How Apple CEO Tim Cook Infuriates Investors

NEW YORK (TheStreet) -- The recent Apple (AAPL) earnings report reminds us there is a specific agenda in mind by investors and analysts who cater to investors. That is, gain smartphone unit share growth and dominance at any cost.

The reasoning behind the agenda is as follows: If Apple can seize the upper hand against smartphone competitors by virtue of increasing unit share, then the competitors suffer and Apple dominates the market. That means that, unfettered by realistic competition, Apple can grow exponentially. That, in turn, means  Apple becomes a growth stock, insofar as smartphone sales go, and that's a significant portion of Apple's revenue.

A growth stock means that X dollars invested now will bring X + Y dollars at some short-term point down the road. In other words, Apple puts money in investor pockets. Any Apple strategy that doesn't do that is disagreeable.

That hasn't been happening, and investors are upset.

However, it was happening in 2011 when Apple's iPhone and, most notably, the iPad were doing well. Google's (GOOG) Android was much less mature. Amazon (AMZN) hadn't yet released the Kindle Fire series. Hewlett-Packard was struggling with its Touchpad, and the BlackBerry (BBRY) Playbook and the Motorola Xoom were disasters. It seemed like no one but Apple would ever figure out how to build a decent tablet. Money poured into AAPL, and the stock eventually zoomed to $700.

It also happened when Microsoft (MSFT) had 95% OS market share and called the shots, and there's a certain nostalgia for the days of market share domination. But then Windows wasn't considered the premium operating system the Mac OS X was. The analogy fails, and that's instructive.

Apple's Different Agenda

Nowadays, the Apple competition is more sophisticated and accomplished. That means Apple has to be careful about its brand. For example, if Apple were to lower the cost and value of its iPhones to increase unit share, several bad things would happen. First, in the U.S. where carrier subsidies have traditionally set a fixed customer price up front, the back-end payments to Apple would decline resulting in lower revenue.

Next, globally, where carrier subsidies are less common, the iPhone would be thrown into a price war with competitors. Demand would surge and Apple would risk not being able to meet demand for a product whose legacy had been quality but is seen to be deteriorating. That's long-term damage. Not being able to meet demand (in the short term) for a degraded product brand (in the long term) is a recipe for disaster. All too quickly, unit share would decline instead of rising.

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