Wednesday, January 21, 2009

AAPL 30,000

Apple Inc. stock has taken a steep drop from a bubbly peak. This is not unlike all companies on Earth, who have seen orders fall by half overnight, or are faced with high rates and crippling, excessive demands for collateral. Intel is at $13, Microsoft at $18, and Google at $309. AMD and ATI merged, and promptly sunk to the single digits, then sub-$5, and now a dreadful 2.35.

What is different about Apple is it's business trajectory. Sales are rising, all product lines increased sales volume, and margins faced no deterioration. The quarter was the best in Apple's history. Ever, and in spite of a deferral of income due to conscription accounting that meant a billion or so dollars fit under the radar.

The classic problem with the "Mac silo", is that it is impossible to measure the market value of say, owning the home and small business database market, Windows and Mac, with FileMaker, or any other of these examples.

Think of Apple's old race to own digital video. The medium had a computational-needs profile that meshed with Motorola/sorta-IBM AltiVec acceleration, and was in the service of content creation. Desktop video sold Apple hardware just as desktop publishing sold Macs and LaserWriters. Now, it is a fillip in Apple's hat, a nice tie-in point for Pixar/Disney or whoever else uses Macs for movies, and the death of Avid's high-end editing station cash cow.

What halo does a working MobileMe cast on the Mac? Is the Google Mail/Docs/Chat/Images/Videos Cloud in action, Mac only, something that anyone cares about? It is either a seminal integration of web services and forever alters the personal computing product proposition, or perhaps no one ever cares, or, worse, it never works. iWork and iLife are difficult to evaluate competitive advantages.

Apple owns the iLife, and Adobe is pushed hard to keep its pro customers against Aperture, too. Microsoft, and Open Office all offer desktop app competence, and Google Docs are effective for lightweight use. Apple has both ends covered and is now saying the packages are part of the "Mac Box Experience" bundle. Either no one will care and Office will continue to dominate, with a slowly growing Google Docs share. The goal is to make it so cool that you get a Mac just to be able to use iWork Online and do sophisticated collaboration in an Apple-forged, Jobs-ordained, vertically integrated environment.

But many will be forced to sell panache and convenience down the river for compatibility. As long as remains siloed, it is a Mac-only way to blow MS Word out of the water for fun and career advancement, and is a hard thing to value. A Mac-only set of consumer multimedia applications has no value to anyone besides Apple. Apple brings everything in its arsenal to bear on iL/iW09, an investment no one else could make, and one which may make the whole software line a net financial loss, even if it is a great, impossible to account for "halo."

Never mind iTunes Music Store paid-download domination, even OS X itself. Snow Leopard is going to reset the bar, and Apple has paid for it already. Now they need only wait for the revenue to flow in whenever it is ready for release. I hope we don't get a WWDC final beta, as it needs to be out and getting tested for real before Back To School and Christmas '09. If Apple releases Snow Leopard into either of those key buying seasons, there better be a quick 10.6.1 when the inevitable deal-killer problems are uncovered in the first few weeks.

So what is Apple worth? They have a nascent cell phone handset business and application platform, a mature desktop computing platform, one of only two or three, depending on how you count, in wide use, and a blockbuster music player platform. They own media delivery and creation from the upper levels of the high end all the way to MacBooks with iMovie. The iPod Touch is in gaming, as well as adding real estate for App Store developers.

All of Apple's various trajectories point up. The horrendous Christmas buying season seems to have done little damage to Apple. I think it is time to revisit valuations of $150 or $180 within a year.

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