Apple Loses $90 Billion In Value Thanks To Failure To Diversify

tim cook worried

In the last 2 weeks Apple’s market value has fallen dramatically. Since 20th July, according to Business Insider:

Apple stock has been dropping since July 20, the day before it reported earnings. As of 4th August, for example, stocks were down by more than 14%

And that’s a LOT of money. $90 BILLION in fact. So, the big question is why? Well, it would seem analysts (yes, those guys again) are getting a little bit edgy about Apple’s failure to diversify. This is a HUGE weakness in the corporation as Tim Cook knows full well. They are utterly reliant on iPhone sales, which is what the Apple Watch was all about, creating a new revenue stream.

The problem is laid bare in this graphic courtesy of Macrumours…

apple pie chart

Yep, THAT’s how much Apple are reliant on iPhone sales. And every quarter that goes by, the iPod (note it doesn’t even warrant a category anymore) and iPad slices of the pie get smaller and smaller in real numbers.

Step forward the Apple Watch. Off it went, like a train – and then it derailed, spectacularly, apparently selling less in numbers than even the humble iPod leaving Apple with the same problem as before.

How to pull off the magic just one more time? Let’s be fair, they did ok with the iPhone 6 and 6 Plus despite them both being either badly manufactured (bendy or having the propensity to set on fire) or just looking plain ridiculous (the 6 plus is stupid) but iPhonians lapped it up despite it being the same old, same old software just in a bigger case.

Everything else they don’t seem particularly interested in.

And since everything else is dropping, it only takes one botched iPhone launch to create havoc.

It’s unclear exactly what caused the slip in Apple’s stock, but Bank of America Merrill Lynch recently downgraded Apple stock from “Buy” to “Neutral” with a new stock-price target of $130 from $142.

Analysts have been concerned about Apple’s reliance on the iPhone, whose sales are slowing, and think it will be hard for Apple to grow its smartphone market share in China — last quarter, Apple’s share slipped into third place behind Xiaomi and Huawei, according to Canalys.

Ahhhh…

Are even the iPhonians of Wall Street starting to see through the Emperors New Clothes?

Bigglybobblyboo

Bigglybobblyboo is a legend almost nowhere at all. He is a founder member of UTB and spends his spare time taking out his anger at the world with a fishfork and a spatula. He is also a Cribbage Master, having won 1 fight online as the other guy refused to turn up out of fear for his life.

  • ray689

    The one thing I find interesting is the services revenue being only 6%. This is what BlackBerry has made a major shift on. Is BlackBerry ahead of the game? Is hardware revenue going to be the Achilles heel for many manufacturers? I think we are already seeing this with most Android OEMs barely making profit even with great sales numbers.

  • bartron

    Given that it’s happening about a month before the next iPhone is released, I suspect the drop in the last few days is stock manipulation.

    But I agree that in the long term, the lack of diversity will kill Apple’s growth. They’ll be a dividend-only stock in a few years.

  • BB Racer !!

    Great Post : Remember the last collapse from Apple from $740 to $340. Forget Apple P/E forget ex-cash blah blah….Apple is a one product iPhone 6 and maintain % margin story of 40%. If that margin % cracks and sales do not meet whisper numbers well $75 is a easy catch . ( Disclosure I own PUTS in Apple. )

  • mrabody

    I don’t expect Apple to implode such as BlackBerry nearly did. While they’re reliant upon the iPhone for the vast majority of their income they still have several other product streams as well as service revenue to cushion their fall. This doesn’t mean that a lot of Apple investors aren’t going to lose their shirts when handset sales drop and the company’s valuation right-sizes. Samsung is still profitable because they are a diversified conglomerate that manufactures appliances, TVs, laptop, chipsets, and all sorts of other goods in addition to handsets and Apple is likely to remain so too.

    I also don’t expect there to be a sudden decline in iPhone sales either. Since people often upgrade their phones every two years, I expect that sales of the 6s and 6s+ will be strong even if they ultimately prove disappointing to investors and Apple fanbois. And given Apple’s magical ability to convince consumers that their fragile, cheaply built handsets are are superior in quality to anything else out there, they’ll be able to “ship” vastly larger numbers of handsets for some time as people continue to replace their broken iPhones.

    In short, expect the shine to come off Apple relatively quickly but the decline to be gradual.

  • Schmurf

    I’d suggest that a long slow decline is worse than a sudden one. The motivation to make change is less powerful when the pain of decline is less. With Blackberry, the drop was relatively quick and the motivation strong. Perhaps Apple will slowly fade off into true irrelevance.

  • mrabody

    @Schmurf

    I’m not even sure we should think of it as a decline. Declining sales isn’t necessarily a sign of failure in a maturing smartphone market – it’s inevitable. But many investors have unrealistic expectations and expect sales to keep going up up up. Apple could sell a quarter of the handsets they currently sell and still be a very profitable company, just not as crazily profitable as they are now. And the share price will reflect it and a lot of people will lose a lot of money.

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