Apple Seen Losing Its Innovation Magic by 71% in Bloomberg Global Poll

Friday, 17 May 2013 07:30 AM

 

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Apple Inc., the world’s most valuable technology company, has lost its edge among investors, according to the latest Bloomberg Global Poll.

Hedge funds sold large stakes of the iPhone maker’s stock in the first quarter, Apple shares are down 40 percent from last year’s high and the company paid higher interest rates for a recent bond sale than Microsoft — in a PC trumps Mac moment.

Now, 71 percent of poll respondents say the Cupertino, California, company has lost its cachet as an industry innovator, which includes 28 percent who say it is permanent and 43 percent who say it may be a temporary hiccup. There are still true believers; 23 percent said Apple remains the best in the business. Six percent were unsure.

“They’ve definitely lost their momentum,” said Lionel Mellul, 43, head of the cash equity business at Sunrise Brokers in New York, a poll respondent. “It’s still at the point where they might turn things around. They still have a strong brand.”

Chief Executive Officer Tim Cook said the company won’t introduce a product to add to its innovations — the iPod, iTunes, the iPhone and iPad — until the U.S. fall, one of Apple’s longest stretches without a fresh gadget since at least 2000.

Apple remains the most profitable technology company, generating $41.7 billion last year. In the global handset business, the iPhone accounts for 57 percent of the industry’s profits, according to Canaccord Genuity.

Increased Competition

Many of Apple’s major products are facing increased competition from Samsung Electronics Co.’s top-selling Galaxy phones, Amazon.com Inc.’s Kindle tablet reader and Spotify Ltd.’s music service.

“Apple is innovating around the same things which, in my mind, is not really innovating,” said Gala Prada, 42, head of pension funds and portfolio manager for Fiatc Seguros in Barcelona, who answered the poll. “There are companies like Samsung — which are taking the lead right now innovating in all kinds of consumer and electronics products — which also make Apple, on a relative basis, look a little bit behind,” Prada said.

The popular perception had been “that Apple could do no wrong, the iPhone and iPad were the best, most innovative products on the market, and all competitors are struggling to keep up,” said Michael Cumming, 35, a senior equity analyst with Scout Investments in Kansas City, Missouri.

“That has changed mainly because of the success of Samsung’s latest products that are very stylish and offer some features not available in Apple products,” he said.

Shine Off

Investors have sent Apple’s shares down almost 40 percent from a September high closing price of $702.10 amid slowing sales and profit growth. The company last month reported its first quarterly profit decline in a decade and predicted the slide would continue in the current quarter.

Hedge funds such as Tiger Global Management LLC, founded by Chase Coleman, cut its stake by 790,000 shares, or $443.7 million including market losses, in the March period, according to a regulatory filing May 15. Appaloosa Management LP and Tudor Investment Corp. also sold major stakes.

Apple also isn’t getting the best interest rates in the debt market. The company paid higher interest rates for a record $17 billion bond sale than Microsoft, the world’s biggest software maker, did a week earlier.

Steve Dowling, a spokesman for Apple, declined to comment.

Jobs’ Death

Mellul, like other respondents, pointed to the 2011 death of Apple co-founder Steve Jobs as a reason for their response. Cook, 52, who succeeded Jobs, doesn’t have the outsized personality and promotional skills of his mentor, they said.

“That company needs a strong personality at the helm,” Mellul said. “There is a huge challenge and they are at the crossroads where Apple could become the next Microsoft.”

Cumming, a poll respondent, said customers like him are wondering what’s next for the company.

“Most rumors surround a watch or TV from Apple, but I think many people see limited potential for a watch and the TV market has been terrible for so long it’s hard to see how Apple can be successful there,” he said.

Apple fared worse among non-U.S. investors, with 74 percent of European respondents and 83 percent of those in Asia saying Apple has lost its cachet as an innovator. In the U.S., 63 percent agreed the company has either permanently or temporarily lost its mojo.

The survey of 906 investors, analysts and traders who are Bloomberg subscribers around the world was conducted May 14 by Selzer & Co., a Des Moines, Iowa-based polling firm, and has a margin of error of 3.3 percentage points.

© Copyright 2014 Bloomberg News. All rights reserved.

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