Why Apple seeks to appease investors through buy-back programs (Part 2 of 3)
Apple shares aren’t performing well
In the previous part of this series, we discussed how Apple (AAPL) is consistently undertaking cash distributions to shareholders in the form of dividends and buy-backs in order to appease investors. Still, Apple shares haven’t been doing well in the last few months. The stock dropped about 9% in a single trading session after the company released its latest earnings report for fiscal Q1 2014 quarter on January 27, 2014.
Despite an all-time sales high of more than 50 million iPhones in the quarter, Apple lost share in the smartphone market. According to IDC, Apple’s share in the smartphone operating system market declined from about 19% in 2012 to 15% in 2013, while the market share of Google’s (GOOG) Android phones increased from 69% to 79% during the same period. Even Microsoft (MSFT) was able to increase its share in this market, from 2.4% to 3.3%, and its acquisition of Nokia’s (NOK) mobile devices should help Microsoft further grow its share in 2014. BlackBerry (BBRY) was another notable under-performer, as its market share declined from 5.4% in 2012 to 1.0% in 2013.
Analyzing Apple’s market share loss
Here, we’ll figure out why Apple hasn’t been able to grow at the same pace as the overall smartphone market. Although Apple is an established player in developed markets such as the U.S., these markets have reached a saturation point in terms of smartphone ownership. Much growth will come from emerging markets, where smartphone ownership is on the rise. However, historically, Apple has failed to grow its market share in emerging markets, and one of the main reasons for this trend is the high price points of iPhone models.
Apple has always focused on quality products sold for higher prices—and not on market share. So the company focuses on maximizing profits rather than market share. However, emerging markets are a different ballgame altogether. These markets are highly price-sensitive, and Apple needs a different strategy to cater to these markets. What does Apple need to do to revive its stock price? Read on to the next part of this series to learn more.
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