Fiddling on the edges

Apple needs more iPhone, less iCahn

Apple needs more iPhone and less iCahn. Once again, financial developments overshadowed technological ones in the company's quarterly results. A stock split, a dividend hike and a bigger buyback provoked a pop in Apple's shares. Rather than Carl Icahn's favorite subjects, Chief Executive Tim Cook could use new products to discuss.

The $150 billion cash pile at the end of the quarter demanded attention, of course. Even with an eight per cent lift in the shares after normal trading hours and stripping out the cash, Apple is valued at 13 times estimated 2014 earnings. The market broadly trades at a multiple of 16, with many companies in the S&P 500 Index carrying net debt.

In that context, increasing the stock buyback plan from $60 billion to $90 billion makes sense. Raising the dividend by eight per cent and promising further annual hikes should help attract more investors seeking income. And a seven-for-one stock split, while economically irrelevant, at least makes Apple more optically appealing for mom-and-pop investors.

It's time now, though, to refocus on a different sort of engineering. It has been four years since the company rolled out a new product. Global smartphone sales growth is slowing, as the majority of users in developed countries already have one.

Rivals like Samsung have arguably caught up in terms of quality. Tablets face even stiffer competition. It all helps explain why Apple's revenue growth has tumbled from a nearly 90 per cent clip two years ago to just five per cent in the latest quarter.

Boss Tim Cook keeps promising something new. There's never a mention on timing, however, except to point out that Apple cares more about getting it right than being first. It's the right philosophy, but the $470 billion technology pioneer has allowed itself to be sucked too deeply into a distracting conversation about its balance sheet. The revolutionizing of wearable devices and television is what shareholders really want to be talking about.