Apple's biggest risk is… a new corporate HQ!?

Apple has been on tear since introducing the iPhone in mid-2007. Hard to believe that was just 6 years ago.

I remember at the time thinking that very few people would buy such an “expensive toy.” Especially after the financial collapse in late 2007 and the Great Recession that followed.

Well, long story short, Apple has done quite nicely for its customers and shareholders. The iPhone has seen several updates and the iPad launched the tablet market. Apple stock price has increased 500% since January 2007. Wow.

Still, there are clouds on the horizon. Even though Apple stock is trading at $400+ now, it peaked at $700/share a little more than six months ago. What’s going on?

I see several risks to the continued growth of the Apple empire going forward.

First, Steve Jobs is gone.
Granted his leadership was a mixed blessing, what with all the shouting, berating employees and so one. A jerk, basically. But, his passion for making “insanely great” products is what drove the company. Tim Cook, for all his management prowess, can’t fill that void.

But that’s not the greatest risk.

Second, you’re only as good as your last hit.
Apple has profited enormously by creating and dominating the smartphone and tablet categories. Now everyone is waiting for the “next big thing.” Will it be the widely rumored Apple TV, or something else? Just like game developers, you’ve got to keep the hits coming!

But that’s not the greatest risk.

Third, fat profit margins are a big target.
Apple was also an innovator in the PC industry, but its fortunes fell when IBM and Microsoft commoditized the industry. Now the same is happening with Samsung and Android. My son just went shopping for a smartphone and decided on the Samsung Galaxy.

But that’s not the greatest risk, either.

The biggest risk is a new corporate headquarters!

You’ve probably heard about plans for new Apple HQ that Steve Jobs presented to the Cupertino City Council in June 2011. Described by Jobs as a “spaceship” and others as a Shangri La, this massive complex would house 12,000 employees in 2.8 million square feet. Now some investors are worried about the costs, which has ballooned from $3 billion to $5 billion.

It’s not the cost that concerns me, but the message this sort of project sends to the everyone: “We’ve made it.” When this feeling starts to permeate an organization, people relax and lose their edge. (Just ask IBMers who lived through the downturn of the ’80s and ’90s.) With Apple’s business strategy based on product innovation, they would be better served to stay lean and hungry.

What do you think? Will the new Apple HQ help the company innovate and continue to lead the tech world? Or, is it a sign that Apple leaders have lost focus on what really matters, and want to build an edifice to their greatness?

Further reading: The Crazy Details About How Apple Is Going To Construct Its $5 Billion Spaceship HQ (AAPL)

One Response to Apple's biggest risk is… a new corporate HQ!?

  1. Andrew Rudin April 5, 2013 at 4:19 pm #

    Bob: you’ve hit on another passion of mine–architecture and design. Its intersection with business performance seems interesting. Has a grandiose, opulent headquarters led to the demise of a company? I’ll have to do some research. Off the top, I think not. But the hubris and self-satisfaction that accompany the executives housed in such digs might be more connected. Overall, I think if Apple accepts the cost overruns and moves forward, it sends a bad message to the entire organization, and opens up a can of worms for “fiscal conservatism” when planning future projects.

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