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AAPL Stock: 119 ( + 1.4 )

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AAPL hits five-month low on innovation, competition worries

updated 09:30 pm EST, Wed November 7, 2012

Investors nervous that company may have peaked

Apple's stocked ended Wednesday at $558 a share, a five-month low despite a slew of recently-announced new products and a strong and popular holiday lineup. While the company's ability to deliver yet another record quarter in fiscal Q1 2013 is not seriously questioned, investors and analysts appear to be nervous that Apple is not doing enough to stay ahead of the competition, and some have voiced concerns that the "next big thing" is not more obviously underway to give Apple another avenue of continued growth.

In addition to these factors, some on Wall Street -- which was seen as being more in favor of Mitt Romney in the election -- are concerned about upcoming fiscal challenges the government faces, including the possibility of a new recession spurred by forces beyond the president's control, such as more financial failures in Europe. Although Apple is currently selling record numbers of iOS and Mac devices, some in the investor community are concerned that the company's margins and popularity may have peaked.

Wall Street has also reacted badly to news that the iPhone 5 is more expensive to build than its predecessors, though over time manufacturing costs should equalize. However, more expenses in the building of the device means lower profit levels -- not to mention that Foxconn's chairman Terry Gou today told business leaders that his company is struggling to meet demand and yet build the devices to Apple's exacting specifications.

In addition, Apple's recent quarterly results -- while very strong -- weren't quite as stellar as expectations had suggested, and a recent survey has suggested that Apple has lost ground to Android in the formerly-bulletproof tablet arena. However the survey was based on units shipped rather than sold to end users, which could suggest that analysts have misread demand for non-iPad tablets, or that the tablet market is expanding thanks in part to alternative options like Microsoft's Surface and Google's Nexus 7.

In recent years, Apple has been seen as a virtually risk-free investment, posting astonishing growth and profitability after a string of hugely-successful hit products, starting with the iPod (which, despite being introduced in 2001, took until the mid-2000s to really take off). It remains to be seen how successful the iPad mini, which has debuted to rave reviews, will be with the gift-buying public.

The market is also watching CEO Tim Cook more carefully now following a major reshuffling of Apple executives that saw some leaving the company, particularly former iOS chief Scott Forstall. Other Apple leaders are taking on more responsibilities, such as Sir Jonathan Ive now adding software interface design to his hardware duties -- a move that many in the Apple community welcome, but the results of which are yet to be seen. Rumors that Apple may stray from long-time partner Intel on Mac processors and other rumblings of future changes may have unsettled investors, who have become used to significant yearly growth in their investments.

There is also, somewhat ironically, the problem of managing Apple's success. Despite the announcement of a quarterly dividend and a three-year stock buyback program, Apple's cash stockpile continues to grow -- now at over $121 billion -- and the companies continues to avoid "re-patriating" foreign earnings to avoid some federal taxes. The company currently manages just a two percent tax rate on the foreign cash, significantly below the 25 percent average it pays on North American income.

Though Cook and many of the executives leading Apple are held in high regard by investors, the loss of visionary co-founder and former CEO Steve Jobs casts a long shadow over the company in terms of its continuing ability to innovate. Looking to the future, investors wonder if Apple will be able to duplicate the success seen by products either currently available or soon to be available that Jobs oversaw. Once Apple runs out of products that he had an interest in, will it still be able to invent and redefine whole industries as it has done in the past?

Once promoted as a company that could become the world's first trillion-dollar-valued business, AAPL has shed about $130 billion off its valuation since September. However, the drop in price may also attract smaller investors who are confident that even without any new innovations in the short term, Apple's existing business will continue to grow and prosper over the next few years.

The high and rising price of the stock has discouraged smaller or casual investors from getting in, and despite some fears that the company's growth may have plateaued at least temporarily, there is an equally strong chance that Apple will report another record-breaking quarter in the face of a worldwide PC slump, and that any new products could upend the market in Apple's favor even more.





by MacNN Staff

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  1. besson3c

    Clinically Insane

    Joined: 03-03-01

    t minus 10 seconds until blahblahblaber's anti-Apple turrets!

  1. blahblahbber

    Banned

    Joined: 02-01-05

    Originally Posted by besson3cView Post

    t minus 10 seconds until blahblahblaber's anti-Apple turrets!

    Im here... no need. Thanks guys.... oh and thank you publisher.

