Why Apple Shares Fell

Four months ago, Apple shares stood at over $700.  Today they sit at about $460, one heck of a drop. Given they've sold more iPhones in the last quarter than in any previous quarter that seems a little mean.  It's affecting their suppliers, too, including Samsung who spend half their time defending themselves in court against Apple.  Perhaps Apple have found the way to wipe the smile of Samsung's face?

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But all of this is unlikely to be the reason the shares fell.  Litigation aside, Apple have been extremely industrious the last quarter in introducing the new iPhone and the iPad mini.  Both have sold well, unfortunately not well enough to satisfy the money merchants but better than most normal people might expect in such a tough economy.

What won't have helped would have been the problems associated with the latest incarnation of their iOS, especially the mapping app that didn't work.

Related stories: Apple told to get lost, Apple to buy Tom Tom

However it's market expectations that they have fallen foul of, something I suggested semi-mockingly in a couple of posts (OK, I was actually taking the p*ss about the obsession with queues forming for new Apple products that actually became accurate, but mainly because Apple decided to market the iPad mini on the internet so aggressively that it likely affected their Apple Store sales).

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And no, I don't think bloggers taking the micky out of Apple influenced the market.  Not much, anyway.

The real reason the share price is now a third lower than it was four months ago is twofold.

First, the price four months ago was too high.  I said that when it started falling - see Apple shares dive south

Second, Apple products are too expensive.  Sure they're selling, even breaking records, but the rate of increase in sales is slowing to a point that the money people recognise as a change in direction.  In calculus we call this the point of inflexion, where a curve changes direction on an axis.  Next quarter they will sell less than before.  Their competitors are catching up rapidly, the tablet computer is no longer a unique offering and the Apple customer base is starting to look static compared to Android.

The share price will sort itself out, so no offers of advice needed there (apart from think carefully before buying, but probably they are close to the right number now).  Apple need to look at dropping the price of its premium products if it wants to attract more new customers to the fold, otherwise Android based products will mop up new customers instead.  Selling the iPad Mini was a brave move as it allowed access to Apple for less than the standard iPad, but it is still a significantly more expensive item than its Android competitors.

My guess is that the rumoured cheaper iPhones will arrive this quarter along with cheaper full sized iPads by summer.  Let's wait and see.

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Apple to Buy Tom Tom

You would think with all their resources Apple would be able to build a mapping app for their iOS.  But after  being slated within hours of the initial release in September up to the recent scathing remarks from the Australian police a few days ago they are still struggling to sort it out.  Sacking senior managers didn't work, either.

It turns out that the mapping module they've been using belongs to Tom Tom, the European mapping software and hardware company.  Tom Tom have a good reputation, over here in the UK at least, although they do get blamed for sending articulated wagons down farm tracks every now and then.  I have a personal theory that the next innovation in GPS mapping needs to be a common sense detector, one that shuts the device down when it detects that the driver is incapable of thinking for him or herself.

Anyway, it seems that Tom Tom would like some cash - about 100 million Euros, give or take - and Apple have a fortune lodged outside of the US that would be taxed to within a cent of its life if brought back into the mother country, so buying out a European company is a great way of using that surplus.

Oh, and Apple need a functioning mapping app that works.  It sounds like they've decided that their own attempts at using the Tom Tom mapping data is not going to happen.  I find it surprising and have assumed that Apple were about to do a 'ta-da' gesture with a re-released and correctly functioning version of their mapping app, but there you go.

They've been wooing Tom Tom and have been flashing the cash, according to industry rumours.  It appears that a purchase announcement is imminent, so if you're a Tom Tom shareholder then it looks like Christmas has come early.

There's another dimension to this story, though.  We know the market leader in mapping apps for mobile devices is Google, who have also spent a lot of time melding their app to a self drive module, creating a car that drives itself.  Cars that drive themselves could be the next big thing - if done intelligently you could imagine a world where all the cars in a city take their passengers efficiently to their destinations, exchanging travel data to a central cloud.  That way traffic jams can be avoided, fuel can be saved and frustration can be reduced.  Apple will have seen what Google is doing and will want to elbow in that market.  Getting a major slice of the automobile industry has got to be a fantastic growth sector.  A marriage between Apple and Tom Tom, arguably the predominant GPS navigation device in the market, will be a major step towards catching up on Google.

And of course Tom Tom wouldn't be able to achieve all of the research and development without Apple's cash.  Or its Cloud knowledge.

I don't know if all this speculation is likely to be close, but it is reasonable.  If it is, then Apple is embarking on an incredible journey, and having Tom Tom aboard is a shrewd companion.  At least they will know when they've reached their destination.

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I can be followed on Twitter too - @RayASullivan
or on Facebook - use raysullivan.novels@yahoo.com to find me

Why not take a look at my books and read up on my Biog here

Want to see what B L O'Feld is up to?  Take a look at his website here

Worried/Interested in the secretive world of DLFs?  Take a look at this website dedicated to DLFs here, if you dare!