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ATPM 2.08
August 1996

Fellow Mac users,

Well, I finally put my money where my mouth is. Not much money, but nonetheless, I have decided to have a financial stake in Apple's future. Maybe now, I'll work that little bit harder to ensure Apple's success against the evils of misrepresentation in the press. If you're wondering what evils I speak of, consider for instance that big, bold article in the Wall Street Journal, that showed that Apple's sales were down compared to a year ago, when in fact they were up by 11%. Oh, and the correction they posted afterwards? It was in a teensy box on page 5 if I remember correctly.

Are you concerned whether Apple is a good investment? I can't answer that. Clearly, if every Mac user bought out the stock, this could be the catalyst for a turn-around. That's unlikely to happen, although a public effort for Mac users to buy into Apple could be seen as a strong voice to the media - "We stand behind our computers without exception!" At the end, I will give you some financial information about Apple that might help you in your decision.

As you may know, Apple has had some interesting times over the last year, with financial catastrophe setting in during the end of Spindler's reign. I hold no grudge with Spindler, but it was inevitable and unsurprising when he left Apple. This left room for Gil to step in, an excellent financial genius who was responsible for the turn-around of National Semiconductor Inc.. His knowledge of Macs is probably somewhat underwhelming, but more importantly, his knowledge of what it takes to succeed as a company is impressive. Just recently, he brought in Ellen Hancock as Chief Technical Officer (CTO). Ellen was a senior executive with IBM for 3 decades before moving to National Semiconductor to work closely with Gil during its turn-around. She knows her stuff. I personally feel that Ellen and Gil are the best choices for an aggressive, and successful turn-around - time will tell.

As you probably know, the PowerPC chip is an excellent architecture, and even in recent "Byte" magazine comparisons, the 132 MHz 604 trounced the 133 MHz Pentium for most benchmarks. The important point about the PowerPC chip is that its architecture is conducive to further speed improvements, and of course, is a RISC based chip, which has already led to such things as RISC-based UNIX for the Mac (courtesy of MkLinux). Already, the 604 has evolved into the 604e with a 180 MHz clock-speed. (should mention here the PowerTower 225Mhz Mac by Power Computing-.Ed) Shortly put - the PowerPC chip is not going to be outgrown any time soon.

Apple is also working hard on its visibility, strengthening internet presence and media publicity. For instance, you're probably well aware of Apple's tie-in with Mission Impossible and Independence Day for example. This is important - Apple needs to stay in the forefront as much as possible, in part to negate the bad publicity it receives from a largely ignorant and PC-biased media.

Apple needs to identify and prioritize its goals over the next year and a half - I can't argue that. For instance, the release date of Copland continually looms far off in the distance, and this can be discouraging even for the most faithful Mac user. The possible plan for a modular release of Copland components is an excellent strategy. Not only does it facilitate simpler beta-testing and debugging, but it keeps the 'natives' happy - if this is rumor, I hope it becomes fact; if this is fact, then I am a happy man.

Apple is playing a strong game in the Internet, and I think that's incredibly important. I won't even go so far to say that the Internet will be a huge cash-cow of the future, but it definitely is the epitomy of trend and hype, and Apple must ride this bandwagon, whether it likes it or not. Apple has recognized this in several ways, getting huge exposure in Web design and web servers. As well, Apple's recent licensing of Allegiant's Marionet toolkit for custom internet apps is an excellent step - as of now, it appears this licensing is solely for internal use to increase efficiency, but it again reiterates that Apple is staying current, and continually pushing the bounds of capability and new approaches. Software developers such as Adobe recognize this, often putting superior products first (and sometimes only) out for the Mac - Photoshop, SiteMill and PageMill to name a few.

And while we're on the topic of software - the media loves to reiterate over and over that IBMs have a vast amount of software compared to that available for the Mac. First off, I'd like to introduce a term called 'signal-to-noise ratio'. It is basically a measure of good-to-bad in laymen's terms. Is it unfair to say that there is a huge amount of junk available for the IBM that is in part responsible for this misleading measure of software available for the IBM? Is 110 so-so versions of Tetris for the IBM-compatibles better than 1 excellent tetris for the Mac? Not in my mind. Compilers? Well, I'll swear by Metrowerk's CodeWarrior until the day I die. Microsoft? If they want to give us ports of IBM software, then I say go for Nisus, WordPerfect, or any other better-written contenders with superior quality. Multimedia and desktop publishing? I don't think I have to say a thing about that. (My favorite line here is, "It's true. There are 50,000 pieces of software you'll never use for PC-compatibles, while there is only 10,000 pieces of software you'll never use for the Mac." - Ed.)

Frankly, the list goes on and on. Also, when I go to a shareware site, I rarely, if ever worry about what version of MacOS I have when determining compatibility. However, if I own an IBM compatible I have to decide if I want to run it under DOS, OS/2, Win3.1, WIN95, or WinNT (did I forget any?) How convenient. Lastly, people used to gloat that IBM had free and awesome UNIX. Well, funnilly enough, so do we - for our RISC machines I might add (although freebsd and netbsd were around long before for 68K machines). Oh, and in the Win95 vs. MacOS 7.5.3 comparisons - once you use both, you know which is better.

