By Kimberly Hill MacNewsWorld Part of the ECT News Network
08/01/07 3:24 PM PT
Traders had a knee-jerk reaction this week on a rumor that Apple was considering cutting production of the iPhone, and shares of Apple fell 7 percent Wednesday. The rumor reportedly originated from an e-mail written by a broker, and has not been substantiated. Apple shareholders appear jittery following several challenges the iPhone has been facing since its recent release.
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Rumors surrounding the iPhone wreaked havoc for its creator on Wall Street this week. On Tuesday, an article published by TheStreet.com attributed a slight drop in Apple (Nasdaq: AAPL) stock to "chatter" about Apple reducing production figures for the device. On Wednesday, Apple stock took a steeper dive -- about 7 percent -- as the rumor was still fresh among traders.
The article, written by senior writer Scott Moritz, cites what the reporter calls a "trading note" from brokerage Miller Tabak & Co. that speculates about Apple reducing its planned production of iPhones from 9 million units to 4.5 million units.
He Said, She Said
Since then, many press reports have refuted the report's statements, noting that the e-mail in question was an independent communication between one trader and one client, and that the production rumor is not substantiated.
Still, the production number underpins an even more important number: the sales target. Apple CEO Steve Jobs is on record repeatedly predicting the company will sell 10 million units in its first year.
That figure will be nearly impossible to hit, Anton Dessinov, an analyst with Yankee Group, told MacNewsWorld.
Nearly 30 percent of consumers are given mobile phones for free -- after contract subsidies and rebates -- Dessinov noted. By comparison, the US$500 or $600 iPhone looks unrealistically expensive.
Pulling the Hair Trigger
However, price point is not the only challenge facing Apple in the mobile phone market, according to Dessinov. Whether or not the consumer market even wants to accept a converged music-phone device is another, he said.
Apple is also locked into particular technical and design questions about the iPhone -- the functionality of its touch screen keyboard, for example, and concerns about battery life.
With so many serious questions and so much publicity, people have what Dessinov described as "a hair trigger" response towards the iPhone.
To a certain extent, he said, the extreme reactions are Apple's own fault, because the company's well-oiled marketing machine put the spotlight on the device.
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