Apple Tastes Bitter Fruit of Financial Loss [Opinion]

Apple has been visited by a worm, a worm of financial loss.  At its core, the problem stems from largely disappointing first-quarter news announced this week. This worm packs a punch: Apple’s stock has lost at least 10% of its value.

The financial misery the company has seen since it announced its first-quarter earnings–and investors almost immediately started jettisoning stock–is obvious. Yesterday, the company’s stock closed at a pathetic $450.50, compared to $514.00 the day before.

Clearly, the company’s stock is tumbling at an alarming rate. Shareholders want out, and based on the abysmal first-quarter results, who can blame them?

The 10% share decrease brings with it another undesired consequence: Apple’s valuation has taken a severe beating. So bad is the drop that it’s the worst decline Apple has seen in four years.  That’s bad, folks.

To put it into perspective as to just how bad things are for Apple right now, when investors ran for the hills this week, they caused a $50 billion decrease in the company’s market cap. This is no small problem, and not even the mighty iPhone can stop the bleeding, apparently.

Although what happened could just be a knee-jerk reaction by investors who, for good reason, wanted more bang for their buck, the failure is still a bitter taste for Apple to swallow, especially since it’s a company that’s used to success.

What’s obvious is that Apple is going to have to, you know, work to regain its footing. Before, success came easily, and they only had to trot out Steve Jobs, who only had to scream about the iPhone and iPad at the top of his lungs. Those days are gone.

CNBC’s Jim Cramer called the first-quarter results “lackluster” and “disappointing,” in a clear effort to be kinder than is warranted.

The days of Apple being able to assume it’ll automatically have stock market success are most certainly over; Cramer pointed out that Apple has had a certain sort of “arrogance” about its shareholders and conference calls, and they need to put more effort into taking both of these things seriously.

It’s time, Cramer pointed out, to realize that conference calls are “key” to a company’s success.

Yes, Apple has been acting like the jock back in high school who assumed that just because he was who he was, he was entitled to success.

We all knew someone like that, and Apple is that jock. Do they realize that?

Apple shareholders and consumers are not in the A/V Club, and Apple is not that jock. They can’t dunk investors’ and customers’ heads in the boys’ room toilets and expect favorable responses.

Apple needs to earn investors’ confidence and money, just like, you know, every other publicly traded corporation out there. Just screaming, “Hi! I’m Apple!” is no longer enough. The hipster has had its day.

Apple should also prepare itself for a massive reality check: losses are projected by some analysts to be far greater this quarter, to the tune of 20% or more. Gross margins are likewise expected to drop.

That stocks are being dumped so quickly should be a sign to those at the top of the Apple tree that the company’s election is not made sure.

It’s true that Apple makes the finest products in the world. One would have to be a fool to not want an iPhone, iPad, iPod, or Mac computer. But by no means should that entitle Apple to assume their success is foreordained.

Sometimes, people become arrogant and adopt a superior attitude when they become successful. Sadly, Apple has apparently fallen victim to that mindset, even though the iPhones sales figures suffered an epic failure in the first quarter, coming in at 47.8 million stacked against Wall Street’s prediction of 50 million units.

Posting a $13.81 earnings per share figure when analysts were expecting $13.47 is all well and good, but it’s nothing to become conceited about.

In fact, for a company such as Apple, that EPS figure should be humiliating for those in charge; Cook should be hanging his head in shame right now and drafting his resignation letter for the greater good.

If Steve Jobs wanted Cook in charge after his untimely death, then Jobs clearly put his faith in the wrong man. Had Apple been placed in the hands of truly competent leadership, it’s almost certain that Apple wouldn’t have missed revenue projects as they did. One has to wonder what, if anything, Cook brings to the table.

Let’s not forget that Wall Street was looking for Apple to bring in $54.73 billion revenue, but Apple posted $54.5 billion. Just like the cheerleader who forgot her homework, that’s just not good enough; as the math majors will tell you, Apple missed its target by $230 million.

More often than not, the sort of people who become arrogant after achieving success–and who look down upon others–get taken down a peg or two in a manner that’s usually quite embarrassing for them.

It’s clear that for Apple, that time is now. It’s sort of like seeing the school bully be punched in the nose by the nerd with thick glasses, a pocket protector, buck teeth, and poor personal hygiene habits who’s just had enough.

Apple is that bully, and investors are that nerd.

Will Apple grow up, get serious, and graduate from high school, leaving the jock’s glory days behind it, or will it end up in summer school while another company steals its girlfriend, i.e. the shareholders, and by extension, the customers?

 

The preceding article reflects the author’s opinion, and not necessarily that of iPhone Alley and its management.

[via: TechCrunch, Fox Business Channel, CNBC]