Apple: the giant suffers altitude sickness and put to the test their limits

A strong wind shakes the branches of the apple tree, a dark shadow is projected towards the earth. No one is immune to the vagaries of the economic time. Not even Apple. At the beginning of October the company had a valuation record of a trillion dollars -878.900 million euros— and dwelt in the top of the world. The planet finance seemed to be spellbound by the figure. Only 42 years after being founded it had a capitalization of more than the wealth of Turkey and Switzerland. And what had been achieved right after submitting your most expensive and fast iPhone. Nothing it seemed could stop her. Even Daniel Ives, a renowned analyst of the brokerage Wedbush Securities, we ventured to a value of 1.5 trillion. The capital markets love the numbers mythical as the maya to their gods. And the signature of Cupertino, California) had a story that was a fairy tale financial. Closed its fiscal year in September with a net profit of 59.531 million dollars ($52.500 million euros) and sales soared to 265.595 million dollars (224.300 million euros). I had never gotten so much money. More funds, even, of that he was able to spend.

The market of smart phones emits signals to enter a phase of maturity

The sun was on the enterprise with the joy of a song by the Beach Boys on a summer morning. However, two months after this blinding light loses brightness in the largest firm on the planet. Its price falls 20% from those days in which Apple was living in the garden of the Great Gatsby. Basically, because the markets only conceive of a time verbal: the future, and this announces that the sector of smart phones or smartphones is in a recession. Your sales accumulate four quarters of declines in a row. Something that touches the heart of the apple because the 60% of its revenue comes from the iPhone. A device that has sold more than 1,200 million units of its 18 versions. “However, the demand of smart phones has fallen this year because of the maturity of the market, the lower aid the change of terminals by the operators, a lack of innovation in the hardware and the economic winds are against,” says Neil Mawston, executive director of the area's wireless Strategy Analytics.

But, perhaps, what has worried analysts is that for the first time in 20 years, the company will, from this quarter, publish the number of phones, laptops and tablets that sell. This has been understood two ways. Sales of holiday —a period of basic in the business— to- disappoint the expectations of Wall Street. And in addition come to an end the years in which the increased orders for iPhones. “No investor likes to lose visibility into a variable just as interesting as the number of devices released, especially when in previous years we had a great level of detail,” says Javier Urones, analyst at XTB.

Distrust

In the market quotes the distrust. “It is not a good image for Apple. Usually companies leave communicate your metrics when they are about to turn around,” says Walter Piecyk, a telecommunications analyst of BTIG Research. This graph different than the anticipated the profit warning (cuts in its forecasts of revenue) in the same week of four suppliers (AMS, Japan Display, Lumentum and Qorvo) that are essential to the company. The message transcends between the lines is that less people are buying their devices. And the big players are out of the game. Goldman Sachs expects sales of 71 million units for the quarter that ends in December and revenues from 89,000 million dollars. The lowest band of a fork that the bank ranks among of 89,000 and 93,000 million. How the giant of Silicon Valley has arrived, exhausted, at your limit? “We've lived with Microsoft or Cisco; the more it grows as a company, the less will be able to do so in the future,” predicts Rui Mota Guedes, an expert from International Financial Analysts (AFI). Also, you cannot deny his nature. “It is a firm cyclical and will suffer in times of economic slowdown”, says Beatriz Catalan, Ibercaja Management.

despite the many shadows, the light pours like honey on a company that is still worth about 859.000 million dollars and that over the years got their products to be of money to the bearer. Sold more units and at a price higher than their competitors. But this inertia is stopped in 2016 with the launch of iPhone 6s and since then sales have not recovered. Less people are buying for the first time, the device and the less you change from Android to iPhone. And the users are slower to replace them. However, the company that runs Tim Cook continues to increase prices to maintain —remember Enrique Dans, professor of innovation at IE Business School— that sense of “exclusivity”. As a showcase of Prada. “The danger is that you leave some clients out and that cost you much effort to get new users”, warns Thomas Husson, analyst of the consulting british Forrester Research.

