Considered another way, if Apple could make 8% more than inflation on their investments each year, they can run forever without selling anything.

That's not actually how things unfold when a company gets into trouble. Your scenario is the perfect, idealized, never-happens outcome. We have dozens of historical examples at this point, from elite, massive corporations unraveling: what they basically never do, is the strictly rational idealized scenario.

What actually happens is closer to chaos loaded with self-interest and stupidity by management and the board.

The board gets attacked aggressively by large investors. Existing management and the board goes into bunker war bribery mode.

The board bribes shareholders, further depleting its cash position. See: IBM's most recent idiocy as their revenue melted for 23 straight quarters, while they continued to buy back stock aggressively.

The cost of their staggering $100+ billion in debt climbs over time as their financial and earnings situation erodes. By the time a serious problem erupts, they'll probably have $200+ billion in debt (they'll have that in just four or five years now), continuing their existing mistake.

They intentionally avoid paying off all of their debt while they can, to hold onto the cash (because hey, debt is cheap today, forget about tomorrow, tomorrow is valhalla and rainbows), which they then make the mistake of expending to bribe shareholders as the stock plunges. Because, you know, things are going to turn around any day now.

Then they end up with less cash than they have debt, and down it all goes from there, in a spiral they can't pull out of.

If we're talking about what happens in a bad scenario, that's more like what commonly happens in reality. That net cash position will not be preciously saved to protect employees, the employees are the first ones to go. That net cash will be used as a bribery slush fund.

Their earnings haven't increased in years. They're facing a zero growth future, if only because of their immense size. The smartphone market contracted by ~9% in 2017 (-16% in China). They're facing a PC market scenario, where consumers start replacing devices a lot less often (while simultaneously smartphones face increased competition from all sorts of cheaper AI-focused devices). Their cash accumulation is far slower now than it was in the past, because it's all going to shareholder bribery. Meanwhile, they've added $50 billion in debt in about two years, with that pace continuing in the latest quarter. Their income to debt ratio has been eroding for five straight years.

Consider: right now Apple is making the incredibly foolish mistake of aggressively buying back stock with their capital, while its AI efforts are an embarrasment and they get their ass kicked by Amazon. Spend $50 billion catching up in AI etc? Or buy back stock? Apple has made its choice, and it shows.

"Their earnings haven't increased in years."

I'd love to own more companies that have this earnings profile for the last eight years. They've gone from $14B in 2010 to over $48B last year. [1]

[1] https://www.statista.com/statistics/267728/apples-net-income...

Just because you have a hundred billion dollars doesn't mean it's worth spending it to try (and quite plausibly fail) to topple an entrenched competitor in a tangential line of business. Monolithic corporations are massively inefficient because the combination of wealth and bureaucracy is the recipe for waste. Let them give the money to shareholders -- isn't that why they were supposed to be in business? Then if it makes sense to invest the money in some other line of business, the investors will invest it in some other company doing that thing.

The fact is that smartphones are now a mature product. There will continue to be incremental improvements, but nobody is really expecting a future iPhone to be to the current iPhone what the original iPhone was to Blackberry. The market is now a cash cow. They have an existing technology and customer loyalty that they can milk for multiple years until increasing competition eats away at their margins, doing that is a profitable medium-term strategy, so that's a completely reasonable and expected thing for them to do.

They could invest their cash in some speculative technology and maybe get lucky, but so can their shareholders.

Apple makes more revenue and far more profits than Amazon, and a much higher percentage of those earnings come from products with AI baked into them--compare the iOS business to the Alexa business.

I'd be inclined to give more weight to your argument, but you've conveniently left off the part where Apple has used debt to buy back shares primarily because so much of their cash horde is held overseas due to the US's wonderfully archaic tax code...which has just been overhauled. I fully expect 2019 to see Apple re-repatriating large sums in order to pay down that debt.

You do make a couple valid points but on the debt side are wrong. The only reason they have such a high debt is due to USA tax policy on repatriation. This has now been removed with new law so what will happen is there prob will not be anymore borrowing anymore. The CFO even mention they will be cash-neutral. Net net Apple will have very negligible debt moving forward and def nowhere near the level it is today or your +$200B.

If you look back just a few years, Apple has responded multiple times to saturated markets by introducing new product classes. We don’t have iPods anymore for instance, now we have watches (even though at one point you could have argued that the music player market was full too). If phones really do start to lose steam, Apple should have plenty of opportunity to create a new interesting product.

And yet Amazon introduced Alexa before Apple did.

Alexa (Applexa?) could have been a natural Apple product. HomePod is clearly a catch-up, and not a particularly interesting one given that Alexa has already moved to built-in screens, and creating an AI home-hub in a variety of form factors, both big and small, is a trivial update now.

Alexa gives consumers utility/service computing without all the tragic time-wasting updater/installer/management nonsense forced on them by desktops, laptops, and (to a smaller extent) tablets and apps.

Cook's Apple has missed the point of this, which is the subtle but huge difference between consumer utility computing and content and hardware consumption computing.

Jobs was a genius at making everything fit together, and I suspect he was reaching for a utility strategy. The iPhone and iPad were the first generation of utility devices, while Siri was a first gen utility service. They were wildly impressive for their time, but still limited by elements of desktop legacy thinking - which is why we have to wait while apps launch and close, instead of just being able to do whatever we want to do.

Cook sells SKUs, not synergies or utility. I see no evidence that Apple is able to think of the future with a unified vision that doesn't involve selling things - even if those things are music and video content units - enhanced by some very constrained AI.

Right now Amazon is more of a synergy company than Apple. The aim seems to be total domination of retail, but there's going to be some overlap in services and in hardware too, and Amazon seem better placed culturally to innovate in ways that win that race.

The iPod was a catch-up product in a crowded music player market. The iPhone was a phone in a world of massive, dominating phone makers. Heck, the Apple II was a computer in an IBM-dominated world.

Apple is not “first” that often so who cares if they didn’t make an Alexa before anyone else?

Instead, Apple tries to get it “right” (and sometimes they still don’t but that is their strategy nonetheless).

Alexa has plenty of flaws. It is functional but not intelligent.

Well, in 2016 they spent > $10B on research. So clearly they're trying to catch up, it's just that they're not very good at it.

I agree, Apple is doomed. They always have been

I generally agree with you but there is the case for negative revenue that could deplete those reserves at a rate faster than you have calculated.

How would that negative revenue come to pass? People returning their iPhones en masse for a refund?

You end up spending lot more money than you make. To counter that, you invest $20 billion dollars in a game changing innovation but it fails leading to a write off. Then you go acquire a company that also becomes a dud. There are 100 different ways to go broke. Take a look at how GE messed up.

Absolutely, but that's not negative revenue.

You could try visiting, but it would have a proprietary docking port. :>

The ISS is going to be de-orbited by 2020. You don't have much time left to visit it, and NASA does not operate any shuttle service anymore.

Prolonged till 2024 https://en.wikipedia.org/wiki/International_Space_Station_pr...

(You’re both missing the joke)

Open the iPod bay doors, Siri.