Shortly after the turn of the new year, Apple (NASDAQ: AAPL) Chief Executive Tim Cook of CNBC said in several interviews that the company's "innovation culture" creates happy, loyal customers commit themselves to Apple's ecosystem – a truism that "probably underestimated" Cook, who is now looking to succeed Steve Jobs in his eighth year, has "underestimated" traders and investors.
Maybe in January, but not anymore. Apple shares have risen 19% since the beginning of the year, slightly outperforming the 14% return of the S & P 500 over the same period. But is the jump justified? What did Apple do to show that the 201
Tastemaker or trend follower
Let's start with the good news. Under Cook, Apple has introduced many new products and extensions for the product line. Some of them were extraordinary hits, for example the Apple Watch and AirPods. Both retired from Cook for several years as CEO.
Also, keep in mind that the Apple Watch is an industry leader in the same way as the iPhone. According to ABI Research, Apple's share of the overall smartwatch market is over 43%: about five times more than its competitors Fitbit Samsung and Huawei . Cook also said that the sale of wearables – including the Apple Watch and the AirPods – increased nearly 50% in the last quarter. Talk about impressive numbers.
Apple is also focusing heavily on services such as iCloud backup, Apple Music, app revenue, and a growing streaming television opportunity. There's no easy apple-to-apple comparison between Cook's Apple and the job-led job.
The alternative? Measure the investment in and outcomes from R & D spending. Apple evaluates a simple four-question test that I developed last year and is still using today to find successful investment ideas:
Did Apple design its own developed products? What are you? When were they released?
Yes (plus 2). Anyone who has not ventured Rip Van Winkled through the last four decades knows the names of Apple's outstanding R & D efforts: Mac, iMac, iPhone, iPad, and Apple Watch. In the past, Cook is justifiably right to announce Apple's innovative power.
Is sales growing faster than R & D investment during the period in which these products hit the market? At what time?
No (plus 0). The annual turnover increased by 67,1% since the end of the financial year 2012 until December last year. Comparable R & D expenditure increased by 71.9% over the same period. That's the difference you would expect from a young company still looking for ways to serve its customers – or from a mature company breathing new life into an aging product line. Apple falls directly into the latter camp, especially considering that virtually everything the company introduced last year was a new confrontation with an old product. Only the lukewarm Received HomePod Speaker entered new territory.
Does the gross margin increase?
No (plus 0). Apple's gross margin has been falling for almost the first day of Cook's reign. The good news? High margin services can change the equation in a year or two.
Can you point to proof of new product development? How soon will they be released?
Sort of (plus 0.5). It's almost unfair to call Apple's upcoming launch of a streaming service a new product. There are already many streaming services, and it's hard to imagine that Apple offers everything Netflix and Amazon . We know if I'm wrong – and I hope it's me – on March 25th.
When Inspiration Counts More Than Innovation
A median rating of 2.5 would be a problem for any company that relies on innovation. In the case of Apple, where a significant part of its reputation is based on being a world-class innovator, the brand is particularly disturbing. But is it as bad as it looks?
There are two ways to look at this data. First, one could say that Apple does a lot with something – and that was always . Compared to other companies, Apple is aware that the percentage of sales in R & D spending is too low. So nobody should be surprised if the Mac manufacturer now spends relatively little on research and development.
But today's Apple is very different from the one where Jobs is helped and requires different skills. Fortunately, Cook has a superior operational track record and is a proven investor for shareholders. What if his team seems less innovative than Apple before? Today, the company is bigger and is backed by a mountain of cash, with products in more regions than ever before in demand.
While Apple may not be the down-to-earth innovator it once was, it's still a crucial flavor maker for billions of consumers around the world. That's why I still own the stock today and plan to keep it for many years to come.