Apple may have peaked

While investors have been getting all moist about Apple’s share prices, Wall Street is starting to think that the Jobs idol has feet of clay.

No one is doubting that Apple is doing rather well, after all it flogged two million perfectly useless iPads for about three times what they were really worth and hopes to repeat the exercise next year by providing all the functionality that the first one needed.

Apple shares now change hands in the $260 range, a 6,475 per cent gain since the return of Steve Jobs as CEO in 1997, a dozen years after the Apple co-founder was ousted from the firm over a dispute with the board.

But the problem with Apple getting any bigger or better is that it has to come up with something else, and there are no signs that is coming.

Wall Street assumes that Apple will take control of the media world with everyone paying huge amounts of cash to Steve Jobs, in a similar way they have done so with Microsoft.

But to do that, Jobs would have to make the big step and licence his iPhone technology to the great unwashed and undo his hardware exclusivity. If he did this, then it is pretty likely that he would make up the money in his walled garden of iTunes and applications. Apple would really become the Microsoft of the next decade.

But he will not. Cooler heads see history as repeating itself. Jobs is refusing to let control go of any of his shiny toys and smartphones based on Google open-source Android operating system are starting to wipe the floor with him. Apple, always second to Rim dropped to third place.

If Jobs were sensible, he would cut the cost of the iPhone to compete. But he will not and packages including the iPhone can be up to three times the cost of something Blackberryish.

Then there is the small matter of how Apple treats its customers and application developers. Autocracy does not sit well with developers, even if they love working for the company. After all would you waste hours making an app only to find it killed off because it did not meet what ever policy whim was going through Steve Jobs’ head at the moment?

Steve does not understand that control ultimately kills creativity. True, moves to protect your iTunes store from soft core porn might win you customers in the US mid-west, but it is not going to sell your products to those with opposable thumbs. Creativity is really going to come out of Android, particularly as its use becomes more widespread.

As one of the analysts in the Star newspaper pointed out,

Stock prices are based on prospects of future earnings power. Warren Buffett-style value investors, focused on the long term, want to see a “moat” protecting franchises like the iPhone, iPod and iPad.

Microsoft is a slow grower but it is damn hard to shift. A company wanting to dump the outfit will find it inconvenient. Getting rid of your iPod or iPad is going to soon be a matter of going to one of the many competitors .

Apple hopes to stay ahead of the competition by upgrading and providing more gizmos on its products. If you have an iPhone, it reasons, you will automatically upgrade to the next generation version. There is a hard core of buyers who will buy what ever Apple tells them, but the more they sell to the “great unwashed” the more they are going to find that there are people who want value for money. They don’t want something that will die after a year.

Anyway, any features that Apple can add to its products can be copied by rivals in the next product run.

This is where Apple’s problems lie. Its inflated share prices are based on the fact that people believe Jobs will keep pulling rabbits out of the hat. The fact is that it can’t. Jobs is too much of a control freak to make the decisions that will enable Apple rule the world and it is only matter of time before his luck runs out.

Like many autocrats his organisation is not geared to coping without him either. Share prices are dependant on future earnings but there are no guarantees that Steve will be around forever. True he has some competent lieutenants, but the great unwashed needs Jobs as its figure head. It is unlikely that many Apple fanboys can name the bloke that Steve left in charge while he was sick.

With these factors in mind it is not surprising that some analysts are thinking if it is a good time to cash in those Apple shares and buy something else.