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Apple + Tech

Do you think AAPL will hit $500?

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Lots of good press for Apple at the moment. And with $A doing well and AAPL trading close to $300 it is probably a good time to buy AAPL shares. The only doubt I have is Steve Jobs‘ health. He’s had a liver transplant. My dad is doing very well 15+ years since he had his liver transplant, but not everyone does so well. If Jobs left the company there would undoubtedly be a price hit.*
But assuming that his health remains good, there’s a few little things that I think might add up to something big:
  • The iPhone is clearly a phenomenon. It has changed the mobile phone industry. In 2-3 years I suspect the market segmentation will be iPhone owning the premium phone market and Google Android owning the bottom. Blackberry will decrease but maintain a niche. Windows Phone 7 might share the bottom with Android. Symbion and other platforms will disappear.
  • iPad: changing the way we use computers

    The iPad is also a game-changer. Probably not yet to the same extent as the iPhone but it’s clearly done well. It’s had great success in the consumer market as an alternative to netbooks (that market niche has pretty much been replaced by iPad/tablets). The iPad has been available for 6 months now and there are still no other tablets available. Lots of companies are talking about them, but none are in production. This is a huge early mover advantage. The iPad is also selling in a market that I don’t think even Apple expected … the business market. I am seeing a lot of iPads at all the conferences / briefings that I attend. They are also in general business meetings.

  • Apple has

    FaceTime: could it replace traditional mobile telephone calls?

Apple’s iPhone 4 and the latest iPods have a new application they call FaceTime. At present this FaceTime technology only works via Wireless networks (eg: a network within a house). It doesn’t yet work over the telecommunications network (eg: Telstra Next G). It’s promoted as a video-calling feature, but it can also be used for just voice. In effect this is turning iPods into phones … but without customers having to sign up for phone contracts. There is no technical reason why FaceTime can’t work over the telecommunications network (data transmission).

Which brings me to what I think *could* happen:
  • The missing link is transmission of data. I think Apple may either buy or set up their own wireless data network (ie: just the 3g bit, or the next generation which I think is called 4g). They’d have to do it country by country, but they could sub-contract existing networks.
  • Once Apple control their own data network they are effectively a telecommunications company. They could improve the customer experience exponentially (imagine Apple customer service from a telco!) and could further lock in customers to the Apple ecosystem. I think this would be enormous.
So yes, I’m confident of $500. I just don’t know when.
From January – June 2009 Steve Jobs took a leave of absence due to health issues. It was later revealed that he had a liver transplant in April 2009. During Jobs’ absence Tim Cook, Apple’s COO, was “responsible for Apple’s day to day operations“. After an initial drop of less than 10% the AAPL share price gained over 60% during this period (from $85.33 on 14 January to $142.43 on 30 June 2009).

The AAPL price increased more than 60% while the NASDAQ rose just over 20% during Jobs' absence

Whilst you might argue that the increase in the value of AAPL during Jobs’ absence is evidence that the company would survive, indeed flourish without him, my view is that a permanent absence would have a significantly different impact on AAPL than a short-term absence. Apart from the high likelihood that Jobs was still overseeing Apple during his convalescence, I also believe that Apple was (and continues to be) executing his strategy during this period. If Jobs was absent then eventually the impact of Jobs’ vision would decrease and Apple’s success would truly be in the hands of others.


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