  1. Inkling

    Mac Enthusiast

    Joined: 07-25-06

    Actually it's Obama's reelection and the dismal prospect of four more years of a morbid economy. Delaying the purchase of digital stuff is one of the easiest ways to save money in right times.

    Having surgery done by a butcher makes more sense than having a nation run by someone as clueless about business as Obama.

  1. besson3c

    Clinically Insane

    Joined: 03-03-01

    Originally Posted by InklingView Post


    Actually it's Obama's reelection and the dismal prospect of four more years of a morbid economy. Delaying the purchase of digital stuff is one of the easiest ways to save money in right times.
    Having surgery done by a butcher makes more sense than having a nation run by someone as clueless about business as Obama.


    Feel better now having gotten this out of your system?

  1. Charles Martin

    MacNN Editor

    Joined: 08-04-01

    Yes, because Obama -- personally, all by himself -- is completely responsible for every aspect of the US economy, including the factors like the Eurozone he has nothing to do with.

    As for "clueless about business" -- oh yes, that's very important to running the government. Not.

    But even so, he turned Bush's bank bailout into a hugely profitable venture and saved hundreds of thousands of jobs in the auto industry ...

    Oh sorry, facts aren't important in your fantasy worldview, I forgot. You're just afraid of Minorities With Power so stuff like reality doesn't actually matter.

  1. Zanziboy

    Forum Regular

    Joined: 08-27-08

    If we look at the firing of Forstall from a more general perspective, the lack of iOS innovation is the primary reason for his departure. Apple needs a fast-paced plan to combine iOS and OSX in a scalable way that provides a good user experience for all platforms. The Surface provides a threat by providing a tablet that works as a net book, while providing a sufficiently high margin to allow them to be heavily discounted if Microsoft wants to go for margin. The iPad Mini disappointed many investors by coming in at a higher price than the Kindle HD and not having a Retina display. Apple need to come up with hardware and software strategy which differentiates if from the "me too" clones.

  1. Steve Wilkinson

    Fresh-Faced Recruit

    Joined: 12-19-01

    @ Zanziboy - I'm sure you're probably correct about the irrational way investors are thinking about this. They are wrong, IMO, but you've probably nailed the reason for the stock drop (well, along with the fact that another Obama term should scare the heck out of everyone, but it's not like Romney would have been much less scary).

    Lack of iOS innovation? I've heard that before, but REAL users don't really want, nor expect novelty. Combine iOS and OSX? That's the M$ path, and HOPEFULLY not the path Apple is headed. Once again, ignorance of technology and the market. The Surface a threat? Not really, other than that I'm sure it will sell to some clueless folks and lots of tech-geeks will buy the 'Pro' until they all decide tablets just aren't the future... AGAIN. (Lots of people THINK they want a combo... I once did as well... but now that I've thought it through and have experience with tablets, I realize that is an unrealistic concept and a fail. I don't think M$ still gets it.) Yes, the iPad mini disappointed many clueless people. The rest will likely be buying them. They are going to sell a HUGE amount of them, as well as the other models. (OK, yes, I was a bit disappointed by the $329 price, as I'd have priced it at $299.) The Kindle HD isn't really a competitor in any true sense outside basic content viewing (ebooks and videos). It isn't a tablet computer. The mini is. Apple doesn't need to come up with anything, as they already ARE greatly differentiated from the 'me too' clones. Anyone seriously following the industry would know that... but I don't EXPECT a bunch of day-traders to have a clue.

    SO, the stock will drop for a bit until the day-traders realize that Apple really is doing pretty well despite their worries, then it will head back up again. We've been here before MANY times... rinse and repeat.

  1. Bobfozz

    Fresh-Faced Recruit

    Joined: 07-28-08

    As always the analysts and the investors ARE the problem.

    None of them KNOW what is going on behind Apple's doors. They worry about things for which they have no control.

    Apple is selling so much "stuff" now they can't keep up. Apple's quite happy but the "guessers" aren't. Forget them.

    Let the smaller investor come in and buy up the cheaper stock that the lame-os shed.

    If Steve was at the helm these idiots would be saying this right now! "Hey Steve, what's next?" And what would he tell them? NOTHING.

    Tim Cook doesn't care what these twits "think" at all.

    I wish MacNN would run some statistics about how often and how wrong these same people are, over and over and stop seeing them as any kind of NEWS item.

