Monthly Archives: January 2013

How liberating to be a fan of Apple products, and not worry about AAPL

Nothing like a good stock bloodbath to clear one’s mind.

Yes, AAPL this morning is down about 11%, having shed the equivalent market cap of one RIM plus two Nokia’s in a few hours.  This despite having reported perhaps the most impressive quarterly company performance in the history of such things.    $23 Billion in quarterly cash flow from operations.  A current asset hoard nearing $140B.  And that will grow by about $250M today.

Apple made more money in December than AMZN has over its entire life.

Given that AAPL is very broadly held, I wonder how many people are no longer able to really separate Apple’s product and stock performances?  How many people are using an iPhone and worrying about whether this product is going to be able to generate stable margins over time?  Probably not many in the scheme of things:  iOS is truly, widely held.

Full disclosure: I shed my AAPL holdings.  It’s not that I’ve lost faith in the company.  I did this because AAPL, like any equity, is exposed to manipulation, emotion, and stock traders and analysts who care little about the holistic company health/longevity/products.  I just don’t want to stomach the thrash right now.

The problem is, somewhat ironically, the same as what Bill or Steve (I forget) once pointed out back in the day at Microsoft:  to double our stock price, we’ll have to grow a Wal-Mart.  Similarly, Apple would need to grow an Exxon.

Apple is going to continue to be an incredible cash pump, unless they fail to execute in a pretty comprehensive way.

  • Smartphone penetration of the overall phone base has a ways to go, and there are no signs of iPhone churning materially to Android.  Samsung is filling the vacuum fast, but I’ll begin to worry when real people (not droidists who stalk Apple chat boards ready to pounce) are dumping iPhones en masse for Android.  Could iPhone volume double at full penetration?  Maybe, though at what gross margin.
  • Tablet penetration is in its infancy (potentially): they sold 20M iPads in the quarter, and I think the addressable installed base will eventually be probably 500M+ devices.  Will volume here double?  Probably?
  • Apple has several not so stealthy Trojan horses in the gaming race (Touch, iPhone, AppleTV).
  • Speaking of TV, the “hobby” continues to grow nicely, and at this rate (2M units in the holiday quarter), they will have an installed base approaching 20M by the end of the year — even without some more disruptive play they may be cooking.  One can easily see this at 50M in a few years, and thus a massive player.
  • Then there’s wearable computing, home automation, automobile aftermarket devices, payments (iTunes competing with Square, Paypal, etc), and the massive PC installed base which will convert slowly over time.

They do need to get their Maps, Music and Intelligent UX (Siri vs. Google Now) houses in order.  Not tomorrow, but they need to show a competence here I haven’t seen.

But I’m excited to watch this develop as a consumer, not as a shareholder exposed to every stupid rumor.   Wouldn’t it be amazing if Apple eventually went private?