Apple Inc. is the wealthiest company in the world by market
capitalization currently with a value of around $626 billion for the year 2012. Market
capitalization is determined by the stock price. A single stock in apple cost around $700 in september. The revenues of Apple however were only $108 billion at the end
of the year 2011. 2012 is not finished as yet but it is fair to say that it
will remain between $100-200billion. These figures do not seem to add up and it
is clear that there is a difference of $500 billion between the market
capitalization value and the actual revenues earned by the company through its
generation of surplus value from its workers whether in America or China. Apple
has truly recovered from its decline during the 1990s. People tend to
attribute this to the return of Steve Jobs to the company. Under Jobs apple
came out with some innovative and well designed products such as the I phone, I
pod and I pad; all were touch screen devices. There is also the I tunes store that allows
you to purchase music etc. Apple seems to exist in 2 worlds however because
there are the numbers reflecting actual
production and the stock market vultures that have inflated the stock value by
such a remarkable amount who hope to cash in on the 2.65 per share. The sales
of Apple products are not vastly superior to its competitors such as Samsung
and Nokia in the mobile phone and tablet market and Hewlett Packard and Lenovo
in the PC market. Apple benefits from
its exorbitant prices which it can afford to charge because of its inflated
stock value and the mania associated with its brand however with a difference
of $500 billion eventually the idealists will be brought down to reality. The
reality that the rate of profit will fall particularly as investment in the
constant capital or the machinery that aids in the conduct of operations will
take over more of the labour. I am not aware of the investments in its means of
production and its labour however based on various reports particularly one
done by the New York Times there seems to be the high quality engineers that
design the product in or around Silicon valley and the workers in China that
turn out the products cheaply so that Apple can meet the demands in the market
particularly as it concerns a launch of a new product. When the workers in the production process are
cast out then growth will be retarded because a company like Apple must invest
significantly in technology and raw materials to keep its operations going
particularly in the US. The company has production outlets for its products in China
as it benefits from cheap labour however based on current production Apple will
need to increase the amount of products it generates so as to be able to have
them consumed in markets across the world and so increase its revenue. Moving
to China is a logical step because it is home to 1.3 billion. They have also
decided to release the I pad mini which is not necessarily much cheaper than
the I pad. It seems as if Apple caters chiefly to high income individuals at
the moment that are bamboozled by their product or the brand of the company but
eventually it will not be enough if it intends to expand revenue in line with
that inflated stock price. Further devaluation will be necessary; devaluation
in this case being increased production and cheaper products. Apple still
refuses to compromise the quality of its products however while they stay high
handed others will eventually adapt to the new technologies and create even better
models at cheaper prices and this
competition alone will make inroads into Apple’s dominance as a brand on the
market which is reflected in market capitalization.
There
are missteps however such as the televisions that never took off, the death of
Steve Jobs which many fear will precipitate the Apple bubble, the faulty maps
released earlier on the new Ipads which forced Apple to tell their customers to
use those of their competitors (Two of the executives responsible for the maps
have been dismissed) and lastly the patent lawsuits with Samsung have dented
confidence. Apple reportedly won a case in California against Samsung about
patent infringement and won the case as Samsung were ordered to pay $1 billion
however Samsung intends to appeal. There was also a turnaround against Apple
where a judge overturned a decision that stated Samsung had infringed on
apple’s patents and so Apple was forced to issue an apology. I have also heard
that the new I pad is not radically different and is only an enhanced version of
its predecessor. The I phone 5 seems to be doing well however but all of these
events points to the inevitable decline because it is clear that Apple cannot
keep up this mystique forever. Apple
always releases a new product ever so often and so once you buy its predecessor
you are compelled to buy the current edition. This is how Apple keeps its goods
in circulation at these high prices because people are not given time to settle
with the product they currently have. This keeps their revenues up but always
at the same level because when you count their market it caters primarily to
middle and upper income groups. Their market share will not radically expand on
that basis for even the I pad mini is much more expensive than the Google nexus
7 and the kindle fire. Apple will never
reach $600 billion in revenue on this basis. In the long term it is possible but
it is safe to say that competition has caught up with them. The Apple mystique
has not bamboozled some because when it comes to revenue Samsung and Hewlett
Packard are wealthier companies and so all the hype about Apple has not
translated into greater revenues because it is still behind its main
competitors. What the hype has translated into is the market cap a little over $600 billion which is based on the possibility that Apple will soar into the
future and create all these magic products that will dazzle the world. The
fallacy is in the expectation because there is no guarantee that apple will be
the next great innovator. I heard that they are working on a television now to
make up for the mishap under Steve jobs. This is all good but it will not get
them increased market share simply because they rely mostly on high income
earners whereas Samsung and Nokia for instance have the expensive phone as well
as the cheap phone for the man who will never buy a tablet much less an iPhone.
