by Asif Khan
We’ve all read the doom and gloom articles on the fate of Apple since the passing of Steve Jobs. This article anointed Jobs the Ronald Reagan of Technology. Several others started asking “WWJD” (“what would Jobs do?”) every time the post-Jobs Apple had a misstep (like Apple Maps). And one can convincingly make the argument that Apple is not the same scrappy underdog we all used to root for.
In fact, Apple is now the most valuable company in the world. It has become the very thing that the Apple loyalists all fought against all these years (anyone remember the famous Apple 1984 Ad?)
Looking back, this past year showed us a not-ready-for-primetime version of Siri, a disastrous PR mess with Apple Maps, a disappointing iPhone4S, a “catch-up-to-Android” iPhone5, a “me-too” iPad Mini, yet another confusing and inconsistent iPod Nano redesign, a needlessly proprietary connector and the worst offender of all, those horrible Genius ads. I MEAN, WHAT WERE THEY THINKING??
To add insult to injury, old-and-stodgy Microsoft seems to have out-Appled Apple this week with the popularity and buzz of its brand new Surface tablet.
And now AAPL stock seems to be taking its revenge. It is down $100 since its peak about a month ago (the week the iPhone5 was announced). The beginning of the end? Hardly. Let’s take a look at the bigger picture.
AAPL stock rose 88% in the year since Steve’s death. But maybe that can be attributed to the momentum that Steve curated. You might say the real test is how the stock will do once Tim Cook’s imprint is felt on the company’s products and direction. By that measure, the results don’t look so good. The stock dropped by $100 since the iPhone5 was announced. That’s $52 BILLION in lost market value. That is $9B more than the market value of HP and Dell COMBINED. That is $5B more than the entire market value of Facebook and its 1 billion users.
On the other hand, Apple is so big that this drop in market value represents less than 14% of its total value. And this drop merely brings its P/E ratio in line with the S&P500 average (about 14%). With Apple’s growth rate far greater than the S&P500 average, this can be seen as a rare opportunity for those that want to buy the stock, to get it at a clearance price. Nothing to see here, folks. Let’s move onto the product line instead.
Apple’s latest quarterly earnings announcement stated that the iPod saw a 19% decline in sales in the last 12 months. Still, at least the iPod Touch is a gateway drug to the iOS ecosystem. But why bother redesigning the iPod Nano? Because they can. The iPhone and iPad have been cannibalizing the iPod business for years but the shrinking iPod revenue stream is still a billion dollar business. And there are basically no competitors left standing. Apple has sold over 300M iPods since its introduction almost a dozen years ago. Most competitors would love to get their hands on this business.
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