Since Steve Jobs’ passing 18 months ago, Apple has nearly doubled and then retreated to roughly where it was two months after Jobs died. In the past six months it’s lost 40 percent of its value on the stock market.
The ostensible reason is, of course, that Jobs is no longer guiding the company and the market is impatient for the next big thing, beginning to doubt Apple’s ability to endure without its founding genius. If that’s true, then I’d like to propose that now is precisely the time to invest in this undervalued asset.
Trading at less than 10 times earnings, my opinion is that the stock is “worth” between 50 percent and 100 percent more than current market behaviors would indicate. I put “worth” in quotes because a company is actually valued pretty accurately by its stock price, since that is the price buyers are willing to spend on owning the company.
But the price buyers are willing to pay now may not reflect what future buyers will be willing to pay when the company demonstrates its abilities to continue leading the world in commercializing dramatic innovations.
No company comprised of more than a few dozen employees succeeds solely because of a specific person, no matter whether that person is the CEO or chief inventor or even largest investor. Organizations are systems, made up of living beings, that collectively create value. Or not. And as a system, the whole is greater than the sum of the parts, and certainly greater than any one part.
Over the last few decades, the designers, marketers and technologists at Apple have created a system, a matrix of value creation that includes its business partners. One of the subsystems crucial to Apple’s successes is its technology sourcing and acquisition capability.
With a great deal of capital ready instantly, the company has large teams of people looking for needed technology, negotiating licenses and purchases, commissioning intellectual property creation, forming the legal supporting structures and protections, integrating unrelated technologies, tracking advances in basic research, etc.
Apple has partnered for many years with manufacturers who have contributed industrial engineering advances that allowed the new designs to be manufactured at costs that ensured important consumer price points were met.
For example, Apple learned from its first version of the iPad, called the Newton, that retail pricing required for commercialization could not exceed a certain level or else adoption rates would be too slow to entice application developers to spend time creating tools for the platform.
The Newton also taught Apple that there is nothing more important than getting the user interface right, a lesson learned on the Macintosh and promptly forgotten with the Newton. But they applied these early experiences to the iPod and the iPhone to phenomenal effect. Apple created an adaptive organizational system.
That system was not designed by Jobs alone. Jobs may have been responsible for the brilliant and brave adherence to incredibly high product performance standards, which included every detail of product and package design. Jobs may have required every key design decision to come by his desk.
But Jobs didn’t solve the technology problems. Jobs didn’t figure out how to integrate disparate component suppliers whose state of science was various. Jobs didn’t create the many cool applications that make the iPhone so addictive and indispensible. Jobs didn’t invent the solutions that met his reportedly exacting standards.
I think there is more going on behind the walls of Apple’s playground than anyone has imagined or leaked to the press. I think Apple has design “tanks” peppered around the world, where really cool stuff is being envisioned by people who have fun being audacious.
Apple is going to launch a product that we will be as amazed at as we were the iPhone, which forever changed the direction of what we came to think of as a phone. It’s simply a life tool, fully integrating much of what we do in the modern world.
So I’m going to bet on the system that the many people at Apple, current and former, have painstakingly built over many years, and which has demonstrated that it can experiment, learn, adapt and succeed in the world of turning cool technologies into cooler life tools that make our lives more effective and more fun.
My prediction is that the innovative leap ahead for Apple will involve the interface between biological and non-biological information processing. The first company to make that jump and make it usable by a mass market will redefine technology forever.
Sewitch is an entrepreneur and business psychologist. He serves as the vice president of global organization development for WD-40 Company. Sewitch can be reached at sewitch1@cox.net.
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