The firm of Cupertino will give you information about the units sold

But Cook likes to talk with the risks. Launched the Apple Watch (only last year he sold 18 million units) or the AirPod, a headset without wires, when many doubted the success of these products. Is tightening the rope, testing its strength; and of their faithful. “I think the customers more active and loyal to Apple are willing to pay a price considerably higher than what it cost today an iPhone”, says Per Roman, managing partner GP Bullhound, an investment bank specialized in the technology sector. Also what you think Cook. If I can't sell more units, can I sell the same but more expensive. “A strategy forced by the fierce competition in prices of Samsung or Xiaomi,” says Daniel Galvan, a director of GBS Finance. In Spain, the models Xs, and Xs Max (the most expensive one launched never by the brand) part of 1.159 and 1.259 euros. By comparison, the iPhone X came out at 999 euros.

however, the fragile future of smartphones will be offset by a surprise in steel and curved glass. Some years ago, when the own Steve Jobs commissioned the architect Norman Foster to design its new headquarters (Apple Park) in Cupertino, an avant-garde circular building that was to house 12,000 employees, the services division was the playground of Apple. But now it sounds just as in-tune that the harp of grass. In the last quarter (Apple Music, Apple Store, Apple Pay, and iCloud, among others) generated for the first time more than 10,000 million dollars. That's why it will launch its own bevice streaming to compete with Amazon Prime and HBO Go.

Has seen the future and goes through to produce and distribute entertainment. Do you solo? Do you or will surprise the market by buying, for example, Disney or Netflix? The question turns in the central offices of the company as the Higgs boson in the particle accelerator at CERN. “Hypothetically speaking, I don't think that buying Disney would be a good option for Apple. I would give it a large boost in content, but also involves incorporating activities (parks, toys) that are not close to their core activity,” says Mark Diethelm, an analyst at the swiss private bank Julius Baer. “On the other hand, Netflix Betticket would make the most sense. However, capitalization of 126,000 million dollars [111.200 million euros] would the agreement be expensive”.

Shopping with moderation

Neither the policy of the company has been signing blank checks. The biggest operation was the acquisition in 2014 of the manufacturer of headphones Beats by 3.000 million. By them is filtered by a music critic. “To acquire companies of these dimensions could cause the firm to deviate from its economic objectives. One of the many talents of Steve Jobs was to discover emerging technologies and consolidate around the business,” says Mati Greenspan, senior analyst at the broker eToro.

But we go through a storm. Atmospheric phenomenon is loaded with plenty of technological gadget is changing how we interact with the digital world. “The future will bring less screens and keyboards and more of a voice and augmented reality,” predicts Greg Brooks, global director of marketing of the consulting firm Mindshare Worldwide. “And here Apple has a tremendous opportunity to design solutions”. The company leaves tracks. Last August bought Akonia Holographics, a start-up that manufactures lenses for augmented reality glasses.

The company knows how to reinvent itself. Do the last test? The Airpods or the Apple Watch

Resources are not short of an apple with a skin bathed in gold. Account with a cash position of 25.913 million dollars and, if we add the investments in listed assets, adds up to the staggering amount of 237.100 million (209.200 million euros). Apple has in liquidity the equivalent of 18% of the wealth of Spain. “It is generating more money than they can spend, so that you have a margin to increase the dividend and buy back securities”, describes Mark Diethelm. Between the last quarter of 2012 and 29 September 2018 (close of your tax year), spent $ 239,000 hand million dollars ($211.000 million euros) to recover their own actions, estimated to Sylvie Sejournet, manager of the fund, Pictet Digital.

