Apple CEO Tim Cook Needs to Start Putting Out Fires

As the market prepares for Apple Inc.’s earnings on Thursday, all I can think is this: Chief Executive Officer Tim Cook has problems. Plenty of them.

The company dropped out of the $3 trillion valuation club this week, leaving Microsoft Corp. to stand alone, thanks to worries over China sales and a multitude of other headaches for the Cupertino-based company. There are at least half a dozen challenges that analysts and investors will most likely ask Cook to address.

Apple is staring down another quarter of underwhelming-at-best revenue

Revenue has declined for four consecutive quarters, the worst run since 2001. One more would make it the worst period since at least 1998, according to FactSet. The last time Apple updated investors, the company warned that revenue would be flat in the October-December quarter, saying iPad and wearables sales (i.e. the Apple Watch) would drop significantly. Still, analysts are expecting a modest revenue increase of 1% year-over-year in what is always Apple’s biggest quarter thanks to the introduction of a new iPhone model and holiday sales. Standing in its way is the continued uncertainty about sales in China. In January, Apple reduced the prices of several products in the country. Bloomberg Intelligence analysts felt this “reaffirmed expectations of a slowdown in the region.”

The days are numbered for its 30% App Store tax

Ignoring the lessons of Microsoft’s disastrous antitrust battles in the 1990s, Cook has taken an antagonistic approach to responding to regulatory and court-ordered actions regarding the business model of its App Store.

Since the store’s inception in 2008, Apple has taken a healthy 30% cut from transactions (with an exception here and there). But recently, large companies have started kicking up a fuss, arguing that Apple should either greatly lower that fee, allow them to offer different ways to pay, or make it possible for companies to have their own app stores, with their own rules, available alongside Apple’s official store in the iPhone and iPad.

In January, Apple was forced to comply with a US court order that directed Apple to allow app makers to direct users to alternative payment methods, which it duly did — though not without remarkably onerous terms that even Apple’s biggest cheerleaders, such as the tech commentator John Gruber, consider to be risky. In Europe, it is adopting a similar tactic — technically “complying” with EU demands on allowing alternative app stores, though certainly not with the spirit some had hoped.