Apple stock falls amid android fear

Apple’s stock slipped below 500 dollars for the first time in 11 months as investors reacted to reports signalling the company’s latest iPhone is falling further behind sleek alternatives running Google’s Android software.

The latest indication that Apple, the world’s most valuable company, is seeing sluggish demand for its iPhone 5 emerged in separate stories published yesterday in the Japanese newspaper Nikkei and The Wall Street Journal.

Both publications cited unnamed people familiar with the situation saying Apple had dramatically reduced its orders for the parts needed to build the newest iPhone because the device is not selling as well as the company hoped.

The adjustment means Apple will buy about half as many display screens for the iPhone as management originally planned for the opening three months of the year, according to the newspapers.

Apple, which is based in Cupertino, California, declined to comment. Spokeswoman Natalie Kerris said Apple executives would share their views on market conditions on January 23 when the company is due to release its financial results for the final three months of 2011. The period covers the first full quarter that the iPhone 5 was on sale.

Although Apple hailed the iPhone 5 as the best version yet of a product that has revolutionised the telecommunications and computing industry, the company’s stock has wilted since the device hit the market.

After peaking at $705.07 (€530.84) on the day of the iPhone 5’s September 21 release, Apple’s stock has plunged nearly 30%. The shares fell 18.55 dollars, or 3.6%, to close yesterday’s regular trading at 501.75, dragging the company’s market value nearly 190 billion dollars below where it stood in late September.

The stock traded at 498.51 dollars earlier in the day, its lowest price since February.

The stock’s decline has not been entirely caused by concerns about the iPhone 5’s sales performance. Industry analysts are also worried about the recent introduction of a smaller, less expensive iPad cutting into the company’s profits.

But the biggest fears hover around the iPhone because it has become Apple’s most valuable product since the company’s late chief executive Steve Jobs unveiled the first model in 2007.

Apple has sold more than 271 million of the devices since then, and in the company’s last fiscal year ending in September, the iPhone generated 80 billion dollars in sales to account for more than half of the company’s total revenue.

But Apple’s upgrades of the iPhone in the past two years have disappointed gadget lovers who have been clamouring for Apple to do more to stay in front of device makers relying on the free Android software made by Google.

For instance, there were high hopes for a larger iPhone screen with the release of the 2011 model, but Apple waited until last September to take that leap. And when Apple moved to a larger display screen with the iPhone 5, it did not include a special chip to enable users to make mobile payments by tapping the handset on another device at the checkout. Such a mobile payment feature is available on some Android phones.

Finally, Apple has insisted that wireless carriers subsidise so much of the iPhone’s cost in exchange for customers’ two-year commitments on data plans that the carriers make little or no money by selling the devices.

That has prompted more wireless carriers to tout less expensive Android phones in their stores, undercutting the demand for iPhones, said Darren Hayes, who has been studying the shifting market conditions as chairman of the computing systems programme at Pace University in New York.

Through the third quarter of last year, Android devices represented 75% of smartphone shipments worldwide according to the research firm International Data Corporation. That was up from 58% at the same point in 2011. Meanwhile, Apple’s share of worldwide smartphone shipments has fallen from a peak of 23% in the fourth quarter of 2011 to 15% in the third quarter of last year.

Samsung in particular has been benefiting from the growing popularity of its Android-powered phones, led by its Galaxy S line. The company said yesterday that it sold more than 100 million Galaxy S phones in less than three years. It took the iPhone nearly four years to reach that milestone.

“This is a real wake-up call for Apple,” Mr Hayes said. “They need to be more flexible in how they do things.”