Apple: Already (Essentially) A Private Company

| About: Apple Inc. (AAPL)

Lost amid the dashed hopes and bitter recriminations of analysts who had expected more than 50 million iPhones sold in Q1 but had to reconcile to a measly 47.8 million, and investors who were assured there would be no more 'low ball' guidance, only to receive flattish low ball revenue guidance of $41-43 billion for Q2, is this hard reality: Apple (NASDAQ:AAPL) cares not one whit about investors, analysts or journalists. Much continues to be written about what Apple needs to do to 'fix' a deteriorating image, to shore up its devastated stock price, and to rectify its perceived fall off the perch of being the largest public company. Apple management, you can be absolutely sure, is unmoved, and will not change one iota of its strategy or approach.

What most investors, analysts and journalists fail to understand about Apple is that the company is already essentially private. Unlike most public companies that employ large numbers of Investor Relations and Public Relations professionals to spread the word and get their message out to the right target audience, Apple employs its IR and PR professionals to disseminate as little information about its future plans, objectives and goals as possible.

Rational and savvy investors, like Warren Buffett, look at Apple's fundamentals and stock price and see great potential for capital appreciation. Unfortunately, such a view is not shared by Apple's management. More than likely, Tim Cook will do little more than Steve Jobs did after Buffett encouraged them both to buy back stock. The reason is that Apple has no interest in sending 'Buy' signals to the Street or doing share buy-backs to boost EPS. Apple management will continue to eschew advice from any and all, no matter how important or well-intentioned.

When I went on CNBC on April 9, 2009 recommending Apple stock at $119.50 per share, I took considerable heat from short-sellers who dismissed me for saying Apple was 'different,' and that the company had a vision to 'change the world'. With $145 per share in cash on its balance sheet, it's fair to say that in the past four years Apple did, in fact, change the world. During the recent Jobs/Cook era, Apple's focus has been entirely on making 'insanely great products' and has never been about generating profits or boosting its share price to reach some arbitrary goal. If you are looking for a company that believes its own shares are undervalued or that it exists to serve its shareholders, you should look elsewhere.

So if Apple does not care about Wall Street, investors, analysts or media, why does it bother with the pretense? The reason is fairly obvious: Apple went public in 1980 at a time when it needed to raise capital to grow, and being public was its best option. That legacy continues, but only because the company became too large to be taken private.

Apple will likely remain a public company because it is convenient to do so, and because it is easy enough to keep doing the minimum required of being a public entity. Apple will cede nothing to its competitors, and it will also not be goaded into statements designed to prop up its stock price when, at the end of the day, Apple doesn't really care what happens to its stock price.

Well then, what does Apple care about? In a word: customers. That doesn't mean Apple cares about you or me, specifically, even though I type this on a MacBook and have owned every iPhone since the first version. No, sadly Apple does not care about me, except in some generic sense with me being a generic customer willing to pay a premium price for a premium product. Apple's passion has always been, and will always be, about the user experience, the quality of its products and its reputation as the leading consumer technology company.

Unfortunately, this singular focus has isolated Apple and led to what I and others see as arrogance and indifference. Wouldn't it be great if you could take the battery out of an iPhone and swap it out with a fresh battery, the way cell phones always used to be? Apple in its wisdom has seen fit to thwart anyone who tries to do so. Opening an iPhone is darn near impossible, and once it's open you can't possibly swap out the battery that is soldered in. That makes many people unhappy. So what? Apple doesn't care if those people won't buy iPhones. Plenty of other people will put up with the inconvenience because the overall experience is unsurpassed - those are its loyal, Apple customers.

Wall Street, in its infinite wisdom, has seen fit to 'punish' Apple for its abject neglect and unwillingness to be obsequious or deferential. The P/E/G of Apple stock has been ridiculously low for years, considering how fast the company has grown and how influential it is within technology. Other companies in a similar position would have likely done more to court Wall Street, to rectify the inequity and to mollify the critics. Apple can afford to shrug and say, 'so what?'

If you can live with the fact that Apple acts as if it is a private company, beholden to no one and nothing, then you should consider the recent share price drop as a buying opportunity. In the long run, as Apple well knows, it matters not what pundits, analysts or journalists say or write, it matters only how many customers are satisfied and are willing to keep buying what is arguably the best technology in the world. In that respect, Apple's share price still has plenty of room for upside, even though it may take a very long time for that reality to sink in.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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