First of all, I wanted to wish you best of luck as you head into 2012, your first full year at the helm of an amazing technology company. Apple (AAPL) is the rare company that captures both the hearts of consumers who love your iGadgets as well as investors who have made tremendous returns on AAPL equity. As both a converting Apple loyalist on the consumer side, and a stock investor, I wanted to say thanks.
The purpose of this letter, since I didn’t think you would actually read it if I mailed or emailed it to you, was to discuss Apple’s capital structure. I know, kind of heavy for the holidays. I have blogged about your stock a couple of times in the past year, and my view hasn’t changed that the stock is no doubt inexpensive, both relative to its current and future growth rates, as well as to its dominant and growing market share in your line up of phones, tablets and computers. Quick math suggests that, excluding your cash, AAPL equity is trading at under 11x next year’s earnings. Quite a bargain.
But I wanted you to take away one key item from this letter. And it is this: as Apple continues to build its mountain of cash, you should realize that you are no longer just managing a technology company, but also you are becoming an asset & money manager. The reason I point this out is, you can continue to grow the company and its market share and profits, but if you mess up the asset management side of the business (i.e. your cash hoard), then you can destroy billions, even tens of billions of hard earned capital.
It is no doubt the single biggest risk that I see in your equity.
Read the rest of the letter here.
MacDailyNews Take: As if Tim Cook and many other people at Apple didn’t understand everything in that letter and more.
[Thanks to MacDailyNews Reader "Edward Weber" for the heads up.]