Apple squanders its riches
Does anyone really like to be bullied? Is arrogance something most people aspire to achieve, or behavior socially embraced? You know the answers. But these qualities too much describe Apple since its sudden success starting in 2010. The company continually sticks a middle finger in the face of competitors, judges, partners, the patent system and pretty much anyone or anything else. The corporate attitude is a disaster underway that, unless checked, will ruin reputation long in the making.
The Cupertino, Calif.-based company makes many of the same mistakes Microsoft did during the late 1990s. Apple's most valuable commodity is its brand, which is being squandered at alarming pace. For a company for which so much stock share value derives from perception, the risk is huge.
Signs of Apple's self-destruction and arrogance are everywhere:
- Bullying other companies in the courts
- Threatening retailers to stop selling Samsung devices
- Refusing to submit to court orders -- not once but twice in a single week
- Pulling from App Store developer partner wares with features that compete with Apple's own stuff
- Releasing half-backed products like Maps and Siri, with presumption consumers will just accept them
Apple's behavior is all so eerily familiar. During the 1990s, when computing kingpin like Apple is today, Microsoft displayed utmost arrogance -- such as dictating how PC manufacturers' brands could display during Windows bootup or what shortcuts partners could place on the desktop. As court documents reveal, the Redmond, Wash.-based company bullied OEMs by a number of tactics, including threats to withhold its operating system. Before US District Judge Thomas Penfield Jackson, Microsoft lawyers and executives appeared petulant and snarked at every court request, or official order, to change business practices.
Corporate arrogance ruined Microsoft's reputation -- and where the company needs it most, among investors. Apple's trajectory is similar.
Microsoft remains one of the most successful, and still hugely profitable, tech companies on the planet. During fiscal 2012, ended June 30, Microsoft generated $73.723 billion revenue and $21.763 operating profit. That's up from $25.3 billion revenue and $11.72 billion operating income during fiscal 2002, Steve Ballmer's first full year as chief executive. But the stock gets no respect, largely because Microsoft squandered its reputation. Microsoft shares closed at $29.50 on November 2, keeping to about a 12-year perennial below-$30 state. On Nov. 2, 2001, the stock sold for $30.70. Recent 52-week high: $32.95.
Three years ago I posted "2000-2009: Microsoft's decade of shattered dreams", looking at so much right that had gone wrong. Microsoft lost its way, in part for losing its reputation, particularly among investors. Microsoft is the safe investment bet that the Street largely refuses to take. Two years ago I asked: "Why won't Wall Street give Microsoft a break?" Investors still aren't, which is amazing considering just how big is the streak of products launching over six months, starting in October.
Investors don't believe in Microsoft or its ability to innovate. Apple CEO Tim Cook would be wise to learn from the software giant. The company's behavior puts off people, and hurts corporate reputation. Given just how much shares move because of perception, Apple risks becoming the new Microsoft in a very bad way. As Windows' maker shows, reputation lost among investors isn't easily regained.
Apple's magic is more than earnings performance; cofounder Steve Jobs used his so-called "Reality Distortion Field" to make people believe in the company. But Jobs has left this world and taken some of the magic with him. Yet something of him remains: Corporate culture of arrogance and bullying, which has no check without Jobs as aspirational pitchman.
Consider recent stock performance. Apple shares closed at $576.80 on Friday, down 3.31 percent from the $596.13 open. Investors didn't receive October 23 new products -- and mighty impressive lot, too -- like other launches. iPad mini hasn't wooed the Street as many people predicted. Within the month, Apple set an all-time high of $705.07 a share -- on buzz about new products. Rumors proved more meaningful than reality. Shares are down about 18 percent since then, erasing gains since late June.
Apple's marketing messaging is largely the same, but the pitchmen are different and nowhere as effective. Meanwhile, bad corporate behavior erodes Apple's reputation. In October, YouGov BrandIndex observed a fall in Apple brand perception, with Samsung actually rising higher. Apple's court case, and subsequent win, against Samsung inflicted temporary perception problems for the South Korean electronics giant. Post-victory, the case works against Apple, particularly as people tire of patent lawsuits. By how much? Take a look at #boycottapple over at Google+ for a look how much. There's a Boycott Apple blog, which I only discovered this afternoon while finishing up this post, and active Facebook page, too.
In late May I started a personal boycott of the company's products and declared independence from Apple on July 4th -- that after being a loyal user since 1998. I'm mad about Apple's bad behavior, particularly that which stifles competition and innovation. What reputation hung on Microsoft following its US antitrust case loss: A company that works against innovation to preserve its monopoly position. That's one Scarlet Letter Apple shouldn't want.
I'm not alone. There is a subtle tsunami growing against Apple. On Halloween, Ed Conway, Sky News economics editor, posted letter: "Dear Apple, I'm leaving you". He gives five reasons under headings: "iOS 6"; "you've lost it"; "you're not cool anymore"; "you're screwing us"; "I don't need you anymore". They give pretty good sense what his problems are. By the way, "you're not cool" is part of Microsoft's biggest reputation problems. Apple, you've been warned.
Days earlier, Simon Phipps posted to InfoWorld: "Why I left my Macbook for a Chromebook". We share that in common. I moved to Chromebook from MacBook Air about five months ago. Old-time Apple users don't just leave. Buying the products is as much an expression of belief as anything else. Consider these switchers canaries in the coalmine.
There's a backlash underway that Apple might yet contain by being less litigious and more cooperative -- demonstrating technology leadership rather than protecting its own interests. As I've so often expressed: perception is everything.
Disclaimer: I am not an investor in Apple or any other company. I own no stocks.