Yesterday Steve Jobs announced that he was stepping down as CEO of Apple. The news is unfortunate but not entirely a surprise given his ongoing health issues.
The stock is holding up pretty well today, just down a tad. And if I had any stock in Apple, I would sell it.
First, let me note that I’m not a high frequency stock trader. If I buy a stock I usually keep it through all the ups and downs and sell only if I need the cash or there is a compelling reason to believe things are about to get substantially worse. I sold my stock in Borders when I saw that Amazon was pretty much unstoppable and I’m still feeling pretty good about that move.
So the question I think about: is Apple likely to keep going up over the next five or ten years?
And my opinion is that it might, but the odds of this happening are small indeed.
There are two issues. The first problem is of course the loss of Jobs. He is an incredible leader, innovator and brand builder. People note that Apple is full of great people, and I’m certain this is true, but replacing Jobs isn’t an easy task.
The bigger issue, however, is that Apple is in a punishing industry. The challenge in technology is that things are always changing and evolving. What is notable and unique today will be standard in a couple years. This is huge business challenge; companies have to keep innovating. A technology company that stands still will fall behind.
It is interesting to compare the long-term outlook for Coke and Apple. Coke sells Coke. It sold the same product twenty-five years ago, and I’m pretty certain it will be selling the same product twenty-five years from now. Apple sells technology devices. All of these devices have been on the market for just a short period of time, perhaps a year. And I’m very confident that none of the
devices Apple is currently selling will be on the market in three years.
Apple has to reinvent its entire product line again, and again, and again.
Can Apple continue to launch brilliant product after brilliant product? It could happen. But odds are this trend won’t continue. And the chance that Apple will be able to do this without the input of Jobs seems remote indeed.
For long-term investors, holding Apple stock requires a lot of wishful thinking. This is a good moment to sell.