You can't discuss Apple (Nasdaq: AAPL) without considering the iStuff designer's greatest asset: the ever-growing horde of fanatic customers.
Steve Jobs built a veritable army of raving fans. Apple is a case study in meticulous brand-building, to be studied in business classes for decades to come. Today's iPhone/iPad/iPod/Mac juggernaut was built around the unifying iTunes hub, promoted to the ends of the earth, and it's a very effective recruitment machine.
Buy one Apple product and you'll want more. Millions of repeat customers make Apple the finest cash machine on the planet right now. Word of mouth is a mighty powerful marketing method.
But there are downsides to that colossal popularity, too. Apple may end up hurting itself on this double-edged sword.
Exhibit "A"
Take the crossfire of patent and design lawsuits that's going on between Cupertino and Korean tech giant Samsung. Apple claims that Sammy's Android gadgets trample all over Apple's intellectual property, to which Samsung says that Cupertino should pay up for using some choice Korean inventions, too.
The battle goes back and forth with each side winning a few skirmishes. In the end, I expect them to smoke a peace pipe and settle the matter like adults. But that could take years, and right now Samsung is using Apple's raving fans as legal ammunition.
In a recent court filing, Samsung asks the judge to strike several of Apple's expert witnesses from the case. Why? Because they buy into the Apple cult and are obviously biased. From the filing: "That cult-like following apparently includes several experts who are appearing on Apple's behalf in this case, and may explain why they have cast aside established scientific methods and governing legal principles in favor of slavish adoration of their client and platitudes about its alleged magical and revolutionary products, issues that are of no relevance to the claims and defenses at issue."
One witness, Henry Urbach, has published an essay on Apple's retail stores, titled "Gardens of Earthly Delight." Urbach also refers to the late Steve Jobs as "St. Eve" and often uses what Samsung calls "flowery language" to describe the company.
That attitude certainly sounds like the Apple cult that another of Cupertino's experts described earlier in the proceedings. "Apple has built a considerable and at times a cult-like following to all things Apple," wrote Apple's damages expert, Terry Musika. Samsung quotes that snippet as evidence that the bias is real.
Of course, Musika himself is on the list of witnesses that Samsung wants to strike from the record, so there's a bit of circular logic going on. You can't trust what this guy says, except when he describes how untrustworthy his own opinion might be.
Whether the "raving fanatics" defense stands up in court remains to be seen, but if Apple gets any more popular, it might have trouble finding usable expert witnesses in the future. Who do you call when everybody's biased?
1984 redux
Samsung uses a similar strategy to attack Apple outside the courtroom, too. In recent TV ads for the Samsung Galaxy line of Android smartphones, Apple fans are painted as conformist hordes, trying so hard to be cool that they miss out on what's actually new and amazing.
I find it ironic that Apple is becoming "The Man," so to speak, three decades after asking America to "think Different" and hurling hammers at the 1984-flavored image of the then-reigning IBM (NYSE: IBM) PC. But there you have it: The iPhone and iPad were never as open and free as those boring, gray PC boxes. Anybody can write and install whatever programs you like on a PC, but it takes geeky acrobatics to do the same on an iPhone. Without Apple's doubleplusgood stamp of approval, you ain't going nowhere.
IBM has long since yielded the consumer PC space to Apple and others, moving on to own the data center instead. Is that where Apple will be in 30 years? Or will today's biggest market cap just vanish when the consumer tide inevitably turns against Apple? I'm afraid it will be the latter, because this company knows how to lead but not necessarily how to react when the tide turns.
I am, of course, in the minority. You don't have to be Henry Urbach to get swept up in the Apple cult. That fact sort of underscores my point, but feel free to read up on the opposing view too. Our senior technology analyst certainly thinks Apple is still a buy. He spells out exactly why in our brand-new premium report on Apple.
