Apple Inc. (AAPL) Underperforming and Down for the Count?

Amazon.com, Inc. (NASDAQ:AMZN)

In the column, Fisher states that Amazon will be getting into the smart phone biz, just as it did with tablets. This might be the case, but to do so the company has two choices-

1). Develop its own operating system

2). Use a forked version of Google Inc (NASDAQ:GOOG)’s Android

Developing its own OS takes major resources, in a game that it is way behind in, if it is to do so, it will likely fork Android. The question is, how does Amazon benefit from this venture?

Do people consume content on phones? I have both tried to read books on my phone and watch movies. Even on my big screen Samsung it’s just too small and difficult, and the smaller battery gets eaten fairly rapidly. Amazon developed the Kindle Fire tablet precisely to give people a way to consume Amazon products and get them into their own ecosystem.

I consume content using my auditory modality on my phone- podcasts, music, etc. While Amazon might be able to sell a few more mp3 downloads, I would like to understand where the profit would be for the company before I give into the idea that they will enter the smart phone market. They sell the Kindle Fire at cost because they believe they will profit by selling content and products to their tablet users. Will they profit to the same extent off of smartphones to justify the large cost of development? How will they, in an ultra-crowded market, convince people to adopt their offering?

Bottom Line

While the concerns raised for Mr. Fisher are valid, it is my analysis that this gloomy outlook assumes that Apple is, and will be, resting on its laurels. With the tremendous pile of cash they have (over 25% of valuation) and the low multiple, a lot of bad news is baked into the current stock price. I believe Apple is a good bet at these valuations, and I said just the opposite at $700 a share.

The article Apple Underperforming and Down for the Count? originally appeared on Fool.com and is written by Margie Nemcick-Cruz.

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