hmmmm, the problem here is that Google continues to grow and Apple is not. Yes Apple has a very nice business and is making more money than Google, but investors are looking at the future, not today, and the data suggests that Google is continuing to grow. It doesn't matter that the PC market is shrinking. The data suggests that the people are continuing to use PCs for doing Google searches and despite the decrease in sales, ad revenue from these PCs are still growing. That brings up another point, which is that PC sales could go to zero and ad revenue could still increase because you don't need to sell a PC to use a PC. This is exactly why Apple needs to start lowering the price on iPhones and take more market share and charge for services on the devices.
It's just unfortunate that big investors have no faith in Apple or Tim Cook. Apple shareholders will continue to lose out for whatever reasons. Over the past year or so, Apple's percentage institutional investors hasn't budged. It's still around 61% according to Google's financial data, down from 68% in early 2012. Even long-term institutions think owning Apple is a waste of money. I guess Apple's dividend isn't even large enough to make the institutional investors salivate. I really just don't understand how Apple became so toxic to investors considering the fundamentals are still very good, no layoffs, openings of more retail stores, getting the iPhone on more carriers, etc.
Apple can do no right and Google can do no wrong. Every single day, Google's share price climbs higher and higher and it doesn't even seem as if they're doing anything special except for acquiring robot-connected companies. I guess Google shareholders and investors believe Google is going to corner the robotics industry in a few years, leap-frogging over all the other established robotics companies. Absolutely nothing spooks Google investors. Google's 3 Stooges, Schmidt, Page and Brin now have Steve Jobs Reality Distortion Field working for them. Tim Cook is doing nothing effective enough to pull in investors or to slow down Google's rapid growth. Apple can't stop Android from growing exponentially, either.
As an Apple shareholder, I've pretty much resigned myself that Google will eventually pass Apple in market cap and have a P/E of around 40 while Apple's P/E continues to compress around to where Exxon Mobil's P/E is at the mid 12s. Apple's share price can't hold onto any sort of momentum. It goes up a bit and then just collapses every quarter. Considering Apple is sitting on so much reserve cash and has so many options to choose from it's really rather disheartening. I know Apple isn't going out of business for a long time but it appears the share price has been capped below $600 and there's nothing much more to look forward to.
You are way over thinking it. Google can do no wrong because they make all their money from advertising and those ad revenues are growing at 37%, despite the PC industry sinking. In other words, even if PC sales go to zero, Google is still going to make money because the people that own PC are still using them and receiving ads. Apple sells a commodity hardware that will eventually succumb to the pricing pressures and the inability to make significant improvements. At some point, your current iPhone will be good enough and you won't care to upgrade. We aren't there yet, but it isn't too far into the future. In other words, the writing is on the wall that Apple's revenue growth is going to slow and Apple will be a giant dividend producing machine. Its not necessarily a bad thing, but its a different investment and warrants a lower multiple on the stock.
....At least that's the theory. Personally I think Apple has some growth still in it, which is why I own the stock.
I appreciate your in-depth reporting, Daniel. While I sometimes rant about the misguided attention given Google's "80%, my devil's advocate position is that Mr. Market's fixation on Google will eventually fade, and in the meantime I can continue to bulk up on APPL knowing that the I'm earning a nice dividend while buying more "on sale".
That brings up another point, which is that PC sales could go to zero and ad revenue could still increase because you don't need to sell a PC to use a PC. This is exactly why Apple needs to start lowering the price on iPhones and take more market share and charge for services on the devices.
What you don't get is that people are using more and more mobile devices and less and less PCs.
Not only are people buying less PCs but they are using PCs less.
Great article. To me, DED often forcefully reports what needs to be highlighted and emphasized because it is so often overlooked by the more popular tech press, (who gets mesmerized by featuring G Glass ski jumping or a robot driving your car).
Whenever I listen to the "collective choir" of Wall Street analysts' Q&A after Apple's quarterly earnings reports, (with some of their inane questions), or read their commentaries associated with their periodic share-value downgrades, why do I get the impression that practically NONE of these highly-paid "experts" ever bother to read articles like this nor follow the handful of a select few other non-Wall Street, yet enlightened analysts or commentators who offer a deeper perspective, and keep pointing out the gaping holes in these flimsy arguments as to why Apple shares deserve to be SO undervalued and always on the precipice of doom and destruction? We all know the handful of analysts I am talking about here. Like DED, most of them are very telegenic and/or write and speak very well. Can't we find a way to see some of these commentators interviewed on TV or quoted in major publications a bit more?
