Apple: Newest victim of the law of large numbers

So it was that following Apple's second-quarter earnings report on Tuesday Cook came across in the company's conference call with analysts as a CEO without a care in the world. He was "confident." He was "pleased."And of course, he was "excited."

He also was spinning Apple's performance for all it was worth.

"We do want to grow faster," Cook said. "But we don't view it as the only measure of our health."

Good try. If I were in Cook's position, I'd want to change the subject as well because here's what the rest of the world sees: Apple's net income fell 18 percent in the quarter while gross profit margins dropped for the fourth straight quarter. Revenues were up 11 percent, but that was less important than the totality of evidence pointing out that Apple is slowing down. What's more, Apple's third-quarter sales forecast was disappointing yet management could only offer vague assurances about "some great new features and capabilities in the pipeline."

Hardly a pretty picture, but part of this is entirely out of Cook's control. Back in 2010 and 2011 Apple was regularly beating earnings expectations. It also had a formidable pipeline that was popping out amazing products. However, after years of turbo-charged growth, Apple is no longer a special case and its product cadence is more workman-like, but hardly amazing.

So what happens? In the face of new, serious competition, Apple can't compete with its own breathtaking legacy for innovation. Felix Salmon has a good post explaining why Apple has become another victim of the law of large numbers and how yesterday's earnings report marks Apple's official transition from being considered a "high-growth tech stock, valued on its monster potential" to just another "cash cow, valued on its ability to pump hundreds of billions of dollars into its shareholders' pockets."

Not that there's anything wrong with that -- cue "Seinfeld" right about now -- but the only way to turn back the clock is to again reinvent the world; so after the iPhone, iPod, iMac and iPad, what now? The iTV? The iWatch? Unless the company is keeping the wraps on the mother of all surprises, Apple's got to rely on marketing to convince consumers its products are superior to the competition. And that was just what Cook did during the Q&A.

"There obviously are tough competitors but we feel that we have the best products, by far," Cook said. "And we are continuing to invest in innovative products and feel really, really confident about our product pipeline in both hardware, software and also services. We have the best ecosystem by far. And we're just going to keep augmenting it and making it better and better. And that shows up in both our loyalty ratings and our customer sat. So I feel very good about our competitive position."

Maybe he does but the critics and the skeptics -- not to mention the fence-sitters -- are hardly of one mind whether Apple is about to rebound. Cook did not offer much for them to grab onto. Help in the way of new products won't arrive soon and the recent disclosure from Hon Hai Precision Industry Co., which makes iPads and iPhones, of disappointing demand is another troubling harbinger that he sidestepped.

The only unalloyed excitement revolved around Apple's plan to double the amount of money that it returns to shareholders in the form of a higher dividend and stock buybacks. Apple raised its quarterly dividend 15 percent to $3.05 a share, from $2.65, as it increased its share-repurchase program to $60 billion from $10 billion. That was a sop to the investor class and it helped ignite temporary fireworks in after-hours trading before the sugar high wore off and the stock reversed course.

Cook did offer a tease that Apple has "some really great stuff coming in the fall and across all of 2014." Sounds as if he's suggesting that 2013 will go down as pretty much of a transition year. That wouldn't necessarily be a disaster -- and maybe it will help quash the goofy rumors circulating about a move afoot to push Cook out as CEO. But it's an unaccustomed role for Cook and his management. For much of the last decade, they ruled the tech roost and the media treated them like demi-gods who could do little wrong, even when they screwed up royally (here and here.) Apple's all the time looking less and less like the world-beater of yore and more like, well, a regular company caught in the midst of a hardscrabble competition with very able rivals.