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Justifying an All-Time High Stock Price

? Knowing When To Go Long |


| Security Vulnerability in iTunes ?

November 16, 2005

Justifying an All-Time High Stock Price

Peter Burrows

Apple's stock hit an all-time high today, thanks mostly, it seems to a Bear Stearns analyst report that suggested the company will sell 14 million iPods in the December quarter. For those of you keeping track, that's roughly half the total number of iPods sold since the iPod first hit the market in 2001. Big, big number.

Now, I'm not so sure that will happen. A lot will depend on whether Apple can fill all the runaway demand. But to me, there's another reason for bullishness--at least if AppleInsider was right in a story a few days ago, that predicted Apple would unveil Intel-based Macs at Macworld on Jan. 9. That would be good for Apple's bottom line, since it would all but eliminate any chance of a drop-off in sales as people delayed purchases until mid-year, which is when Apple has said it expects to begin rolling out the Intel-based models.

Far more important is what such an early deliver would say about the state of the Intel-Apple partnership. Apple is a company that has had its problems partnering in the past; given the lame reception for its ROKR phone, it's safe to put its current work with Motorola in that category. But if Jobs & Co. are getting along with the folks at Intel, then Apple could truly start to make a truly big splash. For years, Intel has been looking for a PC maker that could help it define stand-out products, to breath life into an all-too-gray PC landscape. Instead, most PC makers focused on slashing costs rather than on innovating, to try to keep pace with more efficient Dell.

Indeed, it looks to me like Apple and Intel's interests are very much aligned these days. No doubt, IBM was a fine processor partner for Apple, while it lasted. But success in the PC business wasn't tops on IBM's list; it is Job Numero Uno for Intel--especially now, with AMD breathing down its neck. And if this partnership turns into a beautiful marriage, it could put serious pressure on other PC makers, and fast. Even if Intel innovations created with Apple's help ultimately were made available to other PC makers, Apple would have a big heads-start--and it's got the marketing savvy to make the most of that.

Of course, all this is a big if. We'll have to wait for January to know for sure. But in the meantime, if you've got any ideas for what products the two companies could, or should, produce, let us know.

05:48 PM

Stock and Financials

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Sure, I and thousands of other Mac enthusiasts know exactly what Apple should do. Apple should spend at least as much money touting their computers as they do touting their iPods.

The Mac OS and installed apps are so compelling that Apple must think that everyone already knows this so why bother wasting money advertizing the obvious. The painful truth, however, is that only the Mac faithful and the newcomers who take the time to learn for themselves know this verity. Shame on Apple for not informing the rest of the world about what they are missing. Shame on the Apple shareholders for letting Apple management get away with this corporate malfeasance.

Posted by: Michael Young at November 17, 2005 12:35 AM

More fuel for the fire:

That says that iBooks are going to be the first MacTel on market. This will add to the bottom line and also in my opinion creates a reason for the stock to go even higher than it is right now. Although I'm only 20 years old, so therefore do not have years of experience under my belt, I do believe that the stock could approach the $90 to $95 mark by the end of '06. Apple has been doing this inovating for years and are just now starting to catch the public's eye and knowledge. The amount of room for Apple to grow is enormous.

Posted by: Scott at November 17, 2005 02:34 PM

Apple has already telegraphed their next punch. Steve Jobs has been poo-poohing the idea of the internet on televison for ages, just like he did with portable video. You know how that worked out.

As was the case with portable video, he makes it plausible by basing the lie on an aspect of the truth. The internet-television convergence as it has been tried is uncompelling at best.

When Apple merges the internet and the TV set, we will see it, and we will say to ourselves, "Yes, of course. That is how it should be done."

Dell, Compaq, HP, and Microsoft will build inferior copycat attempts. This serves Apple by concentrating those companies' resources on imitation and away from innovation.

Apple will continue to erode the market share gradually. The computer industry will continue to respond as the proverbial frog in a pot of water.

A frog dropped into boiling water will jump right out. A frog in a pot of cold water will remain calm as the temperature is increased to a boil. Apple is turning up the burner one notch at a time.

About the time Microsoft introduces Longhorn/Vista in late 2006, Apple will be releasing OS X 10.5. Vista has been reported to be inferior to Tiger by those who have seen both. So Microsoft will be releasing an operating system less advanced than the version being retired by Apple. This will not happen in a vacuum.

Don't just look at the rate of growth in sales, watch the rate of acceleration of growth.

Apple has more than $8B in cash and is debt free. That's a pretty good spot to conquer an industry from.

I expect a stock split in late January for Apple. Possibly another one in September or October.

Posted by: Ray at November 18, 2005 05:49 PM

Apple's stock is going to go up for four reasons:

1. The company is continuing its dramatic growth and just now becoming a household name with the iPod.

2. The halo effect is real to some degree (cyclical purchasing does not explain growth numbers), even if only an iPod advertising effect for the rest of Apple's products.

3. Unlike when Microsoft managed its coupe in the 80s (when computer users were naive and entirely cost conscious), people no longer want crap and they realize they have a choice.

4. Compared to other stocks, AAPL stands out and is thus more likely to get a lift as other companies struggle to move forward.

Posted by: Rick at November 20, 2005 12:43 PM

I have become a Mac convert recently. I, like so many PC users, had negative views of the Mac OS (lack of applications etc and compatiblity with PC networks). It was only when I bought a Mac Mini that I found all of these PC views were incorrect. Apple needs to push the ability to integrate with PC networks. The only downfall of the Mac is the lack of games but I would say most computer users don't want to play games hence them having xboxes or play stations. The Macs focus should be on applications. Apple need to push the sales of the Mac Mini. Maybe even combine advertising of them with the iPod. The latest Enimem ad showed the combination of the iPod and iTunes so why not try and advert campaign with 'If you like the simplicity of the iPod why not try the Mac Mini'. I am very happy with my Mac and have since invested in an iMac iSight.

Posted by: Matthew Cheatle at November 20, 2005 01:07 PM

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