Apple is not a tech company

Apple is not a tech company. It is a trillion-dollar luxury product (and services) company. This is not meant as an insult, merely an observation and I am not ready to short AAPL any time soon. They cast off metric booty-loads of money -- so much they don't even know what to do with it. Which is why I don't consider them a tech company. My perspective is informed by having help start a software development company and run it until it had become largely a software maintenance company, from tech to products and services.

Yes, Apple traffics in "tech" writ large, but what I'd call a tech company traffics in innovation. Apple was, for a while, a tech optimization company along with its brand. The insight with the iPhone was to mash up the (derivative) iPod with the ubiquitous mobile phone and slap an Apple logo on it. Since then, they've done doodly squat. Except, of course, make loads and loads of cash and addict millions of people to their phones, services, and brand.

What does it mean if they can't think of something to do with that cash? Yes, they pay a dividend and buy back stock, but that's not innovation. That's turning the crank for investors, which is right and proper in its own way. But, if that's all that's left, then, clearly, they've run out of ideas. And if they're out of ideas, they're not a tech company, by my definition.

As I said, I'm not ready to short AAPL, but there are a few things to keep an eye on. First is the competition. Offerings from Google and Samsung are very strong, and the feature-function gap has narrowed to de facto parity. Second, entry level phones are one tenth the price of iPhones and provide access to the same apps and services that connect users to social media, the Internet, and, oh yeah, make calls. Third, phone quality is sufficiently high across the board that people can be reluctant to upgrade. A new release is no longer a compelling event.

Of course, Apple has a lot going for it and it's hard to see it going away. They have a massive installed based who are deeply intertwined with a labyrinth of Apple services that would make it difficult to switch to a cheaper, and perhaps technically superior offering. Moreover, they control access of companies and developers to their installed. They are sitting on a quarter trillion in cash and that's after a buying back a bunch of stock.

No, Apple is not a tech company anymore, and that's fine. But you know who is a tech company? Amazon. And that they are is amazing and a little scary.