Tim Cook, Jan. 2013
“The iPhone 5 offers as you know a new 4-inch Retina display, which is the most advanced display in the industry and no one comes close to matching the level of quality of the Retina display. It also provides a larger screen size for iPhone customers without sacrificing the one handed ease-of-use that our customers love. So, we put a lot of thinking into screen size and believe we’ve picked the right one.” (Earnings transcript)
Within a few months of its launch, it was obvious to most objective observers that Apple had made a mistake with the iPhone 5’s screen. Although the Retina display is undoubtedly high quality, its 4-inch screen is simply too small.
Over the last year, nearly all competing handset makers have increased the size of their screens, with 5-inch screens emerging as the new standard. The flagship phones from HTC, Samsung, Nokia Corporation (ADR) (NYSE:NOK), Sony Corporation (ADR) (NYSE:SNE) and LG all offer 5-inch (or near 5-inch) screens.
Sony’s Xperia Z hasn’t received as much attention as other Android phones from Samsung or HTC, but the handset could be the focal point of a renewed effort by the company to re-establish itself in consumer electronics. In addition to a 5-inch, full HD display, the Xperia Z is waterproof.
What’s more, the Xperia Z redefines the meaning of ecosystem. While Apple’s iOS devices are known for working well together, Sony Corporation (ADR) (NYSE:SNE)’s Xperia Z will leverage the company’s strengths in other electronic markets. For example, a consumer with a Sony TV will be able to beam their phone’s screen to the TV by simply tapping it on the remote; someone with a Sony stereo can send their phone’s audio to over their speakers in similar fashion.
Despite the fact that Cook continues to defend the size of the iPhone 5’s screen, it may have driven some customers away. Apple analysts, including Topeka’s Brian White, believe Apple will rectify this mistake when it refreshes the iPhone later this year.
Jeff Gundlach, Nov. 2012
“It seems like every meeting I have, everyone owns it.” (CNet)
Gundlach, CEO of DoubleLine Capital, is mostly known for being a bond investor. But he deviated from his traditional domain last April when he said it was time to short Apple. Back then, shares were trading near $600, and although Apple continued to rally, Gundlach was ultimately right — shares hit his $425 price target earlier this year.
Gundlach’s thesis was relatively simple: Apple was over-hyped, over-owned and over-followed. The stock had become a mini-bubble, and there was no one left to buy shares. In September, a record 231 hedge funds owned shares of Apple, making it the most popular stock among hedge funds.
As shares tumbled in the fall, hedge funds began to exit, including such heavyweights as Omega Advisors and Jana Partners.
Buy Apple?
On Tuesday’s earnings call, Cook promised new devices coming in the fall. Those devices could simply be small, incremental upgrades, or revolutionary new products that restore Apple’s growth.
No one outside of Apple knows. For the time being, Apple continues to struggle with a declining business, and shares have corrected for that decline. While the stock continues to look cheap on the basis of its financials, this has been the case for months. Until Apple can show that it’s still capable of growth, investors should look elsewhere.
The article 3 Quotes That Explain Apple’s Demise originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
