New Apple Line Is Flawed but Perfectly Iconic
As a technology company, Apple Inc. (Nasdaq: AAPL) is abysmal. As a profit-generating machine, though, the Cupertino, California-based company is without rival, and it’s only getting started.
At the “Spring Loaded” event last week, Apple managers unveiled a lineup of impressively thin desktop computers in retro colors, new iPads and other new hardware that is certain to sell well.
No company does iconic like Apple. Cupertino product managers are constantly pushing the edge with designs that are purposefully divisive to get into the zeitgeist and modestly flawed to build ecosystem loyalty.
It was 2015 when CEO Tim Cook proudly revealed the Apple Watch, a smartwatch the company had been working on for three years. Despite the considerable development time, the device had ghastly bezels, a screen that required wrist gymnastics to turn on and a battery that couldn’t make it through 24 hours. As a timepiece, the Apple Watch was woeful. Thankfully, that was not the sole purpose.
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First-generation Apple Watches were about fashion. Cook understands companies that are capable of dictating what is cool have an obvious competitive advantage. Also, functionality flaws don’t stop people from buying because being an early adopter is cool, too. It’s kind of a Stockholm syndrome thing that motivates customers to look forward to buying the next iteration.
That’s especially important to note because the Spring Loaded event was full of these devices.
The new iMac desktop is impossibly thin at 11.5 mm, which is about the thickness of an Apple Watch. Priced from $1,299, they also come in seven fun, retro colors. Unfortunately, the computers use the mobile operating system usually reserved for iPhones and iPads. And they have a weird chin with a thick, white bezel that influential tech reviewers seem to hate.
This reminds me of a similar situation when the company made laptop computers in 2015 with a new butterfly keyboard design. The Macbooks were thinner, quieter and impossible to type on. They were universally panned by reviewers, but the new design was iconic. It sold like hotcakes.
When the design was canned in 2020, the Verge lamented the saga of Apple’s bad design … yet the writer admitted to typing the story on one of those flawed devices. How ironic.
The original AirPods shared the same plotline in 2017 when they debuted. For an additional $159, customers got the wireless equivalent of the iconic white Earpods that were previously free with most Apple devices. AirPods sounded bad and looked silly … but that certainly did not stop them from flying off the shelves.
The company sold a staggering 17 million pairs of AirPods in 2017. Sales shot up to 35 million units in 2018, 60 million in 2019 and by 2020, some 114 million units were sold, according to research compiled by Strategy Analytics.
Apple is now in a position where its designers dictate what is trendy. The company can get away with thick, ugly bezels on their iMacs while competitors are spending fortunes in R&D developing miniaturized components to shrink them to nothing.
That leads me back to my main point: As a technology company, Apple is depressing. Managers are not innovating.
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As a business, the company is hitting on all cylinders. Managers understand the target market and the buttons that can be pushed to grow sales. It’s no coincidence that the new iMacs come with white bezels, color-coordinated keyboards and mice.
If history is any indication, the new products announced at the Spring Loaded event will sell well as customers flock to iconic new designs and all of the accompanying accessories.
Apple shares have been lagging the rest of big tech in 2021. Facebook, Inc. (Nasdaq: FB), Alphabet Inc. (Nasdaq: GOOGL) and Microsoft Corp. (Nasdaq: MSFT) have all moved out to record highs while Apple stock remains stubbornly below the Jan. 25 high set at $142.71.
The stock trades at 28.5 times forward earnings and 7.5 times sales. Those metrics seem cheap given the leverage the company enjoys with respect to new product offerings and the relative return on R&D investment.
Apple is scheduled to report second-quarter financial results after the close on Wednesday. Savvy investors should consider buying on any major weakness.
Jon D. Markman