What does this mean? Well, I'm trying to emphasize that Apple puts out an excellent product, and has excellent support - this is not a recipe for success in itself, but it is a requirement for success. People who are saying that Apple has no new innovations, that no new software is coming out for the Mac, and/or current software is inadequate for their needs - are often ignorant about what is available, or biased to the point of blindness. We must be careful not to succumb to this ourselves, even though it is bashed at us repeatedly from the media.

Apple is also successfully fueling multimedia sites, known as Apple studio centers such as the new EC2 facility at USC, primarily for novel multimedia design for developers. Apple needs to stay close to, and nurture its developers - because developers are an integral component of any GUI's success - something Apple may have taken a while to realize. The new Game sprockets SDK is not an exception to Apple's involvement with developers, nor is the collaboration with OSF to bring out MkLinux.

Apple was recently shown to have the highest repurchase loyalty compared to other computer manufacturers at 87%, with Dell in 2nd with 74%. This is not so astounding however, because Apple is not only a computer manufacturer but the sole source for Macs. Hence, if you clumped all the PC compatibles together, and looked at their net repurchasing rate, it would be high indeed. Then again, with the explosive group of Mac clones (Power Computing) the same could be said for Macs, and perhaps greater gains for Mac/Mac-clones will be seen in the near future, since PowerComputing is so highly lauded by its clients. However, more impressive was PC Computing's ranking of Macintosh computers as #1 in a recent survey (no details on this, sorry).

It's a shame that Apple lost Capps and Smith to Microsoft, and is a symbolic slap in the face, to say the least. Actions like this are often warped out of proportion by the media, and hurt Apple more than they should at times. It doesn't help when an embittered Steve Jobs joins on the Apple bashing, although frankly, I can sympathize with his motives. But, this is why the loyalty of individuals like you and I is so important. Vital perhaps to Apple's survival. Even I've been guilty of a bit of griping, when really I have no right to gripe. For instance how can I complain of the Geoport's CPU sapping when it has the best telephony and fax integration I have ever seen, and I knew full well, a priori, how it would affect my CPU?

Now, back to financial analysis - what kind of buy is Apple anyways? Well, first off, we should talk about book value. This is basically defined as common equity per share - or if they sold everything off including property, and pooled all cash reserves, how much money would Apple have per share outstanding? Well, as it turns out, it's about 16.5$ per share. It's not terribly common to see a share trade below its book value, for obvious reasons. Now, that's not say the book value doesn't change - sometimes a company must feed from its reserves during acquisitions, reduction of debt, quarterly losses, etc. But, for reference, IBM's shares are selling at 2.5 times book value, and ridiculously, Netscape is trading at 27 times its book value.

Apple is currently trading at 19.5 $US on the NASDAQ exchange. This equates to about 1.15 times its book value. Low. Why? The market has no faith in Apple. Do you? If so, you would be taking a risk, because as you know, Apple posted outrageous losses over the last year, and expects losses for this quarter as well. The share's price should already reflect the market's anticipation of losses for this quarter. If Apple has done worse than expected, then the price will drop - if Apple loses less money than expected, the shares will go up. Apple's forward earnings per share are - $5.25 per share. Negative. Ouch. The question now becomes - do you have faith in Gil's restructuring?

Well, before you answer that, Apple has had problems in the past that led people to believe that Apple's death was soon in sight. Consider the highs and lows that have occurred for Apple's shares over 52 week periods for the last 5 years (Thanks to Paul Durrant for research):

1996 looks like no exception. Admittedly, its probably worse, with the yearly average of the share value being much lower than in years past. The graph for the last 52 weeks has generally been linearly downward, with a high over the last 52 weeks being just over 40$ US. Can we turn it around? Can Gil? Can MacOS? My answer is yes to all of these, and I just recently stretched out my pennies to buy a half lot (50) shares of Apple from a deep discount broker. After looking into things, I can't see it going much lower than 19, although bad announcements for this quarter (coming out on July 20th I think) could send it lower. I would recommend a heavily discounted broker, with 25$ commissions per transaction plus perhaps a small (3c/shr) fee. This means an investment of approximately 1000$ US for a half lot, or 2000$ US for 100 shares. I won't even mention Apple's dividends - hardly worth buying an ice cream cone with.

I should point out that I do not want you to take my financial advice - I am not a financial adviser, nor do I know much about finances. You could lose as much as everything, and you could gain as much as "a whole lot". That's not the point of this financial expenditure in my opinion. I know plenty about Apple and its products , and I wholeheartedly want to keep Apple around. To help with this, I am casting my vote concerning Apple's future. When someone asks me if I believe in Apple's future, I can resoundingly answer "yes," in the best way I know how - you see, I now own part of the company.

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