Apple: Dismantling a Bearish Argument Against the Tech Powerhouse
A bearish argument aimed at Apple deserves a response.
In fact, I've publicly stated that I'd like the seemingly endless stream of bullish data points and commentary regarding holiday-season Apple product sales to quiet down. (See: Apple iPhone Bulls, Please Keep Quiet)
However, today's article from Thomas H. Kee Jr. on Marketwatch entitled "Time to Sell Apple" deserves a hearty response from this side of the aisle.
So let's take a look.
Mr. Kee states:
"Apple has stopped serving their customers well, and unless they start to serve their customers better the company will begin to lose more market share and revenue and earnings projections will come down aggressively. Most people think Apple's customers are the end user, but because Apple relies so heavily on third-party resellers like Verizon (VZ) and Sprint (S), both of which are feeling margin contraction and negative effects on earnings because of the extremely high cost of iPhones, the real customers are third-party resellers, and Apple is not treating them right."
Now, according to Gartner, Apple did lose market share in the third quarter of 2011, going from 16.6% to 15.0% year-over-year. However, that trend was almost certainly reversed in the fourth quarter for three reasons:
1.iPhone sales were unnaturally slow in the third quarter because unlike previous models, the iPhone 4S hit in the fourth quarter.
2. Everyone from AT&T (T) to Best Buy (BBY) to Qualcomm (QCOM) to Broadcom (BRCM) gave indications that the iPhone 4S is doing huge numbers.
3. HTC and Motorola Mobility (MMI) sales collapsed in Q4.
Mathematically, there is almost zero chance that Apple didn't gain market share in Q4.
Plus, I'll put on my Captain Obvious hat and point out that if those carriers had problems with the high cost of iPhones, they wouldn't have stocked them in the first place! But they did stock them, because a lot of consumers demand iPhones. In fact, Mr Kee. himself points out that "the iPhones may bring customers in the door, so the carriers won't ever stop selling them."
Would Verizon and Sprint be better off if they pushed more, let's say, Research in Motion (RIMM) BlackBerries?
Mr. Kee goes on to say that "We all know that Apple's products were revolutionary, but they are not nearly as elite as they were."
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