Seeking Alpha
Bonds, long-term horizon, growth, value
Profile| Send Message|
( followers)

The Reason Apple Inc. Matters (By Blackberry's Fictitious #1 Fanboy)

Yesterday I read two interesting articles about Apple Inc. (NASDAQ:AAPL).

Source: This Chart Says Icahn Is Wrong About Apple (L. Lewitinn)

Mr. Lewitinn wrote:

... no one is more eagerly awaiting the numbers than its number one fanboy, Carl Icahn.

At the end of the day I read Rocco Pendola's recent article:

Source: Rocco_TheStreet

Mr. Pendola wrote:

What do we want Apple to do?

Drag us out of bed in the morning, brush our teeth and supply us with a game-changing bidet.

Mr. Lewitinn's premonition came true, Apple dropped about 8% after hours and was unable to rebound today. Mr. Pendola's article stood out for his comedic observations about Apple investors' expectations.

These articles represent two interesting and opposing points of view. It seems Apple news falls into three distinct categories:

  1. Bullish analysis
  2. Bearish analysis
  3. Product critique (on new, old, or lack of products)

Though I do not see many articles about Apple's economic importance. It just seems fairly obvious to me, Apple is the most valuable company (or at least one of them, taking into account intricate networks of businesses, some private.)

A top company requires a system that can fire on all cylinders to rise to the top of the top and it does require some luck, yes. To a certain degree it requires the capacity to "be cool." So cool, that masses of people really, truly want your product. Also an important factor is: The way of thinking. For instance Apple's corporate headquarters are at 1 Infinite Loop, not 295 Phillip Street (Blackberry's corporate headquarters.)

To some, the idea of 1 Infinite Loop is as silly as this article may sound. Though, my opinion is Apple is not a silly company - it is a great company. However, importantly I do not believe Apple or any company is quote-unquote "invincible."

51 Million Gadgets (That Happen To Be iPhones)

On January 27, 2014 Apple announced they sold 51 million iPhones, a disappointingly small fraction of the population:

Apple reported sales of 51 million iPhones during the last quarter, the most it has sold in any quarter, up from 47.8 million in the same period last year...

Sales of the iPhone shrank slightly in North America, partly because Apple had trouble making enough new phones to keep up with consumer demand...

Wall Street analysts had estimated Apple would sell about 55 million iPhones... Sales of iPhones Set Record for Quarter: 51 Million (Brian X. Chen, New York Times January 27, 2014)

As anyone, who has experienced the failure of selling 51 million products, would be; investors were discouraged and the stock plummeted. To an extent this is the way the economy works. It is almost like trying to predict what the ocean will do.

With that, I would like to relate an experience truly representative of the Apple economy. An experience which could not be more true if I made it up myself. (Which I did.)

My Blackberry: How I Was (not) Tricked Into Buying An iPhone

Apple gave their iPhone that good ol' college try and seemingly turned up bupkis. Bupkis, especially since where there was once 51 million products, there are now none. I have to wonder if Apple even realizes: No one wants their darned iPhone. (Except for a select few 51 million people.)

Most likely what happened was these 51 million unsuspecting customers either:

  1. Felt sorry for Apple, so they treated the iPhone like a charity case
  2. They were tricked into buying the iPhone, thinking it was a Blackberry (NASDAQ:BBRY)

I actually fell for the latter trick once and like many customers I don't want to be fooled again.

How It All Started

One day I lost my fanny pack with my Blackberry and glasses inside. This happens to the best of us, and being something of a technology expert - I knew right away there was only one recourse. Go get a new phone and glasses.

I should first explain why I was not getting a fancy, new iPhone. It goes back to a little casting call incident:

That was supposed to be me on the left.

On with my story. I will briefly recount my experience, where I was duped. Like many brand loyalists I own a Blackberry shirt. I put it on and went to the mall on a mission - to get a Blackberry.

In retrospect maybe I should have gone to replace my eyeglasses first. It was very blurry:

The Blackberry Store (pictured above)

I went in and asked a sales rep for the newest Blackberry. I know I must have looked out of place without my fanny pack on (it has a button that says "I'm Blackberry's #1 fanboy".)

The employee kindly showed me the Blackberry 5, and it sure was different and modern - it was nice:

I noticed there appeared to be a logo on the phone, albeit blurry from lack of spectacles. "It is a promotional decal, that can be peeled off" the representative said. Of course, I have heard of this technology before (remember I am an expert.) I wasn't born yesterday; I replied "oh, like a sticker, I see."