Cook clearly isn't the showman Jobs was but I've never gotten the impression that Cook had a far inferior desire for quality and precision. In fact, I would argue that Cook's drive for unheard of efficiency is part of the same psychology that was present in Jobs, and probably why Cook was the primary choice as CEO. As an owner of a Retina MBP and an iPhone 5S I see no evidence that attention to detail has waned.
I don't think the quality has waned either. The Retina MBP is a beautiful machine. I just think Jobs was the root cause/inspiration for that quality, and that quality was the driving force behind Apple's resurgence, so it would be more correct to call this the Jobs era than the Cook era.
this may be a good article, but i can't get past the 3rd paragraph. can somebody please proof read?
<<That lost was accompanied by an layoff restructuring of 1,300 employees>>
If that's the only typo you saw, you're fired as a proofreader.
I don't think the quality has waned either. The Retina MBP is a beautiful machine. I just think Jobs was the root cause/inspiration for that quality, and that quality was the driving force behind Apple's resurgence, so it would be more correct to call this the Jobs era than the Cook era.
Who's era it is comes down to who can light their own farts at a board meeting and no one else will acknowledge they saw anything odd happen.
You are way over thinking it. Google can do no wrong because they make all their money from advertising and those ad revenues are growing at 37%, despite the PC industry sinking. In other words, even if PC sales go to zero, Google is still going to make money because the people that own PC are still using them and receiving ads. Apple sells a commodity hardware that will eventually succumb to the pricing pressures and the inability to make significant improvements. At some point, your current iPhone will be good enough and you won't care to upgrade. We aren't there yet, but it isn't too far into the future. In other words, the writing is on the wall that Apple's revenue growth is going to slow and Apple will be a giant dividend producing machine. Its not necessarily a bad thing, but its a different investment and warrants a lower multiple on the stock.
....At least that's the theory. Personally I think Apple has some growth still in it, which is why I own the stock.
This argument can be used to support Apple business perspectives, too : even if they keep the same machines Apple customers generate substantial revenues through immaterial content sales (iTunes, App Store Apps ....) .... I am always surprised WS never pays attention to this .
You are way over thinking it. Google can do no wrong because they make all their money from advertising and those ad revenues are growing at 37%, despite the PC industry sinking. In other words, even if PC sales go to zero, Google is still going to make money because the people that own PC are still using them and receiving ads. Apple sells a commodity hardware that will eventually succumb to the pricing pressures and the inability to make significant improvements. At some point, your current iPhone will be good enough and you won't care to upgrade. We aren't there yet, but it isn't too far into the future. In other words, the writing is on the wall that Apple's revenue growth is going to slow and Apple will be a giant dividend producing machine. Its not necessarily a bad thing, but its a different investment and warrants a lower multiple on the stock.
....At least that's the theory. Personally I think Apple has some growth still in it, which is why I own the stock.
I am pointing out the portion of your post where your conclusion went off-track.
Apple sells a prestige product, that could become a commodity product if Apple marketed it that way. This is why Apple is outselling all but one of the Android-based barely-intelligent phones (at nearly three-times the price) and totally dominating the iPad tablet market where it is also the costliest product. The value of a prestige product is not measurable because it has nothing to do with cost of ownership, but is founded upon other intrinsic features.
We live in a world where there are commodity automobiles and prestige automobiles. There are $10 wrist watches and Rolexes worth $30,000. There will always be room for prestige products even in mature markets such as automobiles and watches.
There's no reason for Apple's revenue growth to slow, especially if then continue innovating and extend themselves into new markets. Apple has such a caché aura they could sell bronzed dog turds and people would line up to buy them. It would damage their brand, but people would buy them.
For better or worse, I don't think this is true. The first x number of products will be credited to Jobs. Unless they flop. Then Cook will be "credited".
I'm curious to watch how this same story will play out over in Redmond Washington... when will the new guy be recognized without people saying, "Oh, that's because Bill Gates is actually doing it," or "That was actually done on Ballmer's watch."
This is one of the top 10 most hypocritical things I've ever read. The author is probably a Apple-fanboy/Google-hater who has written things for other Apple-fanboys/Google-haters to nod along to. The article criticises the media for twisting facts in order to praise Google but the author twists facts in order to bash Google.
Google's appeal to most tech-news is due to the fact that most tech-journalists are nerds and Google is probably the most appealing company to nerds.(BTW I am a nerd too). We nerds like to do sensational things with our gadgets not because it makes sense but because we just can. Google does sensational things with their tech & their money, things like Google glass, FIBER, project loon, self automated cars, robotics, home-automation, life longevity e.t.c. also Google supports open-source projects. It helps that Google is open to the media and not as secretive as Apple.
