Steve could be a yoga instructor! Maybe a cult leader? I kid, I kid...
This week Apple Inc. announced it would no longer be attending MacWorld (press release). The other kicker was that Steve Jobs is not going to be a key note speaker at MacWorld. Instead, Apple is sending Philip Schiller, Apple’s senior vice president of Worldwide Product Marketing, instead of Jobs.
The moves makes sense, as Apple clearly wants to stay away from Trade Shows and focus more on direct customer channels. The buzz surrounding the news is regarding the clear transition of power that is happening within the company. Job's health has been questioned for months now and his withdrawal from the key note speech could be a sign of bad health. The company is possibly entering a restructuring phase and looking for a replacement.
Being a fundamental trader, it's hard to get excited about a company when it's star CEO appears to be in his final years. It's never wise to invest in a company whose future relies on a star. If Job's leaves, there is no more hope for Apple stock, the thing will tank like Russell Peters at the MTV Movie Awards. This part is all speculation and not something I'd be interesting in basing a trade off but it definitely deserves mention as it has future potential.
What does make sense is declining Mac desktop sales and the worst retail environment this country has seen in decades. Apple's retail sales accounted for 21.8% of revenue in their fourth quarter of 2008. Desktop sales were 16.7% of total revenue for 4Q2008. We are entering the age of the laptop but desktops are still used in businesses and homes.
Apple also is getting hurt by the ridiculous prices PC makers are offering for their laptops and desktops. You can get a nice Sony Vaio now for $500 yet a basic MacBook costs double that. Apple's customer base is extremely loyal and willing to shell out the dough for a premium product in a regular environment. In this environment it would be shocking if Apple's sales grew at prior levels, especially if they're not willing to lower prices.
With that in mind the company issued guidance for the December quarter of $9.0 to $10 billion in revenue and EPS between $1.06 and $1.35. This is a broad range on purpose. The company admitted in last quarters conference call that this current environment is too hard to call. I don't think that Apple will miss but if revenue, or EPS, comes in on the lower end of that range the stock should sell off. If there's one thing the stock is known for it's drastic movements off rumors, scares, or downright negative speculation.
We're going to use this to our advantage. I opened a tiny put position in Apple yesterday and plan on adding to it in the coming days. I think it's time for this company to face reality and for the stock price to reflect it.
Cheers,
Nik
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3 comments:
curious on your thoughts if the same will apply to BRK. warren originally thought of running the company from the grave but in the most recent 10k report he's narrowed it down to four individuals when the time for him to step down occurs, one will take over.
of course the next person to assume the position will be no warren bufffett. however, we're talking about warren-a man who memorized college books and then threw them aside with the ability to recite them at will-should be able to find a competent successor.
also note that he's put investment positions in place well past 2015+. i'm also aware his investment style is 'for life' when he makes a purchase than the latter.
I definitely think the same will apply for BRK. In fact, in the 2007 10K he mentions that he never buys companies with "rockstar" CEO's. It's in his mantra.
BRK is a solid business but it's hard to imagine stock appreciation and the same kind of investor confidence in the company once he's gone. I'm not trying to put down the successors at all but a lot comes with knowing Warren is in charge.
Their businesses are going to struggle for a while also, I'd leave BRK alone. Also worth nothing is how BRK is taking a beating on supposedly "safe" derivatives.
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