David Einhorn may have scored a tiny victory over Apple (AAPL) in court last week, but that's not likely to stop the ongoing crash in AAPL shares. That's because Apple's main problem isn't one of corporate structure or a huge pile of unused cash. Apple's stock is lower because the company has lost its way as a disruptive creative force — and there's nothing Einhorn or anyone else can do to help.
Simon Baker of Baker Ave Asset Management agrees. "The only thing that can really help out is innovation," Baker says of the crumbling stock. "That's what Apple is lacking right now."
Apple apologists can whine about Einhorn or "the market" for not understanding the Apple story, but the harsh reality is Apple's not growing earnings anymore. All the things that were unique about the company aren't as adorable when investors are groping for a reason to buy Apple on what is now a 40% dip.
With Steve Jobs gone, the onus for proving that Apple is still an innovation factory falls to the bulls, not the skeptics. Vague assurances that Apple has "solved television" are less an investment thesis than a cruel taunt to shareholders who are now underwater for the last 12 months.
Those who cite Apple's history as a reason for faith need to look back further than 2005 and start considering the dark decade after Jobs left the company for the first time. Back then Apple was looking for grown-up managers to help the company find its way in a post-Mac world. The board turned Apple over to John Sculley, a former PepsiCo exec with vast and impressive experience managing brands.
Sculley ran the company like an MBA. Not coincidentally, he also nearly ran Apple out of business. Only when Jobs came back did Apple regain its mojo. Now Apple is once again being run by a fully capable operator and Sculley is the one heckling from the sidelines, but there's no Steve Jobs begging to get back in the game.
If there's one good thing to come from Einhorn's activism it's that he has been able to get the company to come out from hiding behind its track record and start thinking more practically. Baker says Einhorn has been able to get Apple to address the issue of its bloated cash holdings and how the company can best use the money to benefit the shareholders.
It's no substitute for innovation, but activism is the best thing Apple has going for it right now. If Tim Cook and his team want to change the conversation they need to give Wall Street something else to talk about.