Why Amazon Is Special and Apple Is Not

They don't have even a fraction of Amazon's inventory.

They might compete of some selected products, but it's a long way to the "we have it all" of Amazon.

How much of that pricing power would remain if Costco carried as many items as Amazon? Amazon is predicted to eclipse Costco (and Target) in terms of sales this year (http://money.msn.com/top-stocks/post.aspx?post=34532428-58cf...), so given an equal catalog, Amazon would be able to sell more of each item and command a lower price, no?

Amazon's catalog is so much bigger than Costco's along two axes; more kinds of products, and more varieties of a given kind of product. The latter axis can be good for Amazon, since people have different utility functions, brand loyalties, etc. But one thing I like about Costco is that their catalog seems to be curated; whatever brand/model of a given thing they happen to carry, it's usually pretty decent. Amazon, by comparison, carries good and crap versions of pretty much everything, but you can use the customer reviews to separate the wheat from the chaff). By removing the paradox of choice, Costco not only reaps the usual benefit on the buyer's psychology, but is also able to negotiate better wholesale prices on the items they buy due to higher volume. Maybe that's a way for them to compete?

One of the things that must be considered is that from 1995-2006, Windows machines were better.

I was a Mac user through that time. Windows 95 came around with preemptive multi-tasking. The Mac was still more polished, but Windows 95 was a better operating system. This period also saw Intel processors far outpace the PowerPC. When OS X came out in 2001, it was so slow as to be nearly unusable. 10.1 helped, but comparing it to a Windows XP machine was simply disheartening.

Looking back on this period, I find it hard to believe that I (mostly) stuck with the Mac platform through it. OS X is wonderful today. However, I think it's important to realize that during the dark days for Apple, they were really selling inferior machines and an inferior operating system. From 1995-2001, Apple was selling a cooperatively multitasked operating system against a more technologically sound Windows 95/98. Intel processors were very significantly better as OS X came around and Apple was having trouble getting good PowerPC processors out of IBM and Motorola. Apple introduced a 700MHz iMac in 2002 against around 2GHz PCs. Apple did try to spin it and we all know that MHz isn't everything, but there was quite a gap - a gap that would simply become larger until the Intel switch.

So, it's easy to say that "Windows machines competed on price," but I think looking at the history, Windows machines were substantially better for a decade. Mac OS was still better polished and a more pleasant interface (in my opinion), but the classic Mac OS was ancient by the technology of the day, OS X was dreadfully slow when introduced, and Intel processors wiped the floor with PowerPCs. The Windows machines weren't just "competing on price", but were better.

While people may prefer Android or Windows phones, the iPhone's processor is as fast or faster than what is being offered in the competition. You may want a different mix of features than iOS offers, but I don't think a reasonable person would say that it's technologically inferior to its competitors. In many ways, Apple is still the state of the art. The A6 processor runs circles around the Galaxy S III (http://www.anandtech.com/show/6330/the-iphone-5-review/10), iOS is well liked, the build quality of Apple's devices is arguably the best in the industry, etc. Apple does have competitors and it would be foolish to discount them. However, Apple's current situation is absolutely nothing like 1995-2006. In that period, a dispassionate person would look at Apple's products and find them woefully inadequate. Today, dispassionate people don't find Apple's products lacking.

Since when does P/E matter for any company that is not paying dividends? If you buy a company's stock knowing that they aren't paying dividends, then you are obviously paying for growth.

Some companies are cash cows and don't have to worry much about huge new innovations. Think of Coca Cola. Sure, they have to compete with Pepsi and are probably investing in new equipment but at the end of the day, they aren't entirely reinventing themselves the way most tech companies have to.