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Notes to myself, possibly of interest to others.
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Thursday, January 24, 2013

Vitus on AAPL

For several days the whole market has been furiously discussing AAPL. After yesterday's disappointing earnings announcement, all the pundits are out declaiming AAPL's many obvious flaws. Note that the pundits were not declaiming so loudly before the earnings report, nor were the flaws' obviousness so widely acknowledged.

We are not AAPL fan-persons (we do have a Mac, which, after trying all the PC's available, we actually do love), but we must demur from the consensus, which was aphoristically (since we are into aphorisms today) captured in Mr. Cooper's article below, as basically ".. when everyone you know has an iPhone and an iPad, the cool can rub off quickly." Another view is from a prop. source: "Ultimately, my big fear is that Apple suffers from ongoing multiple compression on higher and higher earnings, resulting in a stagnant stock price a la Microsoft"

The reason we basically disagree is that the personal computing firmament is switching (finally!) from a desktop / local data world to a mobile (phone/tablet) / cloud-centric world.  (See the Mac data in the earnings report link, above.)  This is almost as important as the switch from mainframes to PC's, in our humble opinion.

AAPL is the leader in phones and tablets, and has one foot in the cloud. At Vitus we prefer Android technology over IOS, but for the vast majority, the iPhone/iPad world is a perfect world. There's is a brand bandwagon which will keep rolling for a very long time. AAPL does need to fix their hideously brain-dead iCloud stuff, but one can just ignore it and use DropBox, Google Docs, or whatever.

The point is that AAPL is very well positioned for the future and has a good footprint in legacy technology (Macs). Microsoft has been bringing up the rear on the future for a number of years. Fundamentally different.

Is AAPL vulnerable on mobile (iPhones, iPads, IOS)?  Of course (NB Google). But AAPL is the new and current king of the hill, whereas MSFT has (had?) been king for a very long time. AAPL has had several near-death experiences. The DNA at Apple is to run scared. Remember the concept of The HP Way? A company built with a specific vision imbued in the culture is very, very robust.

Sure, AAPL is now more of a value play than a huge grower. The predictions of a $1000 AAPL stock are revealed to be over-reach. But at Vitus we like the stock, esp. at this price. See the Buffett quote below.

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