Apple stock price takes its biggest tumble since December 2011 falling below $400 as reports from one of their audio chip suppliers, Cirrus Logic Inc, shows that they have excess inventory. This was reported by Bloomberg suggesting the excess inventory hinted that the sales of iPhone 5 have not been strong as expected by analysts.
As we have mentioned in the past, after the iPhone 4, the incrementally changes that Apple made to their subsequent iterations are not good enough to really wow consumers as their rivals, mainly Samsung, have all come out with equally or more compelling smartphones and tablets powered by Google Android operating system.
In addition, the high costs of Apple products and a slowing economy in North America and dismal European markets are definitely contributors to weaker sales. No one should really be surprised about this as this was expected and if Apple continues to make minor changes to their product offerings, they will most likely go the way of BlackBerry with stock price in the double digits and single-digit market share.
Apple has said that they are excited about the other emerging markets such as China, India, Russia, pretty much the BRICS countries, but unfortunately, while they will be able to capture some sections of the middle class with disposable incomes, a lot of people there cannot afford such high-end goods. Most likely Apple will try to shy away from entering into the lower-priced market which will be served by indigenous companies in the home county. This could be a Huawei or ZTE in the case of China. So to suggest that these emerging markets may save them is a 50-50 coin toss.
The only way that Apple can excite the buying public is to come up with revolutionary products with a predictable time to market. The smartphone product life cycle is at the maturity stage now and Apple can no longer command premium pricing.
However, as we also said in the past, we are not counting Apple out for one reason and that is their mountain of cash sitting at over $137 billion. With that kind of money, Apple can afford to make some mistakes and even take their time, well not too long otherwise people will be saying “What’s Apple?”.