Apple Shares (AAPL) Fall 6 Percent Then Steady After Tim Cook’s Announcements

In the face of heavy competition for its most popular devices, Apple Inc. (AAPL) shares fell more than 6 percent Dec. 5, marking the company’s biggest single-day loss in four years. The stock was one of the biggest losers of the day on the S&P 500, dropping $35 billion of its market value.

Apple shares were once some of the most desirable on the market, but have steadily declined since September as doubts of the company’s ability to ward off completion have increased. For example, this year sales of the iPad gave way to the less-expensive Amazon Kindle Fire and the newly-released Microsoft Surface.

“This is not going to be a short-term trend, Brian Battle, director of trading at Chicago’s Performance Trust Capital Partners, told Reuters. “This is a management test, of how well they can perform without Steve Jobs.

“They need another new product that hits it out of the park. Without that, they could get a gradual grind-down in confidence,” he said.

A Dec. 6 report from research firm International Data Corp. was likely responsible for much of the market upheaval. The firm said Apple likely lost market share in the tablet space in 2012—falling from 56.3 percent in 2011 to just 53.8 percent. Likewise, Android products increased their market share during the same period from 39.8 percent to 42.7 percent, IDC said.

Another reason for the Apple sell-off was likely concerns that tax rates on dividends and capital gains may rise next year. If lawmakers in Washington cannot agree on a fiscal cliff solution, the higher rates will take effect in 2013.

“Depending on what happens with the (negotiations), rates could rise next year or they could stay the same,” Battle told Reuters. “They will not be lower, so if you’re an investor who has seen gains in Apple, it is better to take those gains this year rather than next.”

Although Apple is still up 33 percent for the year, it has dropped 24 percent from its record high on September 21.

Tim Chriskey, chief investment officer of New York’s Solaris Group, said selling can sometimes “take a life of its own.

“Some taxable investors take the gain, that creates some negative momentum,” he told Reuters.

Apple made two announcements Dec. 6 that may put some spring back into its stock market step in the coming days, however. First, T-Mobile will finally begin offering Apple mobile products in 2013—the last of the four major US carriers to offer the Apple iPhone and other iOS devices. Originally only available through AT&T, the iPhone is now the most widely available smartphone in the country, with sales outnumbering all handsets using Google’s Android software combined in the 12 weeks leading up to Oct. 28, according to Kantar WorldPanel ComTech. The deal with T-Mobile—the fourth largest US mobile carrier by volume—will only increase the iPhone’s sales.

Apple’s CEO Tim Cook also announced in an interview with NBC’s Brian Williams that the company will start manufacturing some of its Mac computers in America starting in 2013.
“We’re been working for years on doing more and more in the U.S.,” Cook said. “Next year, we’re going to do one of our existing MAC lines in the United States.”

Although Apple has promised to invest $100 million to transition at least one Mac product to US manufacturing, some experts say the move is more of a PR boost for Apple than a major shift in its overall manufacturing plan. The Macintosh computer is the smallest of Apple’s four product lines in terms of unit sales—Apple sold 18 million Macs in the past year compared to 125 million iPhones. Plus, most of the Mac’s parts will still be manufactured in Asia, as will many of the computers since Apple has only promised one line of Macs to be made in the US.

“This doesn’t mean it’s bringing back component production,” University of Manchester Business School professor Karel Williams told CNN. “The Mac is a low-volume product that is irrelevant to shares. That means this is a PR move.”

According to Williams, moving manufacturing of high-volume products—such as the iPhone and iPad—into the US is simply not feasible for Apple.

“Apple needs huge Chinese assembly factories to make the net sexy product at moment’s notice,” Williams said. “No matter how well-meaning Apple is, there are practical limits on the manufacturing business model for what they can bring back to the United States.”

Whether it was the company’s announcements or some other factor, Apple shares steadied on Dec. 6, closing the day up 1.5 percent at $547.24. Still down 6.5 percent for the week, Apple was able to breathe a sigh of relief after the previous day’s losses.