Seeking Apple Hints in Microsoft's Past- WSJ

It will be interesting to see how Apple (AAPL) progresses from here after announcing the dividend yesterday.  I can’t really think of any company to compare it to, as it is so rare for a company to pull off such a tremendous string of hits in the consumer products market.  They have enormous market share in phones, computers, and are dominant in the tablet market which they pretty much created.

Microsoft had less tricks but they are great tricks at that.  Microsoft takes far less risk than AAPL does because its key focus is on the software, while AAPL has a lot more areas where things can go wrong by being vertically integrated.  Apple has executed marvelously and their margins have been extremely high due to some of the deals they have been able to negotiate, and it is doubtful in my opinion that they will be able to keep them at these levels.  I’m not sure that the deals they are doing with the large telecom providers such as Verizon, AT&T, etc are truly that attractive for these providers over the long term.  I’m not trying to imply that these companies would be better of without Apple but I am saying that the industry might get a little more rational than subsidizing so much for the privilege to offer the IPhone.  Because margins are such a big part of the earnings story any decrease would impact earnings substantially.  Competition will improve, and there will likely be a day when it is not in vogue to fork over $500 every 6 months or so for an AAPL product that is slightly better than the last one that you had. Many people have been quick to praise Tim Cook, but the current assortment of products were inspired by Steve Jobs so time will tell if the company can keep its first mover innovation advantage moving forward.
The current market cap is $570 Billion so if you back out the $100 Billion in cash AAPL would need to generate $47 Billion in Net Income to trade at 10 times earnings.  In the last 12 months they have earned $33 Billion so I don’t think it is unlikely for them to achieve that number this year or next, but when you are buying a business, you are projecting 10 years out at least, and I have no idea what the company would look like even 5 years into the future. For momentum traders I get the thesis entirely and if I was only looking at P/E ratios or past growth and extrapolating that into the future I’d be a buyer, but at this size I think the future is far less exciting than the past on this security so I’ll likely allocate my research time elsewhere.  I certainly don’t think Apple is a bad investment at these prices, but I don’t think it is as attractive as some other opportunities that exist.