My Gotham City buddy PED published, “Why isn’t Google’s stock more like Apple’s?”
It should be obvious. Despite spending tens of billions of dollars on an ongoing effort to diversify, Google remains a one-trick pony, and parent company Alphabet (GOOG) has failed to become anything more than a monopolistic advertising company.
Meanwhile, Apple CEO Tim Cook has guided the company through troubled waters following the once-in-a-lifetime birthing and maturing of the iPhone Era™. As much as prognosticators, critics, and members of the technorati elite politburo have argued against Apple’s dominance in various industries, the math says otherwise.
Despite Apple wasting tens of billions of dollars on stock buybacks and shareholder dividends.
More on that in a moment.
Andrew Bary writing in Barron’s came up with four reasons how Alphabet can help boost its own stock.
The stock has advanced 29% this year, slightly ahead of the overall market but way behind the gains of other tech giants like Apple (AAPL) and Facebook (FB), which are up 70% and 53%, respectively
What happened to Alphabet? One reason might be stock buybacks but I don’t buy that. Apple has spent tens of billions to buy back its own stock, ostensibly to allow the outstanding stock to be more valuable. Alphabet has a buyback program, too, but the total share count has increased while Apple’s share count is down 20-percent.
If Apple keeps this up it might be able to afford to buy itself back from public ownership in another decade or so.
If that’s Apple’s goal, great. I’m on record that shareholders do not deserve stock buybacks or dividends. Shareholders do nothing for Apple Inc. except bleed the company of money that could be used to finance other ventures.
Every company of substance wants to grow and both Apple and Google have done that. Then they want to diversify.
Growth, however, slows as success sets in. Apple struggles to grow revenue because iPhone sales have flattened, the Mac business, despite being at record revenue levels is still a PC and they’re going nowhere in a mobile world, and iPad has yet to recapture the glory days.
Thankfully, along with the iPhone ride came a billion customers and Apple has done a superb job selling to the base– Services and Wearables– so the company remains wildly profitable at all levels.
Meanwhile, Alphabet cannot diversify after wasting tens of billions of dollars trying to be like Apple. Google’s hardware brands are much like Surface PCs at Microsoft– sales duds; placeholders for a future that will never arrive.
Alphabet cannot be like Apple because they have little in common except massive riches.