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Apple (Nasdaq: AAPL) shares on Tuesday lost about three quarters of a percent to close at US$252.36, thus continuing the roller-coaster ride they've been on for the last few weeks. Maybe other market forces are at work here, or maybe investors are becoming uncertain about the growing strength of rivals that may come to challenge Apple.
There are two other possible explanations: That Apple has been impacted by the general downward trend of the market, or that investors are taking profits then buying in again at a lower price in anticipation of the announcements Cupertino's expected to make at its World Wide Developers Conference in June.
Google Guns for Cupertino
Google (Nasdaq: GOOG), with its Android mobile operating system, is one of the main challengers to Apple.
For one thing, smartphones running Android outsold iPhones in the first quarter of the year. Meanwhile, a host of vendors is preparing tablet computers, many of which may well run the Android OS.
Then there's Android 2.2, also known as "Froyo." Froyo is fast -- tests showed it's 450 percent speedier than Android 2.1.
Froyo's iPhone-Killing Features
In addition to its speed, Froyo has features the current iPhone operating system lacks -- tethering and the ability to let devices serve as WiFi hotspots, for instance.
Tethering lets mobile phone owners use their devices as modems for other devices, like laptop computers. It's not a new concept -- several carriers have long offered tethering capabilities on some of their handsets.
Last summer when it launched iPhone OS 3.0, Apple said the new software would support tethering. However, the phone's U.S. carrier, AT&T (NYSE: T), has yet to officially allow customers to use the feature.
WiFi hotspot capability lets mobile phone owners share Internet connectivity with other devices over a WiFi connection. The Palm Pre, for example, can be used as a WiFi hotspot on the Verizon network.
Sprint (NYSE: S) and Verizon also offer paid WiFi hotspot services.
Whether or not carriers charge users of devices running Froyo for WiFi hotspot and tethering capabilities, Apple will lose out on this bit of side-by-side feature comparison unless AT&T makes a play for iPhone tethering.
Can Apple Win the Fight?
The record sales of Android devices in the first quarter were partly due to Verizon's aggressive buy-one-get-one-free promotion, and some believe the iPhone will reassert itself once Verizon ends the promotion.
Nonetheless, the results are likely disturbing to Apple, which has prided itself on targeting only the premium market and refused to cater to the low end.
"Where other companies make a product and figure out what they can sell it for, Apple picks the price first and then makes products to sell at that price," Carl Howe, director of anywhere consumer research at the Yankee Group, told MacNewsWorld.
Look at it this way: If people are willing to get an Android phone because they can get a second one free, that negates Apple's value proposition. If they get new features the iPhone OS lacks on top of that, perhaps they may turn their backs on the iPhone for good.
On the other hand, there are several more weeks until the WWDC, and that may give Apple enough time to whip up something new.
Further, Apple's competitors have so far not demonstrated the same kind of sales mastery Apple CEO Steve Jobs has.
"What makes the iPad and iPhone different is Apple's ability to present its products as magical," Rob Enderle, principal analyst at the Enderle Group, told MacNewsWorld. "You have to be able to wrap a story and a complete solution consistent with that story around a new product class like the iPad, and folks other than Apple have struggled to do that."
That Ol' Black Magic
Perhaps Apple's already working its magic. It will most likely launch a new iPhone at the WWDC, and it reportedly plans to ship a total of 24 million units of that device by the end of the year.
Of that number, 4.5 million units will reportedly be shipped by the end of June.
Meanwhile, out of Asia comes news that international bank Standard Chartered has switched from the BlackBerry to the iPhone as its standard corporate communications device. This could be an indication that Cupertino's attempts to penetrate the enterprise are beginning to pay off.
Finally, the iPad continues to gain strength in the market.
"We believe the iPad is a major reason to remain excited about AAPL into year-end as checks indicate very strong sales," Barclays Capital analyst Ben A. Reitzes wrote in a note to investors Tuesday. "Even corporations are piloting the device at a pace that surprises us."
The iPad is already cannibalizing the netbook market, Reitzes said.
"We don't believe that it is a coincidence that we are starting to see weaker sales growth of PCs in April, the same month the iPad came out," he wrote.
At least, then, Apple may be able to hold its own against challengers, until it comes out with the next bit of magic.
