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DAVID GREENE, HOST:
It's MORNING EDITION from NPR News. Good morning. I'm David Greene.
Let's begin our show this Christmas Day with a look back at a business development this year that took many investors by surprise. Just over three months ago, Apple's stock hit a record high - for a few days in September a single share was selling for more than $700. But since then, Apple's stock has tanked. In December, it traded briefly below $500 a share.
In today's Bottom line in business, NPR's Steve Henn explains what went wrong in the company's relationship with Wall Street.
STEVE HENN, BYLINE: Recently, I asked Colin Gillis, an analyst at BCG Partners, if this was it. Is Wall Street's love affair with Apple over?
COLIN GILLIS: I wouldn't say that it's, you know, it's over...
HENN: But Gillis says some investors are bracing themselves for disappointment. Sure, Apple is still dreamy. It's the most valuable company on the planet. It has enormous stock piles of cash in the bank and customer goodwill. Its product announcements are cultural events.
PHIL SCHILLER: I think we can tell by your excitement you know what this is.
SCHILLER: This is iPad Mini.
UNIDENTIFIED MAN: Woo.
HENN: And still some of the old magic - at least for investors - is gone. At first glance that can seem kind of crazy. About a month from now, Apple will release its earnings report for the Christmas season, and analysts are expecting it to rake in well over $50 billion in revenue. They expect somewhere in the neighborhood $14 billion in profits.
GILLIS: Forty nine million iPhones could get shipped in the December quarter. I mean it's a staggering number.
HENN: Gillis says if Apple hits these numbers it will be one of the best quarters for any company in U.S. history.
So why has Apple's stock been dropping?
GILLIS: We actually are seeing a lot more viable competition in this space.
HENN: Apple pretty much created the markets for modern smartphones and tablets, and those market continue to grow by leaps and bound, but Apple's share of the market smartphones is flat, and its dominance of tablets is under attack.
CHARLES GOLVIN: Google has gotten their act together.
HENN: Charles Golvin follows consumer electronics at Forrester research. He says when consumers buy a tablet or a phone, they're buying into an ecosystem. Not so long ago Google's Android ecosystem was kind of a mess. Not anymore. Google's customers are happier.
GOLVIN: They're less likely to look over the fence and see the greener pastures of the Apple environment.
HENN: Google's Android already powers three of every four smartphones sold anywhere on the planet. And now its biggest partners - like Samsung - are competing aggressively with Apple for high-end customers. Golvin says for the first time Android tablets are beginning to sell well too.
GOLVIN: The fear that oh, wait a minute, look what happened on the phone side - right, now look at the market shares. Are we going to see the same thing on the tablet front?
HENN: Many Wall Street analysts believe that kind of tough tablet competition is inevitable.
GOLVIN: That's a wake up call for people who are looking at big upside for Apple.
HENN: But Apple didn't get where it is today by creating or defending monopolies - it made its fortune creating new markets - inventing entire new categories of devices and then selling them at a premium. That is why Wall Street fell in love with this company in the first place.
So when Tim Cook hinted that something big was coming this year at a tech conference in back in June, Wall Street went weak in the knees.
TIM COOK: Never have I seen the things I can't talk about today.
COOK: The juices are flowing.
HENN: After that, Apple's stock soared. And all year rumors have been swirling that Apple had big plans to transform television - the prospect that it would create a new multibillion dollar market for itself seemed both plausible and tantalizing. But when the September arrived and it became obvious TV wasn't the next big thing from Apple this year, Wall Street decided to reevaluate its relationship - at least for a little while.
Steve Henn, NPR News, Silicon Valley. Transcript provided by NPR, Copyright National Public Radio.