Apple (AAPL) Slashes CEO Tim Cook's Compensation by 15%

Per media reports, declining iPhone sales have resulted in Apple IncAAPL cutting CEO Tim Cook's compensation. As a result, Cook took home a compensation of $8.7 million in fiscal 2016, down 15% from $10.3 million received in fiscal 2015.

Per media reports, though Cook's base salary increased as much as 50%, his incentive was only 1.79 times the base salary, unlike last year when it was four times as the company met its earnings and revenue goals. Like Cook, several other top executives have been subject to pay cuts as well.

Apple fortunes remain tied to its flagship offering, the iPhone, which at present is facing growth issues. Demand for iPhones has been marred by global macroeconomic weakness due to currency volatility and declining commodity prices in some key regions across the globe. In fiscal 2016, Apple iPhone's unit sales were down 5.3% year over year. Sluggish demand is a major concern as iPhone alone contributes about 60% to the company's total revenue.

Additionally, we need to keep in mind that iPhone forms the core of Apple's ecosystem. The company has also been seeing a slowdown in demand from key regions like China, which, if it continues, can significantly impact Apple's financials going ahead. About 63% of Apple's revenues come from the international markets. Moreover, competition from newer devices like Alphabet's GOOGL Pixel as well as cheaper smartphones is a major concern.

Apple Inc. Price

Apple Inc. Price | Apple Inc. Quote

Reportedly, last year, for the first time in 15 years, Apple reported a year-over-year decline in its revenues. The company's revenues in fiscal 2016 were down 7.7% to $215.6 billion. Per the SEC filing, revenues were 3.7% below the targeted number for the last fiscal year. Given all these factors, Apple's shares have underperformed the broader market over the past one year. Over the past one year, shares of Apple have registered growth of 19.67% compared with the Zacks Computer Mini industry's gain of 20.68%.

Even the much hyped Apple watch hasn't been much help. As per an IDC report published last month, sales of the Apple watch tanked 71% year over year to $1.1 million. However, the report added that though sales of the Apple Watch were down, there has been overall growth of 3.1% in the shipment of wearables. This was driven by consumers' preference for simpler wearables, which have seen double-digit growth throughout the third quarter. Also, Apple's decision to launch the Apple Watch Series 2 toward the end of the quarter resulted in lower sales. As growth of the smart watch category remains challenged, Apple's Watch will be up against tough times in the future, added IDC.

Though Apple is working extensively on its other offerings like App Store, Apple Music and Apple Pay, these are not yet strong enough to lower the company's dependence on the iPhone.

However, it will be a mistake to underestimate Apple just yet. As per rumors, Apple is planning to launch iPhone 8 next year, on the 10th anniversary of the first iPhone. The new iPhone will reportedlyhave unbelievable features including a glass body, a dual-curved edge-to-edge OLED display with a built-in Touch ID sensor, wireless charging and so on. Analysts expect a surge in demand following the launch of the new iPhone, which is already being dubbed as "super cycle".

As far as sales of iPhone 7 and 7 Plus is concerned, we expect to gain better visibility when Apple reports quarterly results on Jan 31.

At present, Apple has a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the wider technology space include Veeva Systems Inc. VEEV and LivePerson, Inc. LPSN . While Veeva Systems sports a Zacks Rank #1 (Strong Buy), LivePerson carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

In the trailing four quarters, Veeva Systems and LivePersonhave yielded positive average earnings surprises of 47.77% and 56.43%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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