Apple’s Case Study: Reputation, Innovation and Stock Valuation

Apple’s first-quarter profit of $13.1 billion wasn’t good enough for investors, who sent the company’s stock down 11 percent on Thursday. While the view that the company’s years of rapid growth are leveling off was certainly a major factor in that reaction, a look at public perception and the state of Apple’s singular reputation can give us a more nuanced portrait of the company as it enters 2013.The extraordinary reputation that Steve Jobs’ leadership helped build for Apple held strong in the wake of his passing in 2011, but it seems like that sterling image may finally be losing some of its polish. According to YouGov BrandIndex’s Buzz Score, Apple’s consumer perception has lost some ground to its biggest competitor, Samsung. The Huffington Post’s Mark Gongloff writes, “gone, at least for now, are the days when every pronouncement out of the mouths of Apple executives was treated as manna by hungry media and Apple fans.” Haydn Shaughnessy echoes that view in a post from October, writing that Apple “has lost the knack of pleasing commentators.”

Facing Challenges

Apple’s diminished image appears to stem from a range of issues. Problems with Apple Maps, for instance, left a sizeable blemish. “Apple’s key selling point has been that its devices and the software they run ‘just work,’” wrote The Register’s Iain Thomson. “Breaking that covenant by putting out such a lousy piece of software hurt the company more than it would like to admit.” Apple has also begun to face more competition from companies like Samsung, which has posed a threat not just in the marketplace but also in court and on TV. Reports from factories run by its manufacturing partner Foxconn continue to spark negative attention as well—though Apple has wisely countered that controversy by announcing its decision to return some of its manufacturing activities to the United States.

On a more fundamental level, the change may be the difference between Steve Jobs and his successor, Tim Cook. He came in with a reputation as a masterful “operator,” with the assumption that strength could compensate for the loss of Jobs’ flair for innovation. But it has now been several years since there has been a major new addition to Apple’s product line, and “Apple’s reputation as an innovation powerhouse is a direct result of the series of category-reinventing products it introduced over the last 13 years,” (as put by IGN’s Scott Lowe). The Houston Chronicle’s Loren Steffy points to the loss of Jobs as a source of doubt, observing that “investors have worried that the company may lose its innovative spark.” Huffington Post’s Gongloff puts it more bluntly: “Without [Jobs’] mystical reality-distortion field, reality is coming back into shape, and it’s not looking pretty.”

The Perpetual Innovator

Perhaps the long-rumored Apple TV set will restore faith in Apple’s continued ability to introduce market-changing innovations. Either way, the consensus appears to be that the company shouldn’t wait much longer before trying something new. “Innovative products that fail don’t kill a company but milking the same old stuff forever does,” writes Yahoo! Finance’s Jeff Macke. The company “needs to dazzle consumers” but “has been thinking obsessively small and shallow,” according to The Guardian’s Heidi Moore. “For Apple to be cool again,” Moore says, “it has to admit that it is in danger of becoming uncool.” While Cook has continued to project confidence as CEO, it looks like the company may be taking Moore’s advice. On Wednesday one Apple software engineer tweeted, “Feels good to be the underdog again.”

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