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Are Apple Days of Glory Over ?

January 26, 2013

Apple ended the quarter with $137 billion in cash and investments, more than the GDP of many nations, and is current trading at less than 10x earnings, wow. (About $94 billion of this is overseas and would be taxed if repatriated, so some borrowing by Apple might be necessary).

Tiernan Ray writes for Barron’s, who said: "The 37.6% drop in the past four months in market value of what had been the world’s largest companyβ€”Apple relinquished the title to Exxon Mobil Friday, a year to the date it assumed the mantleβ€”is increasingly frustrating investors, so much so, many believe, that the company must give back a lot more to shareholders. "Apple could have, for example, removed the sting of Wednesday night’s report with an increase in its quarterly dividend from the current $2.65 per share, a 2.4% yield. That’s not bad, and it’s certainly better than it was when the stock was at $700, but it pales beside the 4.3% yield on Intel’s shares. Even Microsoft’s long-criticized yield is 3.3%," Ray writes. "Apple could have boosted its share buybacks, too, on which it spent just $2 billion last quarter." Ray writes, "It’s not necessarily wise, however, for Apple to heed the calls to unleash its cash. For one thing, cash doesn’t necessarily have a multiple of zero, as Gundlach suggests, when it’s in the hands of a company that can sell nearly 50 million gizmos at around $600 a pop in three months… Although we’ll probably see a protracted period of hand-wringing about the cash, at some point the focus will return to the fact that Apple can and still does surprise with very good products, of which it sells gazillions."

MacDailyNews Take:
+ 1. If you think Steve Jobs left those in charge of his life’s work with bupkis, you’re a fool.
+ 2. If you think the people at Apple, including Jony Ive, were just hangers-on riding the Steve Jobs train and now its all just sitting, rusting on the tracks, you’re a fool.
+ 3. If you say either of these two things, but don’t believe it, you’re a stock market manipulator.
+ 4. If you wish Apple simply had their iMacs ready when they were supposed to be ready and not two months late, thereby missing out on approx. 1+ million holiday quarter Mac unit sales (which would have just so happened to beat the Street soundly), you’re probably long AAPL.
+ 5. If you know anything at all about Apple product supply/demand, you know that Apple customers wait. Therefore, you understand that sales of iMac, iPad mini, and iPhone 5 (all of which were constrained during the last quarter) will be pushed into this quarter, with its drastically lowered expectations, then you’re thinking ahead.

This is what Jimmy thinks.
+ A. Truly great companies have progression of senior managers, so that the organization advances, not just the lead of one person. Granted many of these high tech enterprises, began with one or several youths that had a great idea; however, with time, these entrepreneurial enterprises advance beyond an individual.
+ B. Apple with its 80,000+ team, have lots very imaginative folks, where new innovative products will emerge; the true test is how many of the new products catch on like the recent successes…
+ C. Apple will continue to refine and improve their iPhones, iPads, Mac Books, MACS, add screen sizes big and small, which will continue to earn more market share…
+ D. Tim Cook is a master of "Supply-Line" mechanics, which is how Time earned his promotion to temporary CEO as SJ became more incapacitated, and later to become the CEO, once SJ simply could not perform… Time Cook has the executive experience, confidence, and fortitude to sustain the pressures of being in High Places, with Equity Market Pressures.
+ E. Apple is selling for 9.9x earnings, that is sitting on $137 Billon in after tax Cash, that has earned a record quarterly profit in dollars and percentages, that is selling over 51% of all smart phones in the USA, up from 37% last year…
+ F. Apple is super fine; however, the traders will cause relatively large swings in pricing, that have little to do with Apple’s future in its ability to earn money and create quality innovative products.

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