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Apple Investors' Delusion Sets In

NEW YORK ( TheStreet) -- The most bullish of Apple (AAPL - Get Report) bulls have lost it. There's no other way to say it.

Over at Seeking Alpha, the usually analytical Jason Schwarz tried -- and failed -- to counter my long-term Apple bearishness:

His [Tim Cook's] only innovative need is to continue to come up with new pieces of hardware to leverage the app store model. Will we get an iPad mini? Of course we will. It's just another piece of hardware for people to buy. If they'll buy it, Tim Cook will sell it. The underlying truth of it is, this isn't rocket science. Amazing things happen when a company is built upon a sure foundation.

If that's not wholesale simplification, sprinkled with misunderstanding, of how Apple rolls, I am not sure what is.

Here's the simplification: His only innovative need is to continue to come up with new pieces of hardware to leverage the app store model.

Here's the misunderstanding of why Apple is not only great, but dominant: If they'll buy it, Tim Cook will sell it. And this is supposed to be a good thing?

Here's where Schwarz got it right: Amazing things happen when a company is built upon a sure foundation.

If he only had opened up his article with that sentence, the rest of the piece might have been persuasive.

This Is Not About Tim Cook

Whenever I express long-term Apple-related bearishness, I stress two things:

¿ The company will not implode minus Steve Jobs; it will just fade from being great and dominant to being good and competitive.

¿ I feel bad for Tim Cook because he is an accomplished and competent person (obviously), but he finds himself in a next-to-impossible situation. It's a bit like the Edmonton Oilers without Wayne Gretzky. You can muster another Stanley Cup championship, but you become just a face in the crowd -- or worse -- shortly thereafter.

Schwarz is correct: Steve Jobs deserves the genius tag for building the Apple iTunes/App Store ecosystem. No doubt about it. From there, however, Schwarz takes the leap to what is really just shocking oversimplification.

Even an ecosystem as incredible as the one Steve Jobs built cannot achieve dominance in and of itself. You must attach significant "value adds" to it. (AMZN), though in a different way, does this well.

Amazon provides features and an overall experience that keeps people coming back to its site to consume everything from the staples to digital content. Free shipping, Subscribe & Save, Amazon Prime, the best user review database in the business, a one-stop shop -- you succumb to the Amazon cult for these reasons and others. It does not begin and end with the mere presence of a smart ecosystem. You need some series of value adds to tie it all together and make it sparkle.
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