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Why Apple won't become a $1,000-per-share company

Apple's New iPhone 4s Goes On Sale

Justin Sullivan/Getty Images

Apple Store customers look at the new Apple iPhone 4Gs on October 14, 2011 in San Francisco, United States. The new iPhone 4Gs features a faster dual-core A5 chip, an 8MP camera that shoots 1080p HD video, and a voice assistant program.

Apple finished up the day at $545 a share. So it's almost halfway to being a $600-a-share company. Which would put it $400 from being a $1,000-a-share company. And there's a raging debate right now in the financial world about whether Apple can make it across that finish line and become the first-ever $1 trillion market cap company. 

For perspective, no one has even even gotten close. And $1 trillion is about as much money as has been made on the Internet in its entire history so far. Big number. Very, very, very big.

At Business Insider, former tech stock analyst (and BI CEO) Henry Blodget makes what I think is the best case against Apple getting to $1,000 a share:

The most extraordinary aspect of Apple's business right now is not its revenue growth, which is plenty extraordinary. It's its profit margin.

In fiscal 2011, Apple had a mind-blowing 24 percent net profit margin.

Why is that mind-blowing?

It's mind-blowing because hardware companies just don't have profit margins like that. Even software companies don't usually have profit margins like that.

The hardware business is generally a cut-throat commodity business with razor-thin profit margins.

Dell, for example, which used to be considered a talented hardware manufacturer, has a 4 percent profit margin. HP, which sells hardware and software, has a 6 percent margin. IBM, which sells hardware, software, and services, has a 15 percent margin.

So you can understand why Apple's profit margin is mind-blowing.

And—here's the important point—Apple's mind-blowing profit margin may well be a temporary aberration.

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Raspberry Pi and the advent of the $100 tablet

Mario Tama/Getty Images

Apple's new iBooks 2 app is demonstrated for the media on an iPad at an event in the Guggenheim Museum January 19, 2012 in New York City.

Over at Fred Wilson's AVC blog, he writes about the gangbusters success of the Raspberry Pi, a very rudimentary Linux-based $35 computer that has no display or keyboard but can be plugged into a TV. And he comes to two striking conclusions, in as few words as possible:

When the cost of tablet displays comes down, which they will, I think we'll see sub $100 tablets. And I suspect that will happen in the next 3-5 years.

For markets that can be end to end digital, like education, this is a game changer.

Let's tackle his first point: a sub-$100 tablet. This is a disaster for Apple (keep an eye out for my post later today about how Apple can and can't get to $1,000 a share). Cupertino needs to defend its pricing model at all costs. As I've written before, price is the most important thing for Apple — not innovation or design. In fact, I'd argue that pricing, specifically pricing for a 30-percent profit margin, is Apple biggest innovation. At least of the Steve Jobs Second Act Apple.

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Andrew Breitbart: Death of a Los Angeles media mogul

Occupy Los Angeles

Grant Slater/ KPCC

Conservative blogger Andrew Breitbart argues with Occupy Los Angeles protesters in this on November 27, 2011.

Love him or hate him — and there never seemed to any middle ground — the news that Andrew Breitbart had died suddenly at the age of 43 sent the Los Angeles media world into shock. Los Angeles, unlike New York, doesn't really do media (it does, of course, but not at the same frenzied level). And although Breitbart's legion of detractors pointed to his despicable opportunism and seeming lack of an ethical compass that would enable him to take a moderate approach toward...well, anything, they nevertheless had to concede that he had built a minor media empire in the West, after stints with Matt Drudge and Arianna Huffington, two other Left Coast media moguls. 

He built up a group of sites that all bluntly targeted what he considered leftist institutions: Breitbart.com, Breitbart.tv, Big Government, Big Hollywood, and Big Peace. Detect a theme there? The ironic thing of course was that Breitbart himself was pretty big, in the sense of being outsized and outspoken (he also didn't lack for physical presence). Tucker Carlson, who knew Breitbart pretty well, had some very nice things to say about the man (see below) — including a bemused yet melancholy recollection of how challenging it could be to get a word in edgewise when talking, or attempting, to talk to him.

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Ron Paul v. Ben Bernanke: Is that a silver dollar in your pocket?

The most entertaining episode from Federal Reserve Chairman Ben Bernanke's testimony before the House Financial Services Committee this morning came — Surprise! — when Texas Republican and GOP presidential candidate Ron Paul launched into one of his patented long-winded spiels about the evils of the Fed, the senselessness of fiat currencies, and the value of "real" money: silver and gold.

Bernanke took it all in stride. The video above doesn't have reaction shots that are quite as good as this shorter broadcast from ABC, so check them both out. You have to hand it to Bernanke, he seems to enjoy the roastings he gets from Paul, in strange sort of way. And he fires back, ever so gently, at Paul's allegations that we're experiencing 9 percent inflation (according to older pricing measures) when the Bureau of Labor Statistics (BLS) says it's only around 4. (They've been here before.)

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Yammer: Nah, let's not do the IPO

Yammer

The enterprise social network that will do anything to avoid an IPO.

With the frenzy surrounding Facebook's impending initial public offering later this year, you'd think that every startup ultimately wants to do that IPO voodoo. Not so. In fact, it's not clear that Facebook even wants to go public. It's just that it has to many private shareholders now that the SEC is kind of forcing it to. San Francisco-based Yammer is a similar if not exactly quite as lucrative story. Yammer is a sort of Twitter for business — an "enterprise social network." And it just secured a new $85 million venture round. Which it's thinking of as a virtual IPO. The best kind, as it means you don't have to do the actual IPO.

Even better, the business is starting to boom. This is from Forbes:

A few years ago many companies were skeptical of enterprise social networking, now it’s become much more common. Now the industry is in a land grab phase, Sacks says. “Five to ten years from now every company will have an internal social network and maybe an external one as well,” he says. “Five years from now not having a social network in a company will be like not having email or phones.”

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