Rotting from the core

Last October I wrote:

Which is why I see the whole of Apple going the same way.  In the latest reported figures, sales are up, but margins are down.  Increased sales are mostly of the iPhone 5C, a model designed for mass sales in the Chinese market, but net margins have fallen below 35%: still eye-wateringly high but decreasingly rapidly.  The number of fools willing to pay over the odds for so-so technology has its limits, and the Chinese appear to fall outside that category.

My forecast for Apple is that their ability to screw more money from a fairly limited product range is not going to be enough to sustain the current Market Cap.  In the long term we are all dead, but in 2014 expect the maggots to show in the Apple share price.

Yesterday shares in Apple fell close to 9% in after-hours trading after the firm reported flat profits of $13.1bn (£7.9bn) during the quarter ending 28 December. iPod sales have dipped: 52% down on this time last year, with further drops expected.

I keep telling people, that technology is just a tool, like a screwdriver, and fancy design is never going to get the *entire* population of the USA to spend over the odds to the tune of $1,000 (i.e. $1,000 *more* than they would otherwise have spent), which is what you need to justify a $455 billion market cap, after deducting the $150 billion pile of cash.

To put that in perspective, total iPod sales ever was 350 million.  At $40 profit per unit, call that $30 after tax (all my guesses), that would have been $10 billion of shareholder value, give or take a bit.  Hard to see where the future value that give a current discounted value of $455 billion are going to come from. If we have to wait a year, then that future dividend stream has to have a value next year of $500 billion. Personally, I don't see it happening.