Forget peripherals: real question is how strong is Apple's core

A LITTLE sympathy for Apple's chief executive, Tim Cook, is in order. Following Steve Jobs was never going to be easy, but he has hardly been helped by the hype and expectation piled on the company.

Yes, Apple exploits the mood merrily when it has a new gizmo to flog, but at Apple the machine has been in ridiculous overdrive for the past year.

The first sign was analysts competing to be the first to predict a $US1000 ($959) share price. Brian White of Topeka Capital Markets was the winner, declaring "Apple fever is spreading like a wildfire around the world". Others piled in.

Given the size of the company and its weight in various indices, not owning Apple shares suddenly became a career risk for the average US fund manager. Who would want to be the fool who stood alone against the iPhone 5?

At $US700 the stock was clearly priced for perfection. After a small slip - a wonky mapping app - the machine went into reverse. With tech stocks there is no neutral gear; they are either on their way to the moon, or they are former growth companies that have run out of ideas.

So last week's numbers were greeted as evidence of the latter - a confirmation that Apple has peaked. It is true that its quarterly profits were flat year on year at $US13.1 billion and that the annual outcome could be the first decline for a decade.

Higher manufacturing costs are a fact of life and Samsung, which has put a dent in Apple's profit margins, is a formidable competitor. The shares fell another 12 per cent to $US450.

But take a step back. After the ride on Wall Street's rollercoaster, Apple's shares stand almost exactly where they did a year ago. For a company in transition that is hardly a humiliation. What matters is the rate of decline.

Middle age comes to everyone and handing out the winnings (Apple has $US137 billion in cash) in the form of dividends or buybacks would be no disgrace. But can anyone really be confident that Apple's growth has peaked, and the 48 million iPhones sold in the past quarter represent a last hurrah? It is far too early to judge. The big event is the next product: it always is.

It is fair to beat up Mr Cook for failing to spot, until now, potential child-labour abuses in the supply chain, but it is premature to conclude that Apple's innovation pipeline is broken, or that it has lost its appetite for risk.