The Apple bear camp has perpetuated iPhone fear since back in the day when "certain analysts" wanted to create the fear that the phone companies didn't like the phones from the get go. Since then, Apple (NASDAQ:AAPL) has done nothing but execute flawlessly, and the iPhone is still the most recognized and widely available phone in the world today.
Apple has been trading semi-well over the last few months, holding its own as investors wait for a new Apple TV and potentially news about yet another buyback. So, naturally, it didn't surprise me when I saw the biggest headline at the end of last week for Apple was the concern that through court proceedings, it was revealed that there were internal documents out there that suggested that the company was scrambling to compete with Android.
Recode.net first broke the story:
Internal Apple documents show the concern, at least from the company's sales force, that the portion of the market occupied by the iPhone was on the wane amid growing competition from Android devices that have either larger screens or lower prices than the iPhone.
- Warning! GuruFocus has detected 8 Warning Signs with AAPL. Click here to check it out.
- AAPL 15-Year Financial Data
- The intrinsic value of AAPL
- Peter Lynch Chart of AAPL
The shift in the market was accompanied by a rising Google ecosystem, the documents noted.
"Competitors have drastically improved their hardware and in some cases their ecosystems," a member of Apple's sales team wrote in a document that was prepared as part of a fiscal 2014 offsite meeting. Portions of the document were shown Friday to the jury in the Apple-Samsung case.
The document, which was presented as part of Samsung's cross-examination of Apple Senior VP Phil Schiller, noted that all the growth in smartphones was coming either from large-screen devices costing more than $300 or from devices that cost less than $300, with the segment that included the iPhone showing decline.
Other concerns noted in the document included the idea that Android rivals were "spending 'obscene' amounts of money on advertising and/or carrier channel to gain traction" and that mobile carriers had an interest in limiting iPhone sales because of, among other things, the high subsidies they had to pay on the device.
Two words: not news.
Strange that this revelation would have any effect on how Apple would perform these days. Nonetheless, it was a prominent headline to end the week for Apple traders. I don't even follow Apple too closely, and it popped across several of the Twitter feeds that I follow. Apple slumped on Friday of last week, but it was amidst a macro market selloff.
Back to business 101 - any company, producing any product, often worries about the competitive advantage and strategy behind those they compete against. You think Burger King doesn't "worry" about McDonald's? Of course they do! This is a healthy part of the business and should do nothing if not show you that Apple is proactive in the way that they compete.
Also, sales continue to trend upward at a decent clip. Meanwhile, the facts continue to paint the story in favor of the Apple bulls. Apple iPhone 5s kept its crown and outsold all other mobile devices during March amongst the four major cell carriers in the U.S. Latinpost.com reported:
According to Canaccord Genuity analyst T. Michael Walkley, the iPhone 5s was the most popular handset with AT&T, Sprint, T-Mobile, and Verizon. What is notable is the iPhone 5s was the most expensive device compared to most of the other handsets.
Within AT&T, the iPhone 5s can be purchased with a two-year agreement for approximately $200, $300, and $400 depending on the internal storage model. After the iPhone 5s, Samsung and its Google Android mobile operating system was dominate as it claimed second and third place with the Galaxy S4 and Galaxy Note 3 respectively. The prices for the Galaxy S4 and Galaxy Note 3 are relatively low compared to the models of the iPhone 5s. The Galaxy S4's prices range between $100 and $250, while the Galaxy Note 3 cost $300.
Additionally, there were other articles out suggesting that Steve Jobs wanted to start a "holy war" with Google (GOOG) - also not really news in 2014, if you ask QTR:
The ongoing Apple vs. Samsung wars have provided some interesting tidbits of information about the companies, including emails from late Apple founder Steve Jobs.
One such newly released email reveals that 2011 was set to be the year of the "holy war" against Google, and how Jobs and Apple were planning to fight.
At the time, the company was working on the iPhone 4S("plus iPhone 4") and the iPhone 5, looking to have an LTE version of the iPhone in 2012. Additionally, the company was looking to build a low-cost iPhone model to replace the aging iPhone 3GS. All of the goals were hit with the exception of the low-cost replacement, which eventually became somewhat of a reality with the iPhone 5c.
But, the facts are that Apple has created the industry standard for smartphones, and in taking a longer-term view than quarter-to-quarter, you can certainly see how it's paid dividends for the company's shareholders:
Then, days later after this news was released, to bring things back to reality, we get write-ups like this one from Forbes:
Counterpoint research released its worldwide smartphone survey for February and it showed that Apple AAPL -1.29%'s iPhones were in the top two positions with the 5s and 5c in first and second place. The 5s has also been the top selling smartphone worldwide since it was launched six months ago. Samsung's Galaxy S4 and Note 3 were in third and fourth, respectively, for February. (Note that my family and I own Apple shares and I have sold put options which is a bullish strategy).
The top five positions did not change from January to February with Apple's iPhone 4S taking the fifth position. What is interesting is that Xiaomi smartphones held the 7th and 10th spots in the February survey vs. the 6th position in the January survey.
The point of this whole article is that in the past, bears have often cited smartphones as an area where Apple is most vulnerable, when that's still far from the truth.
If anything, sales would dictate that as iPhone and iPad sales ramp up, iPod is going to be the most susceptible. Except, that's not as good of a headline because iPod doesn't make up as much revenue business as iPhone. Maybe I'll concede that there's risk there - but as far as the iPhone panic - bears, might be time to give it up.