Why was Apple's stock price much higher back in the good old days? (87-96) I think the answer is "earnings". After Apple made its profits from the Apple IIe it moved onto Macintosh. Even though the Mac had a small market share, Apple was still able to make very good profit off of Macs. When market share droped down a bit Apple introduced PowerMacs in 94 which boosted its revenue and earnings and thus its share prices as well. Then came the infamous 1996...
Blunder #1
As the internet became more popular (back in 94-95), more and more first time computer users were buying personal computers. Apple realize that they need to take advantage of the growing consumer market and sell entry level computers. Thus the Performa line was born. Since Apple wasn't very good at building machines cheaply the Performa wasn't very competitive against Wintel machines. At the same time profit margin and performance had to be cut (often used 68K instead of PPC) in order to produce these machines at large quantity and at a lower price point. Factories were used to build these Performas while the Apple build a 1 Billion dollar back order on higher margin machines. As we all know now the Performa fiasco ended up costing Apple a few hundred million $ in write-offs and lost opportunity. The Performa name was finally dropped this year.
Blunder #2
In late 1995-early 1996 quality control problem with PowerBook 5300 series, and 1710AV monitors was costing Apple millions in repair programs. The 5300 eventually had to be pulled leaving a shortage of Powerbooks on the market. The cost to Apple? If you count up all the repair costs, lost opportunity cost, damage in reputation, lost future sales...probably another few hundred million $.
Misc...
There were other issues such as introduction of Win95, competition from PowerComputing, problem with Copland, production problems...etc. All this came about the same time in late 1995. Serious actions need to be taken to address these issues. So even though Apple made record revenue in Q1 of 1996 it wasn't able to make a profit. Actions were taken...a few hundred mils write-offs, people were laid off, projects terminated, holdins in AOL and other properties were sold off...It costs another few hundred mils just for the reorganization. In retrospect these well publicized and drastic actions may have done Apple as much harm as good by severly damaging its image and consumer confidence. Apple has been bleeding red ink ever since.
Of course, these are all just my opinion formed from a Mac user's perspective.
As for Q1 of 98? I am pretty optimistic. I think all the damage that can be done has been done. What Apple is left with right now is its core users. Furthermore we're not expecting much more $$ down the drain from major reorganizations. With Christmas around to corner sales could be quite good. I don't think Apple will test the 12-14 range with the current board. The lost in the last couple of days is primarily due to the uncertainty in the market as a whole. I certainly do not believe Apple will hit the 5 range. Have you check it's book value? It's at least $9. Let's see...$4 X 127.3 mil shares = $509 mil. I don't think Apple can lose another 500 mil next quarter even if it tries.
Eric |
