Apple Bear's Rebuttal
David Forrest ([email protected])

After re-reading my Bear argument, I suppose I might have been too harsh in calling Apple a "pathetic little company" and all. I mean, we all root for the underdog, right? Isn't that the appeal of Apple to many of us now? We all want it to succeed, to beat Microsoft, to rise to new heights. Unfortunately, I just don't think it will happen. As an investor, I have to evaluate whether or not the opportunity to make money is the best with Apple Computer.

Louis's main argument is that "the turnaround is afoot." I say that's wishful thinking. I can't tell you how many times I've heard the "strong board of directors" argument. Then they fire the CEO and reorganize the board. As for the killing of its too-little-too-late cloning strategy, isn't that admitting that it's not possible to get Apple's computers out to mainstream consumers?

Louis also said, "Apple is still a hardware company by default." NO! It lost the hardware war. Apple didn't do it very well. The company's competitive advantage is in software! Clone the box and sell the software. It won't be able to compete as a hardware business. The number of third-party software companies that are willing to spend the money to develop software for the Mac dwindles every year because the installed base of machines just doesn't warrant the development costs.

Louis says that Apple "scored much-needed support from Microsoft in the form of $150 million in cash and a Mac-first Office 98." Only time will tell, but my guess is that this was a token gesture by Microsoft to help itself out in the anti-trust arena. Keep the competition alive and the vultures (the Justice Department) away. Plus, Bill Gates gets the incremental benefit of Office 98 sales.

I'll even give the company kudos for cutting off the money-losing Newton unit. A good company will cut its losers and let its winners run. The only problem is that Apple has far too many losers for each winner.

Finally, Louis is dreaming about a $54 price target for Apple, to which I say: Good Luck. I hope he's right and that Apple does pull the rabbit out of the hat, but as an investor I won't peg my hopes on a failed hardware business, a "really it's different this time" board of directors, an unproven future OS that, even if it works, may not matter, and a non-committal interim CEO.

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