Enter your email address:
Enter the recipients' email addresses, separated by commas:
Message:
Enter your email address:
Enter the recipients' email addresses, separated by commas:
Message:
Steve Jobs (Paul Sakuma / AP Photo) Driven by cult hero Steve Jobs, Apple has now surpassed Microsoft as the largest tech company in the United States. Reihan Salam on why it's ripe for a fall.
As of last week, Apple has surpassed Microsoft as the largest technology firm in the United States by market capitalization. Shares have been trading in the neighborhood of $250, giving the company a total value in the $220 billion range, behind only ExxonMobil. Apple's price-to-earnings ratio is around 24, almost double that of Microsoft. Speaking very crudely, that means investors believe Microsoft is a mature, slow-growth company while Apple's earnings will continue to grow at breakneck speed. One can imagine top executives at Microsoft fuming at the news, not least because Microsoft arguably saved Apple from doom over 10 years ago. This caps an extraordinary year for Apple, during which it blew past the market caps of behemoths like Google and Walmart and saw its revenue and profit surge in the middle of a severe economic downturn. Not surprisingly, given the gullibility of Apple devotees like myself, Apple's profit margins are the envy of Silicon Valley.
Surely Jobs will one day tire of wielding his charismatic authority as CEO of Apple. And there is no woman or man alive who could fill that man's turtleneck.
Apple Inc. might be America's most beloved company. Led by Steve Jobs, possibly the world's most charismatic man, Apple bears more than passing resemblance to a 1970s therapy cult. With his infectious faith in the liberating power of technology, Jobs has persuaded countless impecunious hipsters to pay vast sums for his brushed aluminum baubles, even as his control-freakery reaches new heights. His turtlenecked product launches are like tent revivals, only more hushed and reverential. Express any doubt about the superiority of a Mac over, say, a humble PC with identical specs that costs half as much and your blasphemy will be met with sputtering, uncomprehending rage. This is the kind of devotion that is the hallmark of a small, tight-knit group, like the Branch Davidians. Yet the cult of Apple has expanded to include tens of millions, many of whom were first hooked by the ease and attractiveness of the iconic iPod, pusher-man Steve's gateway drug.
I say all of this with a mix of affection and regret, as an Apple devotee myself. My conscious mind tells me that Apple products are overpriced and increasingly unreliable, and that the marriage of the iPhone and its exclusive service provider AT&T is the consumer equivalent of the wanton murder of innocents—an inexcusable crime that merits swift and harsh punishment, possibly including death by stoning. Even so, I find Apple products impossible to resist. Shortly after the iPad's release, I purchased it to ease my mind after a minor personal tragedy. And it worked. Who needs human affection when you can spend countless hours downloading apps and staring blankly at a glossy screen? To be sure, it is probably better to be addicted to well-designed gizmos than to crack cocaine. But sometimes I wonder.
The rise of Apple illustrates a number of social trends. Consider that Apple, a company that serves relatively affluent consumers and a handful of electronics-obsessed imbeciles (that's me), is now worth more than Walmart, a company that serves a far larger number of working- and middle-class Americans. Apple's success amidst the downturn, fueled by robust sales of the iPhone and more recently the iPad, is an almost perfect illustration of Plutonomics at work. As Ajay Kapur first observed in 2005, in a report written for Citigroup, the United States has become a Plutonomy, in which the richest fifth of the population is responsible for as much as three-fifths of all spending. And if anything, the painful economic transition we're living through now will only reinforce this tendency. Middle-class households are carrying an extraordinarily heavy debt load. One study, citing 2007 data from the Federal Reserve, found that while households in the top tenth had a manageable debt-to-disposable-income ratio of 116 percent, the next 40 percent of households had a debt-to-disposable-income ratio of 205 percent. Basically, it is that top tenth that is buying the bulk of Apple's products. As long as this slice of the population fares well, there's reason to believe that Apple really will live up to the outsized expectations of investors.
12 May 31, 2010 | 9:12am Twitter Emails
Enter your email address:
Enter the recipients' email addresses, separated by commas:
Message:
"... not least because Microsoft arguably saved Apple from doom over ten years ago." In 1997, Microsoft, playing to the U.S. anti-trust authorities, invested $150 million in Apple, which was sitting on 1.2 billion in liquid reserves at the time. MS also committed to continue developing Office for Mac, which was never really in doubt, because it was a very profitable product for MS. That was just showmanship to try to help them in their anti-trust difficulties with the Clinton administration. There is no argument whether Microsoft 'saved' Apple from doom. It's absolutely untrue. Many careers and fortunes have been adversely affected betting against Apple. I see your points, but I don't think now is the time to short Apple, or Jobs. Reference: http://news.cnet.com/2100-1001-202143.html
We are all just barely leaving the model T era of computing...For the technical semi retards, c'est moi, Mac stuff is just easier and it always works...Did you see the video of the extremely elderly woman and the IPAD?...It's unfortunate that every great company seems to have an arc and eventual down fall but I can't see Apple stock crashing before Google does...Also, I think your point about Mac somehow being the cause of the middle class debt burden is pretty shaky, especially if you leave out 50 inch plasmas, bass boats, new pick up trucks and that big house you shouldn't have bought in the first place...For better or worse we have a consumer economy where hot brands get big sales...Apple's just got good stuff.
You will know its time to short Apple when you see it at Wal Mart. @flyoverland
WalMart sells iPods and iPhones. That said, Apple isn't ripe for a fall but its stock is ... just not right now. Profit taking will come in due time. For now, the corp. is going great guns in Asia and the annual summer release of a new gen iPhone is imminent. AAPL also continues to make the best computers on the planet, but I digress. It is more than a bite of the hyperbolic forbidden fruit to hedge that Apple 'might be the most beloved company.' It isn't, though it ought to have been ... for the past 30 years. Apparently it was rocket science to all others that a better product resulted when hardware and software came from the same manufacturer. When's the last time you bought a tech device that not only worked a decade later as well as the day you bought it but held its value - and didn't have the Apple logo on it?
Although RS' points are not original he has written some first class snark. Steve will be on stage again on June 7. iPads are 2 million sold and counting. If you short this stock now you're nuts!
iPad sales at launch are basically irrelevant. It's a pretty toy that many Apple fanboys will snap up early not matter what. And 1 or 2 million portable devices isn't enough to even come close to establishing any kind of standard (ie it won't 'save' newspapers because it won't have the penetration). The thing to watch is iPad sales long term. If they can keep it up, the maybe Apple is worth the 25x valuation, but I doubt it. iPhone sales are already starting to level out. As much as I like Apple products and hate Microsoft, the market is foolsish to give apple such a high multiple, the emotionality of the situation is clear - and even though some shares may be trading at that price, there are probably not many of them - i.e. demand for a few of them is high. But MS is like the 'bank' of high tech, and with the newer, better OS to replace Vista, they're not going to go anywhere. If Apple can take a stake in the middle class, and sell products to everyone in the world - then they are worth 25x but I don't see that happening.
Steve Jobs symbolizes American Exceptionalism. Thanks for all the tools of information Mr. Jobs, where FREE THINKING People everywhere believe INFORMATION IS POWER. Unless you're Obama who calls Information . . . a " distraction " . . . unless the information agrees with his agenda.
I think he is dead wrong - not for the reasons that he gives, but because Apple products have better engineering, better and more reliable operating systems, are easier to use, and are more reliable over their (longer) lifetimes than the competition. And, when you compare the Apple products on a performance basis, they are not that much more expensive. This is not just a fad moment, but I am convinced (as a former PC/Windows user) this represents a transition in what people are coming to expect from a computer (or phone/tablet/music player).
Of course, everyone is entitled to an opinion but you would think the DAILY BEAST would only welcome INFORMED or EDUCATED opinions. First, in case this guy hasn't noticed, the stock market makes no such promise of "forever," for ANYTHING. You as an investor gets to decide and put your money where you think and sure, some stocks and companies are over-valued temp or permanently but we like to make our decisions based on more facts and not just randomly drawn conclusions which sounds suspiciously more like Apple turned him down for a job so he's lashing out. He doesn't really seem to understand the company nor consumers at all. Just because a product costs more than a "competitors," that does not make it overpriced if there is ADDITIONAL VALUE as the case with Apple's products. He claims they are "unreliable" yet survey AFTER survey, EVERY product Apple sells is ranked #1 in customer satisfaction and their customer service is #1 ranked by consumers in EVERY SURVEY! Some of their products reach as high as 90% in satisfaction - does that sound "unreliable" to you? That's the price of VALUE. I'll bet this guy does not drive around in the cheapest auto make and the cheapest auto choice? Why? VALUE. Sure, Americans should have less debt but one has nothing to do with this - is Apple like GMAC buying a business on giveaway loans? NO EVIDENCE of that. And unlike a $800k house in a bad neighborhood, the average price of an Apple product is sells for $300-$1,400 - clearly a price the average American can scrap together. As for Apple being an underdog - maybe that's important to him though in the same sentence, he advocates Google - a $150 BILLION dollar company so, he draws the line at $150 BILLION in market cap a an underdog and should be championed? Apple is open about their business. They clear apps to sell in THEIR store. If you don't like it - install it offsite but no guarantees just like ANY other store WORLDWIDE. I understand if I go into MACY's, they back what they sell as reputable and sufficient while a flea market shack does not. Just because it's digital does not mean I would rather trade safety for a free for all and in case you're just saying you want to load porn - it's still out on the internet. And then he realizes he has no leg to stand when Steve Jobs only makes money (above $1) when the stock is doing well - how many other CEO's are willing to make that stand? What more as a shareholder can you ask for? How many CEO's get raises while their stock tanks that year? As for Apple's competitors? They are weak and unorganized. Google makes ZERO money for each Android phone sold, it's a FREE OS while Apple will make $700 per phone x 30 million plus another 10 million ipads sold. Do the math. MS? Do you trust them in the cloud with YOUR COMPANY FILES? Think about that but it also has nothing to do with Apple - Apple is NOT an enterprise software company - that's like saying SAlesforce.com has greatnew software, short Apple. What is this guy's background and agenda? Is he an advisor to Apple's competitor? Did they turn him down for a job? It's a hachet job of the worst kind - pulling a lot of random bits of info and claiming it's math. Why draw the line where he has? Apple causes crime because their products are enticing. Apple uses a lot of Earth's rare metals to make things. Apple causes us to not sit in front of our computers when they could be bowing in front of this guy. Who is this guy and how did someone who knows nothing about technology or business get a platform? I notice he does not list his stock position or company relationships on any of the comapnies he mentioned? This guy should seriously think about retiring, he hasn't learned anything new since the internet was launched.
Sophia, you're exactly the problem. Apple is the most UN 'free thinking' entity in all of high tech - far more so than Microsoft. Microsoft does not dictate or control what apps you use. Apples does so - and almost aribritrarly. Yes, the Apple 'cage' is pretty - but it is absolutely a cage. The fact that you - and probably millions like you don't realize that is scary. And by the way - Obama was right. iPads are a distraction. To put another way - if everyone were to lose their iPads and iPhones tomorrow, there would be a lot of cranky people in this world but we would get buy just fine. If BlackBerries (which outsell iPhones buy the way) were turned off tomorrow - the entire business world would come to a halt. Take a reality pill.
There seems to be an inherent contradiction in Salem's article. On the one hand he recommends shorting Apple, and on the other he tells us how he himself is addicted to its products. Apple is going nowhere but continually up. The launch of the IPad is only a prelude to what we will see with the launch of IPad2, which includes all the features that the original release (purposely) lacks.
I must say that this was a fairly weak piece in that your argument almost seems to be that Apple has been winning for a long time now so at some point, gravity should catch up with them and they should start losing. It's like saying that the Sun has been rising in the same place for a while now so logic dictates that at some point it will start rising somewhere else. The bottom line is that Apple continued to knock the ball out of the park during the worst economic downturn since the Depression, absolutely killing it on every metric under the sun. No less, few companies have the product diversity, margins, cash, disciplined, execution culture and deep touch point with consumers that Apple does. That's not to say that they can't or won't fail, just that the discernible facts don't support your thesis. Check out 'Five reasons iPhone vs Android isn't Mac vs Windows' (http://oreil.ly/b6EIWI) if interested in delving into the particulars of why Apple is so well positioned to ride the mobile, social wave. Mark
Apple charges triple for their products, but they don't even produce them in the US. Those products should be made in the USA. Just another citizen of the globe.
Shorting Apple? If you enjoy sitting on the railroad tracks, while a speeding locomotive is coming and then, jumping away at the last second... It's absolutely thrilling!
Sometimes people try to start a market trend (and even perhaps a stampede?) by making predictions that are not based on a company's health, reserves, or anything rational. Gosh, the money one could make taking a short position in that instance. That kind of thinking is what's wrong with capitalism.
It's silly to "hate" a tech company. Apple makes really interesting products that are easy, reliable and fun to use. We should hate them because they built the better mousetrap and others haven't? I'm not a fan boy... I'm just someone who owns a Macbook, iPhone and soon a next generation iPad. iTunes is an easy and convenient way to manage media. I'm part of Apple's future because while I may not be "cool", I'm a customer with enough money to purchase products that work well and enhance my life. There are millions of us. Go into any Apple store and have a look around at who's buying. People who know and appreciate value, that's the Apple customer and that's why the company is so solid. Apple is more than Steve Jobs, and I fail to see any signs of impending doom.
Apple is in a risky position today, why? because it is severly curtailing its freedom of its consumers and fighting partners 1- Closed systems like Ipod, iphone, Apple tv are walled gardens, AOL proved it was good for a while, then people wanted freedom 2- more fights with other companies, Apple is waging wars against Google, Adobe and others, why? some are attacking Apple, yet others are being attacked, like Adobe, Apple is better off making a friend of Adobe in the short term and allow Flash on its products if Adobe can get a better version going. 3- Blu-Ray - sorry apple, people think this is a product worth having, or at least letting consumers have the option of it 4- Censorship- Apple has been censoring on a corporate agenda programs, apps and other content from ipod, iphone, apple tv and yes iPad. this is putting apple in a bad position. it ought to open up these devices. and even if Apple doesn't sell or distribute something it doesn't like, allow others to sell, distribute and install onto things like ipad or iphone. Yes ... people are tired of 1984 and not being able to do things Apple or AT&T doesn't approve of. so... all i have to say here is that Apple is running the serious risk of alienating large groups of people and that will start the flight and decent of Apple from its current lofty heights. if apple were smart, they would start to become a friendly and open company, otherwise.... well that scenario is starting to get a bit murky for them
Thank you. As a first time user, your comment has been submitted for review. It can take anywhere from a few hours to a day or two for your comment to be reviewed, depending on the time of week and the volume of comments we receive.
Please log in to leave comments.
Israel Was Right
Leslie H. Gelb, a former New York Times columnist and senior government official, is author of Power Rules: How Common Sense Can Rescue American Foreign Policy (HarperCollins 2009), a book that shows how to think about and use power in the 21st century. He is president emeritus of the Council on Foreign Relations.
Shocking Calorie Equations
Danielle Friedman is an assistant editor at The Daily Beast. She has worked as a nonfiction book editor for Hudson Street Press and Plume, two imprints of Penguin Group. Her writing has been published in the Miami Herald, the Seattle Post-Intelligencer and on CNN.com. She is a graduate of the Columbia University Graduate School of Journalism.
Israel's Indefensible Behavior
Peter Beinart, senior political writer for The Daily Beast, is associate professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation. His new book, The Icarus Syndrome: A History of American Hubris, will be published by HarperCollins in June. Follow him on Twitter and Facebook.
Israeli Airstrike Kills 3 Gaza Militants
As Egypt temporarily opens border.
Al Gore to Separate from Tipper
After 40 years of marriage.
BP CEO: 'I Would Like My Life Back'
Complains about Gulf spill.
Who Needs an Oil Spill Czar?
Reihan Salam is a policy advisor at e21 and a fellow at the New America Foundation.
How Oil Saved Bobby Jindal
Reihan Salam is a policy advisor at e21 and a fellow at the New America Foundation.
Long Live the GOP!
Read Full Article »