Following the closing bell on Tuesday, Apple shares have continued their downward trend for the year, falling 3.2% to $114.64. With an enormous amount of outstanding shares, this fall represents a loss of $113 billion, or more than the total value of other corporate giants such as Boeing, at $98 billion, and drug maker GlaxoSmithKline, at $106 billion. Facing a saturated smartphone market in the U.S. and a difficult road ahead in the Chinese market, Apple may see a prolonged period of tepid performance.
With China accounting for one quarter of Apple’s revenue, and 60% of that revenue coming from iPhone sales, threats to this part of the business can have a drastic effect. As the Chinese economy is showing increasing signs of strain, consumers may be forced to opt for less expensive imitations of the popular brand. Reception for the new Apple Watch has also not been great indicating that prospects for future growth may be limited.
Downward pricing pressure on the company’s $600 phones comes from the fact that computing is increasingly done in the cloud, rather than on the device’s hardware, lessening the desire to pay for next-generation improvements in that area.
Sales for the company’s new iPhone 6 may get a boost in the future, considering that only 20% of Apple customers who own one of its older phones have chosen to upgrade to the 6 as of yet. This is coupled with the fact that usage of the company’s iOS operating system is growing in Europe. This may be a break even point for the company since Android use grew in the U.S over the same period.
One positive development for the company is found in its recent collaboration with IBM in app-development, as well as the news that IBM plans on switching the majority of its workforce over to Apple devices.
Perhaps the company’s recent interest in car making may turn things around. BMW has already been in talks with Apple about a possible collaboration, but nothing has been official. The software giant has also consulted with experts from Ford, GM, and Tesla. The stock has fallen 7% in the past month and remains below its high for the year of $134.54.
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