What is eating Apple?

London - Among the late Steve Jobs' many distinguishing talents was what observers called his “reality distortion field”: his fabled ability to convince anyone of practically anything. The way he told Apple's story, the way he introduced each Apple product, it seemed as if the company could only keeping growing.

Even when he admitted in 2010 that the iPhone 4 lost some reception because of what the rest of us saw as a glaring design flaw, he defended the gadget as possibly the best product ever made by Apple. Despite near-universal criticism, he guided the company through what everyone else saw as an unmitigated fiasco by handing out some plastic cases.

Two years on, the iPhone franchise is facing increased competition - but it remains strong, with the company selling more than 37 million in the first three months of this year against just over 35 million in the same period last year.

His successor, Tim Cook, hasn't had as much luck in convincing everyone that Apple remains as full of promise as it once was. He has been particularly unsuccessful with investors. The share price, which stood just north of $400 (about R3 600) on Wednesday afternoon, is well below the high of more than $700 seen last September.

But this week, he did manage to divert attention from the growth concerns that have held back the stock by using the ultimate reality distortion device when it comes to Wall Street: cash. Lots and lots of cash.

Announcing quarterly results that showed a dip in profits for the first time in a decade (even though sales climbed, highlighting an erosion in margins), Mr Cook said the company would return a massive $100bn to shareholders by 2015. It is doing this by raising its dividend by 15 percent, and by expanding the scope of its share buyback programme to $60bn. All told, the move marks a $55bn increase to the programme announced last year. There are few companies that can do this. Apple, despite its quarterly net profit easing to $9.5bn from $11.6bn last year, has a cash pile of around $145bn.

That has often riled investors, most notably the hedge fund manager David Einhorn, who have argued for the money to be released to shareholders. Although Apple is going to borrow to fund the move, it can only do this because of the massive balance.

Like Mr Jobs and his product launches, which were never complete without eye-catching superlatives, Apple said the move represented the “largest single share repurchase authorisation in history”.

The move was welcomed by Wall Street. Mr Einhorn, whose Greenlight Capital recently took Apple to court over the cash hoard, applauded the step. “This positive development … demonstrates the conviction of Apple's management and board in the company's future,” the fund said.

But those who have been following Apple over the past 10 record-breaking years would have noticed that the policy marked a break from Mr Jobs' strategy of conserving the company's cash reserves while driving growth by launching high-profile products.

Although Mr Cook was careful to add that “this is the same culture and company that brought the world the iPhone and the iPad, and we have a lot more surprises in the works”, the focus very quickly turned to the payout, obscuring concerns that only days ago dominated the headlines. But the fact remains that while there have rumours about an Apple TV, or even an Apple wristwatch, it is companies such as Samsung with its Galaxy phones and tablets that have been attracting the attention of consumers.

Even Facebook managed to attract the spotlight with its Facebook Home software suite, which transforms gadgets running on Google's Android operating system into always-on social media devices.

Apple, however, has only managed to tweak its iPad, launching a mini version to compete in the increasingly competitive tablet market.

While it remains a robust business, the company seems to be changing into a more mature one where, as the Forrester analyst Sarah Rotman Epps said after the results were released, “the highs are not as high and lows are not so low”. The blockbuster payout certainly appears to have bought Mr Cook some time.

However, when the shareholder euphoria fades, attention is prone to turn back to the pipeline. “They need something that breaks into new verticals, whether it's TV or something that's wearable, that opens up a new revenue stream,” Ms Epps said, underscoring the sense that Mr Cook's task is only half done.

APPLE’S BIG IDEAS

1998

Unveils the iMac

2001

Introduces the iPod

2003

iTunes Store opens

2005

New iPod adds video, and Apple fills line with iPod shuffle and iPod nano

January 2007

Announces the iPhone and Apple TV

September 2007