A Bad New Year for Apple

    Every IT and telecom person knows that it was in Shakespeare’s “Henry IV,” Part 2 that the line “Uneasy lies the head that wears a crown” appeared.

    It’s a great line, and can be used as an assessment and warning to companies at or near the top of the heap. Of course, Apple fits this description perfectly. The truth is that dominant companies can do nothing but stay level or sink. If the latter occurs, many people will secretly – and not so secretly – be gleeful. Apple, of course, carries the added burden of having lost the person who enabled it to rise to such heights.

    The new year hasn’t been good to Apple. On the morning of January 15, the company’s share price sank below $500. The CNNMoney story said that Nomura Securities has lowered its earnings estimates on Apple due to what the firm called “unsustainably high” margins that can’t be sustained.

    The immediate problems Apple is encountering stem in large measure from reductions in orders for iPhone 5. Brighthand has a story on the retrenching based on information that appeared in the Wall Street Journal and was reported by Nikkei. The story said that orders made to Japan Display, Sharp and LG were halved. Brighthand concludes that the cuts may have been the result in an overestimation in demand and not a shortfall in fulfilling reasonable expectations. At the end of the day, however, it is much the same thing: Demand for the product is not overwhelming.

    The industry – or at least some people in it – saw this coming. This column at MarketWatch by Thomas Kee, who is the president and CEO of Stock Traders Daily, is short on specifics. The implication is, however, that he has laid those out elsewhere. Kee cites the loss of Jobs and made the point that the system is set up not to let one company dominate forever:

    I have spoken directly to margin pressures in the past, and I will re-iterate that again here. When Apple first introduced the iPhone, there was nothing else like it, they could charge whatever they wanted to because there was no real competition. But capitalism allows competitors to step in, and when that happens, those innovators who bring products to market often need to reconcile their price points. In order to maintain market share, margins often need to contract once competitors enter the industry, and that is exactly what is happening with Apple.

    In a Business Insider story that sets a new standard in modern journalism headlines (“Apple is Kinda Hosed”), Jay Yarow pointed out that Apple is less than straightforward in the guidance it provides to analysts. That may be coming back to haunt the company, whose earnings report will be issued next week. In this context, those numbers will go a long way to determining if Apple really is in trouble or if the first month of the year has been a momentary hiccup.

    Carl Weinschenk
    Carl Weinschenk
    Carl Weinschenk Carl Weinschenk Carl Weinschenk is a long-time IT and telecom journalist. His coverage areas include the IoT, artificial intelligence, artificial intelligence, drones, 3D printing LTE and 5G, SDN, NFV, net neutrality, municipal broadband, unified communications and business continuity/disaster recovery. Weinschenk has written about wireless and phone companies, cable operators and their vendor ecosystems. He also has written about alternative energy and runs a website, The Daily Music Break, as a hobby.

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