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Tuesday, September 09, 2008 10:44:54 AM
No, it's not possible. The financials you're talking about were operating with 30:1 leverage. Apple operates with less than 1:1 leverage.
Why is it not possible for AAPL to trade to $25? Because between its net cash (which will be near $25/shr by end of next quarter) and its real estate holdings and the value of its IP, you've got fire-sale liquidation value of at least $40. That's the ultimate backstop.
Beyond that, the only way for AAPL to trade down anywhere near net asset value would be for it to go cash-flow negative. There was a time when that was possible. The fixed-cost base on the Expense side of the ledger was large enough that a variance of 20% on the Revenue side could tip them over. Today, the fixed-cost base is a fraction of Revenue. There's basically zero chance Apple goes cash-flow negative unless it intentionally wanted to. Even then, it actually would be very hard for Apple to go cash-flow negative. Their cash piles up on them so fast these days it's amazing.
You could walk in tomorrow and remove the entire iPod business and the entire Mac PC business and Apple would still be cash-flow positive.
Sorry, there simply isn't a realistic path for your scenario.
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