iPhone Reveal Sends Apple Stock Reeling
Sep 11, 2013 12:55 PM PT
Shares of Apple dropped more than 5 percent on Wednesday morning following the widely anticipated unveiling of the company's two new iPhone models the day before.
Representing the steepest drop in the stock since April, the tumble was accompanied by a newly lowered "neutral" rating by Credit Suisse, UBS and Bank of America Merrill Lynch. Taken together with the stock's 2 percent drop on Tuesday, this latest slip has reduced by more than US$30 billion Apple's market value.
"There is always an issue when there are leaks, and this sets expectations very high," said Ian Fogg, mobile analyst at IHS Screen Digest. "That can have an effect on financials."
'That Is Not a World Phone'
At least part of the market reaction was rooted in investors' disappointment in Apple's failure to fulfill expectations that it would deliver a device truly aimed at the masses.
"Apple didn't really do anything yesterday," said telecommunications analyst Stephen Blum of Tellus Venture Associates. "They took the Apple iPhone 5 and split it in two.
"All this stuff about them trying to move downmarket and get something for everybody else doesn't make any sense," Blum told MacNewsWorld. "The 5c is not a low-end device. You have to look at the price of the unlocked phone, because even if the consumer only pays $100 or so for the device, the carrier has to get the value back from the customer."
One way or another, in other words, "the customer has to support the full price of the phone," he added. "They are still selling the 4S, so they have price points that are stepping up from $450 to $850 on the high end. That is great, but that is not a world phone. That won't get them out of the saturated end of the market."
The China Factor
Based on the introduction of the new products this week, IHS has chosen not to upgrade its forecast of overall iPhone shipments for the rest of 2013.
One factor that could still cause a change in the forecast, however, is if China Mobile decides to offer the iPhone 5c and 5s, both of which support the TD-LTE standard used by the Chinese state-run carrier.
"There is certainly disappointment today that China Mobile is not on board," Fogg told MacNewsWorld.
Older iPhones didn't support TD-LTE, he pointed out.
Without China Mobile, "Apple has made some significant steps, but they have really done just enough to maintain their current shipment trajectory," Fogg said. "They have one new operator one board -- NTT DoCoMo of Japan -- but it is smaller than the potential they could have if they could secure China Mobile. So Apple hasn't made big steps where IHS would raise forecasts."
'The Flow Has Been Lost'
Without China Mobile and without handsets that target the low end of the market, the company could be playing to the same market yet again. This could see an increase in global shipments, but it fails to expand to those regions where people can't justify the cost of the devices.
"The notion of Apple's expansion into lesser global economies have always been seen as the logical next steps for their evolution," said Ken Wisnefski, CEO of WebiMax. "The concern has been offering the same product for a lesser price in other markets.
"The creation of the 5c didn't accomplish the lower price point that will influence consumers to purchase it; in essence, it stalled their attempts to further globalize their product reach," Wisnefski told MacNewsWorld. "Since Steve Jobs has been out of the process at Apple, the overall flow has been lost. This was a serious mistake by Apple."
Instead, Apple's efforts to maintain its hold on the high end of the market have only helped drag its share prices down.
"A lot of speculation was that the 5c would be a cheaper and would drive sales, and would raise iPhone shipments," explained Fogg. "The only really uplift here is that the 5c will support 4G."
Competitors, meanwhile, could find opportunity in Apple's weak moves.
"It doesn't seem that an excess of thought was put in to this," he concluded. "While companies like Facebook have seemed to recognize the areas they need to focus on to improve their value, Apple has moved backwards in the process."