Remember when Apple was the most valued company in America? When its share wealth rivaled anything civilization had ever seen? When those days are gone.
According to USATODAY, Apple shares are officially in bear market territory having dropped 20% and loosing some 150 billion dollars.
Just to put that into perspective, Apple’s $150 billion decline is larger than 475 companies in the Standard & Poor’s 500 are worth. A drop this big is the financial equivalent of wiping out the market value of entire companies like Pepsico (PEP) at $145 billion, International Business Machines (IBM) at $133 billion and Nike (NKE) at $111 billion.
Cause of the decline? Speculators see a softening in the smartphone business and believe this could be a sector decline.
Troubling signs pointing to weakening demand for smartphones continues to dog the stock. Analysts are cutting growth expectations for the fourth quarter – and even the first quarter – as they incorporate weaker demand. Despite efforts to diversify away from the mature smartphone market – Apple still gets a vast majority of its revenue and profit from smartphones.
A number of leading investment banks have been cutting earnings estimates on Apple along with price targets in some cases. Analysts on average now expect Apple to report adjusted quarterly profit of $3.24 a share in the fourth calendar quarter, down 1% from a month ago, says S&P Capital IQ. Estimates for profit in the first calendar quarter have been cut 2.4% from a month ago to $2.41.
But Apple is also in the cross hairs of European legislators who believe the Cupertino company colluded with Irish government in a scheme to dodge taxes. Apple warned investors back in April they could be hit with a substantial tax bill:
In its quarterly filing with the Securities and Exchange Commission Tuesday, Apple said it could be required to pay back taxes for up to 10 years if the European Commission rules against Ireland. “While such amount could be material, as of March 28, 2015 the Company is unable to estimate the impact,” Apple wrote.
That, I’m sure did not help their shares. US and Europeans have been after the maker of the iPhone and iPad for a long time over its ability to defer taxes:
Last year, Apple executives admitted at U.S. Senate hearings that the company had relocated $102 billion in cash offshore, as of last year, and that some of these earnings were “stateless” for tax reasons. It does pay some tax in the U.S. – around $6 billion in 2012.
The inquiry covers the years between 2004-14, although Apple first relocated its overseas operations to Ireland in 1980, and a meeting between Apple and Irish officials in 1991, which set up Apple’s tax arrangements until 2007, is key to its controversial tax arrangements.
The company seems confident it will prevail in a hearing. And a decision is coming soon. The Irish believe any penalty meted out will be minuscule.
Regardless of which way they go, the findings won’t hurt Ireland, Finance Minister Michael Noonan told news agencies such as Bloomberg. The minister claimed that any findings against the country would be “based on very thin legal grounds” and challenged in the European Court of Justice.
Meanwhile, Samsung is pleading with the Supreme Court to reverse an Appellate Court ruling upholding a patent infringement lawsuit filed by Apple. Patent lawyers, trolls and others in tech companies all over are waiting to see what the Court will do.
The case, if heard, could have far-reaching implications for design patents, which cover how a product looks, and the sort of financial penalties allowed under the law. Design patents are far less common than utility patents, which cover how a product functions.
The legal framework for design patents, according to Samsung, some other major technology companies and legal experts, is largely shaped by a 19th-century law intended to protect the designs of carpets, fireplace grates and ornamental spoons.
Back then, the design was the heart of such products, so seizing most or all of the gains of a copycat — known as the “total profit rule” — was justified. But today, a complex product like a modern smartphone is a dense bundle of intellectual property with more than 100,000 patents conceivably laying claim to some small aspect of the phone.