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Bear Stearns analysts Andrew Neff, William Hand and Ted Chung sent a note to clients outlining the four risks Apple Computer (NASDAQ:AAPL) faces going forward, from an investment perspective -- excerpt:

In our view, Apple faces four investment risks, but they are not the ones that the Street tends to obsess on (e.g., ODM data points, NAND flash orders, whether iBook ships this week or next week) – we view these latter issues as “noise” that obscure the bigger picture. There are bigger issues which can make or break the company in our view:

• Complacency: Apple is one of the most innovative companies in the technology sector – on the same level in our view as a Google – as evidenced by its ability to develop gamechanging products, systems, and software. Moreover, Apple has institutionalized innovation and a focus on new ideas. It is a place that creative engineers go if they want to develop cool products. But the challenge that Apple faces is not Sony or Microsoft – but Apple. For innovators, the major challenge is not competition from outside but getting complacent. We’ve seen it (unfortunately) many times – the leader inexplicably loses momentum. Dell is a recent example – it lost its edge when industry conditions were favorable and competition was in disarray....

• Competition: Worry about the ones with political agendas... the competition we worry about is not Microsoft, Samsung, or Sony. For whatever reason, these technology behemoths – as well as smaller players such as Creative Labs – don’t seem to get it. Sony should be where Apple is – instead, Apple (when you add the Disney connection) is what Sony wanted to be. The competition we worry more about is that faced by Microsoft: governments. The concern is not whether Apple will be successful with iPod, but will it become too successful that the regulators start to get involved (as we’ve seen in France). Competing with a company is tough, but Apple is good at that – competing with governments is another issue...

• Old Steve: We think one of the fundamental areas where the investors underestimate Apple is with Steve Jobs – they confuse “old Steve” with “new Steve.”
In fact, they usually don’t realize that there even is a “new Steve.” “Old Steve” developed products that Apple thought customers wanted based on proprietary solutions with expensive hardware and expensive software. But isn’t iPod proprietary? Yes – but with three critical differences which highlights how Apple has learned from the past:

• First is the breath of products. Apple used to have just high-end products. Now, iPods range from $69 to $399.
• Second, Apple used to have sell its products at a significant premium, but on iTunes, all music is $0.99 – the same as on all the other devices. Further, its new Intel-based iMac is selling at prices below comparable systems from Gateway and Sony, while MacBook Pro is priced very competitively given its feature sets.
• Third, Macintoshes were developed based on proprietary components that were all “specials”; current products are based on standard components (drives, processors, memory, networking) where Apple gets the best price from volume suppliers.

So the “old Steve” has learned from early mistakes, which is why we have a “new Steve” – with one exception: “old Steve” was perceived as extremely demanding of his vendors and adamantly opinionated (which, in the past, led to suboptimal outcomes) – and "new Steve" is also highly demanding and challenging to his vendors. In his defense, Jobs is usually proven right, but this attitude does create risks.

• Steve Jobs' longevity: Real leaders are difficult if not impossible to replace. While we wish Steve Jobs the best of health, we do worry about his longevity – and not just because of his pancreatic cancer last year. While Apple says that there is a succession plan, there really can’t be – just in the way that it was hard to come up with successors to Walt Disney, Sony’s Akio Morita, and David Packard/Bill Hewlett. While companies such as
Intel have managed to develop next-generation leadership, it is usually difficult to create the next echelon of leadership after a shining star leaves the stage.

AAPL 1-yr chart:

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Source: Apple's Four Investment Risks (AAPL)