Since Apple’s initial announcement of the iPhone in early January, Apple Inc. shares have gone up in price by roughly 40 percent, peaking recently at an all-time high of $127. But with all the buzz surrounding the iPhone, surprisingly, many investors are leaning away from Apple stock.
You may wonder how the ubiquitous buzz surrounding the device can be a deterrent 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 over), some major investors are left to speculate that Apple cannot possibly live up to them.
Hedge fund manager Jay Somaney is just one of a bevy of such investors. “It’s time to take some money off the table,” said Somaney, who plans to sell as much as half of his shares prior to the June 29 release date. Somaney’s reasoning also echoed concerns from stock traders nationwide, “There’s just no way reality is going match the hype.”
Past incidents of super-hyped disappointment include Microsoft’s Xbox System which continues to lose money for the company despite its widespread popularity, leaving Microsoft to garner much of the revenue from the system through licensing agreements and software titles. Last year’s Christmas season release of the PS3 left purchasers upset as the system was plagued with bugs and lacked significant software titles.
While the iPhone will certainly have its kinks to work out, initial sales forecasts for the device are strong. However, it is the long-term feasibility of the product that has investors concerned for Apple’s overall stock growth. If Apple is able to provide superior service when addressing potential issues and continue to develop improvements on subsequent generations, stock analysts see Apple’s stock with a potential of reaching as much as $160 before June of next year.
Perhaps, the key to Apple’s long-term iPhone success is the integration of business enterprising software; specifically, the need for Microsoft Exchange Server capability. While Steve Jobs maintains that the iPhone is the all-in-one super device, it will necessitate the advantages of a Windows Mobile device before it can truly eliminate the working business person’s Pocket PC or Blackberry.
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 an endless amount of software titles and usability. If the iPhone is able to run a virtual version of the new and improved Windows Mobile 6, it will have a fighting chance at achieving long-term stability in the smartphone market. Until then, many sentiments will be aligned with Jay Somaney: sell , sell, sell!
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