Old Is Gold

By Rekha Marwah - October 8, 2012 | Tickers: AMZN, AAPL, CMGE | 0 Comments

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Apple (NASDAQ: AAPL), many say, seems to be loosing its golden touch. Hedge Fund manager, Doug Kass also does not seem very impressed by the company’s performance this year. Launch of the iPhone 5 and reaction of the analysts was not very impressive. Though iPhone 5 is the company’s first product which lacked the "wow factor" its launch has not hurt the company much, yet Kass said Apple may continue to report strong results even in coming quarters and then it may eventually loose its position. The fast rise of the company’s stocks seem to be  skeptical, the shares of the company had already risen 71% this year, it reached a record high of $702.10 in September due to the iPhone 5 mania. Predictions are made that the company is all set to see a 60% profit this year and 20% growth in 2013. Apple specialist, Andy Zacky, who runs a hedge fund focused on iPhone maker, is not happy with all the recent bearish opinions about the company’s stocks he said these negative predictions about the company were merely “to stir up controversy”. He emphasized that the company will touch the $1000 per share mark by January 2014 and said that the company was far from "peeking", it will not "peek" till it reaches $2000 a share. He also mentioned that in the past Kass had advised the investors not to buy into the company when Apple was trading below $100 so there was no reason to believe what he predicts. Apple has lots in its sleeves.

Speculations were made only recently that Apple may be ready to announce to the world the long rumored iPad Mini by next week. It has been confirmed now that the company has made 10 million orders for production of iPad Mini during the fourth quarter of the current fiscal year. These orders doubled Amazon’s order for Kindle Fire.  But according to an analyst the supplies of the new 7.85 inch tablet are likely to “fall short of demand”. Brian White of Topeka Capital Markets had previously predicted this smaller and cheaper tablet that was meant to be challenge to rival devices from Google, Amazon (NASDAQ: AMZN) and likes, will be launched by September, but Apple may be forced to delay the unveiling because of the production shortfalls. These tablets are expected to be priced between $250 and $300, and it is expected to sell between 5 million to 7 million units in the December quarter. White predicts that this device will beat its competitors in the same price range.

Amazon.com, Inc. which has decided to purchase its eleven-building headquarters complex in Seattle in a $1.16 billion deal has generated revenues of $54.33 billion in previous twelve months and earned $377.0 million. The company’s annual sales growth, for past five years have been 35.03%. Amazon has also recently made a foray into video streaming business in direct competition with established player Netflix, Inc.

Apple faces another hassle, there had been speculations regarding a deal between Apple and China Mobile (NYSE: CHL) but the Chinese government’s concern about the subsidies for the iPhone may pose to be a big roadblock for the deal to materialize. The Chinese government which controls the carrier is opposed to the licensing deal because of the “heavy subsidy burden”. China Mobile is the only one of the three major operators in China not to have deal with Apple. The carrier’s rivals China Unicom and China Telecom already sell Apple’s previous versions of smartphones and they are expected to get iPhone 5 in next few months. Apple is interested to make the deal with China Mobile because it lords the Chinese market with 700 million subscribers. Moreover Apple’s baseband chip is compatible with the operator’s 3G network with minor modifications, all the more reason why Apple wants to make the deal. In the first half of the year, China mobile handsets subsidies totaled 12 billion yuan, in August they said that they would raise the subsidy to 26 billion yuan from 21 billion yuan. Apple’s online and retail stores in China sell the iPhones at full price and leave it up to the carriers to offer their own discounts.

As for the iPhone 5, Apple has made mistakes which they have already accepted and if the company continues to make such mistakes it is going to herald the fall of the mighty dominance of the company. In fact the company’s shares have fallen 5% since the mistake was made public. The newer and smaller iPad gives the company a chance to correct their mistake. The mistake may not appear a very grave one to many but it has marked important changes in the way the company does business. In past Apple was extra careful with its products, using best hardware, software and technology available which put Apple steps ahead any competition. People flocked to buy Apple products for they knew they were buying the best. Apple has never put its success above the consumers till now.

Consumer Reports in its review said that though there were some issues Apple needed to fix the new smartphone was among the best in the market and “the best iPhone” yet. Yet they rated it lower than Samsung Galaxy SIII and Verizon’s Droid Razr Maxx. Apple Inc., the costliest undertaking yet, needs to prove nothing to anyone. It might be wrong to tick Apple off as it still is left with many more days of glory. Investment prospects don’t appear as bleak as it is being perceived so people can invest without worrying even a bit.

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