So Why is Wall Street Still Down on Apple?

July 28th, 2008

As most of you know, in his off-the-record conversation with a reporter at The New York Times, Steve Jobs supposedly laid to rest ongoing concerns about his health and ability to continue to perform his duties as Apple’s CEO. Yet, Apple’s stock price continues to take a beating as of early this week, so you have to wonder how much more the Street needs to feel reassured?

Understand that I think Jobs is totally wrong in his behavior. Instead of calling a newspaper reporter, chewing him out, and then giving him the information he wanted on background, he should have acted rationally. How so? Well, why couldn’t he just deliver all the juicy details for full attribution?

Better yet, why not send a letter and some medical records over to Apple’s board of directors — assuming they don’t have such documents already — and give them permission to disclose at least a summary of the basic information?

Why indeed!

Now I do understand that a private citizen should not be compelled to disclose personal medical information except, perhaps, to law enforcement in connection with a criminal inquiry. But when someone is a public figure, as Steve Jobs happens to be, and is also CEO of a multibillion dollar multinational corporation, different rules apply. Sure, Apple may be complying with the letter of the law as far as the SEC is concerned, as they always do. Unfortunately, questions about Jobs’ health clearly took on a life of their own, and this is a climate where personal gossip gets far too much emphasis.

On the other hand, even coming clean on the health of Steve Jobs may not be sufficient. When Apple lowered its guidance as far as profit margins are concerned, it was actually good news, not bad. Unfortunately, far too many financial analysts don’t see it that way, or perhaps they are going to benefit if the stock price is knocked down to their preferred level. But I really don’t have the patience to discuss such nefarious efforts at financial manipulation. I think you get the picture.

You see, Apple is promising a major product transition. When a newly-designed product is released, a company has to recoup its development costs and startup production ramp expenses. Initial purchase prices can be set higher as a result, and they would gradually come down as those expenses are amortized. Apple, however, doesn’t really cut prices very often. So, they would take the hit up front and then, over time, wait for profit margins to catch up.

If this new product is as big a deal as Apple implies, then this all makes sense. As I said, it should be good news, not bad. It’s not the same thing, for example, as a company cutting prices as a form of fire sale to move product that’s catching dust on the shelves. That’s something the financial world has a right to be concerned about, because it means the business in question may be suffering and is desperately seeking a solution to their financial woes.

Apple doesn’t have financial woes. They just keep making fatter profits, and they have plenty of cash on hand to fund acquisitions and, if need be, emergencies should they arise.

So that takes us to this spectacular new product that everyone’s talking about. Just what is it that Apple is being so coy about? In not saying anything several times during their session with the financial community, they, of course, fueled all sorts of speculation about what might be forthcoming.

Certainly there are existing product lines that might be in store for major upgrades. The MacBook and MacBook Pro, for example, have case designs that haven’t changed much from the original iBook and PowerBook versions.

But would new models that have more of the beveled look of the MacBook Air amount to major product transitions? Even something with a touch screen could still look very much the same as existing models, with perhaps larger trackpads to accommodate additional MultiTouch features.

All right maybe that’s not it, so where do we go next?

I can see where Apple might want to revise the iPod touch, to make it more affordable in light of the changes in pricing policy for the iPhone, but the look wouldn’t change significantly, would it? Or would Apple add a nano-based alternative with a lower price of admission and a smaller touch screen? But that doesn’t seem to represent something earth-shattering.

Some tech pundits are even suggesting that Apple has a new flat panel TV under development, which would integrate Apple TV and perhaps even incorporate some sort of built-in audio system that eliminates the need for a third-party product. But Apple doesn’t have a compelling history in providing great-sounding speaker systems.

But what if also Apple licensed TiVO technology, and integrated the new two-way CableCard capability, so you wouldn’t need your cable company’s set top box?

I’m not sure. I’m still having difficulty digesting a fully-integrated flat panel TV solution as something Apple ought to consider as a major product line. Of course, I also felt that the mobile phone market was over-saturated too, and then the iPhone changed the paradigm.

But I don’t mind when I’m proven wrong. Regardless, they sure got my curiosity.

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4 Responses to “So Why is Wall Street Still Down on Apple?”

  1. Transition to SSD? PA Semi chipsets?

  2. Transition to SSD? PA Semi chipsets?

    They just acquired PA Semi, so there wouldn’t seem to be enough time to implement their technology. SSD is still too costly. Yes, the price of a 64GB drive for the MacBook Air has been cut in half, to $500, but that’s still too expensive.

    Some are talking of touchscreens on the new Apple notebooks, but I have also read that such capabilities can be quite costly in a larger screen. So is Apple just going to absorb the higher price of flat panels until larger yields bring them down? That could explain the lowered margins for this quarter.

    Or maybe it has nothing to do with any of this. 🙂


  3. Constable Odo says:

    Wall Street still doesn’t take Apple products seriously. They’re considered just pretty toys for teenagers and adults that haven’t fully grown up yet. RIM, Microsoft, IBM are considered real business-type tech companies. None of that fun stuff in their product lines. Besides, Steve Jobs doesn’t believe in wearing business suits. How can WS take someone like that seriously? (I’m being sarcastic).

    WS has a strange mentality. Even though the consumer market is much larger than the business market for Apple, I believe WS believes the business market is more stable. I guess that WS and potential investors thing there is too much of a risk involved to invest in Apple long term. Apple has lately become the laughing-stock of WS. Apple fans keep trying to pump up the value of the company by saying how well Apple is doing in sales, market growth, innovation, etc. But I notice that the stock price continues to drop, so Apple fans must be in error about Apple’s value. It’s worth much less now than it was seven months ago. So if WS says Apple is crap, then that’s what it is. Nothing will change until WS’s general concensus says Apple is worth investing in.

  4. BobS says:

    They just acquired PA Semi, so there wouldn’t seem to be enough time to implement their technology.

    Don’t be so quick to write off PA Semi technology near-term. Apple was known to be working with PA Semi prior to the acquisition and some think that Apple’s decision to purchase the company outright was due to results of this former collaboration.

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