Apple CEO Tim Cook Needs to Start Putting Out Fires | Opinion

Apple CEO Tim Cook Needs to Start Putting Out Fires

Apple CEO Tim Cook has never faced these many uncertainties at the same time.

| Updated on: Feb 02 2024, 07:24 IST
The company dropped out of the $3 trillion valuation club this week (REUTERS)
The company dropped out of the $3 trillion valuation club this week (REUTERS)

Chief Executive Officer Tim Cook has problems. Plenty of them. The company dropped out of the $3 trillion valuation club this week, leaving Microsoft Corp. to stand alone, thanks to worries over China sales and a multitude of other headaches for the Cupertino-based company. There are at least half a dozen challenges that analysts and investors will most likely ask Cook to address.    

Apple is staring down another quarter of underwhelming-at-best revenue

Revenue has declined for four consecutive quarters, the worst run since 2001. One more would make it the worst period since at least 1998, according to FactSet. The last time Apple updated investors, the company warned that revenue would be flat in the October-December quarter, saying iPad and wearables sales (i.e. the Apple Watch) would drop significantly. Still, analysts are expecting a modest revenue increase of 1% year-over-year in what is always Apple's biggest quarter thanks to the introduction of a new iPhone model and holiday sales. Standing in its way is the continued uncertainty about sales in China. In January, Apple reduced the prices of several products in the country. Bloomberg Intelligence analysts felt this “reaffirmed expectations of a slowdown in the region.”

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The days are numbered for its 30% App Store tax

Ignoring the lessons of Microsoft's disastrous antitrust battles in the 1990s, Cook has taken an antagonistic approach to responding to regulatory and court-ordered actions regarding the business model of its App Store.

Since the store's inception in 2008, Apple has taken a healthy 30% cut from transactions (with an exception here and there). But recently, large companies have started kicking up a fuss, arguing that Apple should either greatly lower that fee, allow them to offer different ways to pay, or make it possible for companies to have their own app stores, with their own rules, available alongside Apple's official store in the iPhone and iPad.

In January, Apple was forced to comply with a US court order that directed Apple to allow app makers to direct users to alternative payment methods, which it duly did — though not without remarkably onerous terms that even Apple's biggest cheerleaders, such as the tech commentator John Gruber, consider to be risky. In Europe, it is adopting a similar tactic — technically “complying” with EU demands on allowing alternative app stores, though certainly not with the spirit some had hoped.  

Companies like Epic Games Inc. and Spotify Technology SA are up in arms and have vowed to battle on. The 30% tax will not last forever. The sooner Apple acknowledges that the momentum is against it and starts working productively with regulators and third-party developers, the better —  particularly if there's risk the discontent will have a knock-on effect with new products, as I'll discuss later.

Its AI plans are lagging behind

Apple's voice assistant, Siri, which has never really been considered cutting edge, is ripe to be enhanced with AI. And yet, it hasn't been improved drastically since the explosion in popularity of ChatGPT and its ilk.

Bloomberg has previously reported that Apple executives are pumping money into rectifying that, and the company recently closed an office in San Diego as part of a reorganization of the Siri team. But of its Big Tech peers, Apple has said the least about how it expects AI to change its products.

Not that consumers should write the company off on this score, of course — as my colleague Parmy Olson wrote recently, Apple's opportunity to produce a powerful and privacy-centric AI is huge, and being late to the party may not matter.

The FTC is coming

In addition to attention from Europe (naturally), Apple can expect a significant lawsuit from the Department of Justice as soon as next month, Bloomberg has previously reported. The department's antitrust division, which is challenging what it contends is anti-competitive behavior by Google, is said to be focused on whether Apple is using its hardware dominance to unfairly edge out rivals. With the details still being finalized, it has been anticipated that the suit might also touch on some of the App Store concerns.

The Apple Watch doesn't have a blood oxygen sensor

If you go to an Apple store or the company's website and buy an Apple Watch Series 9 or an Apple Watch Ultra 2, you will be reminded that the blood oxygen sensor has been disabled. You may not care about that feature, but it was important enough for Apple, according to litigation, to steal the technology from a health tech company, Masimo, and poach some of its key staff members in the process.

California-based Masimo's patent challenge led to two models of the Apple Watch — the Series 9 and Ultra 2 — being briefly removed from sale. They have since been made available again but with the sensor disabled by a software update. Complicating matters further, Apple is now seeking to delay the release of Masimo's own watch, arguing the company is using the row to “directly” target Apple's customers.

The Vision Pro is receiving lukewarm reviews

On Friday, the first customers will get their hands on the Vision Pro, Apple's $3,499 mixed-reality headset. I'm planing to head over to the company's flagship New York store on Fifth Avenue, where I'm sure the feeling there will be that this is a revolution, but I'm not yet convinced it has much appeal beyond a small set of Apple die-hards.

This week, the first “reviews” — based on a small period of use — hit the internet. Impressive hardware, most agreed, but a little too heavy. The consensus seemed to say the device was lacking a core utility and was isolating to wear. Another problem, given that it is being billed as a both a work and entertainment device, was the absence of key apps like Netflix, with speculation of a quiet protest against the App Store polices I mentioned earlier.

Now, it has been said — by me and many others — that the point of the Vision Pro isn't to be a mass market device, at least not until it can gain greater utility, lighter hardware and a much lower price point. Fine, but if that's the case, it struck me as curious that Apple paid for a TV spot during the recent NFC championship game between Detroit and San Francisco. That tells me that while Apple might not enjoy a great number of sales, “buzz” for the Vision Pro — however one might measure that — is critical. Apple's investors never want the company to stop feeling exciting, especially when some of its long-standing successes might be on the wane.

Apple has never faced this many uncertainties at the same time. Cook had better have some answers if he wants Apple to rejoin the $3 trillion club.  

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First Published Date: 02 Feb, 07:24 IST