If You Sell Apple Now, You'll Regret It
Jan 12th 2013 10:00AM
Updated Jan 12th 2013 7:30PM
In the following video, Michael Saylor, CEO and founder of Microstrategy (Nasdaq: MSTR) and author of The Mobile Wave, sits down with Motley Fool technology analyst Eric Bleeker to discuss tech, business, and social trends as they relate to investors today. Understanding paradigm shifts like those discussed here are a cornerstone of Motley Fool superinvestor David Gardner's own investing strategy and are critical to his market-thrashing returns. Learn more about how he discovers his winners -- just click here now to read more.
Michael Saylor: Look, Apple Computer was worth $3 billion 12 years ago, and then it went to $600 billion. If you ask me, Apple Computer is going to $2,000 a share. I'd be very, very long on that company. Whoever is selling that stock must be a moron.
This is a company that's going to actually have 4 billion devices out there. If they roll them over once every four years, they're going to sell a billion devices a year. The thing that people don't get -- you either get it or you don't get it -- I'm going to come back to your PC question. I know a lot about PCs. I bought 10,000 to 20,000 PCs in my life. I've got 3,000 sitting underneath my desks. You put a Dell computer underneath a desk, you don't care that it's loud and it's hot and it's a power hog and it's ugly and it's heavy, and it's an ugly beige cabinet with screws showing. You don't give a crap. You just want it to be $400 or $500.
You put a phone in your pocket, and you sleep on it or next to it, you care whether it's hot. You care what it looks like. You care about the battery life. You care about the radio.
This is an iPhone 5. This runs 10 times faster than an iPhone 4. There's not an 8-year-old on the planet that doesn't want an iPhone 5. Right?
Who wants to wait 42 seconds to watch something download instead of two seconds? Nobody. You don't have to be a genius to run Apple Computer. You just have to, every year, make the product a bit lighter, a bit more elegant, make it a better radio, make it a better battery.
I sat with one of the 10 richest guys in the world for dinner five nights ago, and we had dinner for four hours. He did half the talking; I did half the talking. He's much more successful than I am. I understand that, by the way.
As I said, sometimes you've got to do other things than just have opinions to make money. There's a lot of execution involved, and the rest, but I have opinions.
He said to me, "You know, Apple Computer. Can these guys hold their prices? Aren't they going to follow the model of the PC industry? Aren't their prices going to taper down -- the 40% margin is going to become 30 and 35 and 20?"
It's another example of people just knowing enough to hurt themselves. If you're going to know a subject, you'd better know the subject. Being a dilettante and knowing part of a subject is just enough to hurt yourself somehow.
I said, "No. Their gross margins don't have to tailor down. If you go to France -- this is the benefit; I've seen it enough -- if you go to France you'll see Bernard Arnaul, who runs a company LVMH. They're selling handbags for $4,000, $3,000, $2,500 each.
This is a device that women view as fashion, and it's 10,000 years old. For 10,000 years -- no, the prices are not lower after 10,000 years. If you actually care about this thing, how many women have a $300 pair of shoes? How many have two? How many have more than two?
The truth of the matter is, when the technology goes from being a utilitarian, vocational brick that I put under my desk -- no one gives a crap about that -- to being a piece of clothing, a fashion statement, an extension of your personality, a piece of jewelry ... iPhones, iPads, they're somewhere between clothing and jewelry and accessory. At that point, they can hold that price point forever. They can basically sell you another $500 device every two years, forever, because everybody's got $500. The first billion people have got that, and the rest of the world's getting elevated up.
I think that you're going to see a wider diversity of offerings. You'll see there will be cheaper tablets. The $100 tablet will go to Pakistan and the 700 million peasants in China, and more power to them.
That means those 700 million peasants are going to get a college education and get a master's in computer science, and I'll probably be hiring 20,000 of them, and I'll pay them $5,000 a year, which will be five times more than $1,000 a year, and then I'll pay them $10,000 a year, and the entire society will go from 2 billion to 3 billion to 5 billion white collar workers.
As their discretionary income increases, they're going to buy more and more expensive things, and anybody sitting in the middle of that controlling the software application networks that have all the asset value in them, those companies are going to benefit in a marvelous fashion.
The article If You Sell Apple Now, You'll Regret It originally appeared on Fool.com.Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. 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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