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  • The Good News Won’t Help Apple on Wall Street

    October 6th, 2008

    Apple has some news that, if confirmed, they can really crow about in their financial statements that are due for release later this month. But, at the end of the day, it probably won’t help their stock price.

    Their troubles got worse last week, when a bogus report about Steve Jobs suffering a severe heart attack got posted on a citizen blog at CNN. In retrospect, such controversial stories should be vetted by one or more editors before being posted, but someone was apparently asleep at the wheel.

    It was understandable to watch Apple’s already dipping stock price tank still further. After all, Steve Jobs and Apple are regarded as one and the same. The destinies are always tied together, and if anything happens to Jobs to impair his work at Apple, you just know that lots of people will feel that the glory days are over.

    In practice, this is likely only partly true. Apple has thousands and thousands of employees developing and supporting their products. Without a number of brilliant executives, the vision of Steve Jobs cannot be carried out properly, however skilled he might be at whip-cracking. He is, after all, not an engineer or designer, although he is credited with that and other skills by many people.

    Now it’s also true that Apple claims to have a succession plan in place should the worst occur, although they aren’t revealing what that might be. That, to me, is a boneheaded maneuver, because you can how easily billions of dollars of the company’s value can be lopped off simply by an unfounded rumor.

    Worse, with serious concerns about the economy, despite the decision of Congress last week to approve that so-called bailout package, it doesn’t appear that Apple will get off easily for a while. Even a stellar financial report for the past quarter may not be enough to assuage doubts about the company’s ongoing success.

    Indeed, as I observed Apple’s stock price declining, I was also reading a report that they have already succeeded in selling more than the promised 10 million iPhones so far this year. How did they come by that figure? Well, simply by examining the serial numbers of various units and applying a few known facts about the way Apple designs such data. It may just be a case of spreadsheet voodoo, of course, but there are other indications that iPhone 3G sales are way ahead of what the pundits expected.

    There’s a report from the NPD Group that the iPhone 3G had a 17 percent share of the overall U.S. mobile handset market surveys taken from June through August. That’s the entire market, not just smartphones, and number one is the aging Motorola RAZR, which is often given away as a free premium by cell phone carriers to get you to sign up.

    To make this information even more compelling, at one time Steve Jobs suggested that he’d be satisfied if the iPhone garnered just one percent of the global market. How well they really did won’t be known until the final figures are released.

    Under normal circumstances, extremely positive news of this sort ought to be sufficient to send Apple’s stock skyrocketing. It would mean that, despite the ongoing concerns about the economy around the planet, Apple had managed to succeed beyond the wildest expectations of their severest critics.

    So how can they prevail under these conditions?

    Well I don’t pretend to be an expert on such matters, but if you have less disposable income to spend, you are going to look for something that delivers the most value. Yes, you can get smartphones for nearly nothing, but most provide a level of value equal to the purchase price.

    That is just as true for the cheap PC. Yes, they can probably all handle the basics, such as email and Web browsing, with reasonable levels of performance. But as soon as you run into some sort of oddball behavior, such as the inability to get a peripheral to work, and you confront one of those typical Windows configuration nightmares, you wonder just how much your time is really worth. Wouldn’t you prefer to spend that time earning a living rather than coping with the eccentricities of a temperamental machine.

    I don’t know about you, but the reason I use Macs is because I can usually get my work done without any distractions. Not that things are perfect by any means. We all know that Macs have their own share of problems from time to time. But for most people, they just work, and don’t you want the best tool for the job?

    This isn’t to say that Apple is immune to possible economic catastrophes, or at least severe downturns. In fact, I fully expect Apple’s quarterly results to demonstrate great sales performance, but their guidance for the current quarter is going to be extremely conservative, despite the coming holiday season. Indeed, I expect the stock price may continue to drop for a while before it goes up, unless the overall flavor of the market undergoes some change.

    But that’s as far as my predictions extend, and I always reserve the right to be wrong.



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