As of Wednesday night the stock was down about 3 percent, after having been down as much as 5 percent. And over the past three months, it’s down 22 percent, equivalent to $130 billion in market cap.
This is a big number.
The fall was prompted by a story in the financial press Monday morning that Apple was cutting orders to its supply chain “by half.” That lead to a waterfall of bad news and scary headlines. As a stock analyst, I always get suspicious when there is a sudden wave of bad news, especially from vague or unnamed sources. There are very few coincidences in this world. As usual, John Gruber was quick to call all this out, and he linked to several other posts from Forbes and Seeking Alpha, both of which make good points as to why things may not be so bad after all.
And for what it’s worth, I had lunch with a component supplier to Apple on Monday. They get half their revenue from Apple. At least, I think they do. They would never admit to me that Apple was even a customer, much less if they’d just taken a big hit to orders. But they certainly didn’t act like someone who had just seen a quarter of their revenue disappear over the weekend.
Nonetheless, the tech community is once again worried about the long term viability of Apple’s success. I have heard a lot of the old arguments dragged out again: Android is growing faster, markets are saturating, consumers are losing interest. Etc., etc., etc.
I think all of this is overblown.
First, does anyone really question that Apple probably just had an incredible Christmas season? Up until January, it was hard to find an iPhone 5 or iPad Mini in most Apple stores. So despite what we analysts say, consumers somewhere still love Apple products.
Second, Android may be growing faster, but largely through heavy discounting. It is always easy to gain share by cutting prices. But Apple still has immense brand loyalty, and that has to count for something.
Finally, even if we assume Apple someday makes a misstep, they have $121 billion in cash on the balance sheet. This is not a guarantee of future success, but it is a comfortable insurance policy, and so far they have been disciplined in how they spend it (or not spend it). By contrast, both RIM and Nokia are facing serious financial constraints hobbling their ability to release new phones.
No one has ever managed to stay on top for ever in mobile, and maybe someday the iPhone will just be remembered as this decade’s RAZR. But there is no reason to jump to that conclusion today.
[Note: Do you think the pendulum has swung? Has Apple’s vertically integrated approach to mobile played itself out? Is it getting undercut by more open platforms like Google’s Android? We’ll be discussing these different mobile camps at our upcoming VentureBeat Mobile Summit in April, where we’re inviting the top 180 executives for a debate on how the industry can cooperate better to push the mobile economy forward. See more here.]
Jonathan Goldberg is a research analyst who focused on mobile markets.