Apple Stock's Grip Slips
Wall Street may be losing its exuberance over Apple, but that doesn't mean the company has fallen upon hard times. It's more like it's fallen from a mountaintop onto a vast plain littered with all kinds of competitors who are no longer so obviously outmatched. "Everyone is taking market share from everyone, and the market has not adjusted," said ACI Research's Edward Zabitsky.
Apple's stock dipped below US$400 this week -- the second time it has fallen so far since it peaked at $700 last September. Investors have voiced concerns that the company has lost its innovative edge and that demand for the iPhone is waning.
Apple executives addressed those rumblings head on at the Worldwide Developers Conference held earlier this month, where they unveiled a revamped mobile operating system, a radio service, and an updated suite of productivity applications, among other refreshed products.
This latest drop in stock price may have resulted from a failure to impress -- particularly with respect to iOS 7's new look, said Edward Zabitsky, principal and CEO of ACI Research. The aesthetic changes are nice and were overdue, he acknowledged, but it could be that designer Jony Ive "may have just not had enough time to introduce some real changes," he told MacNewsWorld."
Getting Back the Ecosystem
This isn't a market where incremental updates are always going to do the trick, Zabitsky added. Competition from Samsung and other Android vendors is growing each day, and Internet companies are figuring out ways to make sure their presence on an iPhone is just as important as Apple's.
"Web companies have developed mobile strategies and have direct end relationships with customers," he noted. "Your iPhone isn't really the place where you connect with Apple, with a few exceptions. It's where you go for Gmail, Google Maps, Facebook, Netflix, Twitter and other apps that have nothing to do with Apple. As much as Apple can brag about how many apps it has, people really only use a handful of them -- and they're usually not Apple apps."
Apple's way of doing business is changing, Zabitsky observed, and the market is trying to figure out how to adjust, just as Apple is.
"Apple is losing the ecosystem advantage," he said. "Everyone is taking market share from everyone, and the market has not adjusted to a new model of high-end consumer devices with lower gross margins and lower profits."
That doesn't mean Apple isn't doing well on several fronts and won't continue to be a tech leader going forward, Zabitsky added, but it does mean that stock prices closer to $400 might be more common than the $700 highs.
"It's going to take time to adjust, and people have to appreciate that," he said. "The stock might bounce and even have a significant rally, but it's not going to get new highs on a product cycle without some serious changes to iOS and the way Apple puts itself out there."
On Apple's intellectual property front, Samsung won a victory in Japan this week. The Intellectual Property High Court in Tokyo upheld an earlier ruling that Samsung did not infringe an Apple patent on a method of synchronizing music and video, Bloomberg reported.
The win for Samsung amounts to another notch on its belt, said Douglas Panzer, attorney at the Law Office of Douglas Panzer.
"This is just another heat in the never-ending endurance race between Samsung and Apple," he told MacNewsWorld. "These suits have become a standard part of the competitive process for these companies. Apple, Samsung and all the other players, like Motorola, will continue to play the game this way. They will be ecstatic if one of these wins scores precisely that debilitating blow to the other side -- but as long as they continue to operate, it will be just a high-tech cola war, with each player hoping to be the Coca Cola of the mobile industry."