Apple Inc. (NASDAQ:AAPL)
recently released its first quarter earnings statement for 2013. What I find most particular is the fact that no one is talking about two critical factors that have glaring implications for Apple Inc. (NASDAQ:AAPL). Apple has posted the slowest growth figures in fourteen quarters and its year-over-year earnings, for the same quarter (December), are flat. I believe that we are seeing the beginning-of-the-end for Apple in what I predict will be a protracted sell off of Apple stock. In this article, I will be discussing why.
While Apple Inc. (NASDAQ:AAPL) has been an investment darling for years, earning per basic and diluted shares actually decreased. Traditionally, Apple has consistently posted increased earnings per basic and diluted share every quarter. Yet now, for the first time since the end of 2009, earnings have fallen. While these decreased earnings were not excessive it still is disconcerting. Let’s look at what I believe to be the reasons why.
Asia Is Not All It’s Cracked Up To Be
While some would argue that Apple will continue to be supported by the changing demographic trends overseas, I would disagree. While I will agree that there is a rapid growth of an emerging middle class that are rabid for all things technology, these same consumers are much more tech savvy and, worse for Apple Inc. (NASDAQ:AAPL), demanding. I don’t care how much media “hype” you can develop or how rabid your customer base, no business can escape the inevitable; increased competition, higher costs, and an ever growing fickle consumer. Apple faces all three and their most recent earnings show exactly how it is faring in this fight. Look at the following map of world mobile phone usage.
You will note that there is heavy market penetration in Asia and so of course, this is the go to answer from Apple investors when asked about whether Apple can maintain its momentum. Nevertheless, here in lies the rub, hundreds of millions of aspiring Apple Inc. (NASDAQ:AAPL) customers just cannot afford Apple’s price point. At about 800 U.S. Dollars, even Apple’s older model phone, the iPhone 4, still costs more than twice the monthly salary of most of the emerging middle class. Not many have that kind of disposable income.
Factor in the rising competition from Asian behemoth Samsung and the picture becomes even bleaker for Apple. While Apple’s share of the smartphone market has nearly doubled in China, Samsung’s has nearly quadrupled. For an even more dismal picture factor in the fact that in China, existing network technology is simply not sufficient to fully support the iPhone or even the iPad’s capabilities.
China’s largest service provider, China Mobile Ltd. (ADR) (NYSE:CHL), boasting more than 600 million subscribers, readily admitted that they will not have the technology in place until sometime in late 2013. Quite frankly, that might just be the proverbial “too little too late” when you consider that there are other competitors aggressively targeting China. Case in point, China’s Huwaei Technologies are producing smartphone’s for nearly half the price of the iPhone.
Google Versus Apple
Almost everyone concedes that two of the most dominant smartphone operating systems in the market today are Apples iOS and Google Inc (NASDAQ:GOOG)’s Android OS; however, die hard Apple fans do not want to concede that the Apple iOS is continuing to lose ground to Android. But here is the reality:
