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I bought my first Mac in 1987, and I've used Macs and PCs almost every day since. I bought AAPL stock back in 2002 when many thought the company was going to fold. At the time I was very impressed with Apple's new operating system (OS X), and very impressed with the new iPod. The company had something like $6 per share in cash and was trading for less than $8. Apple was David challenging the Microsoft Goliath. Apple's market share was in the low single digits.Apple's operating system is superior to Windows, as most experts will attest. To date there have been no succesful virus attacks on OS X, and there exists no spyware to slow down Mac computers. Macs are easier to use and they work great right out of the box. You don't need to buy anti-virus or anti-spyware software for the Mac OS. They will do anything a PC can, and more. If you want to use Windows programs you can run them right alongside your Mac programs using virtualization software such as Parallels or VMware Fusion (I should know, I've been doing it every day for over a year).
Apple has grown its share of the personal computer market from the low single digits to almost 10% in the past six years, and it's not just because the iPod has captured almost the entire MP3 player market. It's because Macs are way ahead of computers using Windows in almost every aspect. Critics like to say that Macs are more expensive, but that's true only from a penny-wise, pound-foolish perspective. If your time is worth anything, the best Macs are cheaper than the bottom-of-the-line PCs, because you'll spend a lot less time keeping a Mac running than you will a PC, and you'll be more productive in the process.
Today Apple has about $28 per share in cash, and it's trading around $80-85. Investors have been worried about Steve Jobs' health, and yesterday we learned he would be taking medical leave through June. Steve Jobs was the key to Apple's success, but will the company falter if he can't return? I think that Apple has built such a compelling operating system, and is so focused on industrial design and innovation, that it will almost surely continue to gain market share in computers, consumer gadgets, and smartphones for the foreseeable future. Jobs has created a culture of excellence and innovation at Apple, and it rests on the bedrock of a solid operating system; that's a winning combination even if he can't resume his leadership of the company.
If you can't bring yourself to buy the shares, you should at least go out and buy one of their computers. Only 10% of the people who read this use Macs.
Full disclosure: I am long AAPL.
16 comments:
very hard to reconcile the pricing of Apple/Microsoft operating system/PCs and google/opensource giving away android/linux OS for free.
microsoft trades at a cheap multiple, discounting similar long-term viability questions.
MSFT is cheap because it's losing market share and can't innovate. That's a recipe for extinction. Free operating systems can't hold a candle to OS X. It's all about market share, and Apple is the only one with significant growth potential.
Hi Scott,
I couldn't agree more about Apple (the stock and the product). Working with my kids to educate them about investing, I had them pick 2 stocks each. My daughter picked AAPL and TM. Unfortunately this lesson started last June. Oh well, I guess losing money is a good lesson too.
I could kick myself for having Dell / MSFT computers at home. My son has a Macbook though. He laughs at me when I startup my Dell laptop and go get coffee while it runs through 5 to 10 minutes of "updates" before it becomes usable.
I've been thinking MSFT may be reaching the end of the line for usability, except in the business market. Even there they are starting to lose ground in the desktop to simpler solutions. Maybe like domestic automakers they are doomed because of the weight of their legacy.
You should know that perhaps more than 10% of your readers use macs. At least one of your readers does all his finance blog-reading at work (on a PC) but remains a stalwart Mac user at home.
One thing I've thought about for a long time is MSFT's dominance in the small and medium corporate market. I don't see how this is getting eroded soon. Many small and medium-sized companies are run by people who don't know technology. So, they hire technology people to manage that part of the business. Who do they hire? People who are "Microsoft certified" because that looks good on a resume. So these people are not necessarily computer experts but are MSFT/Windows experts, probably disinclined to recommend a switch to anything else (because they don't know it as well), and who is the tech-unsavvy CEO to tell them otherwise?
In retrospect MSFT's "certification" program was probably their most brilliant marketing ploy, in my opinion.
I probably agree with most of what you said, but I'm too stubborn to let go of years of experience and knowledge I have with windows to learn a brand new operating system.
For someone that does very basic tasks with computers (i.e. listen to music and check email), then the transition may be smooth, but for others that do more, it would take a while to get used to apple's OS.
A lot of people are not willing to do that.
Tadeh: inertia is a terrible affliction. I doubt you would find the change all that difficult, and I think you would find it to be worth your while in the end.
I love AAPL, and the way their stock moves.... im just afraid of all the mutual funds manipulating the price of their stocks. Then I read articles like THIS and think of the panic selling that one mutual fund can trigger to their share price.
-Daniel
Scott..don't be so quick to discount open source. In our present environment of increasing bloat, regulation, and mediocrity, linux becomes increasingly more attractive.
I've been using linux almost exclusively for several years now, because it's much faster/efficient (I can boot an OS in 15 seconds on an old laptop), can run off a pendrive, offers a huge database of great software (all free), and allows for unlimited adaptability. It's also become extremely user friendly (check out distribution like Puppy linux, for example).
Apple's ease-of-use has allowed it to dominate the mp3 player market.
Microsoft has the momentum in the PC market, as there are so many people that know PC software (and the operating system) and switching knowledge and existing software is a monumental task for some (and expensive). Microsoft is dominant in the corporate market for this reason and I just don't see that many switching to Macs or Linux for the majority of business use -- there's just too much investment in software and training.
Don't get me wrong -- Macs are incredible machines and the OS provides a very robust environment from what I've seen. But, just too much money and training for me personally to make the switch.
People switch when it becomes too expensive NOT to. When your computer becomes increasingly slower, dysfunctional because of various viruses and worms; when your time is devoured by having to continually update software; when you have to pay for new licenses and a variety of software packages just to protect it...in addition to all your applications; when you need 2 gigs of memory just to run the system; then it becomes economical to switch. It's not all that difficult, either.
d: re APPL. Note that the story was corrected. Contrafund held only $1 billion of Apple stock. No big mutual fund is likely to have a dominant role in determining the price of one stock.
John Peters: Apple is gaining significant market share relative to MSFT and relative to open source. I don't seen that changing any time soon. Any company gaining market share and being a dominant player in the technology commands my respect.
Cabodog: MSFT has lost its momentum--it's losing market share and will likely continue to do so. It can't innovate. Vista is years behind Mac OS X. Companies are increasingly moving to Macs. Macs will never dominate the business market, but they could make tremendous gains in market share. Why won't companies move to a platform that is easier to use and cheaper to maintain. Companies that are too big and too committed to one platform to change to a better platform are the same companies that will be on the decline, to be replaced by those that are nimbler.
Scott, I got a chance to sit behind my programmer's 30" screen and experience the Mac in all its glory -- pretty incredible look and feel to it. He prefers the Mac hands-down to the PC.
But, alas, I'm sweating having to convert to a new cell phone in two months due to changes at my cell provider (bought by Verizon).
Maybe someday I'll convert; my wife's sure pushing for an Apple laptop...
As far as the stock is concerned, if they're gaining market share and have a more expensive product as well, then by all means, it's a buy.
For those reluctant to switch from PC to Mac, consider: Macs don't get viruses, and aren't susceptible to spyware; Macs can run any Windows or Linus program right alongside Mac programs; Macs come with the best suite of consumer software for photos, music, and movies, all free; the Mac OS is the best available on any platform; Macs are famous for their ability to plug and play with almost any accessory; Macs come with the best backup software (Time Machine) that's also the easiest to use.
PC at work, Mac at home. If you are like me, you have photos and video and music at home. NOTHING is better than a Mac for these HOME-needs. Apple's integration with iPods, AppleTV (very cool), website building, wireless networking (multiple computers in the home) are as simple as simple can be. Using iPhoto to edit pictures and build hardbound photo albums as gifts or for your own use is amazing. iMovie makes it easy (yes easy) to edit video, mix, add titles, add music, etc. The new release of iLife 09 this month will include unbelievable updates to all of these tools, including face recognition, geo-tagging (gps on your photos), and really powerful video editing upgrades that would likely cost a lot of money, if they were even available, and there is no way that you could figure them out by trial and error. For the home, Apple is the ONLY way to go (in my opinion).
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