That may sound a bit radical, but Apple has lost what made it the world's most valuable company -- rapid growth.
Apple got there by offering new products in big markets that were so much better than anything else that people lined up around the block to buy them.
Last July, I wrote that Apple had done a good job of squeezing a huge amount of profit from its then-eight-year-old iPhone. But the vast majority of its growth came from selling iPhones in China.
If Chinese demand fell -- due to a combination of a slowing economy and intense local rivalry -- Apple would shrink.
On April 26, Apple reported its first quarter of declining growth in 13 years. Those sales fell a whopping 13% as Apple sold 16% fewer iPhones than it did in 2015, its revenues from greater China fell 26%, and net income plunged 22%, according to the New York Times.
Apple also disappointed investors with its revenue forecast -- in a range from $41 to $43 billion for the current quarter.
CEO Tim Cook does not appear to understand what is going on at Apple. As he said in a conference call, the decline in sales is a mere "pause. This, too, shall pass. The future of Apple is very bright.”
But how bright can the future be for a company whose revenues depend heavily on charging customers 67% more than its rivals for a lower quality product in a maturing market?
Bloomberg pointed out that operators now have 90% customer penetration so they don't need to pay an upgrade subsidy.
That leaves consumers increasingly opting for the likes of a "$450 Huawei-made Google Nexus 6P, which has a bigger, sharper display, a faster processor, a lighter package and a longer-lasting battery [rather] than the $750 iPhone 6s Plus," according to Bloomberg.
It seems to me that a board of directors should pay the big bucks to a CEO who recognizes when an old product is in decline and invents new products to offset the loss of revenue that will ensue.
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Its Watch -- despite vague claims of exceeding first year iPhone sales which the Wall Street Journal estimated at $6 billion -- and services like Apple Music and Apple Pay have not and are not likely to ever generate sufficient revenue or profit to offset the decline in the nine year old iPhone.
Those services used to be sold at or near their cost to encourage consumers to buy Apple's high margin hardware.
Making little tweaks to the iPhone will not get lots of people to buy new ones. Fortunately for Apple, iPhones do stop working after a few years and many people buy new ones.
I think when Apple introduced the Watch, it thought it was following the innovation path that Steve Jobs pioneered when he introduced the iPod, iPhone, and iPad to take market share in the MP3 player, cell phone, and tablet industries.
But the Watch is a departure from those previous Apple success stories. A Gizmodo review from a writer who bought and used one for a year concludes, "I stopped wearing it two months ago, and I’m not sure if I’ll ever wear it again. That’s because it doesn’t really do anything that anyone needs, and even when it does, it doesn’t always work like it’s supposed to."
Apple's board needs to wake up and do its job.
The simple reality is that Steve Jobs failed at one of the most important challenges any successful CEO faces -- grooming a replacement.
Tim Cook had a background in operations before Jobs elevated him to CEO. There was no reason to believe that he would be capable of leading innovation and he has had over four years to demonstrate his ability to do that.
To be fair, Apple's board is made up of human beings who often make decisions based on confirmation bias -- ignoring information that does not reinforce what they already believe.
People have been conditioned to believe that Apple always innovates. But the reality is that it was led by CEOs like John Sculley, Michael Spindler, and Gil Amelio who did not lead innovation as well as Jobs did when he returned to Apple's top spot.
Apple's board could try to find an innovator to take over Apple's top job.
Or it could keep Cook in place.
But if it does, it should reward Cook for running Apple like a utility. That would mean cutting way back on R&D and marketing -- just investing enough to create new generations of products that will work as the old versions fall apart.
Given the amount of cash Apple generates, it's clear that such cost reductions could add significantly to Apple's cash pile.
Then Apple should boost its dividend yield from 2% to, say, 8% -- costing roughly $12 billion a quarter -- and buy back shares on a regular basis.
Apple cofounder, Steve Wozniak, told an “Ask Me Anything” session on Reddit that he was disappointed with Apple, noting: “Twenty watches from $500 to $1,100. The band’s the only difference? Well this isn’t the company that Apple was originally, or the company that really changed the world a lot.”
Apple's board should accept Wozniak's conclusion and either hire a CEO who can revive the company or charge Cook with running it like a utility.
