Where Would We Be Without Apple?

John Lennon never sang about imagining a world without Apple (Nasdaq: AAPL  ) -- or even Apple Records -- but it's easy if you try.

Researchers and analysts are doing the math for you. Barclays Capital analyst Barry Knapp recently reported that if you back Apple out of the S&P 500, year-over-year earnings growth for this year's first calendar quarter would be flat.

Ned Davis Research's Dan Sanborn came to an even more grim conclusion. Back Apple out of the S&P 500, and earnings growth drops from 7.8% to a mere 2.7%.

Despite the discrepancies, it's getting popular to carve Apple out of the picture.

Comparing Apple to oranges
Morgan Housel took a closer look at Apple's influence on the S&P 500. He concludes that while Apple, at 4% of the popular market metric, is substantial, it's a small fry compared to the companies grabbing the pole position at some of the market gauges around the world.

Today I'm going to take the public's fascination with offering up statistics in regular and "ex-Apple" form in a different direction.

What if Apple didn't exist?

I'm not talking about rehashing the either-or metric scenario that has been bludgeoned to death by Wall Street's brainiest statisticians. Let's go all George Bailey on this. Let's pretend that Apple doesn't exist -- or, at least, isn't the great tastemaker it is today.

It's a wonderful iLife
The fatal fallacy many analysts make in breaking out "ex-Apple" statistics is that other companies would be just as miserable without the class of Cupertino leading the way.

That's not right.

Apple is a magnificent company, and there are clearly certain companies that wouldn't be where they are today if it weren't for Apple's popularity. Would ZAGG (Nasdaq: ZAGG  ) even be around if its protective covers for iPads, iPhones, and iPod touch devices weren't necessary? Would portable consumer electronics even be as popular outside of corporate customers if Apple hadn't shaken things up on this side of the millennium?

Yet many stagnant or slow-growing tech bellwethers would probably be in a better place.

Let's start with Research In Motion (Nasdaq: RIMM  ) . Erase the iPhone, and where is the BlackBerry? RIM would probably be in a much better place these days, with its co-CEOs -- because they wouldn't have been canned a few months ago -- laughing all the way to the bank. Sure, Google's (Nasdaq: GOOG  ) Android's development predates the iPhone, so RIM would have a pesky open-source competitor appealing to global handset makers. However, the very nature of the apps-driven ecosystem wouldn't be as popular. Touchscreens would be less popular than devices with physical keyboards! Android would be nibbling away at RIM's market share in smartphones, but it wouldn't be nearly enough to heave RIM from the top of the hill.

Microsoft (Nasdaq: MSFT  ) is another company that would be doing a lot better in an Apple-less world. The tablet craze would probably never have taken off without the iPad. Consumers weren't even sure if they needed a tablet when Apple introduced the original iPad two years ago. With tablets as merely a niche product -- if that -- and smartphones more of a corporate email and productivity gadget still elbowing its way into the consumer space, there would be no stall in laptop and desktop sales. Folks would keep buying PCs, with netbooks possibly serving the role of tablets, but Microsoft would be selling a whole lot more Windows operating systems and Office productivity suites.

Apple sold more than 15 million iPads during the holiday quarter. What if they were largely Windows-fueled netbooks? Apple sold 37 million iPhones in its fiscal first quarter. What if most of those handsets were BlackBerrys instead?

The end result is that most of the $128 billion collected in revenue last year by Apple would probably have been collected by somebody else.

There's nothing wrong with ingesting all of the analyst and research comments about the big difference Apple is making. It's enlightening. It's a great icebreaker. However, at the end of the day, don't assume that the rest of the market would be Nil City in terms of growth sans Apple.

We'd live in a slightly less innovative world, but a few of the names that we see as laggards today could be darlings.

Apple jacks
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The Motley Fool owns shares of Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Google, and Microsoft. Motley Fool newsletter services have also recommended writing naked calls on ZAGG, as well as creating bull call spread positions in Apple and Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (14) | Recommend This Article (26)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 11, 2012, at 11:53 AM, Risky88 wrote:

    Thought the tablet was pretty much made popular by amazon and apple saw huge amount of profit on it and just expanded the idea to making a larger iphone pretty much.

  • Report this Comment On April 11, 2012, at 12:39 PM, investingNideas wrote:

    Since amazon kindle fire does not have a keyboard and zagg makes keyboard I would hope Zagg would have created one for Amazon and be better off. Now the company can't make innovative products beyond what it already created like near field audio products. Water proofing is going slowly. Maybe a OEM deal soon.

  • Report this Comment On April 11, 2012, at 4:11 PM, TMFBreakerRick wrote:

    Geldej and investingNideas,the Kindle Fire didn't come out until this past September -- a year and a half after the iPad.

    The original Kindle -- from 2007 -- and the generations that followed pre-iPad were more in the mold of the keyboard-based BlackBerry of the time with physical keyboards and non-touch screens.

