rob the moment is finally upon us for
the first time last night apple reported
that iphone sales were lower in its most
recent quarter than in the same period a
year ago that seems like a very
significant moment some people talking
about a blackberry spire style death
spiral is it really that bad or is the
market getting far too excited over
something that we all knew would come at
some point it is a moment clearly a
symbolic moment and it is equally true
that historically very dominant handset
makers once they start to decline in
volume the wheels have come rattling off
I think in Apple's case a couple of
things have to be kept in mind the first
is that Apple is mid product cycle in
other words this first quarter fell
between the iphone 6 and the
much-anticipated iphone 7 and
historically in these mid cycle moments
Apple has purported some pretty soft
revenues in the past revenues have come
down to sort of zero growth this time we
just happen to break the zero barrier
because of weak weaker sales in china
china was particularly weak this quarter
that's probably macroeconomic so maybe
you don't want to make so much of having
broken the symbolic zero barrier the
second thing to keep in mind is that the
stock is actually priced for a decline
the stock trades at about 11 times
earnings if you take out the cash that
is sitting on Apple's balance sheet it's
at eight times earnings so what the
stock is saying is we expect sales to go
down from here and if Apple can prove
that all that's going to happen is a
flat lining of sales from here I think
the stock could potentially go up quite
a lot how realistic is that though
because I thought that the whole
business model of technology companies
like this was was was growth and it was
getting more and more people to buy more
and more stuff and that there are
precious few examples of businesses that
have turned into this kind of annuity
model where you just monetize a very
large and slow
and I think that's precisely where the
debate over the stock is at at this
moment so Apple loves to trump at this
number that the active installed base is
over a billion customers so you start to
do a little bit of math you say if
something over a billion customers is
willing to reup and buy a new Apple
product at a price of say 500 or 600
dollars every say two or two and a half
years it's easy to get to a sales line
on Apple's profit and loss statement of
200 billion 250 billion in other words
right where we are now and if so if you
can just keep people buying renewing
again and again you have an immensely
profitable company that could be sort of
the ultimate value stock and I guess the
ultimate test of that will come later on
this year when we get the
much-anticipated iphone 7 and we'll see
if that reinvigorates the momentum Rob
thanks very much