TD Fall Investing GuideTD Fall Investing Guide
Sat, 26 Jan 2013 18:15:00 GMT | By Deirdre McMurdy, MSN Money

Is Apple really in trouble?

It may be easy — and fun — to call time on Apple. But it’s premature too.


Deirdre McMurdy

Oh go on and just admit it. A teeny-tiny part of you is kind of glad that Apple is getting a bit of a bashing in the stock market and tech sector analysts are suddenly throwing all sorts of shade over its performance and its prospects.

Admitting it only makes you human. After all, there’s not much we enjoy more than watching the mighty fall — or at least stumble. And they don’t come much bigger or less lovable than Apple.

As is its wont, the stock market has been abuzz with negative commentary about the fact Apple has just reported its slowest profit growth since 2003 and the weakest level of sales in 14 quarters. Sales of various iProducts climbed an impressive 18 per cent in the first quarter, but that compares with 73 per cent growth a year earlier.

And that brings us to the first point about all reports suggesting Apple’s imminent demise: absolutely everything about the company — its swagger, its reputation, its clout — is exaggerated.

When the new iPad was released last March, the company’s share had risen by 83 per cent in the previous year and by 50 per cent in the first 10 weeks of 2012 alone. It was the largest company in the world by market cap, its shares were worth $565 billion — more than the entire American retail sector combined.

Not only that, Apple accounted for 4.5 per cent of the S&P 500 and 1.1 per cent of the entire global equity market. It’s not just hard to sustain — especially after the death of the company’s founder and resident genius, Steve Jobs — it means that even the slightest motion creates enormous waves.

Also bear in mind that it becomes incrementally more difficult to meet earnings expectations when a share price is soaring. A large base makes impressive earnings growth tough to sustain.

Another important contextual consideration is the increasingly complicated field in which Apple — and its aggressive rivals — are playing. Where it once had a cozy corporate relationship with Google (Google CEO Eric Schmidt was on Apple’s board for about three years), it now has an intense rivalry that led Apple to abruptly ditch the Google Maps from its operating system and insert its own, flawed version.

But it’s Google’s Android technology that has caused Apple the greatest grief — something that’s not likely to be alleviated anytime soon. The popularity of that rival technology has allowed Samsung to take a huge bite out of Apple’s core business.

(Continued)
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