The Future of AAPL

I'm the only person in the world, it seems, that thinks AAPL is heading for a fall.


...and I'm probably wrong.

But here's my reasoning:

1. They've outpaced the S&P for too long. What goes up must come down :).
2. People are buying AAPL because they visit Mac stores and watch MSNBC... 1+1 = buy stock no matter what. I remember logic like that back in the 1990s with internet stocks.
3. My real reason... below...

AAPL is based on innovation and style. So far they have basically been right every time for the past 10 years or so. What can I say... Steve Jobs is a god. That being said, being able to correctly predict the future and deliver it in a stylistic way that gives you big margins is not an easy way to sustain your business.

Over the next few years, I believe the open platform copy-cats will start to suck up market share. Sure, Apple will continue to grow in the Laptop space and I think it will be hard for people to beat out iPods because they are so deeply penetrated. But I think that iTunes itself is a pretty good target for stealing market share. The format is propriatary. I can only authorize 5 devices, without going through an annoying process. I can't redownload once I lose things, etc. Once someone figures out how to make licenses more open and transferable I can't see that surviving. That being said no one has been able to do that. Perhaps iTunes and the music/movie industry just have the same interests...

Even with that, though, it's tough times ahead. Margins on the iPads and iPhones are going to go down because copy-cats will get into a race to the bottom. Apple is not good at races to the bottom. That will end up creating quarters of below expectation growth and a subsequent drop in stock price. That's just speculation though. I think what's worse is that Apple will lose the platform war because they keep their platform closed. Open platforms won in the 1980s as well and I don't see any reason that will change.

That being said, who knows. Apple could grow and grow and just keep going for decades and then I'll be eating my words :).