From StockReversals.com Team:
How Apple Got Google Played
The 2012 Apple Stock Tipping Point was Google Play
Many investors are scratching their heads over their Apple stock and wondering why we have seen a drop from $704 to $427 in the past 6-7 months as of this article. The market is always the final arbiter and months down the road after a substantial rally and or collapse, the news that drove a particular stock up or down starts to become more apparent.
My opinion of how Google (GOOG) played Apple (AAPL) is based on the early lead Apple enjoyed with their eco-system, and the subsequent catch up play by Google. A substantial market advantage and for a long period of time one might say a “moat” developed around the Apple core business. The launch of I-tunes allowed the I-pod family members to become ubiquitous devices, creating a virtuous up cycle of consumer demand. Eventually this led to the brilliant release of the I-phone which would allow one to eliminate other devices and continue to build the Apple eco-system, creating even further consumer demand. We could say the “tipping” point was the launch of I-tunes service, which later was the key ingredient to the surge in Apple stock, the advantages to consumers to owning Apple devices vs. other manufacturers was huge.
Apple also enjoyed a lack of smart phone competition in the early stages of the smart phone revolution as well. For example, a local Verizon store employee could only throw his or her hands up in the air a few years ago when a consumer walked in looking for an I-phone. Keeping the Apple product associated and only available through AT&T was a brilliant move at the time, but my opinion is Apple stayed with that exclusive strategy a bit too long. This forced consumers to look for other devices from HTC, and then later Samsung to transition to the smart phone models. The only issue was the android eco-system was really disjointed and could not compete with the ease of use of the Apple system, nor the cool factor.
As other phone manufacturers struggled to keep up with the “cool” factor that Apple enjoyed with the I-tunes service and their I-Phones, Apple maintained their lead. All the while, Samsung was working hard on technology that would equal or exceed the I-phone, but they needed a platform to rival that of the Apple Eco-System.
The key tipping point was last March of 2012 and into the summer as Google finally figured out how to combine all of their disparate services into one platform that was easy to access and would speak across devices. The launch of Google Play in March is when I had my A-Ha moment as a consumer of android based phones and devices. Finally, Google figured out how to launch their own eco-system that could rival Apple’s, and thereby remove objections a potential I-phone buyer would have to purchasing an Android based smart phone. Now consumers were free to make an smart phone Android based phone purchase and have a product that was equal or superior to the I-phone.
The same mistake Apple make in the 1980’s keeping their system closed ended is the same mistake they made again this time. Early on this was a boon for Apple as they had little or no competition, and as the Android market and Google caught up, it has now become simply a matter of who can create the best smart phone product, essentially Samsung removed the product advantage in 2012 with their launch of the Galaxy S-3 for example.
I can purchase any Android based phone amongst a myriad of manufacturers now and still have a strong eco-system to surround it. I-Tunes can be exported into Google Play easily as well, and Google Chrome now transfers across multiple devices on multiple computers as long as I’m signed in. Essentially, Google Play caught up with the Apple advantages and with a growing selection of Smart phones, and the incredible Samsung Galaxy S3 phone, Apple was marking their days as the leader.
Apple’s problem now with consumers is you have to wait for them to launch the next I-phone or device. The last launch was in September of 2012 and marked the top in the stock. Slightly thinner, with some color choices and not a whole lot more made for a major product disappointment. Tablets are also now widely available and at much lower price points, and they can tap into the Google eco-system easily.
With the stock market much better at forecasting future news than the average investor, Apple stock immediately began a precipitous decline and may continue to do so unless Apple can launch a series of highly innovative products going forward. In essence, Apple got Google Played as it were and the market simply caught up to them and their early lead.
We can look at the charts of both Apple and Google below and see the turning points outlined:
In summary, Apple is now on the ropes with investors unless they can create and launch an entirely new series of devices, and probably non phone related in my opinion. This is not to say they wont, because if they do come up with the next must have cool device, which I suspect they will… Apple stock will be rallying for months until once again we realize why. Until then, Google has essentially allowed the free market more choices, and in the end that is good for all of us.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.