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I can tell you why Apple is declining in value, it is because they continue not to get it. Don't get me wrong, they have great products and always have, but they continually overestimate the value of hardware and underestimate the value of software. A couple of anecdotes.

Back in the 1960's (or whenever) Ross Perot quit IBM to form his own company, EDS. At the time, hardware accounted for 80% the cost of new computer and software and service the rest. Ross's new venture concentrated on the software side. It was at this inflection point that the market began to turn and eventually software was the 80% and hardware the rest. Ross ran into his old boss years later and was asked how he knew that there would be such a shift. He is reported to have replied: "I didn't, but 20% looked pretty good to me."

Flash forward to 1985. Apple had just launched the MacIntosh (1984) and computing had finally been taken away from just the geeks and shared with the masses. Steve Jobs was on the cover of magazines and Apple was the darling of institutional investors everywhere. Bill Gates wrote Jobs a long memo (I don't have a link, but you can probably find it on the net) in which he said Jobs should liscense the operating system and he outlined the benefits as he percieved them. Meanwhile Jobs, a notorious control freak, was envisioning a plant where Apple would make everything for their own computers....sand entering at one end and computers leaving the other. Compare the futures of Apple and Microsoft from this point.

But what is my point in this? IT'S THE SOFTWARE, STUPID! What Apple should have done, or should do, is liscense the I-Pod operating system to Sony, and Motorola, and Dell, and Nokia, and, and, and, and take a percentage of every sale. Sure they'll lose their unit sales as the knock offs eat their market share, but in the meantime they'll grow their presence across numerous platforms, some we haven't even thought of. They won't do that, though. And given enough time the competitors will come up with a system that is almost as elegant, but cheaper. And Apple's share price will go back down like the cyclical stock it has always been.

Everybody should know that. I don't care who you are.
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