AAPL Headwinds: Is the Golden Age Over?
Falling Apples!!
For the first time in a long time, I confess my confidence about $Apple(AAPL)$ is finally “stirred and shakened”.
Bad news : one after another.
This comes about after a bout of bad presses hitting the media in the past 2 weeks. (see below)
To me, this spells (possible):
- Subscription loss.
- More competitive landscape outside of the Apple environment.
- Price matching from Apple (??) in order to rein in outflow ?
- Gradual reduction dependence on Apps store in EU; especially on repeated visit/s.
- Future legal battles to further incite anitrust behaviour of Apple Inc.
5 Main gripes in US Dept of Justice (DOJ) lawsuit:
1. Anti-Steering: Apple restricts app developers from informing users about alternative payment methods or subscription options outside the App Store.
2. App Store Monopoly: The DOJ argues Apple has a monopoly on app distribution for iPhones and iPads, limiting consumer choice.
3. Third-Party App Restrictions: Apple restricts the functionality of third-party apps compared to its own, hindering competition.
4. Forced In-App Purchases: Apple forces developers to use its in-app purchase system, taking a commission on all transactions.
5. Maintenance of Monopoly: The DOJ claims Apple takes actions to maintain its App Store monopoly, like preventing developers from offering lower prices elsewhere.
Impact:
- Loss of Revenue: If Apple loses the lawsuit, it could be forced to allow alternative payment methods and potentially lower its App Store commission fees, impacting its revenue stream.
- Increased Competition: Opening up the app ecosystem could lead to more competition from app developers and other app stores, potentially affecting Apple's control over the user experience.
- Legal and Regulatory Challenges: This lawsuit sets a precedent and could lead to similar regulations in other regions, further impacting Apple's global App Store business.
Although not part of the lawsuit, DOJ has noted disapprovingly of Apple’s $77 Billion buyback scheme in 2023.
Apart from the fact that it was a lazy deployment of capital, DOJ considered it an indicator of “anti-competitive and exclusionary” conduct.
This stemmed from the fact that budget allocated for share buyback is more than monies pumped into R&D.
Based on S&P Global’s data, over the past 10 years, Apple buyback scheme’s size dwarfs both its R&D spend and the buyback schemes from peers.
It added up to a total of $658 Billion.
Even $Alphabet(GOOG)$ ’s buyback programme (2nd largest), was less than half that at $240 Billion.
Alphabet’s buybacks were also not much larger than the size of its R&D spend over the period.
The demerit of buyback is that (a) it decreases share counts and (b) flatter earning per share figures.
My viewpoints : (mine & mine only)
- Apple and all IT giants are at the crossroad of impending changes whether they likes it or not.
- All these IT titans will not crash and die; they are too big to belly up.
- Neither will the US government allow them to fail or get too weakened; unlike the Chinese govt incessant waves of bashings (Alibaba, Baidu and Tencent) have left them “weak” against international competition.
- I will definitely welcome the idea of a bigger Apple dividend instead of the miserable $0.96 per share. So unbecoming of a cash-rich Apple Inc.
The days of cowboy town in the IT World will gradually be eroded in the name of fair-competition, whatever that means ?
- Do you think Apple Inc share price will fall further this week ?
- Do you think Apple’s carefree days are over as EU & US regulators continue to persecute them in the name of fairness & justice ?
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