If you're driving into Boston, you might notice something new on I-90. Acquia has placed ads on two local billboards; more than 120,000 cars drive past these billboards everyday. This is the first time in Acquia's eleven years that we've taken out a highway billboard, and dipped our toes in more traditional media advertising. Personally, I find that exciting, because it means that more and more people will be introduced to Acquia. If you find yourself on the Mass Pike, keep an eye out!
At Drupal Europe, I announced that Drupal 9 will be released in 2020. Although I explained why we plan to release in 2020, I wasn't very specific about when we plan to release Drupal 9 in 2020. Given that 2020 is less than thirteen months away (gasp!), it's time to be more specific.
Shifting Drupal's six month release cycle
Before I talk about the Drupal 9 release date, I want to explain another change we made, which has a minor impact on the Drupal 9 release date.
As announced over two years ago, Drupal 8 adopted a 6-month release cycle (two releases a year). Symfony, a PHP framework which Drupal depends on, uses a similar release schedule. Unfortunately the timing of Drupal's releases has historically occurred 1-2 months before Symfony's releases, which forces us to wait six months to adopt the latest Symfony release. To be able to adopt the latest Symfony releases faster, we are moving Drupal's minor releases to June and December. This will allow us to adopt the latest Symfony releases within one month. For example, Drupal 8.8.0 is now scheduled for December 2019.
We hope to release Drupal 9 on June 3, 2020
Drupal 8's biggest dependency is Symfony 3, which has an end-of-life date in November 2021. This means that after November 2021, security bugs in Symfony 3 will not get fixed. Therefore, we have to end-of-life Drupal 8 no later than November 2021. Or put differently, by November 2021, everyone should be on Drupal 9.
Working backwards from November 2021, we'd like to give site owners at least one year to upgrade from Drupal 8 to Drupal 9. While we could release Drupal 9 in December 2020, we decided it was better to try to release Drupal 9 on June 3, 2020. This gives site owners 18 months to upgrade. Plus, it also gives the Drupal core contributors an extra buffer in case we can't finish Drupal 9 in time for a summer release.
We are building Drupal 9 in Drupal 8
Instead of working on Drupal 9 in a separate codebase, we are building Drupal 9 in Drupal 8. This means that we are adding new functionality as backwards-compatible code and experimental features. Once the code becomes stable, we deprecate any old functionality.
Let's look at an example. As mentioned, Drupal 8 currently depends on Symfony 3. Our plan is to release Drupal 9 with Symfony 4 or 5. Symfony 5's release is less than one year away, while Symfony 4 was released a year ago. Ideally Drupal 9 would ship with Symfony 5, both for the latest Symfony improvements and for longer support. However, Symfony 5 hasn't been released yet, so we don't know the scope of its changes, and we will have limited time to try to adopt it before Symfony 3's end-of-life.
We are currently working on making it possible to run Drupal 8 with Symfony 4 (without requiring it). Supporting Symfony 4 is a valuable stepping stone to Symfony 5 as it brings new capabilities for sites that choose to use it, and it eases the amount of Symfony 5 upgrade work to do for Drupal core developers. In the end, our goal is for Drupal 8 to work with Symfony 3, 4 or 5 so we can identify and fix any issues before we start requiring Symfony 4 or 5 in Drupal 9.
Another example is our support for reusable media. Drupal 8.0.0 launched without a media library. We are currently working on adding a media library to Drupal 8 so content authors can select pre-existing media from a library and easily embed them in their posts. Once the media library becomes stable, we can deprecate the use of the old file upload functionality and make the new media library the default experience.
The upgrade to Drupal 9 will be easy
Because we are building Drupal 9 in Drupal 8, the technology in Drupal 9 will have been battle-tested in Drupal 8.
For Drupal core contributors, this means that we have a limited set of tasks to do in Drupal 9 itself before we can release it. Releasing Drupal 9 will only depend on removing deprecated functionality and upgrading Drupal's dependencies, such as Symfony. This will make the release timing more predictable and the release quality more robust.
For contributed module authors, it means they already have the new technology at their service, so they can work on Drupal 9 compatibility earlier (e.g. they can start updating their media modules to use the new media library before Drupal 9 is released). Finally, their Drupal 8 know-how will remain highly relevant in Drupal 9, as there will not be a dramatic change in how Drupal is built.
