Doug Kass Apple used to have market defining products that were clearly better than the competition, now their stuff is give or take the same. That is a HUGE difference. There are numerous signs in the iPhone 5 that the company is protecting its franchise – as innovation falls and competitors start to catch up

AAPL: Doug Kass Responds to Barron’s Article

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By Tiernan Ray

In this week’s Barron’s print magazine, I wrote a defense of Apple (AAPL) stock in the Tech Trader column, in response to criticism from Doug Kass, among others, who has written extensively in the last few weeks about the risks to Apple.
Doug responded to the piece in an e-mail to me over the weekend.
Doug’s statement of his position in Apple shares, by the way, is “no position now,” at least as of yesterday, in response to my asking him. (I neither own nor trade in Apple shares in any way, per Dow Jones restrictions on stocks one writes about.)
Doug’s arguments this time around are unconvincing, as were his prior arguments, in my opinion.
But you can make your own assessment. Following is the complete text of Doug’s response.

A couple of observations regarding today’s column in Barrons:

1. I have always been of the view that developing a variant view on a company – like Apple- is the ticket to producing alpha, or excess returns.

2. I have never been uncomfortable with a non consensus view – as long as I felt my analysis was objective and hard hitting. (Probably the last time I took such a position against a market “darling” was when AOL took over Time Warner. AOL’s shares dropped from 80 to 10. I dont expect ANYTHING like that, but I believe AAPL’s future is less promising than many).

3. Apple’s shares have dropped by $50 since my original analysis was published on TheStreet and RealMoneyPro. This has occurred in a generally upward trending market. In other words so far I have been correct on the stock.

4. I felt your article restated and modified but one of my arguments – and your criticism or modifying only attacked the point that your rephrased:
“At the end of the day, the only thing that has really changed is that Jobs no longer is here to intimidate his critics. They feel free to vent their qualms, and more power to them. But none of the public venting, so far, kup to a logical argument against the company or its stock.”

5. The key point is that ALOT is changing. Apple used to have market defining products that were clearly better than the competition, now their stuff is give or take the same. That is a HUGE difference. There are numerous signs in the iPhone 5 that the company is protecting its franchise – as innovation falls and competitors start to catch up.

6. Were people intimidated by Steve Jobs??? Maybe some of his employees, but I doubt I and others were.

“At the end of the day, the only thing that has really changed is that Jobs no longer is here to intimidate his critics. They feel free to vent their qualms, and more power to them. But none of the public venting, so far, adds up to a logical argument against the company or its stock. Apple shares can go higher, so long as the company puts up good sales and earnings growth.”

7. Numerous people have complained the phone feels too light. I am not the only one.

“Kass must be the only person on the planet who thinks a thinner, lighter iPhone is a bad thing.”

8. Reread my column below. Bernstein definitely responded to my concerns about the installed base of customers and upgrade cycle because nobody had ever raised this issue before now all the sudden it shows up in their research. Shows you how not forward thinking the street is as this issue should have been top of everyone’s mind and well discussed prior to to me, a generalist, being first one to raise it!!!!

Thanks for listening/reading!