1999: The Year of Apple January 11th, 1999 News flash: Yet another first for the Apple Corporation. MacWorld San Francisco is the world's first PC convention where the top news story is the "delicious" colors on the case! In spite of such frivolities, MacWorld has made it perfectly clear that 1999 is going to be a landmark year of convergence and happy surprises for Apple investors. This was also the first MacWorld in years that was nothing but good cheer, huge crowds and contagious optimism. Software vendors sold out. Steve Jobs proved once again that he is the industry's best showman. Everyone is happy skipping down the yellow brick road towards the land of OS X. Things also look rosy on the NASDAQ for AAPL. Apple is going to stay above 45 bucks next week. A basic rule of technical analysis has it that old resistance becomes new support. We'll see if that's the case. AAPL has other stats heavily laden in her favor. Apple has the lowest price to earnings ratio of all the big PC vendors at a thin 21, yet she has a fat $2.10 earning per share ratio. The rocket scientists over at Dell have a P/E of 84 with earnings per share at a measly 93¢. Talk about over valued! You'd think Dell was an internet IPO not a dull to the bone, beige box assembly line hurdling into a year of profit crushing price cuts and cruel competition. If I were a fund manager, I certainly would be adding Apple to my basket of stock picks this quarter, especially with earnings release right around the corner. With the market going our way and almost guaranteed profitable quarters as far out as one can see, Apple seems undervalued by years of stigma as a loser stock. MacWorld San Francisco has done a lot to change that perception and, of course, colored our world in rainbow iMac hues to boot. How cheerful! We'll soon be into a price territory where we can all happily speculate on when the stock split is going to occur. Perhaps we're at that point you often see in a successful company's history when a sea change of investor opinion takes place and suddenly everyone wants a piece of the coolest action in town. Institutional investors are like sheep, when the flock shifts direction they all turn together. Apple looks like a particularly green pasture just now. It's hard to tell what you look like to others. As an Apple investor most of us have seen this turn around coming since at least last fall. The iMac, OSX, QuickTime 4.0, Yosemite and the G4, we know all about them and their positive indications for future growth above and beyond the industry average. But there are billions of dollars out there sitting in over priced equities that are ripe for profit taking and looking for a new fast growth home. Apple is now on their radar screen, often for the first time in a decade. Most financial analysts now think that Apple will continue to see gains in 1999 above the industry average. There is a minority opinion, however, most notably articulated by CIBC Oppenheimer, that Apple is at a peak due to the successful completion of the Think Different turnaround. Now that the "Mac is back" surprise is common knowledge with investors, equity growth will slow. Baloney. They missed the point; Apple market share is growing now under new management with a new master plan. That's the main source for future stock price advancement. The morons at CIBC also think that colors for the iMacs will confuse retailers who won't know which colors to stock. More baloney. Retailers have been dealing with multi-colored stock since biblical times, but I digress. Investor's tend to gauge the future of a company by looking at what its management team has recently been able to accomplish. The majority of investors is now coming around to the conclusion that if Apple can attack new market segments, as it plans to do with the iMate and the G4 servers, with the same gusto as they delivered with the iMac, future growth over the PC pack seems possible. Future profitable quarters seem inevitable. Apple has an edge over the rest of the PC vendors with the iMac in the purely consumer market space. Even if the PC market doesn't expand much in 1999 that will be much more of a detriment to the bottom line of the big PC box makers. Companies like Dell depend on market expansion rather than quality comparisons with competition for growth. Apple, with less than 10 percent of the PC market, depends less on market expansion and more on the inherent value of a superior design and interface to attract new quality conscience consumers. Fact: Apple has added more than 300,000 new users to the Mac Platform with the iMac in just four months. Now, with the iMac available in five delicious flavors with a 6 gig hard drive (and Sony PlayStation software), it's safe to say the iMac alone will add a million plus new users to the clan this year. Still, the iMac alone is not going to be enough to sustain rapid growth through all of 1999. That's why it can't be emphasized enough that the success of the iMate is the real magic mystery key to Apple's future in 1999. The technology is in place, the timing is impeccable and the early market space innovators like the PalmPilot and Newton have primed the consumer demand. To maintain recent phenomenal growth Apple must keep cranking out with new consumer home runs like the iMac every 8 months or so. The iMate is the next batter up in the pipeline. All fingers are crossed. This is not to slight the importance of OSX with it's revolutionary Mach microkernal and BSD 4.4 that tie the simplicity of a Mac interface over a Unix codebase and Apache HTTP web server. That said, it should be noted that OSX and WebObjects are true unknowns. Their financial impact on Apple cannot be evaluated at this time. The same is true of QuickTime 4.0. Will they make money? Maybe. Remember that there's at least half a billion bucks of R&D sunk into this stuff that has to be paid back before we can talk profit. Will they make money on the scale of Apple's home consumer product lines? Probably not. Yes, the G3 servers and desktops with their supercool new case and firewire are going to be a big hit. Yosemite, and later on G4s, will make money but ultimately these are just the things we expect from Apple and what we should expect from Dell, et al, but don't. The G3 line merely represents the basic innovation and evolution that Apple must produce every frigging quarter 'til the apocalypse just to stay in the market space with everyone else. It must be a tough life. How would you like to be a company where the entire product line had a shelf life measured in months and anything two years old was positively antique? Next year at this time we'll all be babbling about the new gigahertz G5's and Apple's first wearable computer model will be all the rage. In summary, the emerging consensus seems to be that Apple has developed a basically new design oriented paradigm for engineering and marketing information management products to a wide consumer base. This Think Different convergence of consumer values and engineering parameters has essentially leap frogged the entire PC industry into the 21st century. Of course with our senses so numbed by a planet full of beige wintel mediocrity, perhaps all Apple is doing is delivering some quality with a sense of style. And what is style but a sense of where one is in the bigger scheme of things. Certainty, the conceptualizers at Apple have a sense of which direction history is moving. But now is no time to rest on thy laurels or even blink your eyes. In a world where the order/build/ship time on Dell's product line is measured in minutes, it's merely a matter of time before the PC world reverse engineers Apple's Think Different paradigm into the PC Yugos of the future. 1999 is going to be a very interesting year. Your comments are welcomed.