Saturday, June 11, 2011

Apple is a Granny Smith


News from Cupertino California this week is that Steve Jobs asked the city planning commission for approval of a new headquarters building for Apple Computer. The building will be ultramodern with only curved windows and will resemble a large flying saucer on the 150 acre site that once housed an apricot orchard before it was developed with a Hodge Podge of nondescript industrial buildings several decades back.

Steve presented to the city a master plan to accommodate 12,000 people in the new HQ. There will be underground parking and significantly more landscaping as the surface parking on asphalt paving will be totally eliminated. The architecture of the building is striking and the single circular building will have a total on 1.1 million square feet. It will not have one single piece of straight glass. It will be a low rise building of 4 floors and will have an inner courtyard within the flying saucer.

The thing that perked the Green Machine’s interest is that Apple has proposed its own energy center to provide base laod energy for the HQ and that Apple will only rely on the grid for backup power. Steve did not BS the city that wind turbines, or photo voltaic cells will provide the power, he said straight up that natural gas fired power stations will provide the electricity and heat for the building. He also stated that natural gas is the low carbon emission method for providing reliable base load power. Mr. Jobs must have done his job well by reading Green Explored for real not imaginary information. Steve I applaud you for your vision for a headquarters that will turn heads.

My prognostication is that Apple stock has actually peaked and will decline long before the headquarters is built. I say this only because each and every company that announces a new “world class” headquarters does this while flying high and by the time the HQ is built the tides have turned as competition heats up when one company is making a mint. Back in 1990 I lead a team of consulting engineers to build Apple’s Fremont California factory. Apple was riding high then and Intel was a dog. In very short order Apple closed the Fremont plant Intel soared and it was not until about a decade ago that Apple rose again like Lazarus. I also lead the team of engineers that built Intel’s flagship development Fab in Santa Clara. It too like the Apple Fremont plant is closed. Silicon Valley fabricates no silicon, it is more of software valley and the hardware is pretty much manufactured in Asia. The fabs that I designed for National Semi, VLSI Technologies and others are also dismantled and long gone. My guess is that Apple’s competition will come from Samsung or another Asian competitor and the 12,000 folks that are intended to be housed in the HQ will have some shoulder room when it opens.

I no longer design and build high technology facilities. I have migrated back to basic organic chemistry in the belief that the USA can compete in those markets. My belief is shared by Shell who is planning the first ethylene cracker to be located in the USA in three decades. Shell sees competitive natural gas prices in the USA because of the availability of shale natural gas. I too see this as a boon for US manufacturing of chemicals.

The fools at Amyris who believe they can compete with ethylene derived from natural gas with their bio isoprene derived from table sugar will lose within short order much of their billion dollar market capitalization. Apple has a 301 billion dollar market capitalization. Four firms had over 500 billion dollar market capitalizations prior to the dot com bust. They are Intel, Microsoft, Cisco, and GE. Intel now is worth $113 billion, Cisco $83 billion, Microsoft $199 billion and GE $194 billion. Exxon Mobil has a value of $393 billion.

My guess is that when Apple opens its new HQ in Cupertino, Exxon Mobil will still out value Apple and the $300 billion market capitalization will be a distant memory. It is really interesting how Intel and Cisco who dominated hardware a decade ago are worth only 20% of their peak. I think Apple will rot a little more slowly as they at least are intending to be green. Interesting the peel of apple is much healthier to eat than the flesh. Red Delicious apples have the highest level of health imparting chemicals in their peels. Perhaps we should all be red rather than green. Red is a great color as it means stop, and allow the folks at right angles to pass. A great Red Machine is a Farrari.

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