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There's a rule of thumb on Wall Street: When a company starts building spectacular facilities, it's an ominous sign for investors. Apple's (Nasdaq: AAPL ) proposal for the Cupertino office campus that it's purchasing from Hewlett-Packard (NYSE: HPQ ) looks to be just that.
Apple CEO Steve Jobs himself presented the plan to Cupertino's city council. According to Jobs, the building looks "a little like a spaceship landed" and said "It's a pretty amazing building." Based on the artist's rendering, I agree. The circular four-story glass building is a futuristic head-turner. Though not yet approved by the city, it's already being hailed as an architectural icon for Silicon Valley and part of Jobs' design legacy. Cupertino's smiling mayor referred to the design as "the mother ship."
The plan sounds aesthetically pleasing -- and expensive. Jobs bragged that there's not a straight piece of glass in the building and noted that Apple plans to replace much of the surface parking with landscaping and trees. The company also intends to add an underground parking garage, a rarity in Silicon Valley.
EDS's spectacular headquarters, built before it stumbled and was acquired by HP, was also referred to as a mother ship. Silicon Graphics' (Nasdaq: SGI ) monument campus in Mountain View, Calif., built before Rackable Systems acquired Silicon Graphics and adopted its name, is now Google's (Nasdaq: GOOG ) headquarters -- a.k.a. the Googleplex. Sun Microsystems built an upscale campus in Menlo Park before it fell on hard times and was acquired by Oracle (Nasdaq: ORCL ) . There's a disturbing pattern here.
I'm not suggesting that Apple is an acquisition target, particularly given its $66 billion cash stash and its position as the largest IT company. But an over-the-top campus suggests that management will make bad use of cash. It's a sign that complacency and arrogance are setting in. To compound the situation, these things typically come when the growth driving the need for more office space is getting harder and harder to sustain.
Few CEOs are considered as critical to their companies as Steve Jobs is. Consider that despite being on medical leave, he's spending time on a new facilities proposal. I think the stock probably has at least several good years left, but this development looks like a negative milestone -- and an early warning -- for Apple investors.
I love great design, lush landscaping and early warnings. Apple's proposal for its new Cupertino campus appears to be all three.
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