Investors are cautious as launch approaches
Since Apple’s initial announcement of the iPhone in early January, shares of Apple Inc. have risen in price about 40 percent, recently reaching an all-time high of $127. But with all the hoopla surrounding the iPhone, surprisingly many investors are shying away from Apple stock.
You might be wondering how the ubiquitous buzz surrounding the device can be a discovery for investors. One would tend to think that any form of media and consumer attention for a product would do nothing but good for a product. However, in this case, the hum may be TOO good. With expectations for the device higher than any consumer electronics in recent memory (save perhaps the PlayStation 3, and we all know how that went), some major investors speculate that Apple can’t keep up with them.
Hedge fund manager Jay Somaney is just one of a group of such investors. “Time to get some money off the table,” said Somaney, who plans to sell up to half of his shares before the June 29 publication date. Somaney’s reasoning also echoed the concerns of stock traders across the country: “There’s just no way that reality matches the hype.”
Past incidents of super-hyped disappointment include Microsoft’s Xbox system, which continues to lose money for the company despite its huge popularity, leaving Microsoft to earn much of the system’s revenue through licensing deals and software titles. Last year’s holiday season release of the PS3 left buyers upset that the system was riddled with bugs and lacking significant software titles.
While the iPhone will certainly have issues to work out, initial sales forecasts for the device are strong. However, it is the long-term viability of the product that has investors concerned about the overall growth of Apple shares. If Apple can provide superior service by addressing potential issues and continues to develop improvements in subsequent generations, stock analysts see Apple stock as having the potential to hit as much as $160 before June next year.
Perhaps the key to the long-term success of Apple’s iPhone is the integration of enterprise business software; specifically, the need for Microsoft Exchange Server capacity. While Steve Jobs argues that the iPhone is the ultimate all-in-one super device, he’ll need the advantages of a Windows Mobile device before he can truly eliminate the Pocket PC or Blackberry from the working business person.
Apple may need to take a page out of its own book. When users were first allowed to run Windows simultaneously with OS X on the company’s consumer computers, Apple was praised for opening its doors to an infinite number of software titles and ease of use. If the iPhone can run a virtual version of the new and improved Windows Mobile 6, it will have a chance of achieving long-term stability in the smartphone market. Until then, a lot of feelings will be aligned with Jay Somaney: sell, sell, sell!