Tom Gardner: How You Need to Look at Apple Today


In the following video, Tom Gardner discusses some issues he sees with Apple at the moment, but don't make any investment decisions based off this one video alone. There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Brendan Byrnes: Looking at Apple, is this a company that you like, beaten down now, or do you think there are some serious concerns here? I know you're a big Google bull as well, right?

Tom Gardner: Yeah. I like the founder-run companies, so if the founder leaves -- and in the case of Apple that's happened twice -- I want to know they're being replaced by a visionary for a business like this, where your whole product line is going to turn over within five or six years.

I like to know that whoever's running that business is somewhat crazed about finding the new. My concern about Apple is that -- Tim Cook's obviously brilliant, incredible; I'm not saying he doesn't have a vision, but he wasn't a primary visionary at Apple. That wasn't the role that he played alongside Steve Jobs.

I think a lot of founders turn to their right-hand person, who's more of an operating mind, more of a systems builder, to then run the company, and I think that that can be somewhat suffocating to the visionaries in that business. That can slow innovation.

That's my biggest concern for Apple, so I'm not an Apple buyer here. I know a lot of people at The Motley Fool are very bullish. I know the valuation is very low, relative to the prospects for growth and obviously the incredible balance sheet that Apple has, but I also know that there are two things working against Apple. You've got to at least consider these if you're an Apple investor.

One, you don't have your visionary leader in place, and you know that almost no value was created at Apple during the period that Steve Jobs wasn't running that business.

The second thing is you've got a very large company that, in order to justify a larger valuation, has got to eat up more earnings in its market space, and that starts to get the Justice Department interested. We'll see whether that becomes an issue for Apple. It's becoming a little bit of an issue for Google right now.

Look what Microsoft did. They did two things that really hurt that business. One, Justice Department, anti-competitive, and No. 2, they put an operator and a systems builder in as CEO.

I would say it would be a really good thing right now -- this would be a hugely great announcement -- that Microsoft says, "Bill Gates is coming back." Can you imagine? I think the marketplace, the enthusiasm for Microsoft if Gates said, "I'm coming back as CEO and I'm committing to be back for the next seven years, or the next five years, and at the end of my tenure I'm putting a visionary in charge of this company."

Steve's done a lot of great stuff through a lot of difficult times for Microsoft, but right now the Ballmer tenure has not been a great tenure for Microsoft. They've faced a lot of challenges during that period, but they lack the visionary, and that's what I worry about with Apple.

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Brendan Byrnes owns shares of Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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