If You Sell Apple Now, You'll Regret It

In the following video, Michael Saylor, CEO and founder of Microstrategy (Nasdaq: MSTR) and author of The Mobile Wave, sits down with Motley Fool technology analyst Eric Bleeker to discuss tech, business, and social trends as they relate to investors today. Understanding paradigm shifts like those discussed here are a cornerstone of Motley Fool superinvestor David Gardner's own investing strategy and are critical to his market-thrashing returns. Learn more about how he discovers his winners -- just click here now to read more.

Michael Saylor: Look, Apple Computer was worth $3 billion 12 years ago, and then it went to $600 billion. If you ask me, Apple Computer is going to $2,000 a share. I'd be very, very long on that company. Whoever is selling that stock must be a moron.

This is a company that's going to actually have 4 billion devices out there. If they roll them over once every four years, they're going to sell a billion devices a year. The thing that people don't get -- you either get it or you don't get it -- I'm going to come back to your PC question. I know a lot about PCs. I bought 10,000 to 20,000 PCs in my life. I've got 3,000 sitting underneath my desks. You put a Dell computer underneath a desk, you don't care that it's loud and it's hot and it's a power hog and it's ugly and it's heavy, and it's an ugly beige cabinet with screws showing. You don't give a crap. You just want it to be $400 or $500.

You put a phone in your pocket, and you sleep on it or next to it, you care whether it's hot. You care what it looks like. You care about the battery life. You care about the radio.

This is an iPhone 5. This runs 10 times faster than an iPhone 4. There's not an 8-year-old on the planet that doesn't want an iPhone 5. Right?

Who wants to wait 42 seconds to watch something download instead of two seconds? Nobody. You don't have to be a genius to run Apple Computer. You just have to, every year, make the product a bit lighter, a bit more elegant, make it a better radio, make it a better battery.

I sat with one of the 10 richest guys in the world for dinner five nights ago, and we had dinner for four hours. He did half the talking; I did half the talking. He's much more successful than I am. I understand that, by the way.

As I said, sometimes you've got to do other things than just have opinions to make money. There's a lot of execution involved, and the rest, but I have opinions.

He said to me, "You know, Apple Computer. Can these guys hold their prices? Aren't they going to follow the model of the PC industry? Aren't their prices going to taper down -- the 40% margin is going to become 30 and 35 and 20?"

It's another example of people just knowing enough to hurt themselves. If you're going to know a subject, you'd better know the subject. Being a dilettante and knowing part of a subject is just enough to hurt yourself somehow.

I said, "No. Their gross margins don't have to tailor down. If you go to France -- this is the benefit; I've seen it enough -- if you go to France you'll see Bernard Arnaul, who runs a company LVMH. They're selling handbags for $4,000, $3,000, $2,500 each.

This is a device that women view as fashion, and it's 10,000 years old. For 10,000 years -- no, the prices are not lower after 10,000 years. If you actually care about this thing, how many women have a $300 pair of shoes? How many have two? How many have more than two?

The truth of the matter is, when the technology goes from being a utilitarian, vocational brick that I put under my desk -- no one gives a crap about that -- to being a piece of clothing, a fashion statement, an extension of your personality, a piece of jewelry ... iPhones, iPads, they're somewhere between clothing and jewelry and accessory. At that point, they can hold that price point forever. They can basically sell you another $500 device every two years, forever, because everybody's got $500. The first billion people have got that, and the rest of the world's getting elevated up.

I think that you're going to see a wider diversity of offerings. You'll see there will be cheaper tablets. The $100 tablet will go to Pakistan and the 700 million peasants in China, and more power to them.

That means those 700 million peasants are going to get a college education and get a master's in computer science, and I'll probably be hiring 20,000 of them, and I'll pay them $5,000 a year, which will be five times more than $1,000 a year, and then I'll pay them $10,000 a year, and the entire society will go from 2 billion to 3 billion to 5 billion white collar workers.

As their discretionary income increases, they're going to buy more and more expensive things, and anybody sitting in the middle of that controlling the software application networks that have all the asset value in them, those companies are going to benefit in a marvelous fashion.


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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 January 12, 2013, at 10:25 AM, kbg001 wrote:

    How about If You do not Sell Apple Now, You'll Regret It more... if you can buy back below $450 or even lower ---kbg

  • Report this Comment On January 12, 2013, at 10:36 AM, ddillan wrote:

    Peasants? ...with a Masters?... Making 5k a year?

    Saylor continues to live in his own unique? world.

  • Report this Comment On January 12, 2013, at 2:12 PM, TimKnows wrote:

    If You Sell Apple Now You'll Forget It

    Apple is dead for 2013, $ 450 is a steep price to pay for a stock that must reach fair value.

  • Report this Comment On January 12, 2013, at 4:29 PM, digitally404 wrote:

    $2,000 / share !!!! LMAO.

    That is just absolutely ridiculous. How do you base this valuation? Why not... $9,000!!!

    I'm sorry, I had to stop reading as soon as I read that.

    You are a joke.

