Friday, November 02, 2012

Apple, Bitten

Apple's market cap has fallen $118 billion since Google Maps was removed September 19th.
Other companies (GE, Microsoft, Cisco, AIG) have fallen further in market capitalization, but Apple's recent drop is nonetheless remarkable in a non-crisis year. A scant 44 days ago AAPL had been rising on the heels of the iPhone 5 announcement and the rumored iPad mini. Then the new operating system, IOS 6, was released.

The premature removal of Google Maps was one of the greatest blunders in Apple's 36-year history. Apple knew that it was taking a chance but underestimated the negative reaction:
in breaking with Google and giving iPhone users worse maps than before, Apple has gambled on three things. First, that users will like its maps’ embedded content. Second, that it will be able to improve fast. And third, that the allure of the iPhone and the loyalty of Apple’s fans will buy it time. After all, people do not buy smartphones for the maps alone, and queues for the iPhone 5 were every bit as long as for previous incarnations of the revered device. But Apple has more catching-up to do than it expected. In a market where brands can rise and fall fast, it may also have less time than it thought.
The removal of a single app, important as it may be, wasn't the reason that the market values Apple $118 billion less. Now that Steve Jobs is gone, Apple is beginning to look like just another good but not extraordinary company. The revolutionary product in the pipeline may well be a myth.

It's going to be an uphill slog back to $700 per share.

[Disclosure: I am long Apple.] © 2012 Stephen Yuen

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