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Stocks, Trading  | March 29, 2019

This week Apple (AAPL) held an “event” to announce its entry into streaming videos and credit cards. Among the cheers and applause and the “think different” banners, this marked a new low in the company’s fading effort to remain true to Steve Jobs’ vision of stunning innovation and creativity.

In fact, the only association to Mr. Jobs was the name of the venue, the Steve Jobs Theater. And theater it was. The fact that I did not share the same enthusiasm and passion of the presenters made me think I must have been missing the miraculous points of the show. The resonating audience also was over the top. Are they simply sycophants, or did they see hints of “misfits, rebels and troublemakers” that Apple was once based on long ago?

How Apple plans to compete in the already-crowded streaming business and the super-crowded credit card business is not well supported by any business logic. On the content side, Apple brought out some star-studded names such as Spielberg, Oprah and Reese. They would be the stars featured in new original content for which Apple allocates about $1 billion. But this funding could support only about 30 shows, which barely moves the needle when considering the offerings from Amazon, Netflix and HBO. Netflix alone spent more than $12 billion on content in 2018, and will increase that to $15 billion this year. And let’s not forget the Disney-Fox merger that closed this month, too.

From a pure content perspective, it looks like Apple will have to spend much more than it has planned in order to compete. Additionally, Apple will require a huge marketing and sales effort to compete against these well-known incumbents.

Apple’s answer to this crowded market challenge? One presenter claimed there would be “No more bouncing from app to app!” I’m not certain which strategy consultants discovered this gem, but it’s probably the same ones that conducted the market survey of current subscribers of streaming movies. That survey identified one watcher that had to construct a spreadsheet to determine which shows she could watch. I think that says more about the person than it does the streaming “problem." This entire streaming effort seems misdirected and far away from the original identify of Apple. It most likely will fail from insufficient funding, poor planning, and bad execution.

The company also moved into the credit card business, which is even more brutally competitive than video streaming. From a strategic perspective, it is baffling that a corporate strategy team would recommend this as a best solution to Apple’s stalled creativity. The company seems to be betting on how “cool” the card looks, and relationships with MasterCard and Goldman Sachs. MasterCard and Apple seem to be the most unlikely partners from a corporate identity perspective. The strategic planners must have used step-by-step logic that led to the absurd conclusions.

And what of Mr. Cook, the CEO? He actually introduced the show by reading the dictionary definition of “services” to the fawning audience. I haven’t seen that approach since middle school graduation speeches. Apple itself has carefully crafted its image. Its image is an important-but-elusive factor in its stock valuation. Cook has always projected an image that appears forced and not natural for his personality type.

With other companies this criticism may appear inconsequential, perhaps petty. But I would argue in Apple’s case it is an important soft factor in driving the stock valuation. Jobs set a high standard. To those deeply devoted shareholders and subscribers he was the conductor of the orchestra, not a mere musician following the written music. This ultimately translated into innovation which drove the stock price up.

I expect these Apple TV+ announcements will not positively impact the stock. I do suspect that this initiative is a major blunder whose failure to deliver will drive the stock down. It is possible that, in two years, Apple will abandon this initiative. If you are still romantically involved with the Apple stock of long ago, you must also face the reality that the company is not the perfectionist it was when Jobs was at the helm. For example, he would have never tolerated the horrendous failure called Siri. Now the joke of many movies, Siri was advertised as an ingenious assistant, but it never lived up to the hype. Apple’s phone displays are barely readable in bright daylight. Even the ancient Blackberry screens were readable in the brightness of a nuclear flash. But users can apparently tolerate these irksome features that show no evidence of improvement. Apple seems to be saying, “Live with it.” The stock price will increasingly reflect the frustrating slowdown in perfecting such shortcomings.

For sanity’s sake, owners of Apple stock should consider it a fat-cash dividend player that will lumber along—until the market rejects the new TV+. There will be no more game-changing announcements from Apple. The only improvements will be the slickness of those events at the Steve Jobs Theater.

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