Replies to post #330370 on Zeev's Turnips Patch-No Politics (ZEEV)

[langostino]

F.R. - I'll leave that to you

I know better than to engage in grand pronouncements that the market will "crash" next week or take off in a huge rally. Trying to maintain the smallest directional commitment possible most of the time, then leaning harder during a relatively small number of times a year when we hit more deeply oversold or overbought conditions following long slogs in either direction, and then being appropriately paranoid about it, is what happens to work for me.

As for next year, I've already given you the closest thing I've got to a WAG, which is something not very pretty in the first half of the year, which is why I said I'd be joining you on the more cautious and defensive position next year. If we get a January run and it's big enough, you'll find for a very brief time I may be even further net short then you are. The difference is, I won't be screaming from the rooftops that the world's about to end.

[langostino]

F.R. - one thing on AAPL

"I'm sure they stuffed the channel"

Honest to goodness, you really do just talk out your %#@ don't you? If you had access to the sales channel or knew doodly-squat about the details, you would know there's no way they could stuff the channel because they're still having trouble ramping production, particularly on the mini. The parabolic growth curve has been so exponential that they still haven't got enough manufacturing capacity.

There are plenty of real reasons to think AAPL is severely overvalued here, but artificially bumped sales figures due to channel stuffing is not one of them. As for Jobs, he's not leaving, but if he did, a company that profitable sitting on the intellectual portfolio it has would not be worth cash. I'm not sure if that's a joke comment or just plain idiocy. If you want a starting point for valuing the IP, you can begin with the operating system. Refer back to 1997 when Apple purchased the bare bones skeleton of it for $500 million from NeXT. It would be pretty hard to argue after 8 more years of development and critical acclaim as the superior consumer OS that it would be worth anything less. The Filemaker division could be sold tomorrow for a pretty hefty pricetag. Go through the rest of the properties and you'll find an awful lot of breakup value.

But breakup value is irrelevant at this point, because Apple has gradually transformed itself from a company whose revenue streams were dominated almost entirely by the sale of PC hardware, to one with a much more diversified set of income streams and growing more diversified as every quarter passes. From a business almost entirely dependent on physical PC sales where declining ASPs and lengthening useful lives were creating a downward spiral, they now suck money from a growing installed base with services, software, music and a growing array of peripherals. There is a ton of "hidden" value that has been built up at Apple in the course of the past 6-8 years that has nothing to do with the Dell widget model.

p.s. If you were figuring "back to cash", that would be an interesting moving target. Not long ago, net cash was about $11.75 or so. Today, they've paid off the last $300 million in debt and are sitting on net cash of over $14. When they report in January, the number will go north of $15, and so on and so forth.