Friday, April 29, 2016

April 29, 2016--Apple of Discord

Apple, Inc. by capitalization is the world's largest corporation valued at more than $700 billion.

Earlier this week they reported second quarter earnings.

For the first time in 13 years they not only failed to meet earnings projections but saw revenue fall in comparison to last year's Q2 income by nearly $7.5 billion. Down to $50.6 billion from $58.0.

Third quarter projections are looking even bleaker.

What's going on?

Mainly problems with iPhones, the company's cashest cow since it was first released in 2007.

This past quarter iPhone sales were down by 10 million units--51.2 compared to 61.2 in 2015.

This may be cyclical--people holding on to their current phones in anticipation of rushing to line up to buy the new model later this year. Or, it may be that the air is beginning to come out of Apple's balloon. I almost said bubble.

Since Steve Jobs died, new products have all been pretty much failures. The Apple watch, for example. Anyone know somebody who owns one? I don't.

The Apple we know is still Job's company. What has been and still is profitable are all things designed and marketed during his brilliant time heading the company--iPods, iPads, MacBooks, tablets, and of course iPhones. All the ongoing success derives from the momentum he imparted to the company.

Further, Apple has been the go-to place for consumer electronics in large part because its products have been aesthetically beautiful and, more important, "cool."

Thus Apple is vulnerable because so much of its success depends on its continuing to be convey status.

This could evanesce in a hurry if someone else's smart phone--the Samsung android, for example--is viewed to be cool.

Cool, by definition, doesn't last forever. In fact, iPhones have been most desirable for much longer than the past history of cool things might suggest.

As soon as the kids and hip-hoppers move on to whatever becomes the "latest," that will be when we really will see Apple's earnings and stock value fall off a cliff. This is apparently already happening in China.

If I had any Apple stock, I'd get out of it right now.

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