Is Apple losing steam?
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Is Apple losing steam?

Zacks Investment Research (http://www.zacks.com) says that Apple, the most prolific growth story in the tech industry over the past 12 months, appears to be losing some steam in recent times as shares have declined approximately 4% since the release of its second quarter 2011 results on April 21.

At that time Apple reported an incredible second quarter, with earnings per share of US$6.40 beating the Zacks Consensus Estimate by $1.06 (19.9%) and increasing 92.2% year over year. Revenues surged 82.7% year over year to $24.67 billion. The results were driven by strong iPhone sales, record Ma sales and increased iPad sales, as unit shipments remained robust.
Apple expects revenues of approximately $23 billion for the third quarter of 2011, reflecting a year-over-year increase of approximately 46.4% but a slight decline of 6.8% sequentially. Of course, Apple's guidance is always conservative. However, Zacks says Apple is facing some headwinds that may prevent its bullish run going forward. Like what? Following are some of the highlights from Zacks take:

"After launching a series of innovative products (iPod, iPhone and iPad) successfully, Apple has failed to unveil any new innovative products in recent times (barring iPad 2, which was basically an upgrade of the original version).

"Apple is facing tough competition in most of its revenue segments, especially in the smartphone and tablet market. The iPhone is up against cut throat competition from smartphone makers such as Motorola, Samsung, HTC and LG, which are using Google's Android operating system. Android being open source has helped Apple's competitors to create differentiated devices based on the free source code.

"Apple is entangled in a number of lawsuits against Nokia Corp., HTC, Eastman Kodak and Samsung. More importantly, Apple has received unfavorable verdicts in a couple of cases at the International Trade Commission (ITC). As ITC has the authority to block import of products that infringe U.S patents, the lawsuits could cause a dent in Apple's very sizeable cash balance. It may have to pay a hefty fine or a recurring license fee, which will hurt its profitability going forward."

Though Zacks has some points, I certainly don't think that Apple is losing steam. Look for major announcements at next week's Worldwide Developer Conference involving Mac OS X Lion, iOS 5 and Apple's cloud-based iCloud venture. That should garner lots of press and jumpstart Apple's stock -- and Mac sales. (I also expect a new MacBook Air to debut duringWWDC).

When it comes to iPhone/iPad competitors, well, that's bound to heat up. But Android's success may be slowing down. According to the Nielsen research group, Android saw its first real decline in US share last month. Google's OS dropped in share for the first time in recent memory, down one point from March to 36 percent. The iPhone and BlackBerry were also close to their earlier levels at 26 % for Apple's devices (down one point) and 23% for Blackberry devices (up one point).

As for the myriad lawsuits, who knows how they're all going to turn out. Apple will, most likely, win some and lose some. But the lawsuits, many unwarranted and filed by "patent trolls" will continue, as Apple is the most successful tech company around right now -- and the biggest target.

Apple will face its share of dings and problems in the days ahead. But losing steam? No way.

-- Dennis Sellers

 

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