Another Day, Another Apple Plunge


In what's become a regular event in recent weeks, Apple (NAS: AAPL) saw a sizable sell-off today; off 2%, or about $12 billion in market cap. Let's stake a look at the storylines around the company today.

What's the drop?

First off, if you believe that media outlets reporting they know the reason for Apple's decline on a day-to-day basis have the full story, I've got some swampland in Florida to sell you. On certain days, there are clear events to point to, like when investors were disappointed by opening weekend iPhone sales. However, on days like today, there is no real news that describes the company's decline.

One particularly laughable storyline that caught my attention today was reports that a U.S. appeals court overturned an injunction on the sale of Samsung Galaxy Nexus phones, and this led to Apple's decline.

My colleague Evan Niu does a great job describing why it's absurd that Apple should sell off in reaction to this news in another piece, but the general point is that Samsung itself had argued that sales of its Galaxy Nexus phone was "minuscule" and didn't present any harm to Apple. Put another, sales of the Galaxy Nexus were less than1/100 of the iPhone in the last two quarters!

And some might argue Apple sold off today, not because of the sales threat of the Galaxy Nexus, but because courts aren't upholding Apple's earlier victory of Samsung. To that, I'd respond that one appeals case over an aging phone shouldn't be read into as a precedent to the larger legal battle.

Sprint on the block?

Probably the most interesting news in the tech world today was that Japanese carrier Softbank is close to completing the purchase of a substantial portion of Sprint (NYS: S) . According to the ever-reliable Wall Street Journal, Softbank will purchase 70% of Sprint in a deal that could exceed $12.8 billion.

There are a couple interesting facets to this story. First, it demonstrates the consolidating nature of the telecom world. Hot off the heels of T-Mobile announcing a merger with MetroPCS (NYS: PCS) , Sprint was put in play. Not only that, but Clearwire (NAS: CLWR) saw its own shares soar 70% today! Sprint is a major owner of Clearwire, in spite of their seemingly splintering relationship, and reports are that the company is considering buying Clearwire, in part, to acquire more spectrum for a continuing 4G buildout.

Why does this matter to Apple? Well, Sprint has made a very public bet on the iPhone in turning its future around. The company made $15.5 billion in sales guarantees to Apple in exchange for the rights to sell the iPhone. Some early reports said capital injections from Softbank to Sprint could help the company develop "proprietary" phones to decrease reliance on the iPhone. That situation would seemingly be a negative to Apple.

Yet, I'm inclined to say that such reports are, well, stupid. I don't know what "proprietary" phones mean, but I'll assume Sprint wouldn't go into such an obviously ridiculous direction of developing its own phones. Instead, such an idea might be that it partners with companies like Motorola or Samsung to create flagship Androids to reduce reliance on iPhone sales.

First off, that's not a differentiator. AT&T tried that strategy, pushing Nokia (NYS: NOK) Lumias as an iPhone alternative, with heavy marketing, and now they're rotting as marked down inventory. Verizon has had a series of exclusive phones such as its newest Droid RAZR Maxx that offer counter-programming to the iPhone. Likewise, before the iPhone, Sprint tried offering flagship phones from companies like HTC as iPhone alternatives. That strategy didn't work, as evidenced when Sprint later mortgaged its future to sell the iPhone.

To think that a rejuvenated Sprint with more money means they'd shift away from the iPhone is ludicrous. If anything, it gives them more capital to keep marketing themselves as the low-cost network iPhone owners should switch to. As if the idea Sprint wouldn't continue increasing its relationship with Apple in the future wasn't clear already, the company acquiring it - Softbank - saw its own fortunes turn because it was the first Japanese telecom to offer the iPhone! Simply put, Sprint being acquired by Softbank presents little threat to the iPhone. These are two companies who have seen huge benefits from selling Apple's phone.

More Apple advice

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Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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