Apple is just a no-nonsense lean mean profits-making machine. They'll make make headlines for breaking some sale record, coming up with a new overpriced device but nothing very exciting. They will always be successful because they are an aspirational brand.
Google is more successful at wall street because of potential. Everybody wants to see what Google's investments will lead to (even the most hardened Apple fan only they wish Apple was at the helm of those projects). Apple's profit peak is on the horizon, we all know that the smartphone Market has a saturation point and for the premium market we are ever close to that point. When this point is reached, Apple won't be doomed as the Google fanboy would want you to believe, they'll just be stagnant.
hmmmm, the problem here is that Google continues to grow and Apple is not. Yes Apple has a very nice business and is making more money than Google, but investors are looking at the future, not today, and the data suggests that Google is continuing to grow. It doesn't matter that the PC market is shrinking. The data suggests that the people are continuing to use PCs for doing Google searches and despite the decrease in sales, ad revenue from these PCs are still growing.
That brings up another point, which is that PC sales could go to zero and ad revenue could still increase because you don't need to sell a PC to use a PC. This is exactly why Apple needs to start lowering the price on iPhones and take more market share and charge for services on the devices.
I completely agree. And apple doesn't seem capable of doing paid services.
Maps took time to become acceptable (not good) and was shoved on anybody's phone anyway. Ping went nowhere.
iTunes Radio works only in a handful of countries, and is free because of apple's cash.
iCloud became free, iLife became free, iWork became free. OSX became free. Aperture became almost free (from 300 USD to 80)
Once you go free you can't go back. So if sales decline you cannot make customers pay for your sw. But that's not my point.
Apple has cut off all revenue stream from anything else than hardware sales. And development of these program takes cash. Now they have it, but in time?
And the latest versions of all the mentioned software is a dumbed down version of the previous one (including final cut).
Apple has constantly failed in social, iAd and iTunes Radio advertisements haven't taken off as expected. Maps still needs lots of work (but has become better) but doesn't generate any ad related revenue when it should be a primary source of ads and revenue.
As much as I am an apple buyer and happy user, seeing the total dependency of apple on hardware sales makes me uneasy. If apple ever has a huge flop, a product that doesn't sell, then it is in a world of trouble.
And, because of this dependency, apple has to enter new product categories because as soon as a market matures or shrinks, they lose all revenue. Apple had to enter phone and tablet and they did it quite well. But look at the iPod, there was a time when it was the main contributor to Apple's bottom line. And now is no more. If wearable really takes off then smartphones will become less important. If smart objects really take off, then what little computer is left will go the way of the dodo.
Apple is great right now, but the legs seem thin. They make tons of money, but on 2 product lines with nothing else behind them. The whole ecosystem lives because of the sales of these two products. And, opposite to google, apple is not entrenched in a market (search) that basically gives them tranquility. In 2014 iPhone sales will decline (or, at the very least, stop growing), it is the inevitable cycle of markets and has little to do with competition. So either apple enters a new market or really it will face shrinking. And the price of a smartphone, and related revenue, is much higher (and sales numbers are too) than the one of a watch.
My opinion is that apple is strong, but it has to be really careful to differentiate revenue streams (by doing both home (appletv and others, darn them for not buying Nest) and wearable).
And, for .'s sake, do software right! Fix numbers, pages, aperture, mail, allow me to use airdrop between a mac and an iOS device, etc etc.
Because apple is leaving the door wide open for Microsoft and others.
Comments
Ever… been to any of those?
YEAH. It’s not like Google pulled a Microsoft or anything.
That brings up another point, which is that PC sales could go to zero and ad revenue could still increase because you don't need to sell a PC to use a PC. This is exactly why Apple needs to start lowering the price on iPhones and take more market share and charge for services on the devices.
It's just unfortunate that big investors have no faith in Apple or Tim Cook. Apple shareholders will continue to lose out for whatever reasons. Over the past year or so, Apple's percentage institutional investors hasn't budged. It's still around 61% according to Google's financial data, down from 68% in early 2012. Even long-term institutions think owning Apple is a waste of money. I guess Apple's dividend isn't even large enough to make the institutional investors salivate. I really just don't understand how Apple became so toxic to investors considering the fundamentals are still very good, no layoffs, openings of more retail stores, getting the iPhone on more carriers, etc.