  1. Steve Wilkinson

    Fresh-Faced Recruit

    Joined: 12-19-01

    As far as economics go, the public markets are one of the biggest problems today. They speculate (i.e.: Vegas) rather than invest. Maybe we need some kind of vesting (say, 1 year min) on stock purchases. That would make investors actually think a bit look at the industries and companies, rather than these idiotic, irrational reactions (which hurt companies, their employee, and the consumer).

  1. HPeet

    Fresh-Faced Recruit

    Joined: 10-04-11

    Look at AAPL on a 5yr chart. P/E right now is 12.64 with a yield of 1.8%.

    'Nuff said.

  1. hayesk

    Professional Poster

    Joined: 09-17-99

    Originally Posted by chas_mView Post

    Yes, because Obama -- personally, all by himself -- is completely responsible for every aspect of the US economy, including the factors like the Eurozone he has nothing to do with.



    It's not whether that is true or not. It's what fund managers believe. And I wonder what political party most fund managers align themselves with.

    This is why I don't pay attention to stock prices. They aren't an accurate indication of anything. I wish Apple could do a stock buyback and go private again. Then they wouldn't have to answer to these bozos.

  1. Steve Wilkinson

    Fresh-Faced Recruit

    Joined: 12-19-01

    Originally Posted by hayeskView Post


    It's not whether that is true or not. It's what fund managers believe. ... This is why I don't pay attention to stock prices. They aren't an accurate indication of anything. I wish Apple could do a stock buyback and go private again.



    For sure. Most companies probably wish they could do that. It's kind of like kids resisting sleep and then spending their adulthood wishing they could sleep more. Companies want that IPO (magic 'free' cash $$$), but then are slaves to foolish greed and irrational, uninformed thinking which they can't get away from.

    That's one of my big fears concerning Apple, actually, as perception in the public markets can end up being self-fulfilling. Jobs was kind of a master of the RDF thing, and the investors probably depended on his 'magic' more than their lucky rabbits feet for years. With Jobs now gone, the skittish hoards just don't know quite what to do. Fortunately, once in a while, there is some actual financial reality left in the markets... so when things get too good to ignore, they will buy again.

    So, if an investor is in Apple short term... they need to pay more attention to the press and perception (no matter how inaccurate), but if you're in it longer term, then watch what the company is ACTUALLY doing and learn something about it (and ignore the 'experts,' press, and general opinion out there). Then factor in overall trends (like the election) which affect the entire market.

    My other fear is that times are probably going to get incredibly rough over the next decade or two. I'm not sure how Apple is going to do in hard times, but they are probably structured as well as any tech company to survive. So, as long as things don't get so bad we end up in a kind of pre-industrial state, technology products will still be needed. I see no reason Apple won't be a leader in that kind of situation (just not as profitable).

  1. MyRealGenius

    Fresh-Faced Recruit

    Joined: 10-03-12

    [SIZE=4]Well I'm still a happy Investor in Apple Stock to this day. I bought the stock in 1993-1994 as low as $12.35 a share when everyone was saying the CEO at Oracle was going to buy Apple out. All that talk made the Stock dump to new lows. I'm a very wealthy man because of all the talk that drop the stock back then, and if it happens again I will be sure to ride the money train again. Apple is a secure investment no matter what, they are the underdog of little companies fighting from the bottom up through the likes of Micro$oft, and IBM, and rising to the top. We the users of this product line feel more a part of a bigger picture then the likes of other companies out there. We all display the logos on our cars, shirts, and in my case almost everything I own today has an Apple logo on it. This is not because I'm one of the group of top 500 share holders in the world, its because WE Love this company to the point of talking and cheering for it no matter what. Steve Jobs was a good man, and really the driving force of this company. Tim is a great replacement and will carry on Steve's vision for another 30 years I sure. The bottom line is, even if all the talk drives the stock down... We are still loyal customers, followers, and investors NO MATTER WHAT. [/SIZE]

  1. blahblahbber

    Banned

    Joined: 02-01-05

    Originally Posted by MyRealGeniusView Post

    [SIZE=4] We are still loyal customers, followers, and investors NO MATTER WHAT. [/SIZE]

    Do you love the fact that crApple supports bad ethics by contracting with companies with unjust working conditions and avoiding taxes, preventing the money from being circulated within the economy back in the US where it can go back into new education? I even think some of that money can go into providing more community activities and device-leash awareness programs so that kids aren't looking at their phone all day every day (addiction). I mean, first they blamed the walkman for being anti-social, now the cryPhone/Pod is the COMPLETE distraction in the art of living. There goes humanity...

