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Apple correction should be over by now

November 9th, 2012 · No Comments

The 20% correction in Apple shares should be over, even if there were reasons for it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)

The seemingly inexorable march forward by Apple (AAPL)
has come to a sudden halt. After peaking above $700 a share, these
shares have fallen back to well below $600 in short order. The question
is whether this is merely a blip and a good buying opportunity (like in
the past), or whether there is something more structural at work.

iPad Mini
We
fear that it might well be the latter. Some of the magic of Apple seems
to be ebbing away. While Steve Jobs was rather disdainful of the
concept of smaller tablets, Apple went on and made one anyway. The
result, while beautiful, was also a little underwhelming (no retina
display, for instance) and rather expensive. The 16GB model is selling
for $319, which is quite a bit more than rival tablets of similar size,
most notably the $199 Google Nexus 7. That’s a huge $120 (60%) premium
for the iPad Mini..

More worryingly, by Apple standards, the price (and hence margins) is already lower than usual:

Research
firm IHS, previously known as Isuppli, has taken the Ipad Mini to bits,
revealing that the 16GB model costs Apple roughly $188 to build, which
it then goes on to sell for $319 — not much of a profit by Apple’s
standards. The Ipad Mini 32GB and 64GB models cost around $31 and $62
more to make, IHS added. [The Inquirer]

Sales
were still brisk though, selling 3 million units in the first weekend.
But for how long can this Apple magic work? Apple’s lead in tablets is
eroding:

New data from IDC suggest that
Apple’s dominance of the global tablet computer market may be giving
way. Competing tablet makers, led by Samsung, gained substantial ground
during the third quarter of 2012. Apple’s market share dropped from 65
percent in the second quarter to just over 50 percent in the third
quarter. Meanwhile, Samsung’s share doubled to 18 percent [MIT Technology Review]

[Read on here]

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