

Apple Versus Wall Street - kirillzubovsky
http://www.newyorker.com/online/blogs/johncassidy/2013/02/tim-cook-and-apple-versus-wall-street-dont-pity-the-hedgies.html

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jmspring
Rather than getting into the financial market nitty-gritty's, when "bubble
2.0" hit, an Apple employee mentioned to me that they had an all hands. In
that meeting, Jobs basically told them -- "your job is to execute on amazing
products, our job is to make sure we have the money for you to do so. don't
focus on financials, just focus on delivering"

This is hearsay, clearly, but the point is obvious. Apple management wasn't
worried about their near term financials, they were looking at the long game.
While Jobs was an amazing focal point and product guy, I suspect the engineer
culture at Apple is still focused on the long game.

Yes, a stock drop of $700 to $450 is a big one, but what percentage of Apple
employees are overly impacted by such a drop based on the rapid rise -- mainly
those hired recently. Those that have been around awhile, I suspect, are in it
for the long term.

~~~
TheAnimus
I would suggest that the stock price of over 700 was a bit of market hype,
rather than anything concrete.

Stock prices are ment to be about the future earning potential, not so much
the current. This is why Amazon has such a high stock price, despite making
very small profit compared to say Apple.

However it has come apparent to most investors that Apple is not really going
to be able to see much growth, there was dare I say almost a blind hype, a
bubble regarding the value of Apple.

There is absolutely nothing poor about having a company with the market cap
Apple has, they are cash rich, they have great revenue (who here wouldn't be
stoked to own such a firm), but it simply doesn't match up to such a high
price.

Right now I think the price is held up by speculation of an _iWatch_ which
will once again become the must buy and potentially create an industry which
has never managed to exist before (discounting luxury mechanical, or
Microsoft's smartwatch, or the one that was on KickStarter).

The question is, who ever thought it was worth $700 per share, where was that
growth going to come from?

People had gotten used to Apple being so disruptive, the iPhone I laughed at
when launched, £1800 GBP it cost in the UK with the cheapest contract applied.
Sat as the computer geek for a hedge fund desk we all scoffed at it, do they
not know thats 1/10th of the average salary in the UK? They demonstrated that
they could create something which was considered essential. I know students
who are scraping buy, in debt, on maybe £6k a year, who will still own the
latest smartphone on a contract which puts an annual cost of £500. When out in
a rural part of Thailand (trying to de-stress and live like a digital nomad) A
local bar owner explained you can tell the girls who are for rent, they own an
iPhone 4S. Apple realised people will sell their bodies for such a device.

I was one of the many people, perhaps with a little too much money for his
toys to understand why someone would pay so much for such a thing.

Then they did it again. Tablet Computers where not new, but ones that sold,
and really sold were.

If Apple are able to do this again, with the sucsess of the iPad in say the
watch market, then frankly their current share price could be a steal.

I don't think they will be able too, but what did I know, I was wrong the
first time.

~~~
Kurtz79
I agree, last year Apple and Google were at the same level and it did not make
any sense : Google have their hands on so many more potentially profitable
ventures, while Apple have been very focused on a small number of (highly
successful and profitable) products.

There is no real reason to hold a stock that does not pay dividends, except
for its potential appreciation, and Apple at 700 was overly hyped indeed,
given recent history and outlook.

~~~
michaelt
Google have many more ventures and customers - but Apple make a lot more per
customer; some estimates [1,2,3] estimate multiple hundreds of dollars per
iphone and ipad sold. Google makes what, a few dollar a year in adsense
revenue?

[1] [http://www.zdnet.com/blog/hardware/apple-makes-big-bucks-
pro...](http://www.zdnet.com/blog/hardware/apple-makes-big-bucks-profit-per-
iphone-3g-s/4792) [2] [http://gigaom.com/2010/02/01/apple-makes-at-
least-200-per-ip...](http://gigaom.com/2010/02/01/apple-makes-at-
least-200-per-ipad-sold-report/) [3]
[http://www.thestreet.com/story/11718458/1/heres-how-much-
app...](http://www.thestreet.com/story/11718458/1/heres-how-much-apple-makes-
per-iphone-5.html)

~~~
smackfu
And every one of those customer sales for Apple is hard fought against
persistent competitors.

