Since Apple’s initial announcement of the iPhone in early January, Apple Inc. shares have risen in price about 40 percent, recently reaching an all-time high of $127. But with all the hype surrounding the iPhone, surprisingly, many investors are turning away from Apple stock.
You may 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 buzz may be TOO good. With expectations for the device higher than any consumer electronics device in recent memory (save perhaps the PlayStation 3, and we all know how that went), some major investors are speculating that Apple may not be able to live up to them.
Hedge fund manager Jay Somaney is just one of a handful of such investors. “It’s 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 the reality matches the hype.”
Past incidents of over-hyped disappointment include Microsoft’s Xbox system continuing to lose money for the company despite its wild popularity, leaving Microsoft getting much of the system’s revenue through licensing deals and software titles. Last year’s holiday season launch of the PS3 left buyers upset that the system was riddled with bugs and lacked meaningful software titles.
While the iPhone will certainly have issues to work out, early 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 reach as high as $160 before June of 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 super all-in-one device, it will need the benefits of a Windows Mobile device before it 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 endless software titles and ease of use. If the iPhone can run a virtual version of the new and improved Windows Mobile 6, it has a chance for long-term stability in the smartphone market. Until then, many sentiments will be aligned with Jay Somaney: sell, sell, sell!
