Apple Inc (AAPL)

[Tex]

re bear case

Thanks. The announced story on iPods was y/y growth, and I didn't have my calculator out to spot the sequential contraction. I did notice that the prior quarter showed a sequential increase when folks predicted a sequential contraction. I was thinking any sequential issues were potentially attributable to seasonality and wasn't alarmed, so long as the comparable quarter last year showed Apple as succeeding.

The fact that folks are spending less on iPods is unsurprising. The effect of growth slowing on multiples is certainly worth talking about -- but was anyone really modeling Apple as growing more than 20% or 30%?

What I have a hard time with is Apple's accounting game with the iPhone. Since Apple doesn't make much use of its cash, I can't even see the point of delaying revenue recognition for tax purposes. As it is, all Apple seems to be doing is torpedoing its current quarters by only taking 1/8 or less of current sales as current (I say "or less" because they aren't doing it over 8 quarters but 24 months, and presumably most of a quarter's sales aren't in the first month of the quarter). Sure, Apple gets a revenue-smoothing effect from this ... but surely folks watching the numbers are trying to assess Apple's competitiveness on the basis of unit share, and when they turn to Apple's earnings to see what Apple actually did on the bottom line with those sales, Apple gets clobbered.

The only reasonable thing I can imagine is that telephone pricing and kickback information must be such secretive information and so useful to competitors that Apple is obfuscating the details of its carrier arrangements so they can't be readily sussed out of its financials and exploited by competitors.

One of the bigger long-term irritations I have with Apple (other than its anti-shareholder management and its tendency to dilute) is Apple's lack of exploitation of cash. Apple should do something with it, or let me do something with it. Whenever I read valuations that try to back out the cash in determining Apple's value, I keep thinking that a dollar in Apple's account is worth a lot less than in my own account, and that some discount should be applied.

Decelerating retail growth is certainly of interest, but I've yet to see Apple really attack potentially large markets like Russua, China (one store, whee!), and South America. Apple admits 50% Mac growth in these areas, plus in Germany and France. (And when did they ever agree on anything?) Apple should be exploiting this.

But maybe the Mob in Russia isn't worth fighting

Take care,
--Tex.