LONDON -- There are things to love and loathe about most companies. Today, I'm going to tell you about three things to loathe about U.S. tech titan Apple (AAPL 1.10%).
I'll also be asking whether these negative factors make Apple a poor investment today.
DNA
"Innovation is in the company's DNA." Apple is the company to which this cliche is most frequently applied. It's a comforting idea for fans of Apple to believe that innovation is hard-wired into the business and that it will always continue to innovate, as if that's its biological destiny.
The idea is rubbish, of course: Nurture, not nature is responsible for innovation. And the environment within a business that nurtures innovation can easily change for the worse.
In its heyday, ICI was a top-three global company and one of the greatest innovators around, creating polythene, perspex, and Paludrine (the first really effective synthetic treatment against malaria), among a host of game-changing products. Innovation was in ICI's DNA -- except one day it wasn't, and the business went into decline.
Loss of Jobs
How important was Steve Jobs to Apple's success? It's only been 18 months or so since the death of the company's charismatic leader and we don't yet know.
It takes a good few years for a new Apple product to get from conception to market, so the mystery new product category the company is currently talking about, in which it expects to launch later this year, will still have come from Jobs's vision.
We won't discover until a next generation of Apple products whether the company, post-Jobs, has the same degree of innovation and instinct for what will ring up big dollars in the marketplace.
Analysts still love Apple
Despite the decline of Apple's shares over the past nine months -- from over $700 to around $430 -- the majority of analysts are standing by the company, recommending it as a buy or strong buy. In the most negative roundup of recommendations I've seen, just two out of the dozens of City experts that cover Apple have it marked down as a sell.
I prefer to see the market and the analysts bearish on a company before rating the stock a possible "darkest-hour" contrarian opportunity.
A poor investment?
The City experts are by no means always wrong, and on the face of it, Apple's stock does look cheap. At a share price of around $430, the company is on a price-to-earnings ratio of 10.8 for the year ending September 2013, falling to 9.7 the following year -- and that ignores the $153 a share in cash on the balance sheet.
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