Apple’s stock closed today at $515 a share, down by 23 percent from a high of $705 just four months ago, according to media reports. So why is it that the once most highly-valued company slipped so much and what does this portend for the company in the post-Steve Jobs era?
A number of reasons are laid out in this piece on Salon, which also links to related stories in the New York Times and Business Insider. An economist quoted in the Times, Edward Zabitsky, says that Samsung has surpassed Apple as the best-selling brand of smartphones, usually selling for less than the iPhone. In addition, he says, apps are becoming more important to the consumer than the device they run on and that increasingly, the most appealing apps are ones that access the cloud and interact with other devices. Even though the Apple App Store’s inventory of 975,000 apps makes it the industry’s largest, the Google Android OS, which powers most Samsung devices, has 675,000 apps – though both are growing – the Android inventory is certainly robust enough to make it competitive with Apple’s offerings.
Henry Blodgett, a onetime high profile Wall Street analyst and now a writer for Business Insider, reports that Apple has reduced iPhone manufacturing orders to a range 25-30 million units from a previous of 35-40 million units, indicating shrinking demand. While Apple boasted Dec. 17 that it sold 2 million iPhone 5s in the first three days the new models went on sale in China, CNET reports “a lack of huge lines for the iPhone 5 in China,” and reports that the phones are generating less profit than they had in the past. That would indicate that Apple is discounting prices to move inventory.
Some Wall Street analysts suggest Apple launch a stock buyback program, an often-used tactic to increase the value of shares by making them scarcer. But the decline does raise the question of whether the death in November 2011 of Apple CEO and co-founder Steve Jobs is having an effect on how the company is viewed by the investing public. Jobs was, as we all know, a visionary and a powerful force in the development of Apple products and the management of the company. Does his successor as CEO, Tim Cook, have the same mojo as did Jobs? Should we read anything into today’s news from Bloomberg that Cook’s 2012 total compensation will be ONLY $4.16 million, 99 percent less than the $378 million he took in the year before?
This is also the year that Apple suffered the embarrassment of having its Apple Maps application utterly fail in the market, forcing Cook to publicly apologize for its flaws and for Apple to again make Google Maps available in its App Store. From personal experience I can tell you that Apple products are not as perfect as their ads make them out to be. One day the iPhoto application on my Apple MacBook Air inexplicably deleted all the photos I had stored in there. Poof! Gone!
Cook has his defenders, of course, like tech journalist David Kirkpatrick who said today on the online program Yahoo Daily Ticker that “I don’t think there’s any fundamental problem with Apple.” Despite the Apple Maps fiasco, and negative news reports about worker conditions at a plant in China that makes iPhones, remember that this is the year Apple won a major patent lawsuit against Samsung here in San Jose when a jury awarded it $1.05 billion in damages because Samsung copied its design for smartphones and tablets. The case is on appeal.
Apple also introduced the iPhone 5 and the iPad Mini this year to a strong market response, Kirkpatrick notes. “It’s still by the far the world’s most popular consumer electronics company,” he said, of Apple, further describing Cook as a “brilliant” leader and that the company has “a lot of tricks up its sleeve” for 2013, including what he expects will be the introduction of an Apple TV, which will be connected to the Internet to deliver programs.