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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.
About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.
Let us hope that Apple never choses Steve Ballmer as their CEO.
Apple makes consumer goods and sells media. Software is secondary and just happens to come with hardware, which is where the real money is made. Microsoft mostly makes software and sells services. Over a 10 year time-period, to use the Author's timeline, Apple is creating new products. Microsoft rehashed the exact same products for those 10 years. Apple is up in value over 30% in the past 12 months. There is no comparison other than these are 2 tech companies.
THINK: TOTAL RETURN
You are trying to put an Apple in a Box. I simply don't agree. You are basing everything on stock price. How about the recent 7:1 stock split and dividend increase beginning in June?
If you received a couple thousand in dividend income from Apple last year, this year and onward you should receive 7 X $2,000 or $14,000 in dividends/yr. That's a cash machine! Unlike the Federal government and its bonds, your income goes up and the payer has very little debt!
So, even if the stock goes down or the economy tanks or the government goes bust, you still get income in some form, at least. Over many years, that adds up. Plus, if you reinvest it and all Apple does is hit single and doubles but no home runs ( next big thing) you still win via the power of compounding.
Um No, you will not make 7x more in dividends, the dividends per share will be now be 1/7th of what it was, you net gain is a big 0.
I most be the only simpleton who understands dividends in relation to stock price. Did it occur to you guys that MSFT has been giving dividend to investors for more than a decade!! hence why the stock stays STABLE.
This is among the most useless analyses of Apple stock I've read. Care to dig deeper in your comparison?
"DANGER! APPLE STOCK MIGHT NOT EARN HUGE AMOUNTS OF MONEY! THIS SHOULD BE KEEPING TIM COOK UP AT NIGHT!"
Uh… or maybe Tim Cook is trying to make good products, and doesn't care in the slightest whether you can make oodles of money off of Apple's stock or not, as long as the company is making new things, making lots of money, and making customers happy.
I know it comes as a shock to people like you, but the way Apple got where it is was not by obsessing over its stock price, it was by obsessing over making good products.
SPLITS, EYEBALLS, AND CLICKS
Well, Ski-
So much for Apple's gimmicks. I figured there are plenty of "simpletons" out there who expect a bigger dividend as a result of the recently announced split. Turns out, the dividend issue is separate from the split-adjusted dividend rate. Why else would Apple go up on a down day? Maybe some money rotated out of social media and Facebook and into more solid stocks like Apple which actually make a solid, tangible, and useable product instead of "eyeballs and clicks". Your guess is as good as mine on that one.
I can remeber years back when people had apple dead and buried. And who loaned them a substantial amount of money to get things moving again, oh yeah, it was MSFT! Say what you will about MSFT, and maybe so, they have the capital reserve and resources to make a big change and regroup. I believe they will. From what I understand, they are making headway more toward the hardware arena in the areas of nano tech and quantum computing in the R@D processes. And if those kind of dividends and profit amounts are boring, most companies would love to be so then.