  • Report this Comment On January 12, 2013, at 4:32 PM, McCueRC wrote:

    Interesting equating of Apple to LVMH. It has more than a mere kernel of truth to it methinks. Change the analogy. In automobiles you can buy one of two perfectly good cars, a Kia or a BMW, and they do the same thing - they take you from point a to b on roads at the legal speed limit. From a functional viewpoint they are identical. That BMW is not shaking in it's boots from the Kia threat only illustrates that many things are worth more than just their function.

    ddillan he is referencing the present (historically) temporary wage differential. Today a middle income country has income per capita of 1,006-12,000 dollars. In those countries $15,000 for a masters degree holder is a fine wage. And those masters degree holders are usually the children of the smart peasants who sent the smartest kid to school. In two or three generations the wage gap may be closed, but by then both of us will probably be dead.

  • Report this Comment On January 12, 2013, at 4:32 PM, digitally404 wrote:

    I'm sorry, I direct my comment at Michael Saylor since he said the atrocious valuation of the company.

    Come on Eric, you can't just post this looney toon on here and expect to be taken seriously.

  • Report this Comment On January 12, 2013, at 4:43 PM, Mega wrote:

    Saylor does a great job of expressing why AAPL is a better investment than MSTR.

  • Report this Comment On January 12, 2013, at 6:01 PM, TMFRhino wrote:

    digitally,

    The $2,000 number does appear to be pulled out of thin air a bit and by no means would I call anyone a "moron" for selling Apple, but I think Michael does have some fascinating perspectives on technology if you look past that specific number.

    -Eric

  • Report this Comment On January 12, 2013, at 6:08 PM, 170833147 wrote:

    Michael Saylor is casting pearls to swine. In all candor, the anti-Apple psychology among those who have been poisoned by their jealousy, envy, seething anger and small-ball minds is striking. It is striking because of their animus and venality. It is just a stock, so why the animus, venality, anal sadism, meanness, vitriol and cruelty? Referring to these people as "shorts" doesn't capture who they are. These are the same people who, when Jobs was ill, made joke after joke after insensitive remark about his impending death. Please never forget that these are the same people who monopolize every blog, board, public forum with their doomsday predictions for Apple. You find them here, everywhere. Also, let's not forget that CNBC, more accurately Comcast, has a vendetta against Apple because it poses the most virulent threat to Comcast today. CNBC uses psychological triggers to cause doubt, suspicion and fear. CNBC/Yahoo/ take any, and I mean any otherwise positive news story about Apple and spin it to create doubt. Example: "Apple sells 2 million i Phone 5's on first weekend in China....but loses market share." Or "Apple gains market share in U.S. overtaking Android...but can they maintain margins." Imagine if CNBC used this same approach to reporting on the Oscars, "D. D. Lewis is nominated for an Oscar...will he lose this one too?" To a psychiatrist all of this manipulation is obvious, to the retail investor it works. Michael Saylor uses the term "moron" to describe those who are or would be selling Apple. I refer to them as victims of incessant brainwashing from the likes of CNBC/Yahoo/Wall Street Cheat Sheet/Breakout, et al. To the howling lemmings who keep shouting, as though saying it makes it real "Apple going to 420, 300, 270" I say this: Michael Saylor had dinner with one of the 10 wealthiest men on planet Earth. He is a grand success as an investor, author, other endeavors. You also had dinner last night and you had a discussion with the high school kid taking your order at the drive thru. Only the Motley Fool has been a beacon of common/good sense when it came to Apple during this onslaught of massive manipulation. I say congrats to them and as far as the rest of you, maybe Michael had it right when he referred to you as morons.

  • Report this Comment On January 12, 2013, at 7:27 PM, tychicum wrote:

    I could see a $2,000 share in 5 years. Even if they don't sell a larger share of phones or tablets ...

    All Apple needs to do is defeat the nay-Sayers by rolling out one more industry changing inventions which Jobs no doubt planned out for Apple on his road-map which he doubtlessly left in the hands of the very capable engineering team at Apple.

    Could be TV but could be something altogether different.

    Jobs was always 10 years ahead of everyone else so we could probably see his handy-work for another decade.

  • Report this Comment On January 13, 2013, at 11:06 AM, techy46 wrote:

    Doesn't one really think it depends on what price you bought Apple 's shares. You shoudl ever regret bagging some 100, 200, 300 or 1000% profits.

  • Report this Comment On January 15, 2013, at 3:23 PM, beefangusbeef wrote:

    $2,000 a share? That's hilarious. I'd say that $2.00 a share is far more likely.

    A more useful prediction would be how long can Apple survive without revolutionary products? How long can they milk their past glory? 2, 5, 10 years?

    Before this revolution of Chinese peasants, I predict AAPL to be bankrupt. Worse off than RIMM or NOK currently. Why should you believe me? Because I have a better haircut and dress nicer. Seems substantive enough to reply to this article.

  • Report this Comment On February 26, 2013, at 1:01 PM, core2 wrote:

    No one seems to be seeing the bigger picture.

    The whole intention is for them to tell you want you want to hear, so you either buy more stock, or at least don't offload what you have.

    The stock could be tanking like crazy, and they will spin the same story. (All the while they are quietly unloading the shares themselves)

    Its to prevent a mass sell off, and them taking massive losses (its OK of you take the massive losses, but only after they quietly get out)

    Wake up!

  • Report this Comment On February 26, 2013, at 1:07 PM, core2 wrote:

    Further note

    A lot of those that tell you not to sell, hold your shares, etc are the ones heavily invested themselves.

    It takes a long, long time to slowly offload that much stock without sending it into a free fall.

    (They sell, you buy. Guess who ends up holding the bag (worthless stock)?

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