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“I think they should invest more of it in the margin, in the business,” Blodget said, referring to the estimated $121 billion in cash on Apple’s balance sheet. “Get lower-priced products out there. Stop going after just the premium piece. Get into the real growth engine of the smartphone market, which right now is [Google (NASDAQ:GOOG)] Android, its low-priced phones in China and India, same thing on the tablets.”
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Apple has already shown an ability to give up on high margins as well as a willingness to go more down-market with the introduction of the iPad mini, Blodget added. But this would be the call the company will actively need to make now to be relevant in the future. “If you want Apple to be around in 10 to 20 years, that’s what you want them to do,” he said. “Their profit margins are too high right now.”
Blodget, who praised Amazon.com (NASDAQ:AMZN) chief executive Jeff Bezos for making long-term investments in the online retailer, added that he believed Apple CEO Tim Cook also had the wherewithal and the ability to look at the long-term picture. That may include making some concessions in the present.
“It’s going to hit the stock, near-term,” he said. “There’s no question about it, but over the long-term that’s the best way to build.”
Apple’s stock struggled in the last three-and-a-half months of 2012 as investors and analysts began casting doubts on the company’s ability to keep addressing the growing demand with innovative products as well as maintain its industry-beating margins. The stock dropped a little less than 25 percent since closing at a record high of $702.10 in mid-September until the end of the year.
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