  • Report this Comment On April 11, 2012, at 4:31 PM, DaveGruska wrote:

    Geldej - Apple had the idea for the iPad before the iPhone, but chose to make the iPhone first. There were actually a few Windows tablets ~10 years ago, but the idea never took off - probably because they didn't change the OS to accommodate it.

  • Report this Comment On April 11, 2012, at 4:49 PM, hiddenflem wrote:

    "Microsoft (Nasdaq: MSFT ) is another company that would be doing a lot better in an Apple-less world. " I don't know about this statement. take history back further to the 1980's, Rick, and one could make a pretty strong case that microsoft would not even exist today were it not for apple...

  • Report this Comment On April 11, 2012, at 5:04 PM, TMFRhino wrote:

    Yes, but analysts are looking at *earnings growth* not revenues... We don't buy companies for their sales to investors, its the bottom line. The $46 billion in sales that *conceivably* went to other companies would have been on much lower margin sales and less resulting growth in total market value for other constituents. Also, I don't buy these markets would have been as robust. Look how long Windows Mobile languished... Android only got to where it was because it rapidly copied Apple. Tablets languished for a decade pre-Apple.

    People are buying iPads while they delay buying cars, which are now on average 10 years old (from 8 years just a couple years ago)... If they weren't buying a magnificent product, this money could be going to their savings. Its not a given these sales would just happen to other competitors.

  • Report this Comment On April 11, 2012, at 5:19 PM, portefeuille wrote:

    Barclays Capital analyst Barry Knapp recently reported that if you back Apple out of the S&P 500, year-over-year earnings growth for this year's first calendar quarter would be flat.

    Ned Davis Research's Dan Sanborn came to an even more grim conclusion. Back Apple out of the S&P 500, and earnings growth drops from 7.8% to a mere 2.7%.

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    ...

    Some press reports, he observes, have cited Apple’s disproportionate effect on earnings growth of the index by subtracting Apple’s earnings from Q4′s results last year.

    When one does so, the index’s total earnings growth drops from 7.8% with Apple, year over year, to just 2.7% without Apple.

    ...

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    from here -> http://blogs.barrons.com/techtraderdaily/2012/03/22/apple-ne...

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    ...

    Looking ahead, Barclays Capital's equity strategist Barry Knapp on Thursday wrote that for the current quarter, S&P 500 earnings growth is projected at 1.4%, year over year, including Apple's expected $9.80 per share. If you leave out Apple from those projections, there would be no growth at all this quarter for the S&P, observes Knapp.

    ...

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    from here -> http://online.barrons.com/article/SB500014240531119037155045...

  • Report this Comment On April 11, 2012, at 5:23 PM, portefeuille wrote:

    ... so the Ned Davis Research calculation is for Q4 2011, not for Q1 2012.

  • Report this Comment On April 11, 2012, at 7:42 PM, goeagles2013 wrote:

    Is anyone else getting tired of all the media coverage on Apple? I'd expect it from CNBC or CNN Money, but not from TMF. It seems every third headline is about Apple. A fascinating and immensely profitable company no doubt, but at some point rational exuberance turns into irrational exuberance. Plus, what about the thousands of other companies worth writing about? Give the other guys a chance too :(!

  • Report this Comment On April 11, 2012, at 8:58 PM, Risky88 wrote:

    just because it wasn't touch screen doesn't mean it wasn't a tablet. amazon was the first to ever make a real profit on something like this. Apple just did what they do with almost everything they touch,

    make it better

    at least until the competition catches up-

    which is always debatable because its mostly on personal preference in my opinion.

  • Report this Comment On April 11, 2012, at 9:32 PM, investingNideas wrote:

    This image show all tablets without a keyboard

    http://idit4u.com/wp-content/uploads/2012/03/kindle-fire-vs-...

    Zagg has chance to make one for each or a universal product or one with both USB and bluetooth or a universal USB keyboard case.

    Right now Zagg has a few products in the area

    but no universal USB/bluetooth.

    If any lawyers around who can sue Zagg and force innovation let me know.

  • Report this Comment On April 12, 2012, at 7:02 AM, nmartell22 wrote:

    After yesterday's jump in the Dow, I think the real question this week is not where would we be without "Apple," but where would we be without "Alcoa." Their earnings were the kind of good news out of nowhere that finally ended that down streak the Dow was stuck in. I thought that financial news site MarketSnacks.com with those daily markets summaries had a pretty clever piece yesterday that explained why things finally turned up.

    http://marketsnacks.com/2012/04/11/after-worst-loss-of-2012-...

  • Report this Comment On April 12, 2012, at 8:13 AM, uaku wrote:

    I am sure Mr. Forest Gump would be really happy now

  • Report this Comment On April 12, 2012, at 2:36 PM, racchole wrote:

    Tablet's existed in the 90's from the likes of IBM, etc. They used something called monochrome displays, a term that the next generation I'm sure is not familiar with. Just like they are clueless about the real history of tablets. Apple has a lot of ahead-of-their-time geniuses from this era to thanks for their incredible extrapolation of the "original tablet" ideas.

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