Apple without Steve Jobs lacks the old mojo

PUBLISHED : Thursday, 09 May, 2013, 12:00am
UPDATED : Thursday, 09 May, 2013, 4:45am

Apple under Tim Cook has finally come up with a product that shakes up markets. Unfortunately for Apple's legions of fans, it's not one of those "insanely great" electronic gadgets for which the late Steve Jobs was justly famous.

Dubbed by some as the iBonds, the Cupertino, California-based company has decided to issue a whopping US$17 billion worth of debt as part of a multi-year programme to buy back shares and boost dividend payouts. With a fortress balance sheet boosted by a US$145 billion cash pile, Apple has nevertheless decided to dip into the bond market. To the great cheers of Wall Street, the worldwide subscription frenzy for the debt reached US$52 billion.

How times have changed with Cook at the helm. Only recently, a bet on Apple shares was almost a sure win. But from its peak of more than US$700 reached in September, the stock has fallen by more than 40 per cent. Naturally, Cook gets much of the blame. But since the debt and buyback announcement, the stock has rebounded more than 10 per cent.

Cook has a hard act to follow. No one can really compare with Jobs. The problem is, Cook has not done much following at all. There have been no new products, only upgraded versions of old models. So in one of the most keenly watched corporate quarterly reports last month, Cook resorted to financial alchemy, rather than product wizardry.

To silence grumbling investors, he has promised to return an extra US$55 billion over three years, on top of US$45 billion the company has already committed in its capital return programme. Dividend yield is expected to hit an estimated 3 per cent, unheard of for Apple.

The company has too much cash and Cook doesn't seem to know what to do with it. Because much of its idle cash is parked overseas, its return to the US would immediately incur a heavy tax bill. Now, corporate debt is at record low interest rates. So borrowing for Apple makes good sense. Even the interest payments are tax-deductible. All this will probably buy Cook some time with impatient Apple investors. He has promised "new amazing" products in the autumn and throughout 2014. But he has also realised he needs to show investors the money when he has no new products to sell now.

The Apple that its fans came to adore was never about financials. Now, it is speaking the language of Wall Street. Apple today is a very different company from the one under Jobs.