Apple Could Metamorphose into a Technology Dinosaur
Apple Inc. (NASDAQ:AAPL) announced a few weeks ago that its radical new “AirPods” earplugs are available for sale. My response, along with many others was: so what? While I may be somewhat sarcastic, I’m also left wondering when CEO Tim Cook will finally announce some disruptive technology that would make me stand up and salute.
Apple stock (AAPL stock) is trading at near its 52-week high, up about 10% year-to-date but underperforming both the S&P 500 and Russell 2000.
Perhaps there is some anticipation that the next “iPhone 8” could actually be a major technological upgrade for Apple Inc., but I doubt there is much more that could be done at this time to shock and awe users. I even think that the Samsung Electronics Co Ltd (NASDAQ:SSNLF) “Galaxy Note 7” is a better phone. Unfortunately, it’s also a fire hazard. Then there’s the “Pixel” smartphone recently launched by Alphabet Inc (NASDAQ:GOOG) that is attracting rave reviews.
Now, some would argue that the iPhone is the best out there, as far as the Apple Inc. ecosystem goes, which is comprised of laptops, tablets, watches, and music.
I wouldn’t argue against that premise, but the reality is that AAPL stock is essentially viewed and valued as a commodity stock at this time. There is simply no excitement here.
Microsoft Corporation (NASDAQ:MSFT) is a good example of what Apple Inc. needs to do. MSFT was dead money for over a decade, as the former Wall Street technology darling struggled to excite investors with anything disruptive. Selling Windows and productivity software wasn’t enough, so Microsoft changed its strategy and moved into high-growth areas such as gaming, cloud computing, and really good tablets.
The same can be said for Alphabet and Amazon.com, Inc. (NASDAQ:AMZN), where innovation is making these technology companies a favorite of Wall Street.
The fact that the recent big news with AAPL stock was the removal of the headphone slot in the “iPhone 7″—which forces users to shell out $159.00 to buy the wireless AirPods in order to listen to programming—was nothing short of disappointing.
Chart courtesy of StockCharts.com
Why Massive Cash at Apple Can Help
Now things could change for AAPL stock, since the company does have over $100.0 billion in cash, which could be used to buy many disruptive technologies rather than buy back Apple stock and paying dividends.
President-elect Trump suggested that he would entice companies to repatriate cash from outside the U.S. by significantly lowering the tax rate to bring cash home.
My thinking is that Apple Inc. could use these newfound cash riches to acquire or develop innovative and disruptive technologies in growth segments such as the cloud, the Internet of Things (IoT), or chip technology. Or it could refine its current electronic products. That would be a positive development for Apple stock.
The bottom line is that Apple Inc. needs to be at the forefront of technological innovation and depend less on sales of the iPhone, which will likely lose market share.