But most importantly, for Drupal site owners, this means that it should be much easier to upgrade to Drupal 9 than it was to upgrade to Drupal 8. Drupal 9 will simply be the last version of Drupal 8, with its deprecations removed. This means we will not introduce new, backwards-compatibility breaking APIs or features in Drupal 9 except for our dependency updates. As long as modules and themes stay up-to-date with the latest Drupal 8 APIs, the upgrade to Drupal 9 should be easy. Therefore, we believe that a 12- to 18-month upgrade period should suffice.
So what is the big deal about Drupal 9, then?
The big deal about Drupal 9 is … that it should not be a big deal. The best way to be ready for Drupal 9 is to keep up with Drupal 8 updates. Make sure you are not using deprecated modules and APIs, and where possible, use the latest versions of dependencies. If you do that, your upgrade experience will be smooth, and that is a big deal for us.
This week I was in New York for a day. At lunch, Sir Martin Sorrell pointed out that Microsoft overtook Apple as the most valuable software company as measured by market capitalization. It's a close call but Microsoft is now worth $805 billion while Apple is worth $800 billion.
What is interesting to me are the radical "ebbs and flows" of each organization.
In the 80's, Apple's market cap was twice that of Microsoft. Microsoft overtook Apple in the the early 90's, and by the late 90's, Microsoft's valuation was a whopping thirty-five times Apple's. With a 35x difference in valuation, no one would have guessed Apple to ever regain the number-one position. However, Apple did the unthinkable and regained its crown in market capitalization. By 2015, Apple was, once again, valued two times more than Microsoft.
And now, eighteen years after Apple took the lead, Microsoft has taken the lead again. Everything old is new again.
As you'd expect, the change in market capitalization corresponds with the evolution and commercial success of their product portfolios. In the 90s, Microsoft took the lead based on the success of the Windows operating system. Apple regained the crown in the 2000s based on the success of the iPhone. Today, Microsoft benefits from the rise of cloud computing, Software-as-a-Service and Open Source, while Apple is trying to navigate the saturation of the smartphone market.
It's unclear if Microsoft will maintain and extend its lead. On one hand, the market trends are certainly in Microsoft's favor. On the other hand, Apple still makes a lot more money than Microsoft. I believe Apple to be slightly undervalued, and Microsoft is to be overvalued. The current valuation difference is not justified.
At the end of the day, what I find to be most interesting is how both organizations have continued to reinvent themselves. This reinvention has happened roughly every ten years. During these periods of reinvention, organizations can fall out out favor for long stretches of time. However, as both organizations prove, it pays off to reinvent yourself, and to be patient product and market builders.
Last week, WordPress Tavern picked up my blog post about Drupal 8's upcoming Layout Builder.
While I'm grateful that WordPress Tavern covered Drupal's Layout Builder, it is not surprising that the majority of WordPress Tavern's blog post alludes to the potential challenges with accessibility. After all, Gutenberg's lack of accessibility has been a big topic of debate, and a point of frustration in the WordPress community.
I understand why organizations might be tempted to de-prioritize accessibility. Making a complex web application accessible can be a lot of work, and the pressure to ship early can be high.
In the past, I've been tempted to skip accessibility features myself. I believed that because accessibility features benefited a small group of people only, they could come in a follow-up release.
Today, I've come to believe that accessibility is not something you do for a small group of people. Accessibility is about promoting inclusion. When the product you use daily is accessible, it means that we all get to work with a greater number and a greater variety of colleagues. Accessibility benefits everyone.
As you can see in Drupal's Values and Principles, we are committed to building software that everyone can use. Accessibility should always be a priority. Making capabilities like the Layout Builder accessible is core to Drupal's DNA.
Drupal's Values and Principles translate into our development process, as what we call an accessibility gate, where we set a clearly defined "must-have bar". Prioritizing accessibility also means that we commit to trying to iteratively improve accessibility beyond that minimum over time.
Together with the accessibility maintainers, we jointly agreed that:
- Our first priority is WCAG 2.0 AA conformance. This means that in order to be released as a stable system, the Layout Builder must reach Level AA conformance with WCAG. Without WCAG 2.0 AA conformance, we won't release a stable version of Layout Builder.
