Time takes its toll at Apple
THE plunge in the Apple share price is nasty for Nasdaq, index funds and activist investors who have bought into the Apple cult. It will also have Apple users crying into their trendy green kale juices. After all, for them Apple is not a mere company but a way of life. Users treat their Apple devices with more love than their friends and their pets.
What they rarely see is the downside of an enterprise that has builti n obsolescence to best- selling iPhones, encourages loyal customers to pay top dollar for accessories and charges content providers an arm and a leg for using the iStore. It has contempt for intellectual property, as we learnt during the standoff with the formidable Taylor Swift.
The tone of the analyst and market coverage of Apple’s latest quarterly results, which saw sales rocket 32.5pc from a year ago to $49.6bn (£31.8bn), might have led the uninitiated to believe we were witnessing a national tragedy on a scale even greater that that being experienced by the people of Greece. Hooey, it is nothing of the kind.
What we are seeing is a monopolist at the top of its game. Having sent Microsoft-owned Nokia to an early grave and seen off the Samsung challenge, for the time being, the iPhone 6 is sweeping all before it and now accounts for 63pc of group sales.
It is paradoxical perhaps that in China, where other luxury goods are having such a hard time, iPhone sales grew by 33pc.
This in the country where Apple contractors have in the past been reported to be working in poor conditions for l ow wages. Nothing should be allowed to get in the way of Apple’s super profit margins.
So why the big upset? The main reason everyone seems to be mourning is because Apple chief executive Tim Cook, following the mercurial example of the company’s founder Steve Jobs, is keeping commercial detail of the recently launched Apple Watch to himself.
There are two possible explana- tions for this. The first is that the investment in the Watch has been wasted and this is a ridiculous device that no one wants. The second is that the Watch is simply following the pattern of previous Apple introductions, from the iPod to the iPad, and is a slow burner. As it becomes fashionable to own one, sales will take off.
Admittedly, the Apple Watch has certain shortcomings. For it to work satisfactorily it has to be used in conjunction with an iPhone, so Samsung users such as this writer are immediately out of the circle of love. Designers have done their best but it lacks the panache and style of a Swiss chronograph.
It is also quite small and fiddly so is not for the myopic or dyspraxic.
However, just because a few of these devices have quickly been abandoned and have found their way onto eBay, we should not assume that the first major postJobs device will flop.
Apple users are hooked on anything with the simple distinctive logo. Never mind whether it’s surplus to requirements, it is a must-have. The cult leaders at Apple HQ on the Cupertino campus in California say so.
No one dares argue with that.
Save the SFO
OF all the many regulatory issues facing Barclays, the claim that it paid £322m of commission to Qatar to secure its part of a £11.5bn bailout in 2008 potentially is the most toxic.
Britain may be a bit late in the day in introducing criminal penalties for reckless banking but it does have robust anti-bribery legislation.
Moreover, the 2008 fundraising and the failure to disclose all the details draws the previous Barclays management of the patrician John Varley and former finance director Chris Lucas into the net. Until now they have been happy to let Bob Diamond and his investment banking colleagues take blame f or any alleged wrongdoing.
The Barclays spin is that the Serious Fraud Office is offering the novel but little used device of a deferred prosecution agreement because it is desperate for a success. This fails to take account of the fact that the SFO already has the victory of one guilty verdict over a Libor miscreant under its belt. Moreover, the first foreign exchange trail involving a UBS banker i s currently being heard.
So although the SFO might be fighting for its budget, in an age of government cuts, under the present director David Green it is making impressive progress.
One only has to look at the way City l awyers are running rings around the Bank of England and the Financial Conduct Authority over the HBOS report to understand how well Green is doing despite the shadow of Tchenguiz. The SFO should call Barclays’ bluff over Qatar and let the courts decide.
Wandering eye
MUCH as one respects Tidjane Thiam’s creation of shareholder value in his period as chief executive of the Prudential, memories of his abortive bid for AIA still haunt his reputation. So it would not be that surprising should Credit Suisse investors prove to be less than impressed with his announced intention to swell the asset management business, perhaps through acquisition.
We have been here before.