I could tell they were really excited to make a sale, since they kept commenting on my Blackberry t-shirt. Those Blackberry employees really are geniuses. Now you know me, buy first ask questions later. As I made my purchase the manager greeted me, very jolly fellow, he said: "Watch out because our nemesis, Apple has a store nearby."

I thought out loud: "That's great! Finally Blackberry is stepping up its game - to once and for all defeat the lesser fruit." This has nothing to do with the casting call experience, it's just what I believe.

That day I showed my new Blackberry off to friends. "That's not a Blackberry, that's an iPhone," they said. "No, I don't believe so" I chuckled. Then I began to notice a little bug at the bottom of my texts: "Sent from my iPhone." That's funny I thought. I even tried to change the message.

I began to think I had been had.

You can see from this image how I may have been tricked. I believe the so-called designers at Apple used a little color theory. To make their phones look like they could be Blackberrys. When everyone knows apples are red and blackberries are black, need I say more?

So, I understand where these 51 million iPhones went; many to unsuspecting customers like myself.

Why Apple Inc. Matters

After a few hours (if not days) of trying every method I could think of, to remove the "promotional decal" - I noticed my Blackberry (unbeknownst to me, really an iPhone) worked very well. No it was not perfect, but the phone was sleek and simple. The interface was user-friendly and it had features I'd never seen on a phone, like the internet.

It used to be, if you wanted to know the weather, you had to go outside. Look up at the sky and lick your finger to check to see what direction the wind was blowing. As you can imagine, that was tedious.

There was a phone number you could call to get the weather. You had a couple choices:

  1. You could put your finger over your ear
  2. Or stand halfway across the room

Because the recording was played extra loud for the hearing impaired. The weather forecast recording was played so loud, if you weren't hearing impaired already, the deafening audio would help you on your way.

Now, with the push - not even - with the most delicate tap of my finger, I can pull up the weather forecast. Sometimes I still put my finger over my ear, for old times' sake, while I review the weather update.

I remember the days if you were lost looking for a restaurant, what you did was simply drive around in circles until you found it. Some people would give up and ask for directions - not me.

This iPhone (mine has a Blackberry sticker on it now, and I call it a Blackberry) has an app whereby you can instantaneously use GPS to locate a destination. Which of course takes the fun out of canvassing a city, in circles, for hours looking for a restaurant. Though I will concede: It saves time. You might notice I have placed this phrase in italics. Not because it is important or anything, because it matters - a lot.

When a technology allows a person to perform a task faster and easier it saves time. When a product allows people to save time, they can ultimately do more. I can not quantify precisely how much time Apple has saved customers, however if I had to guess I'd place it somewhere between a lot and a whole lot.

What Is Apple Worth?

Here is a simple question and I can provide a simple answer: I do not know.

AAPL Market Cap Chart

AAPL Market Cap data by YCharts

Apple is the most valuable company on the planet currently:

AAPL Market Cap Chart

AAPL Market Cap data by YCharts

In order to truly understand the current market cap, investors must look back further:

AAPL Market Cap Chart

AAPL Market Cap data by YCharts

This chart reminds be of an old portrait of the stock market:

The Great Wave Off Of Kanagawa (Katsushika Hokusai c. 1830)

To put this in words for the Apple Generation: This is an old-fashioned selfie, from the stock market's field trip to Mt. Fuji. It is to say, the stock market goes up and down.

As you see, even the most valuable companies in the world do. In fact the U.S. economy is founded upon a premise whereby competition is not only permitted, it is required.

You could trace the history of the global economy, and bring in a team of experts to try to determine the direction before hand. Yet, at the end of the day the market will do as it pleases.

Though Apple saw 51 million iPhone sales, not 55 million, it appears one of the reasons was too much demand. Another reason was cell phone carrier changes, to prolong customers' ability to upgrade to a new phone; as reported by New York Times author Brian X. Chen.

As an investor I have found truth to the saying "the only constant is change." Though I have not found "too much demand" to be a major problem often.

Competition Is Fierce

Investors can not discount the fact Apple faces competition, just like any other business. Additionally, investors must realize Apple's market cap has more than doubled since 2010.

This leads back to the very important question of whether Apple is over or undervalued. Many readers and investors want the answer to this question, and some believe they know the answer.

