From the standpoint of a long-term investor, Apple has provided some excellent returns in the technology sector in comparison to all of its major competitors. AAPL, over a 5-year period, has provided investors with returns of nearly 405% off their principle investment. These gains have come from market-dominating products such as the MP3 music player, the iPod, to the innovative iPhone, one of the first all-inclusive touch screen smart phones. With so many groundbreaking accomplishments in the past couple years, investors might think that maintaining their shares of AAPL stock could provide a lucrative opportunity to further increase their wealth. Given the multitude of issues that have recently plagued the technology giant, I am here to tell you otherwise.
On of Apple’s most successful products, the iPhone, has recently faltered concerning sales and demand. Since the release of the intuitive smart phone, the product has only been available on the AT&T communication network. In order to increase profits on their product, Apple expanded their contractual agreements to include a major competitor, Verizon Wireless, in selling the phone. Amidst extensive hype and anticipation, Verizon iPhone sales were relatively underwhelming in comparison to steady AT&T sales. While past releases were met with massive lines on opening day, none were apparent on the new release for Verizon. In addition to the uneventful release of the iPhone on the Verizon network, the phone has maintained a steady market share with little increase or decrease over the past year while phones operating on Android (Google) software continue to increase in demand.
The iPad 2 is another issue that may hinder the future success of Apple. While the company purported exceptional sales for the first version of the tablet computer, sales numbers for the second edition have not been released. This is unusual for Apple, as with prior products they have been quick to release sales numbers to prove the success of their innovative products. The secondary issue for iPad 2 is that it continues to lack the computing power of many laptop and desktop computers that are priced competitively. While it may appear trendy and convenient in terms of portability, its lack of performance and operation of advanced computer programs is a glaring issue that remains to be fixed. Without a solution, the novelty of this product may soon fade, leaving Apple with significant production losses if sales decline.
The last glaring issue that threatens the valuation of AAPL stock is the health of its CEO, Steve Jobs. Over the past three years, Jobs has twice left the company on leaves of absence due to his battle with a rare form of pancreatic cancer. Jobs is cited to be the revolutionary mind behind the back-to-back successful products, meaning that any issues that take Jobs out of the picture will significantly damage the innovation that Apple is currently known for. If Steve Jobs left permanently, stock values would diminish quickly as investors would lose faith in the ability of establishing an equal replacement, undoing five years of constant success.
