A Wild, Wild Week for Apple
Feb 3, 2010 5:00 AM PT
Apple hosted another new product circus last week, and as usual, some investors sat with itchy trigger fingers on the "buy" and "sell" buttons.
When CEO Steve Jobs unveiled the iPad Jan. 27, Cupertino's share prices shot up to US$207.88, up $1.94, or less than one percent, from the previous day's close of $205.94. Apple's prices have been sliding since, closing on Monday at $194.73.
January has been a tumultuous month for Apple. After its stock prices peaked at $215.04 Jan. 19, they went on a roller-coaster ride.
Then Apple unveiled the iPad. In announcing the device, Jobs was lavish in his praise, calling it Apple's "most advanced technology in a magical and revolutionary device at an unbelievable price.
Reaction has been quite mixed. Some Apple followers panned the iPad after seeing the presentation, citing its lack of features such as multitasking, a built-in camera and iChat. They also criticized its lack of support for Adobe Flash and its dependence on adapters.
For example, Shelly Palmer, president of the National Academy of Television Arts & Sciences, who describes himself as a "Jobsian supplicant and an Apple acolyte" and has six Macs in addition to other Apple products, was not impressed with the iPad. "Moving past the name, I am trying to understand what the iPad is and why it needs to exist," he wrote. "If you need to drink the proverbial Kool-Aid to have an iPhone or even 'be' a Mac Person, you'll need a gallon jug of the stuff to get you to buy into the iPad."
Neither Fish Nor Fowl
Others aren't quite sure what to make of the iPad. "I don't think the iPad is going to be a runaway success, but it should fare better than the Apple TV," Andrew Eisner, director of content at Retrevo, told MacNewsWorld. "I suspect the iPad will be positioned more as an Internet appliance, home controller and media player," he said.
"It looks like a great LED screen with a very responsive touch interface," Chris Hazelton, a research director at the 451 Group, told MacNewsWorld. The iPad is going to be costly for users, he warned. "To a greater degree than the iPhone, users will need to budget for content as well -- e-books, games, productivity software and other apps will be more expensive than 99 (US) cents," Hazelton explained.
Many iPhone apps are offered at 99 cents apiece.
The iMac's iProblems
Meanwhile, the 27-inch iMac, part of a new iMac line rolled out in October 2009, continues to cause Apple headaches. On Tuesday, Cupertino released its second firmware update to tackle problems with the computer's screen since December.
In December, Apple had released a firmware update to tackle image corruption and display flickering, following users' complaints. The update released Tuesday is aimed at issues that may cause intermittent flickering.
However, Apple apparently has yet to tackle another source of user anger -- a yellowish tinge on the 27-inch iMac's screen. A rumor has circulated that Cupertino temporarily halted production of the 27-inch iMac, though The Wall Street Journal reported that an Apple spokesperson has denied the halt.
Still, that particular iMac is generally a niche product, according to Broadpoint Amtech analyst Brian Marshall, and so it won't impact Apple's share prices much.
iPhone's Market Share Slips
Yet another bit of bad news for Apple surfaced Tuesday: Its iconic iPhone lost market share in the last quarter. Figures from ABI Research indicate it accounted for 16.6 percent of smartphone sales worldwide, as compared to 18.1 percent in the third quarter.
It's not entirely bitter news for Apple, though. In fact, fourth-quarter iPhone sales were 18 percent higher than in the third quarter. The overall smartphone market, however, grew 26 percent during that period, thanks to Motorola's introduction of Android phones and increased sales of Nokia phones, ABI Research said.
These are merely warning signs that Apple cannot expect to rest on its laurels; unless it comes up with a new, improved iPhone or some other device that captures consumers' imaginations, it might begin losing ground. In the past, Apple has upgraded the iPhone each summer, meaning a new model may be just around the corner.
Faith as a Grain of Mustard Seed
Notwithstanding all the criticism of the iPad and the problems with the iMac, analysts are firmly supporting Apple's stock. That's partly because of the high average selling price of the iPhone.
"The average selling price of the iPhone amazingly increased again to about $620," Broadpoint Amtech analyst Brian Marshall told MacNewsWorld. "That's up about 2 percent quarter over quarter."
He has increased his calendar year 2010 earnings per share (EPS) estimates for Apple from $11.75 to $12 because of the company's higher overall revenue and solid margins and product trends. "We reiterate our buy rating and raise our price target from $260 to $264 based on 22 times our new pro forma calendar year 2010 EPS of $12," Marshall said.
Barclays Capital also considers Apple stocks a buy. The iPad adds "at least $1" in EPS and more than $20 in value to Apple's shares, according to analyst Ben Reitzer. It may cannibalize sales of other Apple devices, however.
Perhaps a call for cautious optimism is required here -- we fear, like Chicken Little, that the sky may fall on our heads, but we hope like blazes that it doesn't.