They Should call it Cursed Phone 4

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They Should call it Cursed Phone 4

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I have written repeatedly about how Apple is in an amazing position and how competing with the company is becoming very difficult. The company's desktops and laptops are getting a massive lift from the buzz surrounding the iPod, iPhone and iPad and as more people buy these aforementioned devices, the community of customers purchasing music and apps soars.

Many companies have cycles they go through - no organization has a share price or business which goes straight up. But if you had to choose a top for a company would it not be when it sees its market cap soar to surpass almost all others? Apple recently had a stock price of $279 which translates into a market cap of $253.8B which put it just behind Exxon Mobil who currently has a market cap of $274B making it the most valuable American company by this measure. As of this writing however the share price of the Cupertino-based Apple has taken a dive down to $241.65 which is a market cap of $219.7B.

Over 30 billion dollars wiped out in a few weeks and many attribute the loss to the antenna problems of the iPhone 4.

I should point out that 13 days ago, TMC's Robert Hashemian wrote an article on TMCnet's financial technology news site regarding Apple shares going to $45. The article was a follow-up from blog entry he wrote on June 21, 2010 titled Apple to $45. I should mention that I told Robert the whole premise of Apple losing such a large amount of value was ludicrous back in June. But sure enough at that time the stock was trading at $270 and had the article convinced you the shares were going lower, you would have saved yourself about $30/share.

Still, I consider Apple, Oracle, Cisco and Salesforce.com among the best-positioned companies in tech going forward. Apple still tops my list because they keep coming out with new products which are new and successful. The iPad for example is a product which from Apple's perspective is just a large iPod Touch. For me though it has become an indispensable business tool and fills a void I didn't know existed between my phone and laptop.

So with so much going for it, why is the company falling in value? The answer is it is dealing with a slew of problems which seem to be part of a downward cycle. Virtually all of the recent issues however are related to the iPhone 4 as when the device first became public it was because an Apple staffer left one in a bar and it was subsequently discovered by Gizmodo and this resulted in Apple having the police raid the home of a Gizmodo editor and confiscate any items related to the device. Most companies do their best to treat the press with respect, dignity and the utmost courtesy - raiding homes of the people who uncover scoops is not generally the way to endear yourself to reporters. So lets call this goof number one.

Then there was the unveiling of the iPhone 4 where Steve Jobs had to request audience members to turn off their WiFi APs so he could get his demo to work. This is one of the most embarrassing things which could happen during a live demo and the incident coupled with 3G problems had the audience roaring with laughter. This was especially the case when someone in the audience shouted the word "Verizon."

Steve Jobs dealing with WiFi issues during iPhone 4 launch

 
 

Then of course this leads us to antenna-gate which is loosely defined as coming out with a phone which makes worse quality phone calls than the phone it replaces. Normally this shouldn't be a problem - unless of course your old phone was featured on Saturday Night Live as not being able to make phone calls either. So basically you upgrade a device which has publicly ridiculed call quality with one which is worse.

To compound the problem, Apple responded to early customer complaints about the "death grip" resulting in lost calls when a hand was placed on the lower-left side of the device by saying customers were holding the phone improperly. Then the company came out and said they would solve the problem with a software update. Then they said the algorithm which controls the antenna bars was faulty. Then Apple came out and said there is no fix and all customers who aren't happy can get a refund without a restocking fee and they also get a free case which should solve the problem. You have until September 30th, 2010 to take advantage of this offer by the way.

During the recent "apologetic" speech given by Jobs he reminded us that keeping customers happy is what Apple is all about - that is of course unless being able to correctly see the millions of Web sites which use Adobe's Flash makes you happy.

And Steve Jobs seemed to make yet another uncharacteristic error - saying the problems with the iPhone 4 are the same as those being seen throughout the industry. The reality is the CEO of no other mobile company I am aware of had to have a major press conference apologizing for antenna problems. In stark contrast, the meetings I have had with RIM execs for a decade or longer almost always begin with the massive amount of R&D the company spends on antenna design.

In the last few months, Apple has gone from doing nothing wrong to virtually everything wrong. And I say this with the ultimate respect for the amazing products the company continues to come out with. But still, these problems are big, important and the antennagate situation is not over in my opinion. I still think a recall may be looming - especially if one emergency call gets dropped on this phone and it leads to injury or worse. Just the poor PR alone caused by such a case may force a recall.

Then there is the Google Android threat. I was somewhat lukewarm on Android until I saw the Motorola Droid X and now I am a believer that this phone and OS combo can do serious damage to the Apple mobile brand. For those of you with fat thumbs like me, typing on the larger screen will be much easier. And boy is it fast - even over 3G.

If I had to make a bet, I would say that if Steve Jobs remains healthy and the company gets past this incident in the next year or so, the sky is the limit for Apple. They will continue to put more pressure on Microsoft, Nokia and RIM while simultaneously selling more laptops and desktops to people who are wowed by Apple stores and the company's products in general. In 18 months I would not be surprised to see the company having the largest market cap of any publicly traded company. Of course the price of oil going up could keep Exxon Mobil's value growing as well.

But if Apple doesn't turn the momentum train around soon, it could lead to bigger problems. Let's not forget customers are still buying iPhone 4s and iPads by the million - but in the end if the company gets a reputation of having flawed products for enough time, enormous damage will be done to the Apple brand. And it all started with the iPhone 4 which if not cursed is certainly  the cause for tremendous profanity from Apple customers and employees.



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