  1. blahblahbber

    Banned

    Joined: 02-01-05

    Originally Posted by Steve WilkinsonView Post


    So, if an investor is in Apple short term... they need to pay more attention to the press and perception (no matter how inaccurate), but if you're in it longer term, then watch what the company is ACTUALLY doing and learn something about it (and ignore the 'experts,' press, and general opinion out there). Then factor in overall trends (like the election) which affect the entire market.
    My other fear is that times are probably going to get incredibly rough over the next decade or two. I'm not sure how Apple is going to do in hard times, but they are probably structured as well as any tech company to survive. So, as long as things don't get so bad we end up in a kind of pre-industrial state, technology products will still be needed. I see no reason Apple won't be a leader in that kind of situation (just not as profitable).

    I agree with this half, maybe not the leader per say but with that bank roll, odds are slim.

  1. Eug

    Clinically Insane

    Joined: 12-09-00

    My last tablet purchase was Android. It's looking like my next phone purchase may be Android as well. Sorry Apple (and AAPL).

    Eug

  1. besson3c

    Clinically Insane

    Joined: 03-03-01

    Originally Posted by EugView Post


    My last tablet purchase was Android. It's looking like my next phone purchase may be Android as well. Sorry Apple (and AAPL).
    Eug


    Are you not bothered by the notion of your carriers cutting off updates at some arbitrary point?

  1. Eug

    Clinically Insane

    Joined: 12-09-00

    Originally Posted by besson3cView Post


    Are you not bothered by the notion of your carriers cutting off updates at some arbitrary point?


    I am not sure I understand the question, but here's an answer anyway:

    My last tablet purchase was a Nexus 7. There is no carrier at all. Updates come from Google directly.
    My next phone purchase may be a Nexus 4. If so, it will be an unlocked device. Updates come from Google directly.

  1. besson3c

    Clinically Insane

    Joined: 03-03-01

    Originally Posted by EugView Post



    I am not sure I understand the question, but here's an answer anyway:
    My last tablet purchase was a Nexus 7. There is no carrier at all. Updates come from Google directly.
    My next phone purchase may be a Nexus 4. If so, it will be an unlocked device. Updates come from Google directly.


    That's cool. I'd think about switching to Android myself if I knew there wouldn't be a song and dance required to get OS updates in perpetuity like I can get with my iPhone for at least as long as Apple supports my phone hardware, which has been longer than the insanely short period of time people with Gingerbread based phones have been cut off from updates.

    I hear Jellybean is very nice, I'm looking forward to playing with it some day.

  1. Steve Wilkinson

    Fresh-Faced Recruit

    Joined: 12-19-01

    Originally Posted by blahblahbberView Post

    Do you love the fact that crApple supports bad ethics by contracting with companies with unjust working conditions and avoiding taxes, preventing the money from being circulated within the economy back in the US where it can go back into new education? I even think some of that money can go into providing more community activities and device-leash awareness programs so that kids aren't looking at their phone all day every day (addiction). I mean, first they blamed the walkman for being anti-social, now the cryPhone/Pod is the COMPLETE distraction in the art of living. There goes humanity...



    I don't think Apple supports that either, which is why they are doing more than most other tech companies to change it. Unfortunately, it is a reality of doing business in a global market. This is a problem with just about any product you buy (if it isn't a problem in assembly, it's a problem in some part of the materials processing or raw material sourcing). The solution isn't for companies to pull out but to keep pushing for change and putting pressure on the governments to change. Until society, overall, in these places along with the government change, the problem will remain. It took the 'West' up until rather recently to accomplish this, and it still remains even here (hence, the need for unions). It's a human nature problem, not an Apple one.

    Yes, it would be nice if Apple brought more money home to the USA... but the USA needs to fix their tax codes for that to happen. NO public global company is going to just lose a bunch of money to wave the flag. These share-holders we're speaking of won't really allow that. I'm pretty sure the USA has higher corporate taxes than most other developed countries. The problem is more with the tax code and personal income tax, where it is pretty low on certain segments of the population. That encourages the situation you're talking about.

    Technology, whether Walkmans or iPods are tools. They can be used for good (like increasing education or helping autistic children), or as just a distraction, or for bad purposes. Having technology isn't the problem with humanity.


