Although Apple Inc. (Nasdaq: AAPL) stock is up about 8% today on the strength of an earnings beat and several shareholder-friendly announcements, the real question is whether the tech giant can keep the stock moving higher.
Veteran Apple enthusiasts and many AAPL shareholders would be loath to admit it, but Apple today is in just about the same position where Microsoft Corp. (Nasdaq: MSFT) was in 2000.
And unless the Cupertino, Calif.-based company can find a different path, it could find itself stuck in the same trap – a company making mountains of money with a stock that stayed flat for more than a decade.
The similarities between Apple now and Microsoft then should be keeping Apple Chief Executive Officer Tim Cook up at night.
In the 1990s, the Redmond, Wash.-based software powerhouse experienced phenomenal growth, and Microsoft stock rose accordingly. From 1990 to 2000, MSFT rose more than 10,000%.
But in the decade that followed, despite relentless growth, MSFT stock went nowhere – literally.
From late 2001, after the dust settled from the dot-com bust, to the end of 2012, Microsoft shareholders had little to show for their investment but a steady stream of modest dividends.
Now look at Apple stock. From October 2001, when the first iPod debuted, to its peak in September of 2012, AAPL stock rose more than 4,200%.
Apple stock went on a rocky ride after that, but has settled into the $500 to $575 range over the past six months.
Tim Cook said during yesterday's earnings conference call that he thinks Apple is undervalued, and he's probably right.
But getting investors to agree is not going to be easy. Let's go back and take a look at what Microsoft did during its lost decade.
Why Big Numbers May No Longer Help Apple (Nasdaq: AAPL) Stock
In its 2000 fiscal year, Microsoft earned $22.96 billion in revenue and net income of $9.42 billion.
The dot-com bust hurt earnings for a few years, but by 2004, Microsoft was up to $36.84 billion in revenue and net income of $8.17 billion. After that, business picked up considerably.