
Apple’s Stock Price Is Crashing And There’s No Bottom In Sight - aaronbrethorst
http://techcrunch.com/2012/11/15/apples-stock-price-is-crashing-and-the-bottom-is-not-in-sight/
======
btilly
I would personally not buy their stock any time soon.

I keep meaning to write a blog entry on this. To understand my reasoning it
helps to be familiar with _The Innovator's Dilemma_ (see
[http://www.amazon.com/The-Innovators-Dilemma-Technologies-
Ca...](http://www.amazon.com/The-Innovators-Dilemma-Technologies-
Cause/dp/0875845851/ref=sr_1_2) for the book). The basic assumption of that
book (backed up with many examples in industries from ship technology to hard
drives to backhoes) is that any technology that has a well-established value
proposition will tend to show exponential improvement on that value
proposition over time. Users needs also follow an exponential curve, but it
tends to be slower than the technology improvement curve. (A lot slower.)
Therefore if you have 2 technologies competing for that market, eventually the
cheap crappy one will be good enough, and after that point hits it wins. The
premium technology will always show great revenue curves even once their low-
end users start switching, but those curves hide a great oncoming disaster.

In every market that Apple is in, it is the premium product. It has
competitors. And its competitors have a pretty good sense of the value
proposition that they need to deliver. Therefore every market line for Apple
is doomed. They show no signs of having new ones to wow us with, so Apple has
a world of hurt coming.

But, you may ask, why did they not have this problem historically? My answer
is because Steve Jobs' genius lay in constantly finding and delivering _new_
value propositions. He found and defined markets for pretty computers, light
laptops, smartphones, and so on. The whole Innovator's Dilemma argument
depends on competing on a known value proposition, and Jobs never sat still
long enough for his competitors to do that.

Of course Jobs is now gone, and there is no sign that Apple has anyone who has
that talent.

~~~
glenra
Clayton Christensen's theory has never applied all that well to Apple, and he
admits this. Rather than say "Oh well, I guess this counterexample proves I
was wrong!" his latest articles tend to view Apple as a weird outlier, one
that pursues excellence (and gets profit as a side-product of this) rather
than pursuing profit.

[http://blogs.reuters.com/great-debate/2011/08/29/jobs-
made-a...](http://blogs.reuters.com/great-debate/2011/08/29/jobs-made-apple-
great-by-ignoring-profit/)

It's true that Apple has occasionally pioneered entire new markets, but it's
also done pretty well with many of its existing markets.

~~~
btilly
His attitude makes more sense if you've read the follow-up book, _The
Innovator's Solution_ , which describes the dynamics inside of companies
facing this dilemma.

However I think that he missed a bigger point. His theory is based on
companies competing on a clear value proposition. But I cannot think of a
single product where Apple under Jobs ever tried to compete on the same value
proposition that its competitors were using. For instance consider the iMac.
In theory it was a desktop computer, competing against a plethora of others.
However it was the _ONLY_ desktop computer that came in your choice of pretty
colors. Competitors laughed, but people bought them.

The Macbook had a very different look, but again was distinguished from
competitors by its appearance. (The specs were similar to worse than direct
competitors, the price was higher.)

The iPod entered a market with established competitors, but was differentiated
by its extreme design simplicity.

The Macbook Air changed things up in a different way. You had another laptop,
which was severely underpowered, left out expected features (like a DVD
player), but offered extreme lightness before anyone else did.

