What is happening to Apple? For so many people and for so long considered the absolute dear of the stock market, Apple is now tasting the bitter side of the Wall Street culture. Unable to keep the fast pace of the last 5 years, the company is being severely punished. However this is the natural path in the technological sector, companies are poised to have problems after good years. The rate of technological development is very high, which means that in 2 years things can change a lot in this sector. Structural change is perfectly normal in 5 years (iPhone was launched in 2007) and it is normal that with the arrival of the competition things get harder.
Apple constructed a whole new market, and was able to dominate it for a couple of years, with only one product. Obviously, the market was prone to more segmentation, and even with a high degree of loyal clients, there was no way Apple would not loose clients in the process. Other companies entered the market with more segmented oriented products which eroded the costumers’ base of Apple products. The same happened to the tablet market, with one particularity: the company introduced a segmented product, the iPad mini. However this cheaper product worked against the perception that the investors had of the company. The product was a success since explored a new market segment, but at some expense of the normal iPad. Since the iPad mini is cheaper, the success of the product meant an erosion on the profit margins of the company creating tension in the shareholders.
In my opinion this is a natural process, and Apple has not yet committed any costly mistake. The big mistake was committed by investors that thought the company would grow indefinitely into the future. Obviously the sales would stagnate or even decrease at some point, and the competition would erode Apple’s fat margins. Now the question is only if the company is going to be able to keep bringing new products to the market. If the company is able to bring new products, in order to keep the product portfolio competitive, there will be a point, if the stock price continues declining, where buying Apple stock will be a good deal again. One thing I am sure, the people at Apple, are almost the same guys who brought the company back from the dead, which should mean that they can do it again.