Forget the Death Cross: Apple May Be the New Microsoft

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The "Death Cross" has been dominant in the headlines of articles attempting to predict Apple's (NASDAQ: AAPL) future stock performance. For those not "in the know" a death cross is when the 50-day Moving Average crosses below the 200-day moving average. Technical analysts believe that when this occurs the stock will fall. In many cases the stock has already has begun to fall by the time the death cross is identified, bringing in to question the usefulness of such technical analysis.

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I think a more profound consideration for AAPL is to look at is in the context of history. I propose that Apple is the new Microsoft.

Microsoft (NASDAQ: MSFT) is a once "must own" stock. It still has much of what made it great in its earlier years except for one critical missing ingredient necessary for stock price appreciation: growth.

Microsoft long ago lost its rapid growth rate. The company matured. Its product cycle slowed. Its true innovative period became history.

It is somewhat inevitable that companies go through a normal life cycle. The young, innovative upstart brings its great widget to market. The world clamors to own, use or consume whatever that widget might be. The company goes public, watches its stock price skyrocket. The owners get wealthy; some achieve iconic status.

Years pass and the innovation slows. Next generation widgets fail to meet the expectations of the company's adoring public. The company begins to spread its wings a little further, branching out into businesses not within its area of specialization, desiring to rekindle some of the magic.

As the company grows it becomes more difficult to impact its overall growth rate even when it manages to strike gold again; eventually interest in the once dominant player wanes. Investors question whether the stock is worth keeping. Management then desires merely to maintain share value and hope for growth.

The company begins to issue dividends. It's been nearly a decade since Microsoft started paying dividends.  Apple started this year.  Microsoft made three regular dividend payments before it issued a special dividend back in 2004, after which it began a more regular dividend schedule.

Apple has decided not to issue a special dividend for now. However, if its share price continues to flounder, higher tax rates be damned, a special dividend could still be in the offing.  

Apple needs to produce some truly innovative products (I hear Apple TV may do the trick) in order to prevent the stock from resembling an elder statesman of the tech sector as opposed to a trailblazing market killer.  CEO Tim Cook has tough shoes to fill. Hopefully, the great Steve Jobs left behind enough great ideas to keep the innovation flowing for a while.

But if the recent iPhone release is a harbinger of what's to come then I would be worried if I owned AAPL. I know of far too many Apple devotees that found less to get excited about in the new iPhone and more than few that passed on it.

Similar rumblings abound that Research in Motion, the maker of the once must-have cellular device Blackberry, is seeing interest come back its way after years of obliteration at the hands of Apple.

As with the end of many empires throughout the course of history, it is often only afterwards that the citizens of the empire realize the peak has already come and gone. In our hyper-analyzed stock investing world this is not often the case, although the exact beginning of the end is commonly debated. I'm not necessarily saying this is so with Apple. But the shine may have already lost some luster and the empire may be displaying some cracks in its armor.


Fool blogger Steven Orlowski does not own shares in any of the companies mentioned in this entry. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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