🚀 go-pugleaf

don winsby wrote:
> 
> Robert Salasidis wrote:
> >
> > I won't go into stack market valuations with you here, but your table was missing
> > two key facts, profit margin and predicted earnings growth (that is what counts more
> > than revenue). Apple can sell all the computers in the world, but if it is not making
> > much money on the revuenue because of low margins then that does not help it any.
> 
> please do go into stock market valuations. that was the point.  my answer was toward the
> statement that 'the stock price will measure the future success of these
> corporations'...something i am sure you will agree is less than reasonable.
> 

Ok here goes. The stock market in general does not care about where a company has been, it is 
where it is going. If I am investing in a company I want to know that I will have more money 
on my hands in the future. That means investing in a company that is growing both its 
revenues, and its profits at a pace that exceeds the street valuation of the current share 
price.

I will agree with you that the stock market is susceptible to heard psychology (and it takes 
a strong stomach to buck the trend) - (for example Netscape - in my opinion). Over the long 
term however most stock prices will reflect the company's valuation.

Apple's current problem in the stock market is a direct result of their poor management, and 
the market in which they are in.

Apple relies on most of its sales to come from low margin PCs. As they have a very high cost 
structure (inefficiency (management mistakes), or simply higher R&D expenditures relative to 
other companies that are not alone against the world), their margins have come under attack 
(Apple having to slash prices to mantain sales). Stock markets hate declining margins (look 
at all the concern over Intel after margins dropped from 52-48%). Microsoft on the other hand 
has no effective competition in its OS market, and its applications are doing very well as 
well. They have a nice string of steady and exceptional growth (#s are present in your own 
post).

Using Apple's book value as a measure of stock price is misleading. Book value includes many 
things including inventories which have a variable cash value (being susceptible to write 
downs if they are unable to get cleared at present prices (Intel's DRAM purcahses cost them 
60+ M$)). their cash reserves are an asset, which guarantees they won't be going out of 
business soon, however restructuring can eat up a significant portion of this (200M$ in the 
last quarter (68M$ loss + restruct costs).

At this point in time I don't own any Apple, nor Microsoft stock. I believe the former has 
too much short term risk, and the latter is overvalued by Wall Street (selling at a multiple 
significantly greater than their expected growth rate).

> as to the Hoover Company Profile table missing profit margin, seems like it was there:
> > Apple:
> >
> >                            1991   1992    1993   1994
> > Sales ($ mil.)            6,309  7,087   7,977  9,189
> > Net income ($ mil.)         310    530      87    310
> > Income as % of sales       4.9%   7.5%    1.1%   3.4% *******
> 
> > vs. Microsoft:
> >
> >                           1991   1992   1993   1994
> > Sales ($ mil.)           1,843  2,759  3,753  4,649
> > Net income ($ mil.)        463    708    953  1,146
> > Income as % of sales     25.1%  25.7%  25.4%  24.7%  *******
> 
> as to predicted earnings growth...these companies dont comment on that.  only the MBAs of
> wall street do that kinda thing, and they are wrong as often as they are right.

However if you are talking about investing then you had better decide in your own mind what 
it will be because that is where money is made.
 
> and as to selling all the computers in the world, i would settle on selling 9-13% and
> restructure to make a profit...wouldnt you...isnt apple???

Yes I would. Apple needed to do it, it will probably do a little more in the near future, and 
if all goes well they will turn the company around. At that point (assuming they are not 
bought out), you will see a return in your investment if you have made one. I for one would 
like to see Apple succeed (but being an Intel fan - I personally don't want them to 
dominate). This would ensure some competition in the marketplace which always serves the 
industry well.