Sentences to ponder

Apple became the world’s most valuable-ever company two weeks ago. It is worth $624bn, more than all the listed companies in Portugal, Ireland, Greece and Spain together. The employer of 63,300 people – each valued at $10m – is more valuable than all the shares available to investors in the MSCI China index, the international benchmark.

Apple is not as big as the domestic Chinese market. But the comparison is not silly: it is more than half as big as the free float of A shares, where foreign investment is restricted.

Here is more.

Comments

Re Apple and China:

The bigger they are, the harder they fall.

I wonder what all the Apple Store employees think about their valuation at $10M. I think it's time they ask for a raise. Maybe they should even unionize!

Sounds like a great time to sell.

You can still make a bunch of money - go short on it! Better yet, OPTIONS!!

'But the comparison is not silly'
Of course it is - at the height of the late 80s Japanese bubble, it was said that the property surrounding the Imperial Palace in Tokyo was worth more than the state of California.

And during another notable period where valuations were fundamentally flawed, a bit of plant material was worth 10 times the annual labor of a skilled craftsment, as noted in the wiki article about tulip mania.

Apple is a fairly successful American company, relying on a network of external suppliers and assemblers to actually produce its products (and ironically, suppliers like Samsung and assemblers like Foxconn don't rely on Apple). And Apple relies on those suppliers to continue to supply the innovation which Apple has so successfully integrated into a package with a hefty margin which American consumers are happy to buy. In the rest of the word? Well, let's just say that Apple is not exactly a giant presence. Or to put it another way - Apple doesn't even actually make its own products any longer, but then, neither do Americans.

That's exactly why it is so profitable.

Steve Jobs led a fantastic team to integrate the best work of millions on non-Apple employees, and because their ability to create a great cookbook in the iPod, the iPhone, the iPad, the Apple stores virtual and physical, a cookbook that is protected from copying by the governments to give Apple a monopoly and protect it.

Microecon 101 - monopoly yields high profits.

Samsung and Foxconn are experts at taking the innovations of others with full rights to use them, and then apply Deming to the extreme to create the best Samsung and Foxconn ownership of the inventions and innovations of the work of others, especially American inventors who are betrayed by American MBAs who dismiss workers as commodities that can be replaced at will with cheaper versions.

And remember, it was the MBAs who ousted Steve Jobs from Apple based on his failing to understand that marketing was the most important asset a global corporation can have, because with the right marketing, cheap labor can be employed to make the products the marketeers decide consumers need.

Apple would not be worth as much as it is today without Tim Cook. Steve Jobs feared transferring Apple technology to other companies, especially companies in Asia. Steve Jobs built an Apple factory in the 80s when all the PC makers were closing US factories and outsourcing to Asia. Tim Cook convinced Steve Jobs that during the decade Steve had been in the wilderness, all the manufacturing excellence had been exported to Asia and it was impossible to build any tech product in the US, even for the extremely high prices Steve Jobs would demand for Apple products.

Samsung is an Apple supplier not the other way around. What Apple has created can be produced by Samsung if Samsung isn't already making it for Apple, because ideas can always be copied.

Steve Jobs was so creative because he rejected every tenet of Wall Street. Steve Jobs didn't get rich from Apple the first or second time in the modest sense of rich of Mitt Romney, (compare Mitt Romney rich with all the Microsoft principals, Larry Ellison, et al). Steve Jobs and Elon Musk and a few others are focused on making things that matter and see money as merely the stuff needed to buy and create productive capital assets and hire the best individual workers to make the best possible products.

Samsung and Foxconn are similar, but driven by nationalism with making things being the means. If nationalism is a major factor in your success, your creativity is constrained, but nationalism is a rejection of Wall Street too.

I think Steve Jobs was a nationalist too.

Is Google really serving America by giving away Android to foreign corporations so they can make great products to sell in America and boost their national interests globally?

Interesting ideas

Everywhere I have travelled in the last two years, from glitzy Hong Kong, to, Industrial GuangDong, to Rural Africa, Elites and their aspirers, have all been sporting Apple products. The big story in the fashion industry has been the commanding margins of premium brands, despite economic hard times, and for the burgeoning wealthy of the developing world, where cell phones and communication tools are exploding in use, the signaling availed by fancy tools, particularly ones symbolizing knowledge and information mastery cannot be underestimated. I'm afraid prior, apple is not just a fairly successful American company, it's a cultural touchstone for many.

