Apple Computer (NASDAQ: AAPL): Losing Monopoly Power
Mar. 2, 2013
Shares of Apple Computer (NASDAQ) have nosedived in the past several months thanks to more competitive environment that the company faces. Samsung is once, and still now, Apple’s rival but now Google and Microsoft are sending out their Apple-like products, notably Chromebook and Windows tablet. Plus, a little rise in Blackberry, which is releasing the Blackberry10 into the market in coming quarters, is making more competitive markets in smartphone products.
Apple was the most valued-company just a few months ago but lost that title soon later. The performance of Apple stock was just amazing when it reached $700 last September but looking back past five or ten years, its performance is still amazing. How come did Apple quickly lose its stock performance in the past months?
Although it matters how much Apple makes revenues and profits, what really matter is how Apple can keep its monopoly power in the market. As more Apple’s competitors have joined the smartphone and tablet markets in past quarters or years, Apple’s monopoly power quickly deteriorated. There are more choices available for consumers in the market and they can choose their favorite types, prices, and brands.
If Apple was still the only seller of smartphones or tablets, the company would clearly be the winner and its stock price would already top $1,000. Google, on the other hand, still keeps its near-monopoly power in its search engine product in the markets while Yahoo!, Microsoft’s Bing, and Baidu are trying to catch Google’s share. Amazon, which is currently trading at very high multiple, however, creates itself the monopoly power in online retail market. It sells almost everything within Amazon network, including drinks, shoes, fridges, and of course e-books. eBay is Amazon’s competitor but the company is more likely become a successor in payment business thanks to a rapid growing PayPal unit. That is the reason that these companies enjoy better performance in their stock prices while the shares of Apple continue to decline.
However, Apple is not a loser yet. The shares are trading at less than 10 times earning and with huge cash position on its balance sheet, the company can have enough room to boost dividends and stock buyback anytime in the near future. Plus, it is still one of the best innovative companies in the world. I believe new innovative products, such as iTV and iWatch, are coming up in the market this year and beyond and bring the shares back into near all-time high from current $430. The stock is cheap at this moment while greater patience requires.
Akira Kondo is long AAPL.
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