Previously, in this article I wrote "I do not know." I can elaborate this further by adding: "It depends." This is not the answer so many are looking for. However I simply don't know and it does depend.

You see, even when a company could be worth more, it could trade lower and vice versa. Therefore, the pursuit of the answer to the question of value is to an extent futile. I know the general consensus, and initial reaction from many is a quick dismissal of this concept. Some definitively might stand and say "Apple's not worth a penny over $50B." Others say "Apple is going to $1,000 a share." However, when your company is not just influential upon the economy; it comprises a significant part of the whole economy, things get complicated.

Perspectives On Apple

While I believe Mr. Pendola and Mr. Lewitinn make some strong arguments there is always more to the story. Mr. Lewitinn somewhat jokingly called Mr. Icahn a "fanboy." However, is Mr. Icahn really?

It remains to be seen whether Mr. Icahn will be good or bad for the company, just today he tweeted that he acquired another $500M worth of Apple stock. In my book this does not make him a fanboy, so much as it suggests he is a powerful investor who has reason to invest in the most valuable company in the world (currently.)

Does "society stink" because some investors bailed on Apple? As much I as I think Mr. Pendola's views are important (and that he is a great tweeter-er,) I disagree. I do not believe society, or those investors, prove to be rude or impolite. Their actions align with the way of business. Apple's value fell back to what it was in October 2013. As a result, long-term shareholders could stand to gain more shares upon reinvestment, with the upcoming February 6th ex-dividend date.

In the world of investing, the few days between now and then either feel like an eternity or a drop in the bucket to different investors. Mr. Lewitinn happened to be right in the short-term, however after a while investors learn that both sides can be right. Then, after a while, they also learn both sides can be wrong (not necessarily in this order.)

The fact is a company's earnings can provide for volatility. Everything can appear wonderful and the stock could drop and vice versa. While it is important to form an opinion of a company's value, it is also important to recognize why the most valuable companies in the world matter. Then to decide if exposure to these stocks (or mutual funds holding them) makes sense or not.

I Can't Lose My iPhone

Alright, I'm slowing coming to terms with the fact I did indeed buy an iPhone, through no fault of my own. You can tell I sometimes compare modern conveniences with the way it used to be. The following comparison is well known now, though it is worth repeating.

A long time ago there was sort-of-an-app for when you lost your phone. It was called Go To The Store, Get A New One. They didn't release many new versions, since it worked so well. That is until somebody decided to compete, and invented the Find My iPhone app.

While Apple continues on its quest to take the fun out spending hours looking for phones and locations - I am forced to bide my time thinking of things to do that Apple can not supposedly fix with an app. I sure would like to see them try to make an app to save customers, like myself, from sending their phone back to Blackberry. Only to get it returned with a note saying: "This phone is actually not a Blackberry."

They may be trying to do away with the notebook and pencil, (with this so-called iPad) but they can not totally eliminate unnecessary tasks. No matter how hard they try. (Note to Apple Generation: A notebook used to be sheets of lined paper bound with spiral wire, by the way. They were fun I tell ya!)

As Mr. Pendola adumbrated so eloquently, there are still a few of us who do not want Apple to: "Drag us out of bed in the morning, brush our teeth and supply us with a game-changing bidet." Ok, well of course he's speaking for himself on the latter point. But the first two points are really uncontroversial.

I simply believe if Apple markets an iRestroom it should be clearly marked: "Made by Apple." None of this tiny Apple logo branding, which as millions know can inadvertently cause waves of misled customers to think they are actually buying their favorite products. Us loyal fans are working on our own app for that, which scans the product and states in plain English whether the product is a genuine Blackberry. Unfortunately so far the app only works on the iPhone, but we're halfway there.

So easily Apple could have been Blackberry and Blackberry could have been Apple. Both still have their so-called fanboys, though at a certain point one company soared and the other sunk. In order to understand today's economy, the difference between Apple and Blackberry matters - the difference is actually of paramount importance.

If you have any thoughts on why you believe Apple does or does not matter, please take a second to comment. Also, to the tens of millions of duped Blackberry customers still trying to figure out how to change their iPhone signature, here is the code.

Sent from my Blackberry, which is not really an iPhone!

Disclosure: I am long AAPL. 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.

Additional disclosure: This article is not a recommendation to buy or sell. Please consult a financial adviser to determine proper allocations to tech stocks.

Source: The Reason Apple Matters