- Our next priority is WCAG 2.1 AA conformance. We're thrilled at the greater inclusion provided by these new guidelines, and will strive to achieve as much of it as we can before release. Because these guidelines are still new (formally approved in June 2018), we won't hold up releasing the stable version of Layout Builder on them, but are committed to implementing them as quickly as we're able to, even if some of the items are after initial release.
- While WCAG AAA conformance is not something currently being pursued, there are aspects of AAA that we are discussing adopting in the future. For example, the new 2.1 AAA "Animations from Interactions", which can be framed as an achievable design constraint: anywhere an animation is used, we must ensure designs are understandable/operable for those who cannot or choose not to use animations.
Drupal's commitment to accessibility is one of the things that makes Drupal's upcoming Layout Builder special: it will not only bring tremendous and new capabilities to Drupal, it will also do so without excluding a large portion of current and potential users. We all benefit from that!
Apple had a rough year; its stock price has fallen 25% since the beginning of the year. Apple also reported a weaker than expected outlook and shared that it will no longer report individual unit sales, which many consider a bearish signal within a saturated smartphone market.
It's no surprise that this has introduced some skepticism with current Apple shareholders. A friend recently asked me if she should hold or sell her Apple stock. Her financial advisor suggested she should consider selling. Knowing that Apple is the largest position in my own portfolio, she asked what I'm planning to do in light of the recent troubles.
Every time I make an investment decision, I construct a simple narrative based on my own analysis and research of the stock in question. I wrote down my narrative so I could share it with her. I decided to share it on my blog as well to give you a sense of how I develop these narratives. I've shared a few others in the past — documenting my "investment narratives" is useful as it helps me learn from my mistakes and institutes accountability.
As a brief disclaimer, this post should be considered general information, and not a formal investment recommendation. Before making any investment decisions, you should do your own proper due diligence.
Over the last five years, Apple grew earnings per share at 16% annually. This is a combination of about 10% growth in net profit, combined with almost 6% growth as the result of share buybacks.
Management has consistently used cash to buy back five to six percent of the company's outstanding shares every year. At the current valuation and with the current strength of Apple's balance sheet, buybacks are a good use of a portion of their cash. Apple will likely see similar levels of cash generation in the coming years so I expect Apple will continue to buy back five to six percent of its outstanding shares annually. By reducing the number of shares on the market, buybacks lift a company's earnings per share by the same amount.
Next, I predict that Apple will grow net profits by six to seven percent a year. Apple can achieve six to seven percent growth in profits by growing sales and improving its margins. Margins are likely to grow due to the shift in revenue from hardware to software services. This is a multi-year shift so I expect margins to slowly improve over time. I believe that six to seven percent growth in net profits is both reasonable and feasible. It's well below the average 10% growth in net profits that we've seen in recent years.
Add 5-6% growth as the result of share buybacks to 6-7% growth in profit as a result of sales growth and margin expansion, and you have a company growing earnings per share by 12% a year.
If Apple sustains that 12% percent earnings per share growth for five years, earnings per share will grow from $11.88 today to $20.94 by the end of 2023. At the current P/E ratio of 15, one share of Apple would be worth $314 by then. Add about $20 in dividends that you'd collect along the way, and you are likely looking at market beating returns.
The returns could be better as there is an opportunity for P/E expansion. I see at least two drivers for that; (a) the potential for margin improvement as a result of Apple shifting its revenue mix, and (b) Apple's growing cash position (e.g. if you subtract the cash per share from the share price, the P/E increases).
Let's assume that the P/E expands from the current 15 to 18. Now, all of a sudden, you're looking at a per share price of $397 by the end 2023, and an average annual return of 18%. If that plays out, every dollar invested in Apple today, would double in five years — and that excludes the dividend you'd collect along the way!
Needless to say, this isn't an advanced forecasting model. Regardless, my narrative shows that if we make a few very reasonable assumptions, Apple could have a great return the next five years.
While Apple's day of disruption might be behind it, it remains one of the greatest cash machines of all time. Modest growth combined with a large buyback program and a relatively low valuation, can make for a great investment.
I'm not selling my Apple stock and I'd be tempted to buy more if the share price were to drop below $155 a share.
Disclaimer: I'm long AAPL. Before making any investment decisions, you should do your own proper due diligence. Any material in this article should be considered general information, and not a formal investment recommendation.