The Cult of Jobs - it is back to the cellar for Apple.
Submitted by Bapcha’s Stocks
Back in Sep 2008, I wrote that Apple was losing its mojo [the stock was at $140 back then]. I argued that apart from doing a lot of things correctly, Apple was guilty of doing a lot of things incorrectly - which led me to question/pick on Apple’s mojo. Here’s the list:
1. Not being brave when updating the Nano.
2. Slighting their faithful.
3. Not marketing iPod Touch as a MID.
4. Gravitating towards proprietary hardware.
5. Once again, thwarting generics [which did them no good the first time around].
6. The Cult of Jobs - dependence on one single person.
Apple’s marketing department did fix #3 and the iPod Touch is marketed as a MID and then some. But Steve Jobs’ temporary exit from the helm for health reasons has the stock down some 7% after-hours today. The stock went down 5% when Jobs was rumored to have died. I have a deep dislike for rumor and innuendo - especially when it applies to the life of a human.
While Steve Jobs is an honorable man, Apple’s response to his now disclosed illness will be analyzed and dissected from every possible angle [in fact, mea culpa of the same]. I think that both the company and Jobs need to be taken to task for the direction that they chose - when it came to disclosing his still unknown illness. Since Jobs is on a LOA, he should have disclosed *what* it was for - or absolutely nothing - with no mention of enzymes or proteins or anything for that matter. In other words, tell us nothing or tell us everything. Anything half-way will invite criticism from both Apple lovers and Apple detractors.
The future for Apple looks like they will be back to the cellar that they were in from 1980 to 1998. Let me explain my thesis. For starters, Apple has been a target of the new Blodgets [while I love the current avatar of Henry Blodget, I am talking about the Y2K version here]. 40% of the smart-phone market - or 77 Million phones is what they need to sell [at the high end of expectations]. WIth numbers like these, Apple will need to cut corners to maintain its gross margins, AND enter the cut-throat world of consumer electronics. Either way, it is a lose-lose situation.
The current growth of Macs is fueled by people willing to pay just a little more for Apple “coolness” and Apple “reliability”. These numbers have already shrunk due to the economy - where for now, the net-book is king. If Apple moves more towards proprietary hardware, a lot of these new adopters will turn on Apple - as they are unlike the faithful - who funded Apple during the “bleak years”.
In other words, Apple will be a victim of its success. They successfully killed the WalkMan, Vista; created a conduit through which people pay real money to download songs [iTunes]; and did not even try to get into the high-end corporate and data-center market [a good move, as this would have put them in competition with Dell/HP]. Now, the only “cool” technology that Apple can conquer is Ubuntu/Goobuntu - but then again, Ubuntu is free, and open - which does not fit into Apple’s mould for success.
So these are what will lead Apple to the cellar:
1. The cult of Jobs.
2. Not being cutting-edge [as it applies to new versions of devices].
3. Existing top end of estimates are ridiculously optimistic.
4. Apple knows how to be a niche player, and has no idea on how to be a commodity electronic gadget-maker.
5. Line-extensions will succeed only for a few years.
6. The Mac, MacBook and iPod Nano are getting stale.
and finally,
7. The new adopters of Macs and iMacs and MacBooks are unlike the faithful who supported Apple from 1980 to 1998. They will happily switch to HP or Dell when the time to replace their toy arrives.
I am confident that there will be a lot of people who disagree with me, but I am an Apple user. In fact, I use my MacBook almost exclusively for all of my computer use. But I am like the people I talk about in #7 above.
© Bapcha’s Stocks Jan 2009.
Disclosures: No positions in AAPL.
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