Yet Another Unprecedented Happening for Apple

Tedra is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Note: A previous version of this article incorrectly discussed which versions of the iPad and iPhone are discounted by Wal-Mart.

There was a time when covering Apple (NASDAQ: AAPL) was very simple. It would release a product that would sell a gazillion units and earn a gazillion dollars, leading to me writing an article about how it had another blow out quarter. Its products were pristine, its business model solid, and investors rewarded it by snapping up shares.

Lately, however, Apple is having a rough go of it. It seems not much can go its way. To keep its ship righted, the company has made some unprecedented moves, but the most recent one has me scratching my head.

It involves the 33% price slashing on the new generation iPhone by Wal-Mart (NYSE: WMT). In addition, Wal-Mart is lowering the price of the third generation iPad.

Several theories are being bandied about, including this being more of a reflection of Wal-Mart’s desperation to lure customers to its stores. You may recall a post I wrote about the world’s largest retailer guaranteeing that it would have the iPad in stock for its Thanksgiving Day/Black Friday sale. No other retailer went that far. The store has not released figures as to how many of the devices it sold, or whether or not it ran out of them at any of its stores.

The other theory about the reason for the price slashing stems from the glut of iPhones and iPads on store shelves. The iPhone’s sales have not been up to analysts’ expectations. As for the iPad, concerns are running rampant that it’s failing to catch on like the previous version in the wake of the iPad mini. The smaller, 7-inch tablet seems to be the Apple tablet of choice. This is worrisome because it raises questions over whether the mini is taking sales away from the iPad. The fact there are several other 7-inch tablets on the market is not helping either.

Apple reported that it sold two million iPhone 5s in China this weekend, which was a record. That should serve to boost its sagging stock for the first part of this week after its horrific downfall last week. There is no question that the news of the record sales in China was much-needed for Apple. However, we can’t escape the fact that China’s largest carrier, China Mobile (NYSE: CHL), chose Nokia’s Lumia over Apple’s iPhone. In fact, China Mobile is the only major Chinese operator not offering the iPhone 5, according to The Wall Street Journal. China has the second largest mobile market in the world, so not having full access to it should be troublesome for Apple and investors alike.

Apple has had to deal with some other snafus that are distinctly uncharacteristic for it as the world’s most valuable company. They include supply problems. I won’t rehash the details, but the map debacle was a mistake that stunned even the most die hard Apple fans. And when the iPhone 5 was first introduced, sales were not as robust as analysts had anticipated.

Apple must also contend with unheard of competition from other hardware and software companies. Its biggest headache comes from Samsung and Google (NASDAQ: GOOG). Their pairing has brought cheaper phones powered by Google's reputable Android operating system. Perhaps the lowering of the iPhone's price by Wal-Mart is in response to customers going for the Samsung models because of their lower prices. And, just an FYI...Google's Eric Schmidt last week bragged about Android-powered devices dominating the smartphone market. During the third quarter, devices powered by Google’s Android carved out 72% of the market compared to just 14% carved out by Apple, according to research firm Gartner.

The many blunders and moves by and related to Apple over the past few months are unprecedented. No matter its previous coups, investors are now trading the stock on its current problems. Don’t get me wrong, Apple’s fundamentals make it nothing to sneeze at, so buying on this dip and staying in for the long-term is recommended. However, the company is now having to win over customers (new and old) and investors who worry about whether or not the company has lost its mojo. It cannot afford anymore mistakes. We’ll see how much of an impact the record sales in China, as well as holiday sales, will boost the company’s earnings when it reports 2013 first quarter earnings next month.

 


TwillyD has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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