Apple’s iPhone 5
There was massive media hoopla over the announcement of Apple’s new iPhone upgrade to iPhone 5 with the global mass media going into hysteria and top news headlines even the Google news in India screaming about iPhone 5 reviews. However the iPhone 5 has not come out with any new feature that seems compelling enough. In fact after the radical new touchscreen technology, Apple has failed to come out with a game changing technology for the mobile phone space. The new features for the iPhone 5 over iPhone 4 released a year ago are:
1. Apple iPhone 5 adds fifth row of icons to home screen
2. Apple iPhone 5 weighs 20 percent lighter than iPhone 4S
3. Apple to distribute the new iPhone all over the world faster than ever
4 Apple iPhone 5 has same width but taller screen
5 Apple says new A6 chip is 2x faster CPU, 2x faster graphics.
Though, I still think that Apple makes a great short at the current stock levels of $665.
a) Sell Side and Buy Side Heavily Long – Almost all sell side analysts and there are tons of them, who are bullish on the stock. Hundreds of hedge funds and mutual funds are also long on Apple. Of the 50 sell side ratings, over 90% of the analysts have rated it a Buy.
b) Competition – The competition in the technology industry is intense and can dramatically change the dynamics in a very short period of time. Look at how quickly companies like Palm, Motorola and others have been consolidated. There are numerous competitors of Apple that are continuously popping up in surprising places.
c) Peak Margins – The prices of competitive phones and tablets are much lower and their features are rapidly converging with Apple products. The recent launch of the Google tablet and acquisition of Motorola by Google indicates that the Apple-Google war is heating up. Apple will have to decrease the prices of its products eventually to compete with other products. It has mostly saturated the market for premium products.
d) Android is gaining marketshare rapidly in smartphones – Android is the most used smartphone operating system now and has gained marketshare rapidly. Being Free, is one of the most powerful competitive advantages it has.
e) Patent Battles with Samsung, Google, HTC are not going to help – Apple is fighting a lone battle against the numerous companies in the “Android group”. At best it can hope for a stalemate.
f) Valuation is rich – When measured in standard ratios like P/E and P/CF, Apple might not look expensive, but the stock is valued richly compared to normalized ratios.
g) Steve Jobs is no longer there – Almost everyone agrees that the current management does not measure up to Steve Jobs. Its difficult to see how Apple can continue to roll out blockbuster products like the iPod, iPhone and iPad without the genius of Jobs.
h) Size is an issue – The massive size of the company and all the ills it brings like bureaucracy etc. make it difficult for Apple to grow rapidly. The huge size of Apple makes it difficult for it to grow rapidly.