Tom Gardner: How You Need to Look at Apple Today

In the following video, Tom Gardner discusses some issues he sees with Apple at the moment, but don't make any investment decisions based off this one video alone. There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Brendan Byrnes: Looking at Apple, is this a company that you like, beaten down now, or do you think there are some serious concerns here? I know you're a big Google bull as well, right?

Tom Gardner: Yeah. I like the founder-run companies, so if the founder leaves -- and in the case of Apple that's happened twice -- I want to know they're being replaced by a visionary for a business like this, where your whole product line is going to turn over within five or six years.

I like to know that whoever's running that business is somewhat crazed about finding the new. My concern about Apple is that -- Tim Cook's obviously brilliant, incredible; I'm not saying he doesn't have a vision, but he wasn't a primary visionary at Apple. That wasn't the role that he played alongside Steve Jobs.

I think a lot of founders turn to their right-hand person, who's more of an operating mind, more of a systems builder, to then run the company, and I think that that can be somewhat suffocating to the visionaries in that business. That can slow innovation.

That's my biggest concern for Apple, so I'm not an Apple buyer here. I know a lot of people at The Motley Fool are very bullish. I know the valuation is very low, relative to the prospects for growth and obviously the incredible balance sheet that Apple has, but I also know that there are two things working against Apple. You've got to at least consider these if you're an Apple investor.

One, you don't have your visionary leader in place, and you know that almost no value was created at Apple during the period that Steve Jobs wasn't running that business.

The second thing is you've got a very large company that, in order to justify a larger valuation, has got to eat up more earnings in its market space, and that starts to get the Justice Department interested. We'll see whether that becomes an issue for Apple. It's becoming a little bit of an issue for Google right now.

Look what Microsoft did. They did two things that really hurt that business. One, Justice Department, anti-competitive, and No. 2, they put an operator and a systems builder in as CEO.

I would say it would be a really good thing right now -- this would be a hugely great announcement -- that Microsoft says, "Bill Gates is coming back." Can you imagine? I think the marketplace, the enthusiasm for Microsoft if Gates said, "I'm coming back as CEO and I'm committing to be back for the next seven years, or the next five years, and at the end of my tenure I'm putting a visionary in charge of this company."

Steve's done a lot of great stuff through a lot of difficult times for Microsoft, but right now the Ballmer tenure has not been a great tenure for Microsoft. They've faced a lot of challenges during that period, but they lack the visionary, and that's what I worry about with Apple.

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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 December 28, 2012, at 11:14 PM, skippywonder wrote:

    In the first place, Apple is nowhere near the dominating percentage of marketshare that Microsoft enjoyed.

    But more importantly it's a complete misunderstanding of Microsoft to think that the Justice Departments was "interested" because of the company's size or share of the market. The Justice Dept. went after Microsoft for its anti-competitive behavior. They used undocumented API functions in their OS to make sure their Office programs ran better than competitors' programs. They broke competitors software if they figured out how to use these shortcuts. They made illegal deals with OEM's to try and keep competitors from bundling their software on new computers. This is all well documented and was the source of their troubles with the Justice Department. It wasn't that they were big, it was they they engaged in illegal monopoly tactics.

    Sure one could argue that this is a risk for Apple, that their desire to use anti-competitive practices might land them in hot water. But to tie this argument to their market cap (or "size") is silly.

    And it is true that Tim Cook is no Steve Jobs. But that hardly means his is Steve Ballmer. To make these two basic comparisons of Apple to Microsoft is to demonstrate a complete lack of understanding of what Apple really is. Looking back on these comments at the end of 2013 would illuminate just how different these two companies are.

  • Report this Comment On December 29, 2012, at 12:15 AM, dwilh51183 wrote:

    I totally agree with the man above me... his comment :you can't compare Microsoft to Apple- no way Microsoft was trying to create a monopoly,while AAPL keeps selling great products that they keep improving every quarter!

    And the bottom line is this, it doesn't matter if Apple is selling pork n beans,green beans, lima beans, pinto beans, wax beans, as long as they keep selling beans! more and more beans and more and more cash keeps coming to the company .that's all that matters. These Journalists keep over analyzing Apple! all that matters is there making a ton of cash

  • Report this Comment On December 29, 2012, at 2:16 AM, NOTvuffett wrote:

    AAPL has been an abject failure in their first and primary mission (to sell PC's). Their market penetration has always been rather low on this front. What they have excelled at is selling ancillary products like music players, phones, etc.

    AAPL has a great marketing engine, and MSFT has always been rather tone-deaf on this front. All the cool kids have Apple stuff, etc.

    What is the last visually amazing game you played on an APPL device? Myst? Maybe I am dating myself...maybe you said 'angry birds' or 'farmville', lol.

  • Report this Comment On December 29, 2012, at 2:29 AM, mjrkong wrote:

    The best stock sale my grandfather ever made in his life was when he unloaded all that IBM stock in 1957, about a year after CEO Tom Watson (former teacher and lumber salesman) gave up the ghost and decided to be mortal. "This here comp'ny ain't worth dog poo", I fondly recall Gran'pappy screeching. "Cash money es whar's you wanna be. Doan ya'll 'member '32?" And my Daddy saying "Gramps, this is 1957, not 1932, IBM is the future". And my Granpappy, sitting there smoking his pipe, saying "Kids, California is the future, not three letters in the alphabet".

  • Report this Comment On December 29, 2012, at 2:49 AM, NOTvuffett wrote:

    what are you telling us mjrkong? that stupidity runs in the family? lol

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