Linked by Thom Holwerda on Fri 23rd Mar 2012 15:09 UTC
PDAs, Cellphones, Wireless I'm currently reading Jerry Kaplan's excellent book "Startup: a Silicon Valley adventure". In this book, Kaplan, founder and CEO of GO Corp., details the founding, financing and eventual demise of his highly innovative company, including the development and workings of their product. What's so surprising about this book is just how timeless it really is - the names and products may have changed, but the business practices and company attitudes surely haven't.
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"You don't call that a distortion of reality? A company with a MARKET CAP is bigger than entire sectors of the economy.

Do you know what a P/E ratio is? That is price to earning ratio. Apple's is low - if you adjust their stock price based on the average P/E in their sector their stock price goes UP... Most investors consider their stock to be undervalued.

The next you'll tell me is that housing bubbles or credit bubbles are evidences of real value. That the Dot Com bust never happened.

Economic Bubble ( An economic bubble occurs when speculation in a commodity causes the price to increase, thus producing more speculation. The price of the good then reaches absurd levels and the bubble is usually followed by a sudden drop in prices, known as a crash.

Apple's stock price has absolutely no relationship to a bubble. It grew fairly smoothly over over the last 10 years - in fact Apple's stock price growth trailed their profit growth by quite a bit most of the time. The dotcom bubble was investors throwing absurd amounts of money at stocks with no real positive profit outlook - Apple is remarkably profitable. If you think Apple's stock price is a bubble you have no idea what a bubble is. Apple is simply extraordinarily profitable - there is no denying this - their market cap is a reflection of this, it isn't inflated by speculation.

When people start making arguments based on market cap and share prices and not real economic value - sorry, but you've just deceived yourself. You further prove that people willingly buy into propaganda.

Please, define "real economic value"...

Considering all economic indicators and theories keep failing in practice, this amounts to nothing more than cargo cult reasoning. It's easy to look at a successful company and point to a few things and claim that's a sign of this and that. And then the company crashes and suddenly it's "Oh we knew all along this would happen". Same happened with Enron and many other companies with similarly good looking figures.

If there's one thing history shows us is that the cynics are always right. Most investors of any company consider their stock to be undervalued, but investors always consider their stock to be undervalued until it all comes crashing down. It is simply stupid to trust anything any investor says. They'll say anything.

Real economic value. How about this: have they actually sold $500 billion worth of iPods, iPads, Macbooks, etc and do the relationship with manufacturers actually amount to a significant percentage of that and adding to that the total salary/wages of Apple employees?

As you yourself pointed out, Apple has a market cap larger than entire SECTORS of the US economy. Do you REALLY REALLY think iPods and iPads and Macbooks etc are intrinsically more valuable than the goods sold in those entire SECTORS of the US economy? Do you REALLY REALLY think the price of Apple products accurately reflect the actual worth of the product rather than what people are actually willing to pay for now? Do you REALLY REALLY think that there are more employees working for Apple than there are for entire SECTORS of the US economy, as you keep pointing out? If an average Apple employee gets paid twice the amount of the average employee of entire SECTORS of the US economy, does that really mean that the employee actually creates twice the value for Apple than the employee for that SECTOR of the US economy?

Maybe I don't know what a bubble is. But then again, you financially savvy types keep telling us "oh, it's different this time, this time it's not a bubble because we're focusing on the right numbers this time". And then POP! Still hindsight's 20/20 and that translates to 20/20 foresight, right?

I'm working on a theory - the more figures financial types brings in to a discussion, the more wrong they are.

"They cornered the media device market. iPod. iPad. They were doing all right with their Macbooks and iMacs. But they really have cornered the market that netbooks used to be aiming for - portable but reasonably useful computing.

You may have some argument with iPod, but only to the point that their competition there is weak financially (because they already killed most of the big names off)..

iPads? Everyone and their brother makes tablets, and quite a few of the competitors in that market have very big pocketbooks...

Netbooks? How can you say something like "they really have cornered the market that netbooks used to be aiming for" - Everyone is competing in this space. How do they have the market cornered?

The iPad is clearly dominant in mindshare and in sales growth, as you and your numbers show. This doesn't mean there aren't competitors. They still carved out a market and cornered it. Sure, people were making tablets before Apple, but there simply wasn't a solid market for tablets until Apple used their iPhone/Touch numbers to make what is basically an oversized iPhone/Touch a more acceptable purchase despite the cost.

"What do you mean "so what?" People here were making the argument that Apple is special in a way that wasn't due to marketing (and hence psychology). I was countering those arguments. Did you not think there were other people commenting on this article?

No - they were giving rationales of why they believe Apple products are good. You were denouncing their reasons and dismissing them all on the basis that it is pure "psychology" - as if they are all brain washed. My point is that sure, Apple markets themselves and creates a brand image - but so does everyone else. You could just as easily apply your argument against ANY company. But Apple is worth over $500 billion dollars - and you say they "are just like any other company". Sorry, but they most certainly are NOT - that is just plainly obvious.

I didn't say they were just like any other company. Get your quotes right. I said they are just like any other company who have CORNERED THEIR MARKET. Not many companies successfully corner a market. But those that do have unprecedented expansion in said market.

If you haven't noticed, the output capacity of the entire world's economy has always been increasing. It's only going to be a matter of time that a company gains dominance and breaks records. So they are NOT special. Special is not "better". Special implies some amount of uniqueness. There is nothing unique about a company dominating and breaking previous records of domination.

And a thousand times the point that, no, Apple REALLY aren't worth $500 billion. A good percentage of it is perceived value and that can be wiped out overnight. We haven't fully seen the effect of Steve Jobs' death yet. You can hide in the comfort of your numbers all you want, but you haven't really demonstrated that you are any different from people who was sure the subprime mortgage economy would last forever, or that Enron was the ultimate investor's dream.

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