Apple, Steady As She Goes May 17th, 1999 The theme at Apple's WWDC last week was 'Steady as She Goes'. Apple's OS strategy is stable, forward-looking and it's even probable that it will be delivered on time. Gasp! That's a claim Apple's major competitor in the OS games will never make. The eventual migration to the awesome 64-bit platform of the G4 is also on schedule, even if that schedule is a bit slower than Mac fanatics would like. Meanwhile, the G3 still has some mileage left and gets more cost effective as time rolls on. This means cheaper, thus more competitively priced, iMacs while maintaining those famously high profit margins investors love. Apple is going to milk the G3 for every MHz before bumping up to the G4. That's the kind of policy message that the Lombard model of the PowerBook G3 Series sends. Don't fix it if it ain't broke. Yes, I've been guilty of second-guessing Apple's timetable for the introduction of new product lines. We always want the latest innovations now. But, hey, Apple's management team executed the roll out of the iMac and all it's various revisions with a flawless sense of timing and market savvy. We can trust the Apple team to do it again and in their own good time. I've heard reports that this WWDC was the most upbeat one in years. The enthusiasm of developers for the Mac platform is expanding. Everyone wants a piece of the iMac action. Game developers are flipping out over the possibilities that AltiVec and the G4 create for vastly more realistic image modeling and interactivity. Motorola's AltiVec architecture guarantees Macs have nothing to fear in benchmark competitions with the Wintel world for years to come. The technology is securely in place for Apple to prosper into the next century. There's nothing but good news to report. Steve Jobs continues on in his guiding role as iCEO for life. Yawn. Apple added 825 new retail outlets for the iMac phenomena by signing on Sears. A very hip move by Apple. Total dependence on CompUSA for strip mall retail presence was fraught with risks. CompUSA can't provide a comfortable experience to most first time buyers unaccustomed to the nuances of computer technology. The iMac will finally be enshrined as a high-end electronic appliance among the stereos and VCRs in Sears' non-techie, consumer friendly environment. It is the throne to which iMac has always aspired. For the newbie in the computer market, Sears may prove to be a safe, non-intimidating venue for their first time purchase. AAPL, Technically, Where to From Here? As for the stock price, we've leveled off on a new plateau. The price movement of the last few weeks is a nice confirmation of Apple's long term upward trajectory. The trend lines could conceivably, with a few more quarters of double-digit growth and some new products (read P1) put us in the $60 range by Christmas. That's assuming that there isn't a general market meltdown. Apple's stock price direction in the short-term isn't likely to be so spectacular. We're in for an extended period of what is kindly called consolidation. It's like a sideways shuffle with a bit of a downward slope as investors wait for new bullish confirmations that Apple is indeed still insanely great. Apple hasn't visited the $40 price range since 1995 and it was saying goodbye then. The high set on June 21, 1995 at $50 1/8 is now a textbook example of resistance. How hard it proves to break may define the ceiling for AAPL in the coming months even if the Dow and the NASDAQ soar to new heights. Apple's financial calendar is a bit more busy than usual. On May 19th, Apple execs meet with financial analysts for a chat. Expect some upgrades. Then there is an option expiration date coming up and a note conversion on June 1st. Conclusion: AAPL is likely to assume a holding pattern till these exercises in the mundane are completed. So don't look for Apple to soar into the fifties like some Internet IPO anytime before investor speculation about the P1 heats up. That could be as early as June if enough voices opine that the P1 will be unveiled at July's Mac World in New York. The timetable of the P1 looks to be a repeat of the rollout Apple executed with such grace and success for the iMac a year ago. However, this time around the naysayers will be fewer and the investors will hop onboard earlier in greater numbers. Meanwhile, all the technical indicators as we go into this week are pointing towards an AAPL pullback of sorts, perhaps to a low of $38. Ouch! Just another accumulation opportunity for the long-term investors. Savvy daytraders could also turn a buck on the dips as AAPL zigs back into the mid-$40's after each zag. Relax. Enjoy the ride. Above all this noise rises one powerful signal and that is continuity. The overall upward trend is continuing upward, overall. The $50 1/8 mark stands like a Mt. Everest of resistance before Apple. Eventually we will have to challenge it again. Because it is there. Beyond that we are in space, the final frontier. As usual there is a caveat to every prediction. This time it has nothing to do with Apple and everything to do with the stock market. I think it is safe to say that we are in a stock price bubble and just a small pinprick in the confidence level will send investors scrambling to lock in profits. Signs of an Impending Correction? Yes, the bull market will continue forever and the possibility of a recession is nil. But the ride up is never straight and we are overdue for a pull back. The extreme inflation numbers for April were a shot across the bow of the Fed and the alleged New Economy. (See last week's column) The .7% increase could be an anomaly or it could be the start of a new trend that spells the end of low interest rates and disaster for the stock market. A bit of price inflation at this point in a hot expanding economy is natural and not unexpected. It could be a sign of a recovering world economy, which is a good thing. The really dangerous inflation that has been with us for some time now is in the form of hyperinflated US financial assets. Meanwhile, the rest of the manufacturing world has suffered deflation stemming from overcapacity and leaps in productivity. The global economy is out of balance. Markets search for equilibrium. If the whole house of cards comes tumbling down, the Fed's attempts to shore up the stock market by lowering interest rates, running the currency presses over time and reducing risk with cash bailouts (LTCM and Russia, through the IMF) will go down in history as a futile attempt to resist the market's natural inclination to seek equilibrium. Alan Greenspan, surely less than a God, may yet be proven less than nature left to her own devises. Apple's schizophrenic identity as an undervalued growth stock with momentum may actually benefit from a more cautious atmosphere where the fundamentals regain their former importance to investors. So, kids, be careful out there. Stay cash heavy. Liquidate those margin positions and remember to never play with money you can't afford to lose. If you follow those simple rules a big market correction will be just another buying opportunity rather than a margin call. Expect the future to shock and amaze. Your comments are welcomed.