-changers in us."
If those remarks sound familiar, it's not your imagination. Last year at D10, Cook answered much the same question by saying, "The juices are flowing, we have some incredible things coming out." At this point, Apple's vague promises are straining the credulity of even the company's most die-hard fans.
With Apple's vaunted iTunes ecosystem starting to show its age, David Garrity of GVA Research says shares of Apple aren't going anywhere until the company finds new end markets. Garrity tells Breakout Apple has plenty of opportunities to prove it can still innovate. "Obviously wearable computing is one, and there's also the logical extension in terms of Apple Television."
Ah yes, Apple Television. The iTV cube that Steve Jobs famously dismissed as a hobby in 2007 has largely been unchanged since. It's a box that users plug into their television sets to hook into iTunes. Not all the tweaks or software updates in the world can expand the modest potential of such a device. As Garrity notes, a full-blown television has been an obvious opportunity for years.
So why doesn't it exist? Cook says it's because Apple only releases products when they're done — not according to some preset schedule. "We think customers love surprises," Cook hopefully added.
Little kids love surprises. Grown-ups prefer to buy products available in the foreseeable future. As it stands, Apple spends a lower percentage of its revenues on R&D than any of its competitors. A company with $140 billion on the balance sheet and a 2.8 million square foot, $5 billion monument to itself under construction would normally be expected to allocate some capital toward a next generation of products.
Garrity defends Apple, noting that effective R&D isn't as much a function of dollars spent as it is the yield generated from the investment. "The $137 billion in cash they have sitting on their balance sheet was some sort of an outcome with respect to past R&D spending."
Point taken and conceded. Apple used to be an innovative company making revolutionary products, which led to a preposterous amount of cash. If Apple invents an iTime Machine with which investors are able to go buy shares 10 years ago, investors will have cause for excitement. Unless and until that happens, shareholders are going to have to settle for checking out the iOS 7 and inferring what exactly Cook means when he says "incredible" at D12.
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- Tim Cook