Now, a kind word about Apple: Given the aforementioned turmoil at Compaq, it might be foolish to find kind words for anyone in the PC world. But it's when the emotions of headlines are fiercest that taking a clear-headed look away from the fray makes some sense. I heard from one of my regular (albeit press-shy when it comes to using his name) money managers regarding Apple (AAPL:Nasdaq).
This is the same money manager who not long ago gave readers a head's up on the rebound at Qualcomm (QCOM:Nasdaq), and not that long ago he was prescient in his reasons for loving the then-dejected GM (GM:NYSE), Ford (F:NYSE) and Chrysler [now Daimler Chrysler ((DCX:NYSE).] "Yeah, I may have lost my mind on this, but I am really beginning to believe this company is misunderstood and underappreciated," he says. "First, the recent improvement at the company is very real. Cash Flow from operations has been gigantic for the last seven quarters. As of the numbers announced last week, Apple has $2.92 billion of cash on the balance sheet. They announced that they are calling their $660 million convertible issue in on June 1.
"When you eliminate the convertible debt and adjust for the new shares, Apple will have over $2.6 billion of net cash on the balance sheet, which is $15.20 a share -- NET. That is 42% of the stock price. Operationally, gross margins have been trending up for the past five quarters, and were just shy of 26% in the March quarter. Remember that Apple has a cost advantage of over $100 a box over the Wintel contingent because they don't pay Intel (INTC:Nasdaq) for their expensive processors and they don't pay Microsoft (MSFT:Nasdaq).
"The net of all this is that I could see perception of Apple changing dramatically over the next six months or so. In a world of vast uncertainty in the PC space, Apple should be one of the few companies to grow." He may have something there. My 14-year-old needs a new computer, and she'd really like a blue iMac! It's the way she says, "They're so Cuuuute! Just like a Beetle." And look at the resurgence at VW. (Yep, you know what car is destined for my garage one day!)
This is a great article, and we recommend that you read it. There is much more than what we quoted.