Friday, 15 February 2013

My response & predictions 4 Tim re Unusual Moves in Confronting Apple's Huge Pile of Cash -

Unusual Moves in Confronting Apple's Huge Pile of Cash -

Might make sense to distinguish two things, "valuation of a company" is the measurement of market sentiments/expectation of how the company is doing and will perform.. this sadly most of the time DOES NOT equal to "viability of the company" as a going concern. Case in point is the big drop of share price of Apple when it has billions of cash (when other zombie firms which are highly leveraged and could fail as actually don't have enough cash to pay staffs.. but their share price might be doing well, as you actually don't know they have problems until too late..)

yes; financial structuring and wizardly has so far been mostly trying to fit the company into how the "market wants it", especially for publicly listed firms. It also try to fit all firms into the accepted norm of the capital market, niche verticals, highly specialised, "not too much cash" and ideally highly leveraged and high top line growth, all these are the perfect ingredients to make a "hot" or "great stock" with high multiples... 

It centres on the idea of "efficient use of capital" is DEBT rather than Cash... 

Must read blog response from Prof @AswathDamodaran Musings on Markets: Hundred dollar bills are hard to come by!

Tim should become the leader like Steve & focus on the business, and service what the business need in medium to long term and do not follow suit of likes of GEC Marconi where equally under pressure by market & shareholders really squandered the cash and broken up the firm. 

or Indeed use the cash and bring Apple back to private and focus on the job itself but hey, not as glamorous & won't pave way for another job. 

World economy is in a dire situation now: part of the reason maybe we forget the "value creating" goals of the capital market... where as Jack Bogle pointed out in his seminal book "The Clash of Culture", most of the capital market is speculative rather than value adding investing (his example of USD250Bn value adding equity investing vs whole of market of USD33Trillion)  and if genius financial engineering minds like Mr. Einhorn could force company to do "the right thing" and if "the right thing" is from the capital market's perspective and if Jack Bogle is correct that it focus on the "rent seekers" needs... then it is indeed very likely many great companies like Apple (guess you cannot find any companies greater than that now!?) will not survive... 

I would therefore make another two predictions: 1) Tim will not survive 5years if he does not follow the market wants, namely paying out more dividends and/or share buy backs... 2) Apple will decline in 5years if indeed Tim or his successor succumb to needs of the capital markets  Therefore, 3) Apple will thrive as & when it finds another true visionary to keep it at the very top and focus on needs of Apple and most importantly its users 

(Declaring that I am only an observer and not an apple user, nor stock holder;  I bought a top of the range iPod 40G player which was never used, especially I bought it in NYC and the battery of it was and still is rubbish!)

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