17 January 2011

Short Apple

Apple Inc. Chief Executive Officer Steve Jobs, a cancer survivor, was granted medical leave of absence to focus on his health.
It's not like the board could say no.
There's a legitimate debate on how private a high-ranking executive's health really should be, especially in a circumstance like Apple, which has a cult following that generates a huge percentage of its sales, and that cult is tied to the CEO.
The problem from my perspective is this - something like that doesn't magically appear on the MLK holiday, and timing is everything.
In this case, it stinks.

Apple is tied to the image of its CEO in a way that few other companies are (and no, Microsoft is not as tied to Gates, especially since Ballmer is doing quite well on his own accord).  As such, expect Apple stock tomorrow when the markets open up.  And don’t expect their stock price to rise as high again.

All of Apple’s flagship products will have pretty strong competition in the coming months.  The iPod now faces the Zune.  The iPad will face a plethora of other tablets; they already face the B&N Nook and the HP Slate, and more Android devices will be on the way very soon.  Windows 7 is a major improvement over Vista, and offers an intuitive and slick interface.  Google is getting ready to release a Chrome OS.  Android phones are already outselling iPhones.  In fact, iPhone being offered on the Verizon network will likely prove to be problematic for both AT&T and Verizon.  All of their major product lines have credible and serious competitors.

There will be Apple fanboys who will buy anything with the shiny apple on it, but I imagine that their devotion to the brand wanes significantly in the face of Jobs’ illness (or demise).  As such, the brand is going to take a hit.  The marginal consumers will head to platforms that are less expensive and less restrictive, and the fanboys will start to lose their maniacal devotion to the “magical” brand.

It’s the circle of life.  Make the most of it by shorting Apple.

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