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More About the Apple/Wall Street Disconnect

So as I write this column, Apple’s stock price continues to decline, though not quite as quickly as it did earlier this year. In case you forgot, it all started when an as yet unconfirmed report from Asia claimed that Apple had severely cut back on orders of displays for the iPhone 5, indicating what was believed to be a sharp falloff in demand. Early in January, the mainstream media, including the Wall Street Journal, picked up on the story. Since Apple doesn’t typically respond to reports of this sort, far too many so-called journalists and commentators took it seriously without doing actual research.

Indeed, there has been a procession of reports attempting to explain what Apple needs to do to right the ship. That Apple’s profits, though more than 50% higher than Samsung’s, were relatively flat in the December quarter, caused further downgrades. So what has gone wrong with Apple?

Or has anything gone wrong with Apple?

Well, you have to wonder what’s really happening amid reports that the iPhone 5 was the world’s most popular smartphone in the December quarter, followed by the iPhone 4s. The highly-touted Samsung Galaxy S III took the number three spot. So much about iPhone 5 sales flagging, and it appears it got a big start in China during that quarter when over two million units were sold the first weekend.

And once again, you’ll want to pay close attention to the world “sold,” which Apple intends to mean that the unit was delivered to the buyer. It’s not “shipped,” where a company sends boatloads of product that end up on a warehouse somewhere or in the stock rooms at a dealer. That doesn’t demonstrate how many people are actually buying the things.

Another rumor: A report that Foxconn had stopped hiring factory workers because of the falloff in demand for the iPhone 5, hence reduced production. That report, however, was denied by Foxconn. But in the real world, you expect that sales are going to be less in the March quarter, but that’s nothing more than a seasonable trend, not an indication of reduced interest in Apple gear. Beside, it’s also reported that sales of the Galaxy S3 had begun to fall off in the December quarter since the product has been out for a while. A new model, the S4, is expected to be announced in a few weeks and go on sale some time in the spring.

But Wall Street isn’t paying attention to Samsung’s claims about falling profits in 2013, or that Amazon, though reporting good sales, continues to barely make a profit. How does that benefit the market anyway?

So we have here the peculiar situation of bad news about Apple, real or imagined, triggering huge declines in the company’s stock price, whereas good news is causes little or no reaction.

Now I’m more interested in solid journalism and reasoned speculation rather than simply shooting from the hip, and making wild guess that may get lots of attention, but have little basis in fact. I’m also under no illusion that Apple is perfect, or that they can’t do things better.

Anyone who has used Apple products over the years can produce huge lists of software features that don’t work properly, or could be improved in usability, or hardware issues that can be extremely vexing. I’ll only cite my son, Grayson, and his sad experiences with a 2008 Black MacBook, which he received as a graduation present. It has been returned to Apple dealers for major repairs, including the hard drive, LCD panel, logic board and various and sundry other components. In a sense, he has a new computer there, but the optical drive is dead. After doing a couple of favors after AppleCare expired because of the computer’s unfortunate history, Apple will not pay for any more repairs. So my son will simply save for a new computer when the one he has ceases to work. He is not going to throw good money after bad to fix the drive.

While I’ve had no problems with iPhones or iPads, I can count a couple of iPods over the years with failed hard drives, including my son’s 160GB classic. But mechanical hard drives on a small music player are clearly subject to worse abuse than even a note-book, so it stands to reason that the iPod is almost all flash memory these days, except for a single classic, essentially the same product my son has, that continues to appeal to folks with huge media libraries, and a willingness to take a chance in questionable longevity.

Going forward, the quirky situation in the financial markets has only put heavier pressure on Apple to deliver financials for the next few quarters that meet reasonable expectations. If those expectations are exceeded, even better. But it’s also true that some of those so-called industry analysts have gone way overboard in predicting huge sales for Apple, and when their unreasonable hopes and dreams were dashed, the people who screwed up weren’t blamed. Apple was blamed. But the numbers will nevertheless have to tell a good story to begin to overcome all that bad news, however false that bad news might be.