Hola Todos!
It’s absolutely amazing what has happened to Apple’s share price over the last six months. From a high of $702 in September 2012 to the lower 400’s in March 2013, it’s been one wild ride. Full disclosure: I do not own any shares of Apple or shares of any other firm for that matter. Even fuller disclosure: I am a marketing Ph.D. not a finance Ph.D. and sometimes Wall Street makes no sense to me whatsoever.
Case in point – Apple. The rumormongering goes something along the lines of this: Apple has not had a blockbuster product since Steve Jobs died and worries persist that Android/Samsung is eating into iPhone’s market share. I believe I started this paragraph with the word rumormongering.
Apple has one of the best balance sheets in recent memory ($137 billion in cash, zero debt, $12 to $16 billion in new cash per quarter, a single-digit P/E ratio). As for iPhone, not only did the iPhone 5 outsell Galaxy in the US and around the world, but the iPhone 4s ALSO outsold Galaxy in the US and around the world for the last quarter of 2012. While no one seemed too excited about iPad mini (even I complained they missed the price point), Apple could not keep the device in stock during the holiday shopping season. Over 80% of Apple’s revenue came from products released in the last 12 months.
Once again, Philip Elmer-DeWitt of the Apple 2.0 blog hit the nail on the head. Steve Jobs was known for having a reality distortion field around him. In this post, Philip suggests that the reality distortion field has been inverted: now everything is normal inside Apple yet people on the outside cannot grip reality.
Here is my take – the business press has been writing positive articles about Apple for so long that those articles are no longer interesting to readers anymore. Instead, the articles that say Apple is “in big trouble,” “losing it’s cool” or “just plain doomed” attract more attention. I’m curious to see how long business press will keep ignoring fundamentals and instead continue with rumormongering just to attract attention. What will they do if Apple does roll out at least one or perhaps two new product lines this year? We’ll just have to wait and see.
Something to think about today…
Best regards,
Dr. Dan-o
Associate Professor of Marketing
Stillman School of Business
Seton Hall University
Hi Dr Dan-o,
I love to follow Apple stock and have a few opinions on it. I am not a finance person either having a BSBA in Mktg, MBA in Mktg and an MS in Computer Science. In a way my background gives me a different view of Apple.
When you own 100% of a market and sell 1 million products and then two years later you only have 50% of the market due to competition but you sell 5 million products, that is a good thing. Of course the headlines can read, “Widget Company Loses Half the Market” instead of “Widget Company Sells Five times the Number of Widgets”.
This is inline with your article. But it goes further. With competition comes lower ASP and smaller margins. Of course if make $ 10 profit per widget selling 1 million and only $ 8 profit per widget selling 5 million, you have made more money. This is if you take in all costs.
Apple has the potentional to sell its products through China Mobile which has over 700 million subscribers. Though no name smartphone producers are taking lots of market share, Apple could do well with added potention. There are 15 million unlocked iPhones on China Mobile already. Apple has over 685 million people left to sell. Twice the size of the US. Not all are buyers or can afford Apple products, but a cheaper phone could make inroads hence with a much lower margin.
But if China Mobile customers start getting locked into IOS and Apple can get some money from apps and itunes, then they can wait until those customers can grow into more expensive products. New products can help Apple also. iWatch, iTV and others. Who really knows what is going on.
Finally we have to assume Apple is taking time to reset the company. I can’t believe the stock will be at $200 at the next Annual Meeting and Tim Cook will say “Hey I feel your pain and next year will be even more pain.” But Apple has led the press to think it is doing nothing and the stock will only fall. As Jim Cramer said, “They deserve the benefit of the doubt”
As the competition between Google, Samsung and Apple heat up and the money at stake, the benefits to the consumer will be great. 150 billion (what they should have at the quarters end) will allow much innovation at Apple.
Hola Dan – thanks for the well detailed and on-point comment. I could not agree with you more that Apple is doing a number of “resetting” strategies; starting last fall with the shake up in upper management, to the new product launch schedule (i.e., changing the resent launch months for iPhone and iPad – therefore opening up new slots this year for – perhaps – new Apple products. I’m curious as you are to see how this year will turn out. The market, however, is not so patient.
best
Dr. Dan-o