|
The Apple Cycle: Summer Brings A Good Bite
The Apple Cycle Thank God it’s June 12th. We are exiting the annual late spring PC sales slow down and transitioning into that yearly brief repose of optimism which sweeps over the Apple investor as MacWorld approaches. This year the spring slump was worse than usual. I’m not talking about the anecdotal evidence of declining iMac sales hailed by a few myopic analysts, but the hit the stock price took. In fact, so far 2000 has been the worst year for AAPL since the last US economic slowdown in 1994. But that’s about the change. Bear with me, dear reader, while I take you on a short tour of what’s been dubbed the Apple cycle. Long time Mac investors may be excused from this week’s exercise since they surely know the Apple cycle by rote. Year after year AAPL can’t get any respect in the fiscal third quarter! Of course, this May few technology stocks could find respect. Nevertheless, one would think that the multi-year trend of tradable lows in Apple’s stock price during May, once noticed in the charts, would reverse itself as the smart money used this time of year to accumulate and never to sell, no matter what the market sentiment. A quick review of AAPL’s charts going back to the early 1990’s shows that AAPL almost always moves higher from the month of May as three major cyclical forces cooperate to drive investor enthusiasm. The Promise of MACWORLD NYC Lately, MacWorld in New York is where Steve Jobs has been making the really paradigm busting hardware announcements as opposed to the January MacWorld held in San Francisco. The dead of summer is the perfect time for Apple product cycles to begin and the Big Apple is a perfect venue for a grand global Mac party. Hopes for, and news from, MacWorld supports AAPL’s price through out June and July and often gives the stock price a fair boost if significant hardware evolution in announced. Education Sales on the Ascendant Just as the buffing MacWorld NYC puts on AAPL’s shine begins to fade from the headlines, speculation starts to grow over the back-to-school sales season. Education sales are divided into two business groups at Apple: The kindergarten through twelfth grade (K-12) unit and a higher education sales unit. Both units experience accelerating sales from June through September. By August the usual round of clever analysts will surface with predictions for greater than expected units sales, blah, blah, blah… in the quarter due to increase spending by schools attempting to ramp up their aging and/or lagging IT infrastructures. This year could be especially kind to Apple’s educational sales because the iBook is available to meet demand in quantity — unlike last autumn when shortages plagued the iBook’s introduction. Plus, the futuristic looking device is now a proven and familiar product, while still retaining the cachet of a bleeding edge exotic. Apple is perhaps the only corporation in the world that creates educational supplies that both teachers and kids can agree are cool. Current conditions at the school district level exhibit three trends going in Apple’s favor. Education bureaucracies — most often run by conservative late adopters — are starting to get it. Computer literacy is as important as literacy itself. Secondly, information networks are so central to the task at hand in schools that market saturation won’t be reached until every desktop has a networked PC on top of it. Proportionally, the education PC market has more room for growth than either the consumer or enterprise market. Unfortunately, our school systems are about a decade behind the business world in their level of IT implementation. Apple, as the educational sales leader in both the US and World market, has a commanding head start over the competition. But perhaps most importantly, especially in the light of the Microsoft debacle, Apple has the trust of education leaders. Teachers know that Apple has an experienced educational sales infrastructure specifically tailored to meet the needs of this specialized market with complete packaged solutions. Thirdly, school districts are finally receiving the funding they require to extensively expand their computer education facilities. Information technology is becoming more than just a class in school, it’s emerging as the preferred medium for conducting the process of education in many different subjects. The iBook, airport and their future kin promise to eventually replace much of the paper based education model in favor of a hyperlinked, networked paradigm that has already sweep away the old paper world in corporate America. A Bountiful Mac Christmas: Christmas is the premiere sales season for most corporations involved in the marketing of cool, fashionable stuff to western civilization. Increasingly, consumer IT products are becoming the most hoped for gifts under the Christmas tree. But who wants to get an ugly beige Wintel box for Christmas? That’s about as much fun as getting those socks and underwear you need rather than a Sony PlayStation. Apple’s annual cycle of releasing the bleeding edge in cool consumer PC hardware in the summer gives the company plenty of time to get the word out by the holiday season to the masses. Perhaps, even more importantly it gives Apple time to ramp up its manufacturing to meet the demand crush for their hot products. Apple’s 1st fiscal quarter (September through December) is the season that Apple’s stock really begins to out perform, especially since the event of the iMac phenomena in 1998. This year, consumers are dope heavy with cash and techno-crazed — at least in the US where unemployment is pinned down at 30-years lows for the foreseeable future. They’ll buy more PCs for Christmas gifts than ever before. No doubt Apple’s product lineup certainly makes very appealing gifts, whatever the other more objective merits for purchasing a Macintosh may be. MacWorld January 2001: The OS X Wild Card The post Christmas season brings the blues to most PC stocks but not usually to Apple, at least not immediately. Besides the spring back to school educational sales rush, Apple investors always have MacWorld in San Francisco to look forward to. Usually this far ahead of the event there is little known about what might be on the agenda. But this time around we can bet that MacWorld in January of 2001 is likely to be ground zero for introduction of Mac OS X and the dawning, literally, of a new millennium for Mac Users. Given the strangeness created by the Microsoft shipwreck, novelty is about to raise its odd head in the PC world. It’s impossible to predict exactly how a neutered Microsoft will alter the operating system and software landscape in detail, but one effect is obvious. It means liberation for smaller enterprises to attempt daring feats of innovation without fear of being dealt a one-stroke deathblow from the ruthless and bloated Goliath Microsoft has become. For investors of all stripes a neutered Microsoft means the freedom to think outside the Wintel box and that can only be good for Apple and OS X. If the PC industry were a poker game, OS X would be like a wild card in Apple’s hand already flush with four spades in the hole (the iMac, G4, PowerBook and iBook). Perhaps by MacWorld 2001 it will be time to lay the cards down. Applying the Apple Cycle So there you have it. A full year overview of the Apple cycle. Of course, the only thing that really remains the same is that things will change. Nevertheless, within the narrow context of Apple’s cyclical nature the above panorama is rough guideline to the season from a Macintosh perspective. Practically speaking, the Apple cycle indicates this is undoubtedly the wrong season to sell Apple’s stock. And if you are so inclined, this is the perfect time to accumulate AAPL, now that the weakest sales season is behind us, and the promise of MacWorld NYC, a busy Christmas and the wild card of OS X lie directly ahead. Your comments are welcomed. |