Apple (AAPL) will release its 4th quarter report soon. It will probably be another great quarter for Apple, the company that introduced the IPhone in 2007. The main goal of this article is to try to predict what is expected of Apple in the long run, and to check if the company internal value is attractive.
Apple has 3 major advantages:
1. Excellent Management – Steve jobs is one of the best managers out there. He is a natural leader and the years he was not working in the company proved how important he is for the future of apple. As long as he is there, I see only great thinks happening in Apple.
2. Dominant position in the various markets – Apple is participating in 4 major markets at the moment:
a. MP3 market - Apple is the leader provider of MP3 players for a long time with IPOD with over 70% market share. This product is a major anchor for the company in terms of revenues, market positioning and brand image. This is the product that re shaped Apple from a computer manufactures to the yet to come the world leading consumer electronics manufacturer.b. Mobile phone market - Apple just launched the IPhone one year ago and they already sell 4M handsets per quarter, and this with a price of 600$. My partner in Meijob.com bought the IPhone few months ago, and he is so enthusiastic about it that I am sure that when it will reach a normal price range and release a smaller version (IPhone Nano) it will probably become the world leading mobile phone of 2008 or 2009, Nokia watch out…
c. PDA market – another friend of mine just bought the IPod touch in Beijing. He likes PDA, and I asked him why did you buy it for 500$, when you can buy IPhone instead in 600$, and he said because he likes PDA and he does not need a phone in it. If he buys apple as a PDA it means that Palm and HP, you need to watch out…
d. Laptops – When epidemics starts (IPOD, IPhone, I Touch) and something becomes ubiquitous, it also influence perception of other segments. Apple will also increase gradually their market share in the lap top market (New Mac book AIR is just a start). IBM (IBM), Lenovo (LNVGY.PK), Dell (DELL) and Compaq watch out.
3. Great viral marketing based on excellent products and PR – Apple just like Google is an excellent PR player. I don't remember a single movie or a hot TV series that I have watched in past few months that I didn't see an Apple product. It is becoming wide spread and a desired product for everyone. With such a dominant position and excellent product, I see Apple shifting from a company that produces great designs that appeal to a small segment to a company that becomes main stream in our daily life, just like Google (GOOG) and Microsoft (MSFT). Ubiquitous will become part of Apple, unlike the past.
To summarize, it is nevertheless highly recommended for value investors to check Apple for the long run. It looks like the upside is big. The company is destined to be the world leader in several huge markets that seem destined to converge.
Disclosure: None
