Tags: Apple | market | leader | commoditized

The Right Way to Think About Apple

By    |   Wednesday, 12 Dec 2012 07:35 AM

Just a few months ago, many believed that the share price of Apple was headed to $1,000 and the company was destined to take over any market it chose to enter. Now, traders are selling Apple and questioning how much downside lies ahead.

The truth is Apple is a market leader that now sells high-priced products that have become commoditized. Apple computers have always maintained a small market share and high prices. The company used the cash from those high prices to fund the iPod, the iPhone and other products. They were the first to enter those markets, but there are now competitors.

This is not the first innovative company in history, and the lessons of history show trouble ahead for Apple investors. Years ago, memory device maker Iomega was a market leader with a stock price that couldn’t be stopped. Flash drives sold for premium prices when they were introduced, but are now given away by advertisers. As prices fell, so did the value of Iomega, which was eventually bought by storage industry giant EMC.

Apple is a great company, but there are signs that competitors are succeeding in developing less-expensive alternatives to iProducts. Consumers, already struggling with bills and concerned about keeping their jobs, may find that cheaper products are good enough just as they have for every other consumer electronic product.

In 1999, Microsoft, Intel and Cisco enjoyed the type of market share and future expectations that Apple has now. All three remain industry leaders, but investors have not been rewarded. Microsoft is almost 60 percent below its all-time high, while Intel and Cisco are more than 70 percent below their highs.

Twelve years from now, Apple may still be an industry leader, but investors may regret a decision to hold the stock waiting for a rebound.

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MichaelCarr
Just a few months ago, many believed that the share price of Apple was headed to $1,000 and the company was destined to take over any market it chose to enter. Now, traders are selling Apple and questioning how much downside lies ahead.
Apple,market,leader,commoditized
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2012-35-12
Wednesday, 12 Dec 2012 07:35 AM
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