In today’s episode of the 24/7 Wall St Podcast Doug McIntyre and Lee Jackson discuss Apple’s (Nasdaq: AAPL) current predicament. The company is under fire from the justice department and seems to have stalled out on new products. The services business is under fire, and Europe has taken aim at the company. How do they get out?

Transcript:

This is Doug McIntyre, the editor-in-chief at 24-7 Wall Street, and Lee Jackson, our senior editor for the markets, public companies, economics, is with me today.

I have never seen Apple out of options.

I’ve seen them in trouble.

I’ve seen them running out of money.

I’ve seen them have to turn to Microsoft for cash.

But right now, Apple, which for many years was considered the most valuable brand in the world, And the public company with the largest market cap is stuck.

The two problems that they’ve had most recently is that their car business, they’ve decided to kill that.

And they don’t have an AI solution, or if they do, they’ve kept it secret from everybody.

So do you see this the same way?

I do.

I do.

And it’s interesting simply because, you know, the one thing Jobs was good about is there was constantly something new on the table because he knew that there was, you know, a demand from the public for new products or new ideas or things of that nature.

And they’ve hit the wall.

And like you’ve said many times, they got nowhere to go.

And plus, I read today that the Apple store in New Jersey, I think it is, they’re filing to unionize.

So boy, that’ll help out.

Yeah.

When I look at Apple right now, what I see is a company with one huge advantage.

They have $2.2 billion. installed devices, active devices.

So they have a lot of way to make money if you buy a new one.

The new iPhone 16 has to be a lot better than the iPhone 15 for a surge in sales.

iPad, Mac, watch are not selling well.

They’re okay, but they’re not going to pick up the slack.

The services business, which was growing fast in many ways, is what’s under siege right now legally.

It’s certainly part of the pathway to Apple being what is considered a walled garden.

So I think between the lawsuits and the problem with new products, you could see this stock go down a lot in the next quarter.

Yeah, I think so, too.

And how aggressive is the Justice Department going to get on this?

The suit’s far ranging and covers a lot of territory.

And like we’ve discussed before, if they say you’re going to have to split the whole thing up, it could happen.

It could happen.

And then, of course, you got Europe on your back.

So if you’re the general counsel at Apple, you probably don’t know what to do when you get up in the morning.

There are not a lot of I’m trying to think of an analog for this there.

And this happened at Microsoft maybe a decade ago.

You know, they had all the Microsoft Windows products.

They had the server products.

They had failed to get into smartphones.

It was a massive, massive stump.

And the cloud was not a big thing yet.

So they were stuck in the hall between this great the all these great years when they own the operating system business two or three things fail all of a sudden they’ve got the the cloud business it looks like that but I don’t see what apple’s cloud business is I don’t I don’t see where they become the leader in an industry the way that microsoft was able to do in the cloud fairly quickly

Well, and, you know, Azure to a large degree would go in and cut huge deals, you know, to undercut AWS at Amazon.

And so I guess the only way that Apple could have a huge cloud business would be to go in and kind of lowball Azure.

But, I mean, that takes a huge infrastructure and would take years.

They’d have to buy somebody.

They’d have to buy somebody because you can’t change that fast.

So let’s move to that.

Let’s move to that.

What Apple cannot invent, what Apple cannot defend in court, it can buy.

Apple has, at this point, well over $100 billion of cash on its balance sheet.

It produces more cash every quarter.

Its borrowing capacity is limitless.

It can borrow more money than the U.S. government can.

So, Lee Jackson, you’re Tim Cook.

What are you going to buy?

Boy, I don’t know.

It has to be something either AI related or. or cloud-related, and you would certainly think that some sort of innovative AI purchase would be where they would go.

Because, I mean, it wasn’t that long ago that Microsoft, you know, was investing in ChatGPT and GPT.

And, I mean, that was, what, a year and a half ago that that came out?

And look at how quickly that has come to fruition as a real industry change, you know, a titanic change.

Or teutonic.

A lot of people would say that companies like Oracle, Salesforce are now legacy software companies.

I don’t know if that’s true or not.

But if you wanted to diversify into enterprise computing, into enterprise software, is that a way they could go?

Because they don’t have a footprint there at all.

I guess it is, but again, it would be really expensive.

I mean, for them to purchase Oracle or somebody of that size would be a big chunk.

And again, they could do it a lot with stock.

It wouldn’t have to be a cash deal, but boy, that is not going to be an easy road if you’re going to go down the enterprise road, period.

Well, strategically, my point of view is that they don’t have a choice.

There is no consumer business to bolt on to what is basically their 100% consumer company, really.

There’s nothing you can buy and bolt on to them.

You’re not at the lead of AI.

You probably never, ever will be.

You have no enterprise revenue.

At least it’s diversification.

So if you look at it from that way, it seems to me that diversification well away from their core business right now because they’re getting sued over their core business.

Let’s go to something we’re not going to get sued about.

Say Oracle or Salesforce, it’s those kinds of companies I think they have to look at.

I think you’re right.

I mean, they’re going to have to go in and either, and either one is going to be a big paycheck to write, you know, to, to one of those companies.

And again, they can do it with stock and they have a lot of shelf stock they could do it with.

And the liquidity in Apple is big enough that, you know, a move like that wouldn’t really rock the boat either way, but I think you’re right.

Yeah.

So this is what we’re going to do.

There is an endless appetite in the investing world for talking about Apple.

So I think every, couple of weeks, three weeks, you and I’ll come back to this and we’ll just continue to take the pulse of this thing because it is going to be a three ring circus for a long time.

It certainly is.

You’re exactly right.

Take care of yourself.

Thanks, Doug.

See you soon.

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