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Concern about the health of Apple's co-founder and chief executive has reportedly been one factor damaging stock prices.  (Source: Cupertino City Council)
Concerns about overvaluation, succession are top on investors' list

By market cap Apple Inc. (AAPL) is the world's biggest tech company, having recently passed Microsoft Corp. (MSFT) for that spot.  Apple also recently passed Microsoft in quarterly profits.  And the company blows past analyst estimates virtually every single quarter.  Still, all is not well for Apple in investors' eyes.

Apple stock hit a high of $364.90 in February 2011, and has since churned, cycling up and down.  But since the start of June there's been consistent downward momentum, which has dropped the stock to well below its cyclic lows, plunging it to $315.32 USD a share at the bell on Monday, June 20.

Most analysts attribute that 15.7 percent drop to uncertainty about the succession plan for Apple, after the departure of chief executive Steve Jobs.  Mr. Jobs, who co-founded Apple in 1976, returned to the company in 1997 and transformed it from a struggling boutique vendor to the world's largest gadget maker.

But with Mr. Jobs suffering from complications of pancreatic cancer, which caused him to need a liver transplant, his health has been a major concern over the last several years.  Most recently Mr. Jobs took yet another medical leave of absence, though he's still giving public presentations and attending company meetings.

Henry Blodget at Business Insider writes:

In a way, the situation Apple finds itself in is akin to an impending CEO retirement--without a successor having been named. In such "lame duck" periods, companies can become paralyzed, as managers focus more on their own future and political stature and uncertainty and less on the business.

And, in Apple's case, unfortunately, the situation is even worse: No one knows whether Steve will return, or when, or even when the question of his return will finally be put to rest. So the company is in a sort of perpetual purgatory.

The source of Apple's stock drop may also be of a more technical nature.  In terms of price-per-earnings ratio, the stock is somewhat overvalued at a P/E ratio of 15.0 (by contrast Microsoft has a 9.7.  P/E ratio isn't always the best judge of performance, but some fear that Apple's stock has risen too far, too fast.

Additionally, some believe the options markets are dragging the stock down as trading was flat for much of last week until Thursday-Friday.  However, a 1.5 percent drop on Monday dispels that theory somewhat.

Some investors still stand firmly behind Apple.  Andy Zaky of the Bullish Cross says that Apple stock will likely reach $500 USD/share, so is a great buy at $300-$320 USD/share.  He writes:

Because of the market's short-term blindness to this obvious reality, we find it prudent to put a strong-buy rating on the stock if it so happens to trade under $300 during a potential brutal summer correction.

His sentiments are echoed by Horace Dediu at Asymco.



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RE: Pluhleeze
By Tony Swash on 6/21/2011 11:12:08 AM , Rating: -1
The Apple is Doomed Meme

Definition: The belief that no matter what is the actual reality of Apple's financial, business or sales performance the company is destined to soon suffer a severe set back to both it's business and market share.

Origins: The origin of the the Apple is Doomed Meme (AIDM) lies in the transformation that has occurred in the fortunes of Apple since 2000 and the shock this has caused to the world view of a small but vocal minority. This minority is composed mostly of those who are financially or emotionally attached to either the Windows/Microsoft, Google/Android, or Open Source ecosystems or those who consider themselves 'techies' and who therefore prefer their technology to be complex and arcane (which is thus empowering for those who can 'master' it).

The general structure of the belief system that underlies the AIDM is archaic in that it is firmly rooted in the technologies and market conditions of the 1990s, thus AIDM is related closely to the broader 'Techie Luddite' syndrome (the obsessive clinging onto the technological certainties of yesterday).

For a brief period in the 1990s the market for information technology devices was dominated by the following unusual characteristics:

a) The total domination of the personal computer market by PCs running Microsoft software such as Windows and Office.

b) A small market share for Apple products (at it's lowest the Macintosh only had 3% of the PC market) and an almost continual decline in Apple's financial performance (this led to the widely held but erroneous view that the two phenomena were connected).

c) The domination of the PC market by a model based on a single OS standard straddling many different competing OEMs producing a wide range of different and swiftly evolving hardware platforms and add-ons.

d) The dominant position of enterprise and corporate IT in driving the broader consumer PC market and standards.

This historically fleeting juxtaposition of characteristics is fixed in a minority of people's minds as being somehow the 'natural order of things' and therefore this leads to the belief that this natural order is bound to remerge some day soon. When it does Apple is doomed.

Hence:

"The Mac still has a tiny market share of only [insert a percentage figure that has to be adjusted upwards every quarter]"

"Microsoft/Google has been slow to get started in [insert any of the wide range of markets and product categories the company has been failing in] but once it gets started it will give crush Apple"

"Android will crush Apple" [a statement which only ever connects to market share and never connects to the most successful business model, in the 1990 the two were synonymous so, for those transfixed by AIDM, the two must always equate]

"Apple has no profile in the enterprise market and that is the dominant market" (implying that the demands of enterprise technology will always trump the demands of the consumer market, something which historically has only ever happened for a brief period in the 1990s]

"Open beats closed" [Note this usually refers to the model of one OS straddling different hardware OEMs. It is a misnomer, what is actually meant is that fragmented beats integrated]

"Soon Apple will pushed back into being a niche player in [insert any market or product sector in which Apple is growing rapidly]

"Apple's success is transitory because it is all based on advertising, media hype and the stupidity of consumers" [whose ability to make rational decisions uninfluenced by ads or hype about what is best to buy to meet their needs has suffered some sort of mysterious collapse since the golden age of the 1990s when their purchases were far more rational]

etc,etc,etc.


RE: Pluhleeze
By cjohnson2136 on 6/21/2011 11:16:18 AM , Rating: 2
Of course if anything negative is said about Apple Tony comes in and starts his preaching.


RE: Pluhleeze
By Tony Swash on 6/21/11, Rating: -1
RE: Pluhleeze
By croc on 6/21/2011 7:33:54 PM , Rating: 3
Steve Jobs is a piker. And, with a net worth of ~6 Bn US, I guess he feels he has to be. Poor little rich kid...

The Bill and Melinda Gates foundation itself is worth ~6 times Steve Jobs net worth.

So, WHEN Steve Jobs dies, how will history view him? As the creator of toys for rich people? Certainly not as the great philanthropist. And who will replace Jobs at apple? what happened the last time he 'left'?


"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg














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