Tuesday, 30 April 2013

As Apple sours, investors turn to a new favourite

Sentiment is shifting among technology investors.

While the once cult-like faith in Apple Inc. has developed cracks over the last year, bullishness towards arch-rival Google Inc. has been steadily rising.

Over the past 12 months, Apple’s share price has tumbled 31 per cent while Google’s has risen 30 per cent.

The shift indicates which company investors now believe has the clearest path to tech supremacy, and suggest that Apple’s stumbles are increasingly being seen as Google’s gains.

The companies’ fortunes began to diverge last September, just days after Apple introduced its latest smartphone, the iPhone 5.

Initial sales came up short of upbeat expectations. Then Apple got entangled in a spat of its own making when the company decided to remove Google’s mapping software from iPhones and iPads.

Unfortunately for Apple, its alternative mapping product debuted with problems, prompting a public apology from chief executive officer Tim Cook.

The launch a month later of Apple’s iPad mini only accelerated investors’ concerns. The smaller and cheaper version of Apple’s original tablet was designed to fend off encroaching challengers, which include Samsung's Galaxy Tab, Amazon.com’s Kindle Fire, Microsoft Corp.’s Surface and Google's Nexus 7. But the unveiling disappointed the Street, where some fretted that the iPad mini’s price was too high, and others worried about weaker-than-expected sales for the bigger iPad.

Almost overnight, there seemed to be a realization that Apple was no longer going to blow minds with great innovations every product cycle. That notion has had analysts reworking the financial numbers on Apple as sales growth in the high-end smartphone market has begun to cool. Last week the company revealed that its decade-long record of quarterly profit growth had snapped, and it warned that sales this quarter could actually retreat by as much as 4 per cent.

“We believe total profit growth will remain stagnant unless Apple is able to create a massively successful new product or service category,” Andy Hargreaves, an analyst with Pacific Crest Securities, said in a report following Apple earnings.

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