AAPL's Rise: Perception Is Everything
September 20th, 1999 

Perception is everything

Apple's new products are simply amazing -- just last night I was excitedly showing someone the foldout ad for the G4 Macs in this week's Newsweek -- they are amazing machines, with great design and great marketing behind them. It's been really great to see, it makes you wonder what could have been had Steve Jobs never been kicked out of Apple in 1985. Apple looks like they have a great future in front of them now. All I know is that I want a G4 and one of those huge new 22-inch Apple LCD displays. :-)
Marc Andreesen, cofounder of Netscape

The Wall Street Journal sent me their weekend "Encore" edition for the first time this Saturday. It's something new that they are trying, very graphic and splashy. On the front was a full-page picture, in vivid color, of a bondi iMac, and it wasn't an advertisement. I almost choked on my coffee when I saw it. The Wall St. Journal's editors used the image of an iMac as an appropriate frame for the title of the issue, which was about older Americans getting online.

I mention this because it illustrates the paradigm shift in public perception that Apple is undergoing in the eyes of the press, the public, and The Street. As all old time Apple investors know, the Wall Street Journal is notorious for ignoring Apple. The editors have always seen Apple as something of a bleeding heart liberal. To see a life-size iMac on the cover of even an experimental weekend Encore edition is a shocker, and a sign of the times. *

*Note to WSJ editors, if I want fluffy USAToday-style content I'll buy USAToday. Stick with that old WSJ hard-nosed, fiercely conservative format, with the little etchings of the CEOs and other suspects. Soon we'll have around the clock trading, and we need you guys to remain a familiar standard for sanity's sake. Next thing you know, the Financial Times will lose the pink paper. Cut the fluff.

Everyone is watching Apple now, especially the techno-vultures. Last week, Compaq's CEO Michael Capellas said, "Apple has established there is great appeal with different design. (duh!) Yes, you will see us absolutely follow that pattern. We're going to really, really drive innovative design. (gag!) I think the Internet has caused us to think differently." Half a decade late on that one, dude. I wonder how Compaq retained so large a group of clueless people all in one place at one time? But I digress.

The point is that this is yet another illustration of the paradigm shift in opinion about Apple. Since when does a CEO of the mighty, if wounded, Compaq acknowledge that tiny Apple even exists, much less announce to the world that they intend to "follow" Apple's design leadership?! Perhaps I have slipped into a parallel universe? I can almost hear the theme to the Twilight Zone in the background. Then Rod Sterling steps out of the sky and says, " Imagine for a moment, if you will, the contrived monstrosities the designers at Compaq are dreaming up to foist onto the world with mega-million dollar promotional campaigns." It's gonna be ugly.

Everyone is watching Apple, and not just in the computer industry. Have you seen the "Dodge Different" television ad campaign? When my wife and I saw it for the first time, we just looked at each other drop-jaw perplexed. Did Apple buy Dodge? Or did Dodge hire the world's most uncreative ad agency? Do clueless, overpaid corporate image-makers really believe that the Apple "Think Different" campaign is why Apple is the comeback kid? Just borrow the Think Different theme, and you too can become the market leader in a year?

Hackers are good for Apple

Last week, the US Army, fed up with 19-year-old kids hacking their NT servers, decided to go with WebStar servers running the Mac OS instead. NT by its very ubiquity, and the fact that it has a command shell and remote access, is profoundly insecure. In addition, NT demands many more man-hours to maintain than an Apple server does. This anecdote illuminates the huge untapped enterprise market out there just waiting for Apple to get serious about corporate marketing. iBooks and iMacs will dominate the public image of Apple, but G4, then G5, sales should increasingly become a major source of gross earnings in the next couple of years.

