It's tough to keep track of the litany of articles predicting doom for Apple (NASDAQ:AAPL). My favorite thesis posits that, eventually, Apple will fail because it simply cannot be the top dog forever. Now, that's bold.
In this article, I discuss three things that could -- based on popular notion and/or my own brain rumblings -- trip Apple up. For each one, I provide reasons why I think bears continue to over-hype the potential obstacle.
If I were Tim Cook, I'd be ticked off. Cook stands in the long list of victims of our society's tendency to take the most simplistic route to a reason for why something happens. Here's what I wrote in the immediate aftermath of Steve Jobs' decision to officially step down:
That's just what we do as Americans. You said heroes are needed, so heroes get made. And on the flip side, as an example, it really stinks for the president that Osama bin Laden is no longer around. He has nobody to direct the electorate's bitterness and rage toward.
Americans just hate layers of complexity. We prefer simplicity. Or better yet, we do whatever we can to keep ourselves from having to think.
Steve Jobs is Apple. Jeff Bezos is Amazon. Larry Page is Google. Mark Zuckerberg is Facebook. Elon Musk is Tesla. And bin Laden is public enemy No. 1. We pay scant attention to historically-rooted causes for this or for that. We don't take the time to study complicated and multi-faceted systems that breed success.
We pin everything on one guy. And, of course, if that one guy slips up, we'll turn on him and make his life a living hell going forward. How dare Steve Jobs get sick and leave Apple shareholders in limbo? Off with his head!
The more I think about what Jobs did, the more I think practically everybody misses the point.
Maybe it's just my inclination as a human to want a fellow human to be okay, but I truly believe that Jobs did what Apple shareholders have been essentially asking him to do all along; He removed the cloud of uncertainty.
By putting Apple's succession plan into motion (yes, Apple has had a succession plan all along), Jobs takes himself out of the equation, at least publicly, and gives Cook the opportunity to further ease into a role he's been playing for months anyhow. Going forward, Cook will take the stage for major events like an iPad unveiling, not Jobs.
I can just see things happening behind the scenes. Jobs and Cook working together, continuing to innovate and making sure that when the day does come that he's in "sole" control Cook does not miss a beat. Simply put, I would not be surprised if Apple is executing what amounts to a relatively low-key Research in Motion (RIMM)-like Co-CEO structure. Of course, the big difference is that this one actually works.
And I'm not talking about share dilution. I'm talking about the dilution of Apple's product, as it continues to make it more accessible to the masses.
First, Apple made iPad one of the least expensive tablets on the market. Now it appears ready to enter the pre-paid market with iPhone. This would be my biggest concern if Apple did not tread so carefully. The company hardly moves quick as it contemplates a move like this. And that's a good thing.
Consider the iPod Shuffle. It did nothing to dilute the allure of the iPod (iPhone did that). Plus, a Shuffle comes with fewer features than higher-end iPod models. iPad did not dilute the Macbook; rather it revolutionized an industry to the point that Hewlett Packard (NYSE:HPQ) decided to exit stage left.
Because of Apple we now listen to music on our phones. And, many of us, "compute" on a tablet. Depending on what it looks like, Apple's forthcoming pre-paid smart phone (assuming the company goes through with it) might just revolutionize how we go about getting connected with a mobile phone.
I just extended my contract with AT&T (NYSE:T) for two more years. I fell for the allure of the free phone. The only reason why I have a BlackBerry is because it was the best free choice available. I could have gone for an inexpensive iPhone, but I felt like I would have been slumming it socially with an out-dated model.
Looking back, I wish I would have gone pre-paid. If Apple comes to the table with a viable option under a pre-paid plan, I would assume large numbers of people will go that route. Apple dominates markets; it does not succumb to them. It dictates the terms that others end up following, feebly.
This naturally leads to the issue of competition. Name the space, Apple sets the terms of how the players will compete.
Consider an area where, directly, Apple does not even make that much money -- audio entertainment. Apple really did not redefine radio; it merely rendered the delivery method and notion of "radio" moot.
Take a look around you, it's not too complicated, Apple is the undisputed leader when it comes to entertaining people. And it produces no content. Nobody publishes celebrity lists of favorite Pandora (NYSE:P) stations, most listened to Sirius XM (NASDAQ:SIRI) channels or daily terrestrial radio stops. The cold, hard fact is that all of the above-mentioned, in one way or another, respond to Apple. And Apple could care less because it's not about the content, it's about the delivery devices.
Research in Motion could provide free beer and a (wink/nod) massage alongside its new BlackBerry music service, it would still fail. It's not simply that Apple's devices do it all (particularly, they allow users to access any type of content they want, including content they owned before buying an Apple gadget), but they work really well and have become social phenomena. The copycats have it all wrong; they need to come up with something better -- a new innovation -- not just a cheap knock-off of what Apple already does.
HP is dead. RIM is dying. And the rest -- Android (which is best described as a pie lots of people get a piece of) and the random others -- are less than competition to Apple. They're not even ankle biters. I'm not sure exactly how to classify them, other than to say they do not matter. At least not enough to make dreams of Apple's eventual demise anything more than that.
One of the only companies that could actually compete credibly with Apple, Amazon.com (NASDAQ:AMZN), clearly has no interest in doing so. Just as Apple does everything it does to drive people to its hardware, Amazon does what it does, such as releasing a tablet, to encourage people to support its core revenue streams.
My near-term conviction to buy AAPL and AMZN ahead of the holidays remains intact. AAPL will re-test $400 on a strong holiday season, while AMZN will soar past its 52-week high when it gets around to officially announcing its new tablet.
Disclosure: I am long P. I may open or close positions in any of the stocks mentioned in this article, often using options, at any time.