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BenoitEssiambre
Apple's problems stem from Jobs not Cook. Apple's downfall was set in motion
when they decided to turn their back on the technical community and the
entrepreneurial community and made products that were more and more mere
consumer appliances instead of computers.

Although in numbers, techies and entrepreneurs are a minor customer of Apple,
they have disproportionate influence and are trend setters.

I remember back in 2001, there was a lot of chatter among techies about OSX.
It was all about how it came with a BSD licensed core, good terminal, a
standard Unix environment, Perl out of the box, etc.

It was a fresh alternative to Windows which was a lot more open than iOS of
today but still pushed software development in non standard and monopolistic
directions compared to the Unix based OSX.

Thus began the rise of OSX. It was a credible technical platform and at the
same time it would spawn some killer consumer features, a nice and fast
simplified desktop environment and well integrated innovative consumer
accessories such as the iPod. Sure Apple pretty much always limited their OS
to their own hardware, but it didn't matter to techies as long as they played
well with others by staying mostly compatible with Unix standards.
Entrepreneurs were also free to sell software for it directly to their
customers. You could buy a subscription on the devices without giving 30% of
the revenues to Apple.

I tried to run a Perl script on my mac the other day and a perl module
wouldn't compile because of some error with PowerPC compiler flags. PowerPC!
Clearly Perl on OSX has not been maintained for a while.

I'm currently writing a subscription web service along with apps and the 30%
cut to Apple is a dilemma for management.

Amazon doesn't let just anyone run apps on their Kindle devices either.
However Amazon devices are meant to be pure consumption devices mostly for
Amazon products whereas Apple wants iOS to be the main computing platform of
the 'post PC era'. Pure consumption devices have a much more limited market
than computing platforms. When Apple locks up their platform they are limiting
themselves to this much smaller market.

No developer wants their computing platform to be locked down, non standard
and encumbered by huge revenue levies.

The software development and entrepreneurial world needed a credible
alternative thus came Android. None of them wanted another closed, non
standard, fee encumbered platform thus failed, Palm, BB and Windows Phone and
eventually Apple.

~~~
sarvinc
"I tried to run a Perl script on my mac the other day and a perl module
wouldn't compile because of some error with PowerPC compiler flags. PowerPC!
Clearly Perl on OSX has not been maintained for a while." I suspect this has
something to do with dropping support for Power PC in Apple's dev tools.

I do development work in perl in OSX. One of our problems is that Apple _does_
update Perl versions etc.

It's a shot in the dark but I'd suggest editing
/System/Library/Perl/5.10/darwin-thread-multi-2level/Config_heavy.pl and
removing all instances of '-arch ppc'

Hope this helps

------
kalleboo
It seems like a lot of companies reach a nice stable point of development, but
then get lost when they have to keep stockholders happy with short term month-
to-month gains.

Is there some way for a company to amicably go private and delist when they no
longer need investment? The only example I know of recently is Dell, but that
was an unsuccessful company with a low value.

~~~
mmariani
I'd dismiss that idea as too costly to implement. If I were in their shoes I'd
try a different approach.

Has been widely known that Japanese companies focus on longer term business
goals instead of month-to-month gains, and I argue that worked alright for
them.

Instead of valuing so much secrecy I'd make public a ten year business plan,
and offer to buy the shares of those who lack the vision, patience, or
interest in the company's goals. Thus giving freedom to the company by making
those funds available to invest on a long term business plan. This would turn
out to be much more affordable for the company.

~~~
kirillzubovsky
Apple wins in part because of their secrecy. Would iPhone have been so
successful if they told the whole world of it's coming 10 years ahead? Well,
technically they did, in their patent filings, but the world wasn't listening.
But, if they did so publicly, Samsung would've been there, copying the tech
way earlier then they did.

