The success of Apple, both in the marketplace and on wall street is well known. It now has the highest market capitalization of all companies, beating even the constant performing oil giants. The price of Apple stock continues to climb as it is recognized as the bell weather company and leading innovator of the technology era.
So the question is, “Will Apple’s tree grow to the sky?” or has Apple peaked? Is this the beginning of the decline like so many other leading companies that have reached the top and then descended from that peak. Will Apple repeat the history of Microsoft, which had its own stock peak in 1999, and has been in continual wane ever since?
One glaring issue: the loss of Steve Jobs. Perhaps never before in history has a CEO been so indispensable and such a direct force in the success of his (or her) company. As Apple’s leader, Steve was a perfectionist. He had no tolerance for mediocre products and drove his team to near perfection. Recall when Apple produced the substandard MobleMe in 2008, Jobs raked the development team over the coals, insulting them and their work, dismissing the team leader, and generally punishing them for embarrassing Apple. I wonder how Steve would handle the iPhone 5 maps fiasco.
It is by Steve’s leadership that the iPod, iPhone, and iPad became great innovations and successes that have forced every other technology company to play catch-up. The question is whether Apple has any more ground breaking products up its sleeve, or is it now to be a battle in the courtrooms over patents and copied technology.
Part of the reason is obvious: Jobs isn't there anymore. It is rare that a company is so completely an extension of one man's persona as Apple was an extension of Jobs. Apple's current executive team is no doubt trying to maintain the same demanding, innovative culture, but it's just not the same without the man himself looking over everybody's shoulder. If the map glitch tells us anything, it is that.
I think Steve built a wildly innovative company, but without him at the lead, holding off the “suits” as he sought perfection and his vision of art and design, Apple will sink to another company run by committee. Another Microsoft. Another IBM. Another HP (dreadful thought … I expect HP to be bought out by Lenovo). All very profitable companies, but no longer the leaders they once were. Their trees grew and grew, but then they declined. These are the lessons of history. (There are worse fates. Remember Compaq? Remember DEC? Remember Atari? Remember RCA? Remember Zenith? The forest is littered with dead trees too.)
But there is also a less obvious — yet possibly more important — reason that Apple's best days may soon be behind it. When Jobs returned to the company in 1997, after twelve years in exile, Apple was in deep trouble. It could afford to take big risks and, indeed, to search for a new business model, because it had nothing to lose.
It happens in every industry, but it is especially easy to see in technology because things move so quickly. It was less than 15 years ago that Microsoft appeared to be invincible. But once its Windows operating system and Office applications became giant moneymakers, Microsoft's entire strategy became geared toward protecting its two cash cows. When Microsoft designers brought forward a proposal for a tablet computer in 2000, it was vetoed by the head of the Windows division for fear it would cannibalize Windows sales.
Although Microsoft still makes billions, its new products are mainly "me-too" versions of innovations made by other companies. MS is currently struggling to match the iPhone and iPad after failing so completely to match the iPod with their “Zune.” (Of course, I consider MS currently led by a fool. The “Bizarro Steve.” Gates had vision, Balmer has none. But I digress.)
Now it is Apple's turn to be king of the hill — and, not surprisingly, it has begun to behave in a very similar fashion. You can see it in the patent litigation against Samsung, a costly and counterproductive exercise that has nothing to do with innovation and everything to do with protecting its turf. That is Steve’s legacy too. He was adamant in his disdain of the Android phones being copycats of the iPhone. Under his leadership, Apple became one of the most proprietary computer companies in the world, even denying Adobe's Flash system access to the iOS ecosystem with a justification of security, or battery drain, or HTML5, or whatever excuse was current.
You can see it in the decision to replace Google's map application. Once an ally, Google is now a rival, and the thought of allowing Google to promote its maps on Apple's platform had become intolerable. More to the point, Apple wants to force its customers to use its own products, even when they are not as good as those from rivals. Once companies start acting that way, they become vulnerable to newer, nimbler competitors that are trying to create something new, instead of milking the old. Just ask BlackBerry, which once reigned supreme in the smartphone market but it is now roadkill for Apple and Samsung.
Even before Jobs died, Apple was becoming a company whose main goal was to defend its business model. Yes, he would never have allowed his company to ship such an embarrassing application as Apple Maps, but — despite his genius — it is unlikely he could have kept Apple from eventually lapsing into the ordinary. It is the nature of capitalism that big companies become defensive, while newer rivals emerge with better, smarter ideas.
Look, I don’t like to give stock tips. It is very hard to make predictions, especially about the future. However, the crystal ball is pretty clear on this one. Apple stock may continue to grow for some time … primarily on momentum, but I suspect it has hit the peak. It is time for me to cash in my chips. Apple continues to be a top company, and I am not going to stop buying their excellent products. I have, however, sold my Apple stock. I think it is time to look for someone else to lead the market. So what companies do I expect to take the lead. I continue to hold stock in Amazon and Google, although Amazon’s P/E is crazy. It is really more a recognition that, year after year, Amazon’s profits hold at a steady rate. Sometimes peaks are something to avoid.
The next big leader of the technology surge? That I’m not sure. Lenovo is an interesting company, especially given its Chinese roots. Facebook is big, but it is having problems matching its internet success on wall street. No, I suspect the next big company is so small now that we don’t even know its name. Will it be the cloud, or solar energy, or a car company, or something we aren’t even thinking about now. Fifteen years from now I’ll be asking “Has unknown-company reached its peak?”