My in-laws have been using Apple (NASDAQ: AAPL) computers forever. I have been using Microsoft (NASDAQ: MSFT) Windows-based machines, because most of our software and that of our engineering consultants was not supported on Macs. This extended to our home/studio. Well, a few years ago my daughter (remember, the iPhone enthusiast?) got an Apple notebook, then my wife did, then six months ago my 11 year old got one. iMacs are taking over the house.
Apple has made a lot of strides in the past 18 months to make all this switching much more easy. From using Intel processors, to adopting Windows options, to improving the operating system and already having the historically superior machine in terms of stability, anti-virus environment, better graphics and sound integration and more innovation on all levels.
So what does the Microsoft-based Windows PC offer me? As far as I can figure out, there are two advantages. The first is price: Apple charges extra for the cool factor, as it does with everything it produces. Although you have to give Apple credit for innovation and its R&D efforts, that has a cost. Microsoft is not known for innovation. The second thing a Windows PC offers is the greater number of programs available. The second attribute is bound to change as more and more people buy Macs and software companies and developers look to grow with that end of the market.
Apple also offers an integrated series of products that plug and play in a way that is not rivaled by Windows-based products. Apple's share of the personal computer market has been growing, and it looks like it has plenty of room to grow further. That seems to be priced into the stock, which closed today at $166.39. As a matter of fact, I think all the good news is priced into the stock now, which has a P/E ratio of 42 (TTM). This is one where I am a huge fan, but not a buyer.
Questions:
- Are you planning on switching from a PC to an iMac? (...or vice versa?)
- What is the largest percentage of users or market share that the iMac can achieve and then sustain?
- Are there PC features which I have overlooked that surpass iMacs?
- Will Microsoft continue to expand its hardware offerings so that it can compete better with Apple?
- Is it even possible for Microsoft's corporate culture to innovate in a competitive way with Apple?
- What does tech rock star Steve Jobs have up his sleeve for his next act?
- Could Apple continue to outperform without Jobs?
- Is Apple stock fairly priced or has the hype made investors overly optimistic?
What other questions loom large for Apple and Microsoft in the coming year?
My gut reaction is that Apple stock is overpriced, perhaps by as much as 20%, from my value perspective, but you may not have a great buying opportunity in the near future if you want to own it. I also sense that the iMac will be an even more compelling machine for me when I need a new notebook computer.
To find potential opportunities and verify my track record, read Chasing Value or Serious Money.
DISCLOSURE: I do not own shares of AAPL or MSFT
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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Reader Comments (Page 1 of 1)
11-16-2007 @ 7:35PM
Jonamac said...
Is this post for real? Altogether strange.
11-16-2007 @ 10:18PM
benoir said...
more software???
like what??, what is it that 99% of the entire world's population needs that isn't on the mac. The argument about software is stupid
11-17-2007 @ 10:34AM
Shane said...
Actually, since you can use the included BootCamp software to run Windows Vista or XP natively on a Mac, you are incorrect in stating more software is available for Windows. On a Windows pc you can run Windows software. On a Mac you can run Mac software and all of the available Windows software. And you can run that Windows software at native speeds with no performance hit and with complete compatability.
Also you stated "Apple charges extra for the cool factor". I would say that IF you are paying more it is for the "historically superior machine in terms of stability, anti-virus environment, better graphics and sound integration and more innovation on all levels" that you mentioned earlier.
I think however you would have been better off characterizing Apple pricing by stating Apple does not compete in the "cheap" segment of the computer market. Instead, Apple is very competitively priced in the segments they do compete in, specifically full featured computers. There have been many price comparisons conducted in which comparably configured Macs and PC have been found to be comparatively priced.
11-17-2007 @ 11:16AM
Arnold Ziffel said...
Trust me--having had to use Windows for the past 10 years or so at work, the supposed advantages to using it as an operating system are next to nil.
It is always a relief to get home, where I can use our Macs and where we don't have to worry about security issues and all the crap that goes with using a MS machine. Having owned Macs since '89, I have yet to find a need for any Windows-only software. Also, never had any issues whatsoever with any malware in almost 20 years. How many Windows users can say that?!
If you must have Windows training wheels, install VMWare's fusion or Parallels.
11-17-2007 @ 7:06PM
Neil Anderson said...
Leopard is the cat's meow. Lots of great features like Quick Look, Spaces, and Time Machine.
11-17-2007 @ 11:34PM
Teo Smith said...
iMac is NOT a laptop, dude! How can you write such a detailed dissertation about Mac vs Win without actually understandig the products that you are talking about ?
11-18-2007 @ 12:30AM
mrmister said...
This guy is ridiculous--he uses "iMac" as though its synonymous with all Apple computers--I don't think he understands the products, even though they are being used all over his house. I doubt he's done any cost comparisons recently between Apple and a comparable Dell, or research of any kind--he may know stocks, but it's clear he knows very little about Apple, Microsoft or the computer industry at large. Pass.
11-18-2007 @ 1:14AM
NightWriter927 said...
It is obvious from your article that you know next to nothing about Apple and Macs. While your house may be awash in "iMacs" Apple's laptop computers are the MacBook and the MacBook Pro. So when you're in the market for a notebook computer, you'd best go to an Apple store so you can actually see the difference in the iMac and the MacBook and MacBook Pros.
Your arguments that Macs cost more and there's not as much software available are old and lame. Those are arguments people were using years ago. Come up with something new and spend at least 10 minutes researching before you right. You insult your readers with your lack of knowledge masquerading as someone who knows what he's writing about.
Check out the new Dell all-in-one iMac wannabe... cleary much more expensive then an iMac with limited choices in screen size, etc.
11-18-2007 @ 2:02AM
Sheldon L said...
I have not had the opportunity to try Autodesk products like AutoCAD on the Mac/Windows but that is one that is required.
11-18-2007 @ 7:54PM
George H said...
I can't believe they posted his blog! No stupid blogs please!
- Switching was easy for years Sheldon! It seems you never knew!
- Price factor? Apple has always been cheaper, did you try to compare the specs of the computers?
- LOL@Steve Jobs a tech rock star.. ha!
Do a proper research first mister..
11-19-2007 @ 5:17PM
gmboyd2000 said...
Sheldon, Sheldon, Sheldon,
You're a fan but not a buyer? It would've been so much better if you'd been a buyer and not a fan. Nevertheless, I trimed my position and believe that this one would've been well into the $200s if that darned old sub prime mess hadn't caused so much hate and discontent. My guess is that we may not approach that level until June of 08 though we may have an explosion of epidemic proportions landing well north of $200 if they beat substantially in Jan. I can't make any earnings calls until late Dec. Remember, Beltway Greg called for $1.05 in the last quarter and damned if he wasn't the best O' the bunch. (All those smart people and little ole me). But of course if I had been playing the Price Is Right I would've gone over the price on the Showcase Showdown. Crazy times though. What we're seeing here isn't a true slowdown or recession. This one is manufactured and is the result of the comedy of human errors and not really a part of any true economic cycle. What does this mean? While things are looking bad at the moment, any brightness on the horizon would result in a whiplash smile for all of those Billy Idol fans out there.
Beltway Greg
Coming to your town soon.
11-19-2007 @ 6:55PM
Gary Brockie said...
Umm...Apple charges more for the 'cool factor'??? Have you priced the all in one PC's from Dell, Sony, and Gateway? Apple charges more because they are not selling commodity driven boxes, they are selling computers designed for the needs of the users. They are also not selling cripples, they have lots of built in features that are options on the tower PC's. Oh and yes they are trying to make a profit. If they fail to meet customer needs they will quickly see profits disappear.