~~~
neya
I agree with the secrecy part, but please stop with the Samsung copying Apple
bullshit, it's simply not constructive. I'm sure you know how much copying
went into Apple's products themselves.

~~~
Hari_Seldon
Samsung copying Apple is not bullshit, it was very overt and obvious to anyone
paying attention. it was also proved in court.

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mbesto
_At the meeting in February 2010, one shareholder asked Jobs, “What keeps you
up at night?” Jobs quickly responded, ‘Shareholder meetings.’”_ [1]

[1] -
[http://www.forbes.com/sites/stevedenning/2011/11/28/maximizi...](http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-
shareholder-value-the-dumbest-idea-in-the-world/3/)

------
rohern
It might be that there is a growing population of companies with strong
incentive to move away from the model of the public corporation given that
short-term growth trumps all other concerns on Wall Street.

We have seen Michael Dell buying back Dell, companies like Facebook and Zynga
getting nothing but grief for having publicly traded stock, Elon Musk making
it very clear that SpaceX will stay private so that it will be capable of
long-term planning, and now this silliness with Apple that does appear to be
just market griping over what is clearly a very strong company looking to the
future.

~~~
mooreds
This just a corollary of the fact that has led some to propose a financial
transaction tax: that the stock markets, which used to be focused on providing
capital to companies, are now focused on betting faster and with more borrowed
money.

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nicholassmith
Wall Street giveth, and Wall Street taketh away. When Apple's stock price
really, really spiked it wasn't likely to be ma and pa investors putting their
cash in but the big boys assuming they'd make money from it. I imagine a lot
of them did, and then when they'd made their profits pulled out because they
had no interest in investing in the core business but plenty interest in
making money.

Which is fine, it's their job to make money for the clients and funds they
manage, but honestly it's coming across as crying over spilt milk. There's
people who took a gamble and came in late, rather than playing the numbers and
thinking logically that the price was unsustainable and got burnt, now they're
punishing the company and trying to extract something to cover their losses.

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tdees40
Two things: (1) The Law of Large Numbers doesn't mean what the New Yorker
thinks it means. (2) Is issuance of a dividend really "financial engineering"?
This is just a silly piece by a guy who apparently doesn't understand finance,
tech, or investing.

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dantheman
IIRC the reason companies focus on growth over paying dividends is due to the
tax structure.

~~~
khuey
Absolutely. Tax rates on LCTG are much more favorable than tax rates on
dividends.

~~~
vetinari
Well, you pay taxes when you realize the gain (i.e. when you sell the shares).
Until then, it is only theoretical and there is nothing to tax (the share
price can also go down, not only up).

Another POV is, that when company pays dividends, they are not sure what to do
with the money, they have nothing interesting in pipeline and therefore they
can not provide better return on investment than the investors individually
can.

~~~
orofino
Regarding the paying of dividends representing the lack of innovation, I have
this to ask: have we ever had a company with such massive cash reserves
relative to the balance of the market?

I think it makes (common) sense that this is a signal of ending innovation,
however, Apple has so much cash, it is difficult to fathom what they could
possibly do with it other than return it to the shareholders (which they ARE
doing).

That is the other strange thing I see about all of this, they ARE returning
value to the shareholders in terms of dividends, are these big shareholders
(Einhorn et al) just not happy with the rate at which they're being paid?

~~~
khuey
This is an important point. The traditional "dividends mean mature company
with declining innovation/growth" line of thought may not apply here. Apple
has more cash on hand than the state of California spends from the general
fund in a year. Apple is in uncharted waters for a private company here.

------
eliben
When will this fascination with how much other people in private corporations
earn end? I know, I know, it never will...

