L2 Founder Scott Galloway spoke on Bloomberg‘s Cory Johnson yesterday about Apple’s earnings call. Galloway said Apple is the only hardware manufacturer to sustain 39 points of margin. Even Gateway (which Galloway was on the board of) made gross margins of 6 points. He said Apple is a hardware company with the balance sheet of a software company, and its earnings results should silence Tim Cook critics.
Apple has not come out with a new product lately, which Galloway said is not necessarily a problem. It might be the first trillion-dollar company without a new product. If the iPhone absorbs all profit in the mobile space, and the iPad serves as the growth engine of mobile, the two devices are enough for Apple to maintain its high market cap.
Sources say Apple employees are having a hard time getting projects greenlighted under Tim Cook’s regime, but Galloway believes he has a wearable tech project the go-ahead. Apple hired Burberry and YSL CEOs Angela Ahrendts and Paul Deneve last year, most likely to work on a luxury accessory. Furthermore, it would be irresponsible for the best brand in the world not to enter the luxury space. Luxury goods companies trade at 15x EBITDA and Apple trades at 7x. Deriving as little as 10% of revenue from luxury goods will have an impact on their market cap.
Galloway was also optimistic about Facebook’s earnings, also released yesterday, saying no $10 billion company has performed better globally. Watch full video here.