Much Ado about Apple

Thursday, March 02, 2006

Working for Intel, I've been hearing even more than the average person about Apple and how great it is. There are a lot of great things about Apple - here's a few:

  • Great product design: I don't know anyone who doubts or questions Apple's product design prowess. This involves both hardware (iPod, iMac) and software (OSX).
  • Steve Jobs: Steve definitely has a way about him. He is a great leader; however, in my mind not necessarily a good manager.
  • Recent stock price: A year ago, AAPL was trading just over $40/share. It made it over $80 before settling back to it's current price of $69.35 (10:55AM EST March 2nd, 2006).

Please, stop the insanity. Apple will always be a player, and never be the player, at least not for very long, at least not while Steve Jobs is running the ship. Why? Despite 20 years of evidence to the contrary, Steve still seems to believe that proprietary systems, vertical integration and customer lock-in are the way to profitability, market share and investor value. When they hit on a great product, the stock will go up. When they can no longer innovate the product to keep its popularity up, the fad will go away, and Apple will lose revenues, profit, market share, and stock value. I see no evidence to suggest a sustainable model.

Sometimes I look at a stock and am completely at a loss to explain how the market can value the company the way it does. In Apple's case, P/S right now is <4, which does a fair job of explaining it, despite a 37.48 ttm P/E and a 26.73 forward P/E. However, Apple's company and stock, in my opinion, is a house of cards, and I'll stay away from AAPL, despite a belief that in the short run, there are profits to be had. Oh, and my music player? It's a Creative MuVo TX FM (1GB). I'll write about the virtues of it in another post.

Emil's Wicked Cool Blog