A Big iPhone Slump Bites Into Apple (AAPL)

The only way Tuesday's earnings call for Apple (ticker: AAPL) could've gone worse was if CEO Tim Cook made it on a Samsung Galaxy.

And if there was a number to dial for the analyst conference, it might as well have been an unlucky 13. Here's why: The iPhone sales slump for the first quarter of 2016 reflected Apple's worst quarterly performance in 13 years.

Apple stock opened Wednesday at $96 a share, more than 7 percent lower than Tuesday's close of $104.23. For naysayers, it was a field day.

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"Apple is a big-league professional catastrophe," says Eric Schiffer, CEO of Patriarch Group, a private equity firm with offices in Santa Ana, California. "It's a national embarrassment and the greatest failure post-Steve Jobs in tech history."

Decline not unexpected. Apple's glum summary was no surprise to Wall Street or the tech digerati. When Apple released its earnings report for the last quarter of 2015, Cook acknowledged that iPhone sales would likely fall in the months to follow.

But he never hinted at how much. And the Q1 tally of 61.2 million smartphones sold was off 16 percent from the same quarter in 2015. More than two-thirds of Apple's profits stem from the iPhone, so it's easy to see why some viewed the performance as more disaster than disappointment.

"The earnings shortfall is a seminal event for a tech bellwether," says Robert Johnson, president and CEO of the American College of Financial Services in the Philadelphia area. "This is much more than an idiosyncratic, single company blip. This will shake the confidence of many tech investors beyond Apple."

In terms of market capitalization (the total dollar value of Apple's outstanding shares), the tech behemoth has taken a hit for the history books. On Tuesday, that figure posted at $578.58 billion. By Wednesday, it was in free fall to $541.82 billion. To put that in perspective, the drop of close to $37 billion represents roughly 7 percent of Apple's market cap -- more than three times the worth of Twitter (TWTR) and twice that of LinkedIn Corp. (LNKD).

While Apple still boasts a wealth store of Fort Knox proportions, you likely won't find execs at One Infinite Loop trading high fives. A week ago, Apple was worth $594 billion; two weeks ago, $621.55 billion; and in July of last year hit an astounding $745.63 billion.

Beyond the numbers. So let's get out our iPads and review: Since that July 2015 apex, Apple has lost close to $204 billion in nine months, or more than a quarter of its value. But while the numbers tell one story, gut feelings and emotional exuberance on the trading floor tell another.

And if the Q1 report cemented any fact, it is this: For all his formidable talents as a numbers guy, Cook isn't going to spearhead any product revolutions with the showbiz panache of Jobs, Apple's late co-founder.

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Whether releasing the first iPhone in 2007 or overshadowing the likes of U2's Bono onstage, Jobs was a tech rock star who attracted hordes of groupies who bought anything and everything with his ubiquitous, delicious fruit logo on it. He also championed a sleek, minimalist aesthetic that transformed computers and smartphones from clunky, intimidating machines into sexy objets d'art.

"As a long time Apple user, I can say that there's not only been a lack of innovation but also a lack of quality in their builds," says Eden Chen, CEO and founder of Fishermen Labs, an app development company. "A bunch of their software products are disasters -- take iTunes Connect -- and just look at the reviews of any of the other software they put out. They're amazing at seamlessly taking users from one computer operating system to the next. But Apple's lack of innovation is the classic problem laid out in the Innovator's Dilemma."

Different leadership. Put another way: Jobs was a product visionary who beat the curve, while Cook is a corporate caretaker of legacy products.

"There's a different feel about Apple since the loss of Steve Jobs," says Darren Hayes, an assistant professor and director of cybersecurity at Pace University's Seidenberg School of Computer Science and Information Systems in New York. "It has been many years since the company has released a product that has the public mesmerized. We've come to expect technology companies to surprise us and Apple has only surprised us with disappointing earnings growth."

That observation, if you will, rings as too true. Apple's bulky iPhone 6 series certainly didn't inspire the oohs and ahhs of previous models, a fact underscored when it introduced the iPhone SE last month. For the first time ever, Apple unveiled a smaller phone as opposed to a larger one. Yet it was hardly revolutionary, as the SE is a throwback in size and style to the iPhone 5.

Nor has the Apple Watch generated gotta-have-it enthusiasm. The product has been largely a bust, viewed by some observers as an attempt to enter a crowded field rather than forge a market all for itself.

"Bullish investors might counter by saying the Apple Watch has been, despite some oddly negative press, a big success, with unit sales twice that of the iPhone in each product's first year of existence," says Barry Randall, a technology portfolio manager on Covestor and a Boston-based registered investment advisor. "But so what? Because an Apple Watch requires an iPhone to work, and there is now an installed base of 500 million iPhones worldwide, it would've been difficult not to sell 12 million Apple Watches."

"Apple is at its core a product company, and this means that it must continuously hit home runs to continue its success," says Jerry Kim, assistant professor of management at the Columbia Business School in New York. "Coming up with one home run is challenging enough -- to generate a string of home runs is pretty much impossible, especially given the global nature of competition. Contrast this to platform companies like Google or Facebook that focus on building an ecosystem."

A global bet. How to put a brave face on all this? Cook and crew made it clear they're betting on growing Apple's sales in India and China. India, for example, has seen iPhone sales increase by more than 50 percent.

"I certainly wouldn't bet against Apple," says Anand Deshpande, CEO of Persistent Systems, a global technology company based in Pune, India. "India presents a huge market potential for them. And even though India is huge, we're in our nascent stages of growth. So as our economy gains momentum, that means more and more potential customers for Apple."

But the iPhone's future overseas is far from a slam dunk, as Android-based products continue to infiltrate and compete in booming markets.

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And so, the inevitable question arises: WWJD, as in What Would Jobs Do?

First he'd likely scream, in his legendary, tyrannical way, for his minions to hit the lab and whip up something new to make the masses salivate.

"Investors aren't generally known for patience," Randall says. "And until that next game-changing product comes along, we'll see growth investors continue to sell shares of AAPL to value and income investors."

But odd as it sounds, Jobs in all likelihood would also hold the course. Randall says: "Apple ought to be quite profitable for some time to come. Apple's relationship with its customers will always come first. And many of them don't care and might not even know the company is in Wall Street's penalty box."

A former longtime staff writer, editor and columnist at the Chicago Tribune, Lou Carlozo writes about investment for U.S. News & World Report, and personal finance for Money Under 30 and GOBankingRates. He is based in Chicago. Connect with him at linkedin.com/in/loucarlozo.