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Daniel Nations

High Expectations Taking a Bite Out of Apple

By January 21, 2013

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Apple CEO Tim Cook

Later this week, Apple CEO Tim Cook will announce that Apple has broken its sales record with revenues of over $50 billion for the quarter, a significant increase over the previous record of $46 billion last year. And yet, with reports of Apple cutting expectations of iPhone and iPad shipments in half and stock price of $500, down from the $700 range mere months ago, you'd think Apple was on the verge of collapse.

The bad news for Apple started with the latest major release of the software that runs the iPad and iPhone. iOS 6.0 ditched Google Maps and replaced it with a product full of bugs and misinformation, leading many to ignore some of the good features in the app. It also got rid of YouTube as a default app, with Apple cutting more ties with Google.

This was followed by reports that the iPad Mini was cannibalizing sales of its bigger brother. There was also speculation that Apple's release of the iPad 4 was due to poor demand for the iPad 3, speculation that seemed counter to the record sales of the iPad 3 the weekend of its launch and the 84% increase in iPad sales the first full quarter after its launch.

And now, we have Apple cutting their expectations in half for the iPhone and iPad this quarter, which has sent the stock down to $500.

What's it all mean?

Misinformation appear to be driving the price down rather than cold, hard facts. Apple slashing iPhone and iPad shipments for this quarter isn't based on their original estimates for this quarter, it is based on how many they sold last quarter. Obviously, Apple wouldn't expect to sell as many iPads in the first quarter of 2013 as they did during a holiday season that also saw a new iPad released.

There are also reports that some Apple suppliers would keep production lines open during the Chinese New Year to meet the high demand for the iPhone and iPad. And while these reports are about as reliable as any other rumor, it is interesting how they weave such a tangled web. Apple can't be both lowering expectations for how many units they will sell while suppliers are having a hard time meeting demand.

What's it all mean? Likely, it means Apple's stock is on sale right now.

Photo © Kevork Djansezian / Getty Images

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