Newsletter Issue #1003
August 25th, 2020TWO TRILLION BUCKS AND COUNTING
I’m writing this on the cusp of Apple’s four-for-one stock price split.It’ll mean, in a practical way, that you will be able to buy a share of stock for 25% of the former price and thus with 25% of the former value. Practically, it’s main value is to make it more affordable for regular people. After all, how many of you can easily buy a company’s stock at more than $500 a pop?
Now, here’s an official definition for market cap: “Market cap — or market capitalization — refers to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a market cap of $1 billion.”
As you can see, it’s a very artificial rating, based on the vagaries of the stock market and not on a company’s actual finances, although big companies ought to do better. But there’s also a level of hype involved; it’s based on perceptions as much as reality, so some companies might find themselves valued way behind their worth.
Now before I get too far into this rabbit hole, no I am not a financial maven, and have rarely invested in the stock market. Some even suggest I would have done far better in my old age if I actually put some extra money, when I had some, in Apple way back. It might have been a good idea at the time, but I had something, rare in journalism these days, and that was ethics. Holding a stock position — however small — in a company that I covered wouldn’t be appropriate.
Regardless, I could hardly have envisioned where Apple would go during the bad days of the mid-1990s. In those days, it was a given that the Mac OS was becoming buggier and buggier. I remember, for example, setting up my first Power Macintosh in 1994, only to confront endless system crashes. I had to download a system update before I got something remotely stable, and this was a product that was just released. System problems were one thing, but poor design decisions were another. In those days, you could still switch out or upgrade hard drives and RAM, but the process was as user hostile as you can get. You had to take apart the logic board, and removal delicate wiring harnesses.
Funny that I once attended a meeting for members of Apple’s Customer Quality Feedback (CQF) program, where a new Mac with an easy upgrade design was demonstrated, and there was a roar of applause from the audience.
Sad to say, Apple hasn’t learned from any of this. Today’s Mac portables are sealed boxes, and, upgrades for desktop Macs, other than the Mac Pro, are hit or miss, mostly allowing for extra RAM. I’d love to see that change, but the ship sailed a long time ago. Indeed, SSDs are soldered onto the logic board on all the 2020 iMacs except for the really large ones.
In any case, through Apple’s period of its largest growth, the success of its biggest product, the iPhone, has been considered as a make-it-or-break-it situation. If sales fall, Apple must inevitably be in danger of folding unless some new product or service replaces it.
Well, at least some alleged tech and financial pundits said that.
That iPhone sales actually rose slightly in the last quarter, despite the pandemic, shows that’s not a danger. Besides the sales picture revealed the financials indicated the real answer as to how Apple deals with market changes. So with more people working at home, both iPad and Mac sales increased by decent margins. The same can be said for services, which means that Apple can continue to profit from its customers even if there are few new gadgets to buy right now.
It’s a sure thing that customers are still ready to buy Apple. That some developers are complaining about what they regard as overly restricted policies doesn’t matter to most people, except to the developers who feel those policies hurt them. So it’s not as if Apple has any incentive to change; the response is mostly about spin control except for occasional tweaks.
At the same time, Apple will continue to cite its environmental commitments and its charitable activities to demonstrate its commitment to being more than just a place for investors to grow their 401Ks.
That said, it’s still an open question how long Apple can milk its existing product lines before new stuff must come, and I’m not talking about AI glasses. For most people, the need for such a gadget hasn’t been demonstrated, although it’s also true that Apple has had a habit of succeeding with new products that people didn’t believe that they needed. Thus the success of the iPhone, which revolutionized the value of a smartphone for regular people, and the Apple Watch that appears to be on the same path because of its health and fitness values.
Now when it comes to the Apple Watch, if I had a spare few hundred dollars, I might consider one. Even cashiers at convenience stores — not the highest paid people — are wearing them. The band on my $12.88 Walmart watch broke a while back, and I just haven’t felt the dire need to replace it. I have my iPhone and my iMac to deliver the right time, plus the microwave and the stove. When I’m driving, the car displays the time, so having an appendage on my wrist doesn’t seem essential.
Well, maybe it’s old age, but I’d probably benefit from the Apple Watch, and may consider one someday. But the same can’t be said for AI glasses or whatever they might end up being. I wonder how they’d integrate with someone who is nearsighted, though I suppose the features could eventually be scaled down to contact lenses if not, at first, with optional prescription lenses. But the enhancements would probably make me feel I’m becoming a cyborg. But maybe that’s humanity’s destiny, to take on more advanced artificial features to expand one’s life.
It didn’t hurt the “Six Million Dollar Man” of that old TV show, although that would be $6 billion nowadays.
Now I suppose you could say there are still troubling signs on the horizon for Apple and its fellow travelers in the tech business. When a company gets real large there are antitrust concerns. The things it does to build a business aren’t considered “kosher” when the company comes to dominate a market.
When asked about such matters, Apple CEO Tim Cook has said the company actually doesn’t dominate in any of the areas it competes in. I suppose you can say that for computers, smartphones and tablets, but not for wearables. AirPods and Apple Watches rule their product categories, though not by overwhelming margins.
The real antitrust concern is about the App Store, the only place where developers of apps for its mobile gear can play. There is no way to sideload apps from elsewhere as you can with Android, although that might actually be considered a negative. It would impact Apple’s security practices if it ceded control of software for all but Macs.
For now, you can still buy Mac software outside the App Store, but I see the handwriting on the wall. For one thing, apps that exist outside that environment are harder to sell. Developers have to creative find ways to reach customers with their stuff. Beyond freedom, however, Apple’s sandboxing limits the ability for some apps to work, which means things will have to change before such products as Rogue Amoeba’s Audio Hijack can enter the App Store.
In the scheme of things, though, the issues of apps and placement are relatively minor for most Apple customers. It’s not on their radar, so Apple continues to focus on the things that matter, the things that will help them move to a $3 trillion market cap someday soon.
THE FINAL WORD
The Tech Night Owl Newsletter is a weekly information service of Making The Impossible.
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