    Originally Posted by blahblahbberView Post

    I agree with this half, maybe not the leader per say but with that bank roll, odds are slim.



    Yea, the leader aspect would depend on how they react and how many other companies would survive. I'm just saying that they could be if they made the right moves in such a situation.

    Originally Posted by EugView Post

    My last tablet purchase was Android. It's looking like my next phone purchase may be Android as well. Sorry Apple (and AAPL).
    Eug



    I see Android kind of like I see Unix (just less open). I've setup unix boxes both for personal purposes, as well as administered them at work. While I can do this, someone needs to pay me to do so, or I need to have a really good reason to go there, to not take the Apple route. It just isn't worth it to me. I hear the latest version is nice too, but I wasn't impressed at all with previous versions. I'm at a point in my life/career where I want to get down to work with my technology, and care little if I can customize the 'desktop' as I like, download the latest mystery app, or fiddle with relatively useless settings, etc. About the only thing I can appreciate about Android is being unlocked carrier-wise for less money. Otherwise, I just don't see the point outside of being an anti-Apple rebel or because you're too young to have gotten over your tech-fiddling years. (I don't mean that as a putdown... I too enjoy digging into technology from time to time... but I simply don't have the time any more. I do it now once in a while as more of a hobby and mess with stuff like MythTV, etc.)

  1. Eug

    Clinically Insane

    Joined: 12-09-00

    All versions of Android before 4.0 were crap IMO. 4.0 was the Android beta. Android 4.1 Jelly Bean is very decent however as an OS release. It's a smooth OS, with lots of nice features, and it generally doesn't get in the way. And 4.2 should be even less in-the-way, since in 4.2 they've hidden all the developer options (which most people would never use) completely.

    I'd say 4.1+ is a true mainstream and modern consumer phone OS, on almost on par with iOS in terms of slickness, and superior in a few aspects. From a consumer point of view, I'd compare iOS to Mac OS X, and Android 4.1 to Windows 7. Yeah, I prefer OS X to Windows 7, but Windows 7 is perfectly fine too for the masses. Unix? Not so much.

    BTW, I did root my Nexus 7 and install all sorts of stuff on it... and then decided it was all a waste of time. Now I just run it stock and unrooted, with no modifications of anything... just like I do with iOS.

    Originally Posted by besson3cView Post


    That's cool. I'd think about switching to Android myself if I knew there wouldn't be a song and dance required to get OS updates in perpetuity like I can get with my iPhone for at least as long as Apple supports my phone hardware, which has been longer than the insanely short period of time people with Gingerbread based phones have been cut off from updates.

    I hear Jellybean is very nice, I'm looking forward to playing with it some day.


    For the Google LG Nexus 4, the only carrier selling it will be T-Mobile. Otherwise you can only get it unlocked... which is fine since the 16 GB model is only $349 unlocked from Google Play, which is unheard of for a flagship phone of this class.

    That must really piss off the retailers, because I believe that's less than the wholesale pricing for the phone from LG.

  1. Steve Wilkinson

    Fresh-Faced Recruit

    Joined: 12-19-01

    Originally Posted by EugView Post

    All versions of Android before 4.0 were crap IMO. 4.0 was the Android beta. Android 4.1 Jelly Bean is very decent however as an OS release. It's a smooth OS, with lots of nice features, and it generally doesn't get in the way. And 4.2 should be even less in-the-way, since in 4.2 they've hidden all the developer options (which most people would never use) completely.
    I'd say 4.1+ is a true mainstream and modern consumer phone OS, on almost on par with iOS in terms of slickness, and superior in a few aspects. From a consumer point of view, I'd compare iOS to Mac OS X, and Android 4.1 to Windows 7. Yeah, I prefer OS X to Windows 7, but Windows 7 is perfectly fine too for the masses. Unix? Not so much.



    OK, that makes more sense. I don't have a lot of time on Android, and none, so far, on Jelly Bean. I've also seen it more on tablets (which would be my main area of interest at this point). How do you feel the situation differs for tablets? (I'm not fully aware how much of the app market is tablet vs blown-up phone apps, but I know that's an issue.) I suppose the Android 4.1 to Win 7 would be a closer comparison from what you're saying. I was think more the older version would be more like Unix in terms of the UI clunkiness (not quite as polished as Windows.... can't believe I just said Win is more polished than something.... heh). Something like Ubuntu is somewhat user friendly if you don't muck around too much and have decent hardware.

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