Apple can do no right and Google can do no wrong. Every single day, Google's share price climbs higher and higher and it doesn't even seem as if they're doing anything special except for acquiring robot-connected companies. I guess Google shareholders and investors believe Google is going to corner the robotics industry in a few years, leap-frogging over all the other established robotics companies. Absolutely nothing spooks Google investors. Google's 3 Stooges, Schmidt, Page and Brin now have Steve Jobs Reality Distortion Field working for them. Tim Cook is doing nothing effective enough to pull in investors or to slow down Google's rapid growth. Apple can't stop Android from growing exponentially, either.
As an Apple shareholder, I've pretty much resigned myself that Google will eventually pass Apple in market cap and have a P/E of around 40 while Apple's P/E continues to compress around to where Exxon Mobil's P/E is at the mid 12s. Apple's share price can't hold onto any sort of momentum. It goes up a bit and then just collapses every quarter. Considering Apple is sitting on so much reserve cash and has so many options to choose from it's really rather disheartening. I know Apple isn't going out of business for a long time but it appears the share price has been capped below $600 and there's nothing much more to look forward to.
You are way over thinking it. Google can do no wrong because they make all their money from advertising and those ad revenues are growing at 37%, despite the PC industry sinking. In other words, even if PC sales go to zero, Google is still going to make money because the people that own PC are still using them and receiving ads. Apple sells a commodity hardware that will eventually succumb to the pricing pressures and the inability to make significant improvements. At some point, your current iPhone will be good enough and you won't care to upgrade. We aren't there yet, but it isn't too far into the future. In other words, the writing is on the wall that Apple's revenue growth is going to slow and Apple will be a giant dividend producing machine. Its not necessarily a bad thing, but its a different investment and warrants a lower multiple on the stock.
....At least that's the theory. Personally I think Apple has some growth still in it, which is why I own the stock.
<Bla bla bla...>
What you don't get is that people are using more and more mobile devices and less and less PCs.
Not only are people buying less PCs but they are using PCs less.
Great article. To me, DED often forcefully reports what needs to be highlighted and emphasized because it is so often overlooked by the more popular tech press, (who gets mesmerized by featuring G Glass ski jumping or a robot driving your car).
Whenever I listen to the "collective choir" of Wall Street analysts' Q&A after Apple's quarterly earnings reports, (with some of their inane questions), or read their commentaries associated with their periodic share-value downgrades, why do I get the impression that practically NONE of these highly-paid "experts" ever bother to read articles like this nor follow the handful of a select few other non-Wall Street, yet enlightened analysts or commentators who offer a deeper perspective, and keep pointing out the gaping holes in these flimsy arguments as to why Apple shares deserve to be SO undervalued and always on the precipice of doom and destruction? We all know the handful of analysts I am talking about here. Like DED, most of them are very telegenic and/or write and speak very well. Can't we find a way to see some of these commentators interviewed on TV or quoted in major publications a bit more?
Cook clearly isn't the showman Jobs was but I've never gotten the impression that Cook had a far inferior desire for quality and precision. In fact, I would argue that Cook's drive for unheard of efficiency is part of the same psychology that was present in Jobs, and probably why Cook was the primary choice as CEO. As an owner of a Retina MBP and an iPhone 5S I see no evidence that attention to detail has waned.
I don't think the quality has waned either. The Retina MBP is a beautiful machine. I just think Jobs was the root cause/inspiration for that quality, and that quality was the driving force behind Apple's resurgence, so it would be more correct to call this the Jobs era than the Cook era.
Not weird, monkeys can't ever look the big guy in the eye.
If that's the only typo you saw, you're fired as a proofreader.
Who's era it is comes down to who can light their own farts at a board meeting and no one else will acknowledge they saw anything odd happen.
You are way over thinking it. Google can do no wrong because they make all their money from advertising and those ad revenues are growing at 37%, despite the PC industry sinking. In other words, even if PC sales go to zero, Google is still going to make money because the people that own PC are still using them and receiving ads. Apple sells a commodity hardware that will eventually succumb to the pricing pressures and the inability to make significant improvements. At some point, your current iPhone will be good enough and you won't care to upgrade. We aren't there yet, but it isn't too far into the future. In other words, the writing is on the wall that Apple's revenue growth is going to slow and Apple will be a giant dividend producing machine. Its not necessarily a bad thing, but its a different investment and warrants a lower multiple on the stock.
....At least that's the theory. Personally I think Apple has some growth still in it, which is why I own the stock.
This argument can be used to support Apple business perspectives, too : even if they keep the same machines Apple customers generate substantial revenues through immaterial content sales (iTunes, App Store Apps ....) .... I am always surprised WS never pays attention to this .
