Every time there’s a hiccup in Apple’s sales or earnings, some analysts rush to declare that the company is past its prime and that it might even wind up as “the next BlackBerry” or “the next Motorola” if it’s not careful. Barron’s has spotted a recent CNBC interview with famed hedge fund manager David Einhorn, who explains quite clearly why there is simply zero danger of Apple suffering a BlackBerry-style meltdown.
Basically, it comes down to Apple users and the remarkable loyalty they have to their favorite company. Because Apple fans not only love Apple products but show something that borders on distain for anything else, they will keep providing the company with large piles of money even if it goes through an innovation rut.
“I think Apple’s a little bit different from those, because the software component makes it a recurring sale,” Einhorn told CNBC. “If you have an iPhone, you’re more likely to buy the next iPhone. They have over a 90% renewal rate on that basis, which is something those companies never had before.”
Einhorn also said that the company was being wise in snubbing activist investor Carl Icahn’s pleas to increase the size of its share buyback program and argued that having a healthy cash position has always been one of the company’s staples for longterm financial success.
“You had a culture under Steve Jobs where there was a concern to have a cushion if the market’s are not there in some period,” he said. “Blackberry is seeing that now. I think it makes sense for Apple to maintain a very good, strong cushion, so they can continue to innovate even if the market hits a bad cycle.”