Apple Inc. (AAPL): Why The ‘Next Big Thing’ Might Not Be A Gadget
Is Apple Inc. (NASDAQ:AAPL) starting to lose its “cool” factor? Co-founder Steve Wozniak recently told Bloomberg that the company is “kind of losing that” edge.
For Apple, its shares may have a little more room to go to the downside as other companies scramble to fill the current innovation gap in the lucrative tech marketplace. But for a company that reinvents itself with every new product release, supposedly losing its edge probably doesn’t even rank on its worry list.
After all, Apple has never been a company that rushes something to market. Right now, it could very well have a ton of brilliant plans and prototypes locked up tight in its Cupertino, Calif., headquarters.
And when the time is right for its next cool invention to come to market, you can count on it being sold out in pre-orders within hours of the announcement!
I always say the best way to invest is to follow the money. When it comes to Apple, the more-appropriate bet is to get positioned and to let the money follow. Today I’ll share with you four distinct ways Apple can re-establish itself as a knockout play … without having to reinvent the (click) wheel!
As the company continues to release the “next” iPhone, iPad and MacBook … literally, with improved devices rather than revolutionary new ones … diehard Mac fans are awaiting the next big thing that they’ve come to expect from the company.
More than the Mac cultists, though, investors are waiting for the next technological marvel that would make Steve Jobs proud … and make them, if not rich, then perhaps gain back any losses they might have incurred in the stock in recent months.
Apple’s Next Big Thing Might Not be a Gadget
Some say it might again take the lead with an iWatch. Others say it might be the delivery of an Apple iTV. For me, I think the real payoff is in Apple’s production of iCash.
No, that’s not an upcoming product. But if Apple can find a way to invent it and make enough money to drive share prices back above $700 from their current $450 level, it can feel free to steal the idea! Learn To Trade Like A Billionaire With My Free E-Book!
Whether or not its coolness is in question, the fact is that tech companies are really good at making money.
And Apple is a cash cow.
Perhaps the best use of its cash is not necessarily to develop new devices, but to acquire companies that can remove some of the heavy pressure to innovate.
After all, it can afford it …
What Would You Buy With $137B in Cash?
In Apple’s most recent earnings report, it listed $137 billion in cash and cash equivalents on its balance sheet.
The answers to that consistently come back with a list of U.S.-based companies like:
- Credit card giant Visa (V), with a market cap of $106 billion.
- Networking equipment titan Cisco (CSCO), with a $112.13 billion market cap.
- Or even some of its component/semiconductor partners like Qualcomm (QCOM), with a $110.6 billion market cap.
- Or even chip vendor Intel (INTC), with a $104.58 billion market cap.
It’s not news that Apple has cash. It’s not news that it could buy another large company or two.
What is news is that it’s holding on to such a large part of its value in cash.
Take a look at this another way. If you are going to buy out your own company, you would hoard cash to be able to leverage up the company.
What Apple Can Learn From Dell, Other Techs
Dell (DELL), which is in the midst of a management buyout, is flush with cash at 21.7% of its market value. Assuming no one complains too much about the price, this looks like a done deal. Learn To Trade Like A Billionaire With My Free E-Book!
As for the two other stocks mentioned, they may be attractive from a business perspective, but guess what?They are also loaded with cash.
Qualcomm is holding on to 24.6% of its value in cash. And Cisco Systems is keeping 25.5% of its market value in cash. In both of these cases, an all-cash deal makes no sense — they already have that!
And Apple’s biggest traditional competitor, Microsoft (MSFT), is sitting on big cash mounds too, with 28.1% of market value in cash. So don’t expect any growth or transactions to come from that direction, either.
4 Ways Apple Can Establish Itself As an All-in-One Stock Play
Historically, tech companies have been reluctant to pay big dividends because of their growth prospects. Apple has an advantage there, but being a dividend-payer is only one way to keep its competitive edge.
Adding or enhancing its footprint in the social, mobile, analytics and cloud space is a logical next step. This can be done by using some of that cash to not “reinvent the click wheel” and instead to partner with — or otherwise acquire — the companies that are already monetizing their services in these four critical areas …
In Social Media, plays like Yahoo! (YHOO) or, even better, a tie-up with a China-based company like Baidu (BIDU) or SINA Corp. (SINA) could generate some interesting new product extensions.
My take on this is that the international arena makes a whole lot more sense, especially in China where the opportunity for mobile applications is growing.
In the Mobile space, I may be accused of blasphemy but why not buy Nokia (NOK) and cut the heart out of the Microsoft initiatives? That’s cruel but actually might be more effective than sinking money into BlackBerry.
In Analytics, my thoughts here go into cybercrime-related or health-care systems applications. But what’s wrong with Apple making a drive-by offer at Salesforce.com (CRM)?
This one’s only $25 billion and, again, it’s one of those companies that integrates with practically any service out there that has anything to do with e-commerce.
And finally in the Cloud space, it’s not inconceivable that a hardware company becomes oriented toward servers and virtualization. So maybe there’s a DELL in Apple’s future after all.
My take on it is that I see some cash coming to Apple shareholders just like Microsoft did a couple of years ago. It won’t change the course of the company, but will put a smile on a lot of investors’ faces who owned this mammoth above $500 per share.
In my case, I just added three new tech plays to my Global Trend Trader portfolio, and I’m looking to add a few more consumer-oriented plays over the next few days.
To get in on those names — and to find out more about the four global mega-trends my subscribers are following to profits in 2013 — click here now to gain instant access to my latest research report that outlines these incredible profit opportunities!
Related Ticker: Technology SPDR ETF (NYSEARCA:XLK).
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com/.