And that's not all that hard when you control the search engine all the researchers use to fluff out their daily drivel...
I am pointing out the portion of your post where your conclusion went off-track.
Apple sells a prestige product, that could become a commodity product if Apple marketed it that way. This is why Apple is outselling all but one of the Android-based barely-intelligent phones (at nearly three-times the price) and totally dominating the iPad tablet market where it is also the costliest product. The value of a prestige product is not measurable because it has nothing to do with cost of ownership, but is founded upon other intrinsic features.
We live in a world where there are commodity automobiles and prestige automobiles. There are $10 wrist watches and Rolexes worth $30,000. There will always be room for prestige products even in mature markets such as automobiles and watches.
There's no reason for Apple's revenue growth to slow, especially if then continue innovating and extend themselves into new markets. Apple has such a caché aura they could sell bronzed dog turds and people would line up to buy them. It would damage their brand, but people would buy them.
I'm curious to watch how this same story will play out over in Redmond Washington... when will the new guy be recognized without people saying, "Oh, that's because Bill Gates is actually doing it," or "That was actually done on Ballmer's watch."
i'm not the proof reader & i didn't get any further.
Nice article Daniel!
Anyway long story short: Google's earnings are still growing fast, Apple's don't.
WallStreet likes growing businesses. That's it.
Google's appeal to most tech-news is due to the fact that most tech-journalists are nerds and Google is probably the most appealing company to nerds.(BTW I am a nerd too). We nerds like to do sensational things with our gadgets not because it makes sense but because we just can. Google does sensational things with their tech & their money, things like Google glass, FIBER, project loon, self automated cars, robotics, home-automation, life longevity e.t.c. also Google supports open-source projects. It helps that Google is open to the media and not as secretive as Apple.
Apple is just a no-nonsense lean mean profits-making machine. They'll make make headlines for breaking some sale record, coming up with a new overpriced device but nothing very exciting. They will always be successful because they are an aspirational brand.
Google is more successful at wall street because of potential. Everybody wants to see what Google's investments will lead to (even the most hardened Apple fan only they wish Apple was at the helm of those projects). Apple's profit peak is on the horizon, we all know that the smartphone Market has a saturation point and for the premium market we are ever close to that point. When this point is reached, Apple won't be doomed as the Google fanboy would want you to believe, they'll just be stagnant.
I completely agree. And apple doesn't seem capable of doing paid services.
Maps took time to become acceptable (not good) and was shoved on anybody's phone anyway. Ping went nowhere.
iTunes Radio works only in a handful of countries, and is free because of apple's cash.
iCloud became free, iLife became free, iWork became free. OSX became free. Aperture became almost free (from 300 USD to 80)
Once you go free you can't go back. So if sales decline you cannot make customers pay for your sw. But that's not my point.
Apple has cut off all revenue stream from anything else than hardware sales. And development of these program takes cash. Now they have it, but in time?
And the latest versions of all the mentioned software is a dumbed down version of the previous one (including final cut).
Apple has constantly failed in social, iAd and iTunes Radio advertisements haven't taken off as expected. Maps still needs lots of work (but has become better) but doesn't generate any ad related revenue when it should be a primary source of ads and revenue.
As much as I am an apple buyer and happy user, seeing the total dependency of apple on hardware sales makes me uneasy. If apple ever has a huge flop, a product that doesn't sell, then it is in a world of trouble.
And, because of this dependency, apple has to enter new product categories because as soon as a market matures or shrinks, they lose all revenue. Apple had to enter phone and tablet and they did it quite well. But look at the iPod, there was a time when it was the main contributor to Apple's bottom line. And now is no more. If wearable really takes off then smartphones will become less important. If smart objects really take off, then what little computer is left will go the way of the dodo.
Apple is great right now, but the legs seem thin. They make tons of money, but on 2 product lines with nothing else behind them. The whole ecosystem lives because of the sales of these two products. And, opposite to google, apple is not entrenched in a market (search) that basically gives them tranquility. In 2014 iPhone sales will decline (or, at the very least, stop growing), it is the inevitable cycle of markets and has little to do with competition. So either apple enters a new market or really it will face shrinking. And the price of a smartphone, and related revenue, is much higher (and sales numbers are too) than the one of a watch.
My opinion is that apple is strong, but it has to be really careful to differentiate revenue streams (by doing both home (appletv and others, darn them for not buying Nest) and wearable).
And, for .'s sake, do software right! Fix numbers, pages, aperture, mail, allow me to use airdrop between a mac and an iOS device, etc etc.
Because apple is leaving the door wide open for Microsoft and others.