Pressure builds on Apple to make a move

April 24, 2013: 5:54 AM ET

Despite the company's announcement of a dividend increase and stock buyback, the truth is Apple didn't have much to say. And that may be problematic.

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FORTUNE -- Here's what Apple told investors about its business Tuesday: Margins, revenues, and profits in the next quarter all will be worse than investors had expected. Here's what Apple didn't address Wednesday: Specific plans for any new product categories or personnel moves, either among its long-serving management team or to fill at least one long-vacant hole. The stock rallied in after-hours trading.

Oh yeah, one more thing: Apple (AAPL) said it will dramatically increase its dividend, its share buybacks, and, for the first time, that it will borrow significant amounts of money to fuel this return of capital to shareholders. Apple actually bragged on its earnings call with investors that it will be one of the biggest payers of dividends in the world. Think: Insanely great … dividends?

There's more. Tim Cook, the man with the most unenviable task in the history of business, that of following Steve Jobs, said Apple planned to release "great" new products in the "fall and throughout 2014," and, eventually, new categories. The fall? If true, meaning that if Apple's big meeting with developers in June is a ho-hum event from a new-product perspective, then Apple will have gone a year without new product introductions.

MORE: Apple beats targets, will return $100 billion to shareholders

New products at Apple is the only thing that matters. Margins are eroding because new products cannibalize older products. The success of the iPad Mini is a financial penalty for Apple: It's a less profitable product than its bigger cousin. But that is beside the point. Apple said a significant number of iPad Mini buyers are first-time iPad buyers, and this is what is important, adding new Apple customers to its lists of people to market the next great products -- whatever their configuration. Remember, Apple has done this before. iPod Shuffle customers spent less than they did on iPods. They also had to have an iPhone when it came out.

In some ways, Apple sounds delusional when it talks about itself. Asked, as he has been many times before, for his take on the trend to pack bigger screens into smartphones, Tim Cook said he thinks Apple's iPhone 5 has the best screen in existence and that big screens aren't for everyone. He'll keep saying that until Apple offers a phone with a bigger screen. And we'll see how that sounds when we witness customer reactions to the new Samsung Galaxy S4, a product whose media blitz has just begun.

In other ways, Apple shows that it is very much in tune with reality. Cook knows keeping $145 billion lying around is too much. So he'll give more back to shareholders. He knows that with interest rates as low as they are it makes no sense for a company with Apple's balance sheet not to borrow money and share the benefits with shareholders. So he's taking on debt -- Steve Jobs's aversion to the stuff be damned.

The world stops and listens when Apple talks. The problem is that Apple doesn't always have something to say, and Tuesday was one of those days. It would be foolish to assume Apple isn't ever going to have anything to say again. But the pressure certainly is building.

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About This Author
Adam Lashinsky
Adam Lashinsky
Senior Editor at Large, Fortune

Adam Lashinsky is a San Francisco-based editor-at-large for FORTUNE, covering Wall Street and Silicon Valley. Lashinsky joined FORTUNE in 2001, after two years as a contributing columnist. Prior to joining FORTUNE, Lashinsky covered Silicon Valley for TheStreet.com and The San Jose Mercury News. A Chicago native, Lashinsky holds a B.A. in history and political science from the University of Illinois at Urbana-Champaign.

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