How This Executive Departure Turned Apple Into a Growth Stock

Sir Jonathan Ive left the building in June this year, and Apple (NASDAQ: AAPL) shed $9 billion in market cap when the announcement was made. That wasn’t surprising. Ive was the Cupertino, California, company’s design guru and the man behind some of Apple’s most iconic products. So his unexpected departure came as a shock to Apple investors at a time when iPhone sales are on the wane.

It has been five months since Ive left and it is clear by now that his departure hasn’t dented investor confidence one bit. Apple has remained a top growth stock.

AAPL data by YCharts.

The iPhone has regained its mojo, and the company looks all set for a big 2020. So it would be relatively safe to say that Ive’s departure was probably a blessing in disguise for Apple. Let me explain why.

Apple needed a change

Ive had been at Apple since 1992, so his departure probably gave Apple executives the room to get someone else on board with a fresh perspective. After all, there wasn’t much to differentiate recent-generation iPhones from their rivals as design innovation in the smartphone space came to a grinding halt.

Of course, Apple has moved ahead with the times by equipping the iPhones with an all-screen design, but that’s not different from what others in the industry are doing. Thanks to the premium positioning of Apple’s iPhones, consumers were finding it hard to dole out the extra cash when comparing them to cheaper but well-equipped rivals.

For instance, there were several Chinese smartphones similar in appearance to the iPhone X, and at much lower prices. In the meantime, Apple’s prime rival Samsung pushed the smartphone design envelope with a foldable device in 2019, and Motorola Mobility followed suit by rebooting the iconic Razr phone in a foldable form.

What’s more, even Huawei has joined the foldable smartphone revolution with the Mate X. Apple, on the other hand, has been slow to catch up to this trend. Cupertino has already filed a patent that indicates it is working on foldable smartphone design, though it might be a couple years before a foldable iPhone hits the market, as recent leaks suggest.

In all, Apple’s rivals are looking more likely to pull ahead of the curve on the design front as far as innovation is concerned. I’m saying this because a foldable smartphone could give users more screen real estate that they can use to play games, browse the internet, or consume video content.

This could be a key selling point for foldable smartphones and prove to be a pain point for Apple, which has been losing a lot of ground in the smartphone space. The bottom line is that while rivals have been trying new things, Apple has gone stagnant. This is why it was important for Cupertino to try something new on the design front, and that required a fresh perspective.

Image Source: Getty Images.

Small design changes are helping iPhone sales

By now, it is clear that Apple needed to shake things up from a product-development standpoint. There hasn’t been a major shake-up just yet in the post-Ive era. That’s because, even though Ive left to form his own design firm to pursue other things, he continues to work closely with the company on a “range of projects,” according to the statement Apple issued at the time of his departure. He’s just doing so with a trusted contractor’s level of access and oversight.

It’s becoming clear though that the small changes made to this year’s iPhone have started bearing fruit and could encourage Apple to move further away from Ive’s design philosophy.

The latest iPhone 11 Pro Max has bulked up instead of slimming down. It weighs 226 grams, up from last year’s top-of-the-line iPhone XS Max’s 208 grams. The depth of the device has also increased this time, to 8.1 millimeters, while the previous two flagship devices had a depth of 7.7 mm.

The bulk and the depth of the iPhone 11 Pro Max can be attributed to a bigger battery, along with the addition of a third camera. These practical changes and a lower entry-level price have injected new vigor into iPhone sales. This might not have been possible had Ive been at the helm since the design guru was reportedly obsessed with making devices thinner.

Design leaks indicate that Apple will continue to make tweaks to the iPhone’s appearance next year. The company might eliminate the notch at the top of the viewscreen that allows for the earphone and forward-facing camera and even go for a complete design overhaul as it prepares to integrate 5G into 2020 iPhones.

Cupertino probably believes that a combination of a fresh design and the deployment of 5G will help it ship 100 million units of next year’s iPhone models. For comparison, Apple predicts 80 million shipments of the 2019 iPhone models.

In all, Apple’s newfound confidence and resurgent iPhone sales indicate that Ive’s departure might have been a blessing in disguise. After all, the small tweaks made to this year’s iPhones are already working, and a fresh design perspective for 2020 could help Apple move up in the smartphone race.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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