This movement has been fed ever since the tax reform of Donald Trump, which makes it easier to repatriate profits made abroad. A strategy that sustains the price of the securities, encourages the payment of bonus to the directors and placed in the center the goal of maximizing the value for shareholders. The dotted line draws the financial capitalism. “Do you use Apple your money to rebuy titles because it is failing to create new products spectacular as the iPhone or the iPod, or, on the contrary, this lack of innovation is a direct consequence of employing the cash in large part to the buyback of paper?”, questioned Marshall Auerback, of the Independent Media Institute.

however, this reflection comes to the markets just as quiet that an echo without a return. Few listen to it. “The policy of share repurchase, given the enormous generation of cash flow, is a strategic move very clever Cook and his team, and has been applauded by investors especially in the absence of M&A [mergers and acquisitions],” says Daniel Ives, an analyst of equities Wedbush Securities. In this never-ending autobiography of the money that you enter the company there are transactions that justify the euphoria. Carl Icahn, who is considered to be the investor most aggressive of Wall Street, bought 3.600 million dollars ($3.200 million euros) in the securities of Apple between July 2013 and January 2014. Two years after the sell with a profit of 2,000 million (1,800 million euros).

The huge liquidity that accumulates will allow you to buy any company that would like to

This is the garden of good and evil where Apple mixture archangels and demons. In 2017, the European Commission agreed that he had to return 14.300 million in taxes not paid to Ireland. The financial structure that had been erected there to pay a taxation tiny-it was illegal. Almost two years after the money is frozen in an account pending the appeal filed by the irish Government, who does not want to stop being a green meadow fiscal. Part of the money can help the country meet its commitment of 0.7% of GDP to foreign aid, “and another part could be used to help the irish poor”, suggests Jeffrey Sachs, special adviser to the secretary-general of the United Nations. “Grab the money. Are taxes that come from one of the most successful companies in history. Are overwhelmed of benefits. Take it and use it”, he insisted in The Irish Times. But nothing changes. Deduct the leaves of the calendar and where the feeling of living, always, in the same day, even a different country. “A recent report from Taxwatch estimates that Apple pays an effective form about your benefits “real” in Uk less than 2%”, writes Alex Cobham, director of Tax Justice Network, a group of activists that denounces the abuses of the international taxation system.

the shadows of The success

But not a single one has had problems with the numbers, but also with the words. The slogan on the back of your appliances —“Designed by Apple in California. Assembled in China”— has been a boomerang geopolitical and labour. In 2011, he was accused of exploiting chinese workers. Foxcoon, a vendor of the company located in the south of the country, experienced a wave of suicides. The employees criticized the days excessive and appalling working conditions. And last October opened an investigation to find out if a provider taiwanese company was using students illegally to assemble Apple Watches in the chinese city of Chongqing.

Since then, the asian giant (where the company gets 18% of their income and where their products are folded to censorship by the Government) demonstrates the fragility and the strength of the block. Until now, Cook has been able to dodge the tariffs imposed by Trump to the country, to criticise the policy of the president and at the same time benefit from their tax exemptions. The ceo of the company looks like Moses parting the waters of the Red sea. When Mark Zuckerberg, responsable of Facebook, had to declare in front of the Congress of the united States by the scandal of Cambridge Analytica, Cook saw the sessions from his office in Cupertino. Their businesses are different. He sells hardware. Other transform data in advertising. “We could win tons of money if monetizásemos to our customers. If they were our product. But we have decided not to do that,” said the news channel MSNBC. However, for the prayers answered also shed tears. Goldman Sachs estimates that Google will pay next year to Apple about 10.500 million euros to continue being the default search engine of iPhone, iPad and Mac. And if the seeker gives a number this is because it is very cost effective to send advertising to the fans of Apple.

beyond those clouds that pass, the great virtue of the company from Cupertino is its ability to cling to life. Has overcome the death of Steve Jobs, the bankruptcy, the success of Android, the saturation of the mobile market and the rise of artificial intelligence. All the while his reputation has remained so white and silent as the walk of the oxen on the snow. Because your business are the devices and not the information. Hence its image of defender of the private life of its users or firewall in front of the bonfire of the fake news. Despite the temptations, the apple has never been expelled from paradise.