AAPL Stock — Slicing the Apple in Two
Saving the least likely for last, how cool would it be to see Apple (AAPL) separate its hardware division from its services divisions? The former is iPhones, Macs, and iPads, while the latter operates, among other things, iTunes and any subscription-based business models AppleTV manages to muster.
Both divisions are profitable. The benefit of breaking them up is letting the market decide if it wants to ride the hot and cold growth stemming from launches of new iPhones and iPads, or coast on the relatively-recurring revenue generated by iTunes … particularly now that iTunes Radio is available and AppleTV has scale.
The counter-argument is that Apple became great mainly because the company controlled the entire consumer experience, from start to finish, and splitting the company into two pieces might negate some of the self-serving connection between devices and services. However, that presumes we’ll see Steve Jobs-like innovation (of hardware) in the future, which doesn’t appear likely at this point.
Breaking Apple into two units might actually jolt both halves into thinking creatively again.
In the same sense that economists have predicted seven of the last four recessions, market journalists are likely to predict far more spinoffs than actually materialize. So, take none of these predictions as an absolute certainty. On the other hand, all four parent companies are strong in their own right, and would make for solid investment even if the described spinoff never plays out.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.