Whether we're talking about Apple's new product lines, or product lines that
were in existing markets, there seems to always have been some unique value
proposition which Apple offered that its competitors did not. I think that
this fact is integral to its success.

~~~
glenra
Yes, Apple has often competed with better design and superior miniaturization.
But how is this different from other firms? For instance, Sony has often tried
to make things smaller and cooler-looking than competing products, from the
WalkMan to the Vaio to the modern day. Few companies enter a market resolving
"I'm going to just try to make _exactly_ what other guys are making." (Well,
okay, maybe Samsung does that.)

No, the big difference is that Apple often _succeeds_ when they try ambitious
new designs, whereas Sony and HP and Microsoft usually fail when they try to
do the same thing.

I've always thought there was a large amount of self-fulfilling prophesy
involved in this. Apple, like Tinkerbell, works primarily because we believe
in it. If we stopped expecting it to succeed, it would stop succeeding.

Suppose HP releases a product that seems really cool and potentially useful
but has a few annoying flaws - the software doesn't work quite right. Few buy
it, HP never fixes any of the flaws, HP discontinues production, and you find
the abandoned product on the discount shelf at Fry's.

Now suppose Apple does the same thing. Because _it's Apple_ we know they're
committed to _fixing_ the initial obvious flaws. Developers and users see the
_potential_ in the new product, not just what it is but what it could be.
People buy it. A rash of "early adopters" buy it practically sight unseen and
then whine in blogs/newspapers/magazines about what Apple needs to do next to
make it perfect. Apple takes the revenue they get from those early sales,
considers the suggestions, and _fixes the problems_. The original buyers get a
software patch; new buyers get version 2.0 that fixes the original problems
and more.

The first iPhone didn't have copy-paste and didn't allow third-party apps and
didn't have an "app store". People bought it, and within a year or so it did
have those features. Apple has a _track record_ of sticking with it and
improving their crazy stuff, so we trust them to fix problems, so they find it
worthwhile to take bigger risks.

[Minor nit: The first iMac only came in Bondi Blue. The choice of colors
period came later, when it was already a hit.]

------
sytelus
I think most sell off is driven by fear of next potentially disappointing
quarterly announcement compared to same holiday quarter of last year. Apple's
center of success is gigantic subsidy from mobile operators. Investors might
have reason to believe that this model is in great danger because of
astonishing slew of similarly capable alternatives available to operators. On
iPad front they already essentially cut their absolute margins big time by
releasing iPad mini. Add introduction of slew of upcoming models running
Surface/Win8 in to the mix and you can see that Apple's gigantic revenue
streams are in great danger.

The fix for this would have been new products by Apple and that's what Mr
Market has been expecting for long time. But instead we have only seen new
minor versions of same old. The reason Apple's stock has been able to climb at
accelerated pace so far was continuous stream of new products every 3 years
and that seems to be gone now. Perhaps that might be the reason for Apple's
new employee initiative of 20% time?

------
lucisferre
Apple is trading at under 12 times earnings right now. Still seems like a
pretty reasonable buy to me. There is almost always a bottom in sight unless a
company just reeks of failure.

------
jarrodrobins
While Apple stock have definitely been falling for the last few months (and I
know, I have stock), let's not forget that so has everything else lately. In
particular, in the last week with focus moving away from the presidential
election and back towards actual issues rather than trying to get votes,
people are remembering that the so-called 'fiscal cliff' is just around the
corner. Apple's fallen yes, but LinkedIn has also fallen, so has Google, so
has Microsoft; all quite significantly I might add.

Sometimes things aren't as simple as "STEVE JOBS IS DEAD," a new Nexus handset
or more lawsuits with Samsung. Sometimes it's just the market overall. Even
earlier in the year I noticed it with the Greek bailout issues. Apple stock
had been falling for weeks, then suddenly the pro-austerity party in Greece
won the election, and stock prices started shooting up again as concerns over
Europe collapsing were alleviated.

------
georgebarnett
Pundits are posting clickbait containing the word Apple and there's no end in
sight :(

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ChuckMcM
Now is a good time to use that option knowledge to make a killing! :-) Link
baitness aside, tech journalists focusing on stock price rather than companies
_was_ one of the less useful parts of the dot com bubble.

------
Terry_B
"The price is still up 30 percent on the year but far from its 74 percent
increase a few months back."

------
chucknelson
Let's all chip in here and _not_ click this link. Don't support these
pointless articles.

------
bravoyankee
I was expressing a similar sentiment just yesterday:
<http://news.ycombinator.com/item?id=4786923>

Nobody cares what I think, but I'm going to go ahead and predict that Apple's
descent will be dramatic and historical. Apple is shellshocked with Steve's
passing and is completely directionless.

Apple was Steve, Steve was Apple. One cannot exist without the other.

~~~
thedrbrian
Just longer, not faster than its rivals nor lighter with faster internets and
better battery life? It's not like the iPhone 5 has been getting rave reviews
across the the board or anything.

