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The facts about how $13 Billion dollar industries do not just disappear.

By:David K. Every
©Copyright 1999

Apple is a huge company

Apple is a $10+ billion a year company. They have almost $2 billion in cash backing them up right now. While it is theoretically possible for them to go out of business, it is highly unlikely, especially when the company has Billions of dollars in cash backing them up and many loyal customers and superior product. If you fear Apple disappearing then should also fear buying products from McDonalds or even Microsoft as they are smaller companies than Apple is (though at his moment are more profitable).

There is a slight possibility that Apple could be bought out, but then that usually means that the company (and its products) are attractive and likely to continue to exist for years to come (though some evolution would be likely). So even if Apple did merge or was bought out - your computer investment would be safe because a company would not buy Apple out and then destroy the market that they just bought.

To quote from a recent MSNBC article "Consider some basic facts. With roughly $1.1 billion of cash on hand, Apple has more folding stuff [cash] in the till than 96 percent of all publicly traded companies in America. [Apple's] got as much cash on hand as Philip Morris, Delta Airlines and Eli Lilly ... and more than Cisco Systems and plenty of other high-tech high flyers." Its not exactly like Apple is insolvent, despite some of the Apple bashing articles that we've read lately. The article goes on to point out " And when you deduct current liabilities, Apple is still left with $2 billion in ready money . That is twice as good a current ratio as the average for all the computer industry." So there seems to be no worry about Apple as a company. They have lots of staying power as a company.

Macintosh is an industry

Apple is more than a company - the Mac is an industry. Think about that. I believe Mac computers as an industry had more sales last year than the entire VCR and Video industry combined. Do you fear Video Tapes disappearing soon? Well they will - in another 5 years or so DVD (Digital Versatile Discs) will take over that marketplace - but most people do not fear buying a VCR today. So Macs are a more secure purchase than a VCR.

Apple is licensing Mac Clones - and Apple gets profits on each sale. Motorola, IBM, Acer, Samsung's parent company (KG), Pioneer, Tatung, Power Computing, and many other companies are all racing to be Mac Clone makers. If the Mac is a dead industry, then why are these companies investing millions or billions of dollars and their time? Macintosh is an industry by itself - but the Mac can share the resources of the rest of the PC industry by using the same expansion cards, monitors, printers, scanners, Memory, hard drives, keyboards, mice, cables, speakers, manufacturing, and so on. This is allowing the Mac market to grow immensely.

There are reports that Apple's market share is slipping but what does that mean? Market share is a measurement of unit sales at any given time. If you look at Apple's sales for the past few quarters people have been understandably reluctant to buy Macintoshes (all the misinformation has made people question Apples existence, so people have been taking a wait-and-see attitude). Most analysts are comparing Apple against the rest of the world combined, but remember Apple is cloning now - if you factor in all the Mac Clone sales Mac sales have been growing as fast as the rest of the industry. Mac sales were up to 5.1 million last year ('96) or 10% larger than the 4.5 million units the year before ('95). Furthermore every Macintosh event has more attendance over the previous ones. Apple is getting more developers at Every event (WWDC or Mac Hack) and there is more enthusiasm, and every MacWorld attendance is larger. That is what I call a thriving industry.

If you are only concerned with market share, and you are real concerned with MacOS disappearing, then you should be more concerned with WinNT - its got a much smaller market share and fewer Apps available.In fact there are more 32 bit Apps for the Macintosh then there are for Windows95 and WinNT combined. (To be fair Mac Apps have had 32 bit applications since '87, while they are new for WinNT and Win95). There are over 15,000 Macintosh Applications available - so Software availability is not exactly at issue with Macs either.

Computer generations are about 1 1/2 years (the technology doubles). This forces people to buy new machines Every 3 - 4 1/2 years. But remember, this market is very volatile and it is nearly impossible to predict what will happen in the next 3 - 5 years. (Think of computer years as dog years - except that its about 13:1). So the question of buyers should be "Can Apple can survive the next 5 years" and if the answer is yes (which is obviously is) then users can safely buy a Mac. Well Apple has almost $2 billion in the bank -- it seems to me they can survive quite a while on that.

Apple is almost always ranked #1 in customer satisfaction, customer loyalty, customer repurchase and quality. Macs have the lowest support costs, and are the easiest machines to maintain and install. Macs have excellent market share in many markets like multimedia creation, web creation, lower education - K-12 (60%+), higher education, desktop publishing ~ especially color pre-press (where Apple holds 75%+), and many other markets. So without compelling reasons, and there are currently none, those customers are not leaving Macs. This means Apple has a guaranteed revenue stream, which means Apple will not go out of business until Windows or some other OS offers compelling advantages over the Mac. Those in the know say that Win95 is better than Win3.1 but admit that it is no competition for the Mac.


I am no conspiracy buff, but it is interesting to note that companies that have had a bad (or worse) time are pounded on much less by the press -

  • Packard-Bell (verged on bankruptcy twice in the last three years).
  • Acer has not exactly been doing well
  • NEC has had their share of troubles

I try to explain why I believe the press has been on an anti-Mac crusade since 1981 in "Why is the media so biased?".

Stock opportunities

Apple has been taking a beating in the press, and their stock is undervalued- however the industry is waking up to that fact. (Remember the objective of the stock market is buy low - sell high. Apple is under-valued, that is a prime time to buy). So if you are looking for an investment opportunity, now is the time to buy Apple. Again to quote the MSNBC article - "With $1.95 billion in balance sheet book value, and 124 million shares outstanding, Apple's investors are holding stock with a book value of roughly $15.50 per share. That's three times the book value per share of a Microsoft or a Dell". That translates to a bargain.


Created: 02/09/97
Updated: 11/09/02

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