After all, the world isn't all borgish, corporate American, information officers licking the jackboots of Microsoft and Intel. (No one ever got fired for buying Microsoft.) Europeans and others don't have to slavishly subscribe to the world according to Bill. In fact, France's Finance Ministry is investigating complaints from consumers who are upset that they have to buy Microsoft's Windows software every time they buy a PC. They just don't get it, do they? Redmond should send an emissary to explain that world OS dominance is the Divine Right of Microsoft and demand tribute, or Bill will revoke France's license. Got to quell those treasonous Gauls before they inflame all of Europe with their heresy.

I hope Apple is shrewd enough to take advantage of this rebellious situation in Europe. Unfortunately, the monolingual, surfer dude, corporate culture in Cupertino hasn't a good record of relating well to Europeans. Apple's marketing there sucks, and the Macs are so overpriced that Apple has been hemorrhaging mind share in Europe, even as the iMac claims the hearts of the Japanese and Koreans. Apple loves to single out the Japanese as an example of how well Macs do overseas, but that paints too rosy a picture. This problem is a relic corporate artifact from the Gil Amelio days. Certainly, the way Apple is organized in Europe needs a major overhaul.

In other news, IBM was at the Paris Apple Expo event showing off its Via Voice software. The Expo was primarily an iBook launch, wasn't it? One clever poster on an AAPL stock board asked, "There is no sound-in jack on an iBook - why is IBM demo'ing Via Voice at iBook shows?" Good question. This is, of course, how rumors get started. So don't pass this along. But if anyone from Apple is reading this, put the darn microphone back on the iBook, OK? Jeez, what were you guys thinking? Hope it's not part of that "make 'em buy a new Mac" strategy we saw demonstrated recently with the non-upgradeable G3 firmware fiasco. But, we won't go there.

And just in cased you missed the news last week, iBooks are shipping as of last week in the US. They'll start selling in Japan in October. Apple has 160,000 pre-orders for the iBook and hasn't even started taking orders from Japan where the iBook already has rock star status sight unseen.

Stock Split?

Adobe Systems has announced a two-for-one stock split in the form of a stock dividend on Oct. 26. This inspired one reader to ask, "Wes, AAPL is so expensive now. When is it going to split so I can afford to get in?" I decided to call Steve to see if I could chat him up on this topic. Unfortunately, his secretary's secretary informed me Steve was busy, and he didn't get a chance to return my call by deadline.

However, perhaps I can throw some light on this stock split thing.

No one can say when AAPL will split. The rumors are that Apple's leadership likes the high numbers. They just sound so much better... $70, $80, $96 sounds so much cooler than $35, $40, $45 1/2, etc. The psychology is to let the price go higher. It makes for better news bites, and is easier to compare to old historical price charts. You might not think price should matter to the sober traders on Wall Street, but perception is everything.

Stock splits are used to add paper to the market. If you own 50 shares and the stock splits you now have 100, so the amount of stock in circulation doubles. Apple has announced a stock buy back program, which is the opposite of a stock split. Apple is actively reducing the paper in circulation and thus driving share price up. Go figure. Don't expect a stock split till the triple digits.

Speaking of AAPL's price, a technically inclined reader pointed out to me that the AAPL chart is now in the process of making a "flag" formation, which is an unusually bullish consolidation pattern that forms a profit taking area of congestion of about half way up a big advance. It indicates that your big chance to get a piece of Apple is at hand today. The next earnings report is likely to be so killer that the flag will break out on the upside.

Must Reads for Ultra-Capitalists

Sorry this week's column is a ramble. I just read "The Age of Spiritual Machines" by Ray Kurzweil and am still in a state of shell shock. I can't stop doing mental gymnastics trying to get my brain around the metaphysical implications of this book. I don't think I'll ever be the same. Also, you should read "Dow 36,000", by James K. Glassman and Kevin A Hassett, in the latest Atlantic Monthly. The article trashed all my cherished misconceptions about the stock market, and that leaves me precious little to write about. Oh well, no one ever said an infinitely progressing, asymptotic, learning curve for the rest of your life was going to be any fun. Stay tuned for the next century.

Your comments are welcomed.