Is Apple in Trouble?


A year ago, we wouldn't be singing this tune, but it looks like Apple fans (and shareholders) may be in for yet another pinch as the company released an unsettling bit of news late Sunday. The market, as usual, overreacts to this information, but investors do need to consider the idea that the iconic technology company has its work cut out for it going forward. As Apple faces tepid demand for its flagship device, what should investors think going into 2013?

Dun dun DUN!
Don't worry, I am not going to turn this into (too much) of a sensationalist article heralding the end of Apple's reign of joy. But, as someone who was trying to tell people nine months ago that this wasn't an impenetrable machine of profit, I feel entitled to some degree of "I told you so." OK, ego checked.

Late Sunday, sources familiar with the situation told The Wall Street Journal that Apple's iPhone component orders were substantially cut based of weak forecast demand for the devices. Specifically, screen orders were cut in half from the original numbers.

Now, depending on where the product is in its lifecycle, there is nothing to be worried about by a drop-off in demand. But we are only four months into the iPhone 5. If this is indeed a sign about waning interest in the iPhone 5, then it's an extremely unsettling event to me.

Now now, children
Let's be real: Apple remains the most relevant and influential tech company in the world. Sure, Google kicked things up a notch last year, and Samsung proved its lawyers had just as much chutzpah as Apple's, but this remains the company that can announce a doggie door was installed in Tim Cook's office and people will line up to see it.

Android devices may be the worldwide leader right now according to the numbers, but that is the work of many companies (Google, Samsung, HTC, etc.). The truth is, Apple doesn't need to be the No. 1 purveyor of all things "smart" in order to be a great company (and stock). And it won't be a year of losing market share anyway, not with a fifth-generation iPad rumored to grace us with its presence as early as March.

Apple does need to restore some of that mystique that it has become known for, though, to keep us hooked. iPad 4 -- What was that? A CPU improvement and a minor camera change -- that's small potatoes. Being the most innovative, disruptive, impressive company on the planet, Apple must continue to knock our socks off. If that means an iPad 5 that can pour me the perfect Old Fashioned, then so be it. We all have to make sacrifices.

The bottom line is, Apple is kicking off the new year with some less-than-pleasing news. It seems the weakened demand comes as a surprise to even the company, and by a wide margin (referencing the slice in screen orders). While I think the company will continue to be a class-leader, it's going to need to reaffirm confidence for those who are, with good reason, nervous. 2013 isn't 2012, or 2011, and one can only rest on its laurels for so long.

iPad 5, iPad mini 2: I am eagerly waiting my Old Fashioned.

Apple has been a longtime pick of Motley Fool superinvestor David Gardner, and it has soared more than 215% since he recommended it in January 2008. David specializes in identifying game-changing companies like Apple long before others are keen to their disruptive potential, and he helps like-minded investors profit while Wall Street catches up. Learn more about how he picks his winners with a free, personal tour of his flagship service, Supernova. Inside, you'll discover the science behind his market-trouncing returns. Just click here now for instant access.

The article Is Apple in Trouble? originally appeared on

Fool contributor Michael B. Lewis has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.