The
market cap will be reduced eventually in line with revenues and the world will
come to realize that Apple is not as great as once thought. Apple cannot hope
to grow at such proportions estimated by the market. That has only been fueled by speculation on the stock market and so the bubble will burst particularly if
it exclusively targets high income groups. Apple seems not to have understood
that the majority of the world’s 7
billion population is poor and lives in
the gutter created by capitalist companies such as Apple and its competitors
regardless of their sanitized brands that bamboozle, dazzle, befuddle and
corrupt the minds of those people that have raised this company as if revering
a god head but in time they will realize their folly. Apple even intends to buy
up some of its own stock over a 3 year period which is a clear realization of
the bubble in the making. Also a report on CNBC discussed this issue and Robert Van Batenburg from St. Louis capital markets said that according to guidelines that regulate
investment in stock on the S&P 500 there is 5% limit for investors in the
particular stock of a company. With Apple’s inflated stock price that 5% limit
in the S&P 500 will soon be reached and so people will soon be forced to
sell their stock and then a devaluation of price will occur because according
to Robert although there are many people buying into the stock seeking cash payments there are not many
sellers and so when the 5%limit is reached a lot of people will be forced to
sell and so the stock will naturally devalue because it has been cheapened. He was challenged on the
basis that others will wish to buy the stock such as pension funds seeking
annuity like payments but Robert countered by saying that 75% of the
investors are mutual funds, and trust
endowments and the hedge fund owners are but a ‘small sliver’ and so the
majority are buying in now to cash in on the high stock price. This means that
these people are regulated by the extent that they can earn dividends on their
stock so that they can earn cash payments. When the cash payment ceases, having
reached the 5% limit, they will have to sell and invest elsewhere. They are
getting returns on their shares right now on the basis of the revenues
generated and so the issue still is how will Apple close the $500 billion gap
even though it will still be one of the richest companies in the world by
revenue should it pass the $200 billion mark.
The good thing about the inflated
stock price is that it gives apple a lot of available capital to invest in
research and development. This means that there is still the hope that they can
come up with the next magical product however unless they increase market share
all that money being invested in R&D will begin to evaporate as sales do
not radically skyrocket. As a publicly
traded company therefore Apple relies on its brand to keep the money coming in
but the reality is that revenues will never reach that high mark for even Exxon
which is the richest company in the world by revenue, with over $400 billion in
sales, has not reached that level. Apple will never close that $500 billion gap
because it is close to reaching the extent of its market share which will be
eroded by competition. This is not anything dramatic however for with the
decline in the stock price at least Apple will not be pressured to please
investors and will be able to spend more time on innovation as opposed to
worrying about increasing sales which has led to the mishaps during the year
2012. What has made Apple great will eventually make it relatively small i.e.
in line with its revenue base which is not mind blowing by any stretch of the
imagination. A lot of people will lose money but as long as it remains a corporate
issue then no feathers outside the exclusive Apple circle will be ruffled when
the bubble bursts and things return to normal. The idealists who still believe
in Apple’s promise will no doubt disagree.
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