Thoughts On 2 Great Companies

Thursday, July 23, 2009


Apple may just be the best company in the country. The US recession drags on but someone might want to tell Apple with shares now trading just 22% off the all-time highs having rallied over 100% in the last six months. Apple continues to run on all cylinders racking up a whopping 626% increase in iPhone shipments in the third quarter even while increasing gross margins 2.5%.

Long did many investors doubt the ability of Apple management, and long did many investors miss a great opportunity. Much of Apple's success can be attributed to a little-known man by the name of Jonathan Ive, the principal designer of the iMac, MacBook, iPod and iPhone. Ive, working in collaboration with the brilliant Steve Jobs, created three major products with excellent features and aesthetic appeal.

The company, nearing bankruptcy in the mid-90s, reinvented itself with the iMac in 1998 returning the company to profitability after five long years of red ink. Then, out of nowhere, Apple introduced the iPod in 2001 and went on to dominate the portable music player market. Most recently, Apple wowed us again introducing the iPhone in 2007 quickly stealing market share from much more entrenched rivals.

Apple's management goes further than just creating great products, it knows the rules of stock market investors. Apple consistently under-promises and over-delivers, the exact posturing investors seek. The Jobs-Ive collaboration has proved incredibly effective and the company is worth a study in reinvention and bold management moves.


Shares of Starbucks are trading up an astounding 80.9% year-to-date trouncing the S&P's 8.1% gain. For a company selling an unneeded, overpriced product, the recession has done very little to hurt its sales. Sales were reported down a minor 7.6% year-over-year, impressive given its high-end specialty products. Starbucks is now ubiquitous with 16,680 stores at the end of 2008.

The company has been notorious for its top-notch branding efforts. For years Starbucks never offered any sort of sale or promotion, never was a deal to be had. The company was simply committed to providing a consistent, quality product for a set price. The strict adherence to brand image has placed Starbucks far ahead of any of its competitors. And now, Starbucks is cashing in. For the first time, Starbucks has been offering deals to its customers to increase revenues. The new pairing deals offer a reasonably-priced breakfast option while the current promotion at select stores reducing prices for repeated business in a single day will likely drive traffic higher. Starbucks is finally taking advantage of its image to maintain revenue stability throughout a tough recessionary time.


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