I can't speak for the rest of the world, but in Europe, Apple presence is raging. From Denmark to Bosnia (the latter having more counterfeits, of course)...

The Apple fanboy culture here is obnoxious, and, for the first time, it involves the age bracket over 40.

Apple stock cheap if you look at forward PE. That said, they continue to grow share of market, through great products innovation and momentum...and they will keep increasing dividens - and maybe take some of shares OFF the street.

Remember, they have over $100 B in cash waiting to be used.

BUY, but cover your downside before each quater's announcements. Had you done that last quarter, you gained, bought at $573, and are sitting on more upside at $667.

Note: yes, I'm Long AAPL.

A lot of the same things used to be said about Microsoft stock. Just a warning.

http://www.felixsalmon.com/2012/08/chart-of-the-day-apple-vs-microsoft-edition/

Yes, Microsoft was more overvalued in the past. What will we be saying about Apple 12 years from now? I am old enough to remember the first mania in Apple.

That's not my point. The point is that the growth that was expected from Microsoft was extremely high in 2000.
To justify it's current price, Apple hardly needs to grow at all.

Furthermore, given that Apple is a global status symbol and most of it's earnings come from abroad (where there has been no Great Stagnation), we'll probably say, "It was a fair investment then, but it's really overvalued today!"

"Remember, they have over $100 B in cash waiting to be used."

That's a bug, not a feature. One hundred billion is not a war chest--it's an admission that you can't find any good investments. How much return do you need today to generate an attractive IRR as against the money market? We used to hear a lot about Microsoft's cash hoard, too. Apple has to change the world every four years to keep the music going.

At Apple, not the average employee is worth $10 million, but the capital each works with is worth $10 million.

"Not as big as the Chinese market"? Presumably, "market" is a flow -- GDP -- but the value of Apple is a stock. Rather, Apple seems 1.5 times as valuable as the domestically owned corporate capital stock. Well, my friend's house is worth 1.5 times mine--he had more inherited wealth than I do.

Let's get our units of measurement right.

Let’s get our units of measurement right.</blockquote

Amen to that. Economists and the popular press seem to always omit time units ("the interest rate is 5%") when including them ("5% per year") would be far more transparent and less likely to result in this kind of confusion.

Spot on, Curt. Also, they often fail to distinguish a 10% rise from a rise of 10 percentage points.

Assuming market valuation works as in corporate finance theory, the $10 million is the value of all future residual cash flows per worker.

Revenue per worker (extrapolating to year end) is around $2.37 million per year.

But MBAs see the value of a worker as maybe $10 an hour, plus $10 in jack boot government dictated overhead, and in a free market, the worker would be worth $5 an hour given the large pool of unemployed workers and the cost of labor in Africa.

Revenue per worker was advanced as a metric to compare IBM to Univac and NCR to justify the gold plated wages and benefits IBM provided - the golden handcuffs.

By the end of the 80s, it was used to justify firing Steve Jobs, and it seemed to me the ideal corporation had 5 employees with everything outsourced - a CEO needed at least 5 employees so he could improve over 4 years - firing the doorman increases revenue per employee 20%, firing the janitor 25%, firing your driver 33%, and firing your secretary 50%, and by resigning and having the BOD takeover running things, a huge golden parachute is obviously justified because all the revenue is produced with no workers at all.

For context, Portugal has a huge amount of unlisted equity, Ireland has a decent amount of unlisted equity (including the foreign-owned firms) and its biggest firms have secondary or even primary listings in London, and Greece probably has lots of unlisted equity and a very large foreign ownership rate of businesses as well.

So, Apples and Seville oranges.

Agree with Millian.

Is Apple really the "most valuable-ever company"?
1. Market capitalization is just the value of equity. It isn't the total value of the company.
2.What about private companies? We don't know how valuable they are precisely because they haven't gone public. eg. Greek shipping.
3. What about state-owned companies? Any of these as big as Apple? CNPC maybe?

Perhaps: "Apple's is the most valuable-ever public equity" would be more accurate?

Apple is smaller than Microsoft was, in inflation corrected dollars, in 1999. Microsoft is now a legacy company being steadily by-passed, much as beseiged cities were in the middle ages. OK for the moment but unevitably going to be mopped up at a later time. Or, as Marx put it, "They will wither on the vine."

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