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  • Is Wall Street’s Negative Delusion About Apple Ending?

    March 19th, 2013

    So Apple hasn’t felt the love on Wall Street since last fall, not because of something they did wrong, but because of perceptions that may or may not be true. When the iPhone 5 launched last September, some five million units were sold as of the first weekend on sale. Apple touted this as a record. They even ran out of stock, which meant they would have sold more if they could have built enough to fully satisfy demand.

    However, some industry analysts decided Apple had to sell up to ten million copies. Any less was a miss. Indeed, in that quarter as a whole, the Samsung Galaxy S3 outsold the iPhone, in part because purchases of the latter were postponed as customers waited for the new model. The iPhone 5 remained back ordered until December, but still managed to beat back the Galaxy S3 by a hefty margin in that quarter.

    In the ensuing months, we’ve been hearing more and more bad news about Apple. The glory days are over, the supply chain reveals that sales of Apple gear tanked. It’s time to move on. Except that the NPD Group reported that Mac says were up 14% year-over-year in January and February in the U.S. These numbers appear to indicate that the severe constraint in iMac supplies really took a toll in the December quarter, just as Apple said.

    In the run up to the arrival of the Galaxy S4, you could feel the delight of Apple critics that Samsung would hit a home run. And what about a defection or two from the iPhone to the S3 by some high-profile Mac bloggers? How could Samsung possibly miss?

    But when you look at the actual hands-on reports from the media after last Thursday’s special event in New York City, it’s clear they weren’t so impressed. The S4 is only slightly different from the S3 in appearance, and only the internals are enhanced. This is the sort of criticism thrown at Apple when the iPhone 4s replaced the iPhone 4, but in that case it was also an attack against Tim Cook only weeks after he replaced Steve Jobs as Apple CEO.

    In recent weeks, there have even been some demands that Cook go. A big fuss was made over his declining popularity among Apple employees as a CEO, from 97% last year to 93% this year. It’s not such a big change, and it may be that some Apple workers are upset over the large drop in the stock price. He’s still ahead of Steve Ballmer. Besides, if Apple’s stock price soars again, that rating may well change accordingly, and a popularity contest doesn’t make a company successful. The way Microsoft is doing, Ballmer should be getting a zero rating from Microsoft’s employees.

    Yet Apple may be over the worst of the negative publicity. In the first two trading days after Samsung’s Galaxy S4 was launched, Apple stock has continued to grow at a pretty decent pace, even though the overall stock market was on the decline. Certainly the results of any single trading day or two are hard to take seriously, and it’s not as if the recent declines in Apple’s stock price make any sense.

    But you have to think that Wall Street wasn’t so impressed by the way Samsung upgraded the S4. Aside from predictable hardware upgrades, there are some software gimmicks that may or may not attract customers. Reviewers have been mixed about how well Smart Scroll and other features will actually fare in the real world. It’s almost as if Samsung decided to throw in everything they could make work at least passably, hoping that customers would be overwhelmed with the pomp and circumstance. Will these features catch on? Can they?

    I also want to be fair to Samsung. I have carefully evaluated the S3, which is a pretty decent smartphone, but somewhat ragged around the edges when it comes to software. Did Samsung make things better, or just add more fluff without refinement? A few hands-on sessions are not enough to make that determination. By next month, actual shipping units will be in the hands of reviewers, and then we’ll know the truth, although it does seem that Consumer Reports is prepared to give the S4 a high rating regardless. Their blog on the subject clearly points in that direction, which amounts to prejudging to the nth degree.

    Meantime, when it comes to Apple’s rising stock price, it’s too early to predict a trend, and I would never presume to make predictions when it comes to Wall Street. Someone else’s bearish comments about Apple may reverse the trend. Besides, beyond boosting iPhone advertising, and putting up some material at their Web site, it’s not as if there’s any evidence of how Apple is really doing so far this quarter, aside from that NDP Group report on improved domestic Mac sales.

    If Apple can meet their own guidance, and deflated analyst expectations, when the current quarter’s results are announced in a few weeks, Apple might really change perceptions in a big way. Or maybe the critics will find another way to attack Apple. In the meantime, Apple’s stock price resumed the downward slope Tuesday by a small amount that was not enough to erase the recent gains.



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