Down to the core: Apple stocks free-falling, but company OK for now
Since the calendar turned 2013, Apple and its stocks have been drawing attention. Al Gore exercised his options as a director on Apple’s board and purchased 59,000 shares of Apple stock in January for a ridiculously low $7.475 each, which was the price when he joined the board in 2003. But that was not the biggest news. Apple stocks closed below the $500 mark for the first time since February 2012. The company hit an all-time high of $702.10 on September 19, with the release of iPhone 5. Four months later, Apple opened at $450.66 on the NASDAQ, one day after releasing its first quarter earnings. This amounts to a 36 percent drop in overall company value or roughly $225 billion. Apple is not going out of business anytime soon, but perhaps it will need some fresh ideas to reclaim its powerful authority.
Quantifying the impact of Steve Jobs‘ death in October 2011 and Apple’s subsequent performance on Wall Street is difficult. Jobs was the ultimate innovator who was always looking for the next big idea. Jobs made Apple one of the most profitable companies in America after it nearly went bankrupt in 1998. Tim Cook, Apple’s current CEO, has been with the company long enough to have experienced its ups and downs over the past 15 years. Cook has made several changes to the company, including firing the senior VP of retail Jonathan Ive. Some have argued that Apple’s success was built on disagreements between executives, but Cook said he wants to create “a culture of harmony.”
Along with a new, more harmonic structure, Apple continues to lead and innovate, especially in the mobile device market. The company accounted for 75 percent of all smartphone profits in 2011. Apple products continue to be luxury items for most, despite scattered good news about economic conditions. On a global scale, unemployment is still a major concern. The United States still has an 7.8 percent unemployment rate, while the eurozone reached an all-time high of 11.8 percent unemployment in November 2012. The US Money Reserve, for example, benefits from this economic uncertainty, as more Americans and Europeans are buying bullion to hedge against inflation and protect themselves in case they lose their jobs. No matter how consumers earn a living or safeguard their finances though, people around the world are still willing to pay upwards of $1,000 for an iPhone 5.
Therefore, to prevent Apple products from being priced beyond the reach of average consumers in the United States, Apple benefits big-time from its Chinese labor force, to the tune of a 45 percent profit margin. Americans are aware of sweatshop-like factories in China where Apple products are made. Only 42 percent of Apple product owners said this is a concern. There has been a push recently by some in Congress and the White House to offer incentives for companies that bring jobs back to America. President Barack Obama has responded with mixed signals on outsourcing in general, and no major legislative action is imminent in Congress. As long as this remains the case, Apple is in no danger of being required to overhaul its manufacturing policies. This means Apple continues to be accessible to consumers and remains a strong force within the market with yes, room to still innovate, despite free-falling stocks.
- iPhone 5 vs. iPhone 5S (Rumored) (gottabemobile.com)
- Apple CEO Cook Considering Greenlight Push for Preferred Stock (bloomberg.com)
- Budget iPhone 5 will be plastic and ‘ready for China’ (telegraph.co.uk)
- What Apple Might Learn from Samsung (pehub.com)
- Apple iPhone 5 Features and Specifications Review and Top 2013 Deals Revealed Via Find My Price Comparison Platform (prweb.com)
- Apple Must Innovate Its Way Out of Market Slump (eweek.com)