Apple earnings: It’s time to ‘think different’

It’s hard to know what’s shrinking faster: Apple’s ability to come up with new ideas, or the value of its shares. Either way, it’s not a race that inspires a lot of investor cheerleading.

As expected, Apple on Tuesday reported record sales but lower profit for the first time in a decade. This comes after a quarter in which iPhone shipments were lower, though sales of its iPad tablet have never been better.

“We know we didn’t meet everyone’s expectations,” Apple CEO Tim Cook said in a conference call to discuss the firm’s quarterly results. “We acknowledge our growth has slowed and the market has decreased.”

What’s worse is the sense that, unlike last year’s launch of the iPhone 5 and the iPad Mini, there may not be many other blockbusters on the horizon for the Cupertino, Calif.-based tech giant in the months ahead. I have argued in this space before that Apple has matured enough as a business that it doesn’t necessarily need to come up with new tricks. That doesn’t mean there aren’t opportunities to innovate and add value to its customers. It’s about choosing the right markets, and I’m going to suggest something that may sound a little back-to-the-future: a renewed focus on the desktop.

Time to think PC?

In a world centered around mobility, it may seem counterintuitive, if not suicidal, to reinvent a hardware category that appears to be in serious decline. PC shipments have been falling for the last year, being outpaced by phones, tablets and anything else that doesn’t have to remain plugged in. Gartner predicts a 7.6 per cent decline in desktops this year.

This has had a serious dent on the fortunes of HP, Dell and even OS providers like Microsoft, but it affects Apple too. Its success in the mobile category may actually be cannibalizing a category that’s traditionally had higher margin, but iMacs are never the first thing mentioned in its earnings anymore, but the number isn’t promising: under four million Macs were sold this quarter, down about 2 per cent from the same time a year ago.

On the other hand, you could argue that the 1997 introduction of the iMac was the beginning of Apple’s renaissance. Sure, it was criticized for having more style than substance, but it made a connection between Apple and the consumer market that proved transformative. Apple has never been afraid to zig where the rest of the IT industry was zagging, whether it was entering highly entrenched markets (like smartphones) or ones which seemed dead and gone (like the tablets, which Microsoft tried and failed to ignite in the early 2000s).

Unlike phones and tablets, the latest of which are probably already in consumer’s hands, desktops are getting long in the tooth. Microsoft, for example, recently announced the long-awaited end of support for Windows XP, and there are plenty of businesses across North America that have continued to run it on their corporate machines. Apple could fill that void with something app-oriented, affordable and as easy to integrate with business systems as it is a home stereo system, finally finding a welcome audience among IT departments.

“The most important objective at Apple is creating innovative products, and that remains in our control,” Cook said. “We’ve got a lot more surprises in the works.”

If Apple could give the market a reason to invest in computers so powerful consumers were willing to stay put in front of them for a while, that might be the biggest surprise of all.