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| AAPL |
Apple
Inc: The world's largest corporation by
market valuation, one of the most recognizable brand names on the planet, a corporation that generates
about $150MM in sales every 10 minutes, a company that revolutionized already existing devices
that were invented or created by less imaginative designers, a corporation that benefited for having one of the greatest
marketers-in-chief and creative geniuses we had even seen (Steve Jobs)… and one could go on, and
on, and on…
In Dec ‘12 Apple held about $137B cash,
which is equal to about $145/share. Unfortunately (or perhaps fortunately for others), about
$94B of that cash ($99/share) is held offshore.
Offshore cash is not readily available for sharing with shareholders via e.g. dividends, buybacks, domestic acquisitions, etc. If Apple were to repatriate the offshore
cash, they would be liable for taxes in the range of about 30%.
Domestic cash-on-hand can
be applied as mentioned above. This
portion equaled about $43B (or $46/share) in December. Added to Apple’s near term,
predictable U.S. cash flow, this would be sufficient to fund Apple's $10B
stock-repurchase program and current 2% yield.
The PC market was likely Apple’s foundation
for being viewed as an extraordinary innovator. Cool factor achieved with the MacBook!
Apple’s incredible success with then
new, mega-popular iPod (mid-2000’s) followed their success enjoyed with revolutionized
laptops. No-one wanted to be seen with another MP3 music device and dominant portable music mainstays, like Sony, virtually disappeared almost instantly. Today, Apple’s fortunes are closely
tied to their successful iPhone sales, and – albeit to a somewhat lesser extent –
the iPad.
For investors it's interesting to note that Morningstar has a $600 fair
market value estimate on the stock price that is currently trading at around $480/share.
Apple Bulls would claim that:
- The smartphone market is growing so
fast... even if Apple grew at the market rate the company would enjoy great revenue growth
- The iPad has been Apple's fastest growing
product ever, even eclipsing success achieved with the iPod and iPhone
And the Bears may say that:
- Short product cycles cause intense
competition, and more competitors are raining on Apple’s parade, more
frequently... with products as good, or even better
- Apple has to rely on partnerships
with other technology providers like Google, Facebook, Samsung and others,
often referred to as Apple’s frenemies
- Many people believe that Apple -
without Steve Jobs - suddenly looks quite ordinary, despite its girth as the largest
company in the world by market capitalization.
To this last point above, there can be
little doubt that Steve Jobs' passing was a blow to Apple Inc. He was a one-of-a-kind leader, business master,
marketer, perfectionist and the revolutionary behind the creativity and
innovation, that is Apple.
What’s wrong with Apple?
Very little, it seems, whatever the
current stock price!
Disclosure: No position
