This analysis was first published in SvD Näringsliv, in Swedish, on May 3rd, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
Apple is offering shareholders the world’s largest share buyback. That is an easier message to deliver than acknowledging that product development has started to feel a little stiff.
Tim Cook rarely says more than he has to. Preferably less. Apple’s CEO typically lets the numbers speak for themselves. When you have no stellar numbers to show — you manufacture them.
When Apple reported its quarter on Thursday evening, it was not sales or profit that took centre stage. Both came in undramatically, just above analysts’ modest expectations. Instead, the board — with Cook at the helm — announced that they intend to buy back shares worth 110 billion dollars: just under 1,200 billion kronor. According to CNBC, it is the largest share buyback in stock market history. They also raised the dividend.
That is how Tim Cook operates. It is elegant, and it creates substantial financial value. But exciting? It is not.
Earlier this year, Apple shut down “Project Titan” — the development of a self-driving electric car that had been the worst-kept secret in the company. The project had been running for around ten years but was judged unlikely to be good enough to justify a full-scale launch. Project Titan had the potential to expand Apple into an entirely new product category. Self-driving cars are extraordinarily difficult to pull off — as one can see not least at Tesla. It was an enormously ambitious idea, with the potential to transform a giant market, and required colossal investment just to get started. But there were no self-driving cars. The money can now be used to buy back shares instead.
Another enormous bet has been the spatial computer Vision Pro, whose development costs are estimated to have cost Apple around 215 billion kronor over more than fifteen years. Vision Pro launched in February this year — but those hoping Cook would give any indication of how it had been received waited in vain. He offered only a vague comment about how nice it was to hear from people who had tried it.
Otherwise, there has been conspicuous silence — both from Apple and from the wider world — about this new product category. It will likely take a couple of substantially cheaper iterations before the scale reaches anything worth mentioning in a quarterly call.
Beyond the buyback and dividend, two numbers stood out. China sales came in above expectations but fell compared with the previous year. Difficulty in China was anticipated — domestic Huawei, operating under heavy US sanctions, reported strong growth and an enormous jump in profit just days earlier. Huawei is a telecoms company with more products and business areas than just smartphones, but its strong results point to a broader trend: intensifying Chinese nationalism and an increasingly frosty geopolitical relationship between the US and China. Apple has historically been masterful at navigating this complex situation — being deeply dependent on China for both sales and manufacturing. But the political climate has rarely been as complicated as it is now, and maintaining the balance to stay in good standing with both the US and China requires constant calibration.
Note Tim Cook’s recent visit to Indonesia, where he discussed production with President Joko Widodo and was reported to have said that “the investment opportunities in Indonesia are endless.”
The second notable number was strong services sales — including the App Store and iCloud among others. Several analyst questions focused on the services that Apple does not yet offer: those involving AI. “We believe we have advantages that differentiate us from competitors here,” said Cook, referring to Apple’s integrated model with proprietary chips, hardware, and software. The conditions for something unique are there. But the actual AI services have yet to materialise.
When pressed on timing by an analyst, Cook said he did not want to get ahead of what they would be talking about “in the coming weeks” — a clear nod to Apple’s developer conference in early June, where the company is expected to reveal more about its AI ambitions. That would come well after other major players such as Microsoft and Google.
Apple has generally had no problem being last into a category. They were not first with smartphones, nor with smartwatches. But they have come to dominate both once they committed. Following the market and doing existing things better has been Apple’s success story. The innovation has been in the execution rather than the idea.
It is impossible, however, not to wonder whether Apple has started to get stuck in old ways of doing things. Big ideas require big investments. But buying back your own shares for billions of dollars suggests that such ideas may currently be in short supply.
