Apple shares have lost about a third of their value since I originally made that short call last summer. That's a couple hundred billion of market cap gone like farts in a hurricane.
I'm perfectly aware that there's lots of reasonably well-informed analysts out there who project the company's rate of cash accumulation going forward will continue at the rate of the past few years. If one accepts that line of reasoning it's easy to think that two or three years down the road the cash horde alone will equal the current market cap.
Ergo, at $430 Apple is a buy, even a bargain!
I think not, and my argument against buying Apple is based at least as much in sociology as in economics.
Dominant brands in any tech field don't dominate forever. Think Kodak, Xerox, Sony, Nortel, RIM... that's a list that could go on for a long time. Times change, tastes change, and most importantly, the competition never stops competing.
Here's an insightful review of Steve Job's biography by Evgeny Morozov, published a year ago. I was especially intrigued by Morozov's discussion of corporate culture at Apple and how dependent it was on the personality of one man.
No matter how gifted the professional managers now at the helm are (and the jury is out on that question) it is not possible for them to maintain that corporate culture. It will be self-maintaining due to its own momentum, but that's a time-limited phenomenon.
I think the share price drop over the past six months has more to do with the atrophy of that momentum than with any material developments with the company.
And that's something the management cannot change.
Between the image problems that have emerged due to its relationship with Foxconn, its increasing dependence on litigation instead of innovation to maintain market share, the loss of a charismatic leader, the renaissance of key competitors, especially Samsung, the next three years are not going to look like the past three.
At $430, Apple still has a long way to drop.
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