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Apple Finds the iPhone Rumor Mill Can Be a Real Grind

Yuval Rosenberg
Tuesday, 15 Jan 2013 | 11:04 AM ET
Source: Apple

The shine is clearly off Apple.

Forgive the tired pun, but there really hasn't been a more appropriate time to use it over the last ten years. Reports from Japan's Nikkei News Service and The Wall Street Journal that the company drastically cut back on orders for iPhone 5 components due to weak demand sliced 3.6 percent from Apple's stock (AAPL) Monday. The share price dropped as low as $498.51, marking the first time it's been below $500 since February 2012. Apple is still the most valuable company in the world, but it has lost more than $190 billion in market cap since shares topped $705 last year.

Read more: iPhone 5 vs. the iPhone 4S: A Comparison

Breaking Down Apple's Dip
Tom Demark, founder of Market Studies, says the Apple rally could be more than 20 percent.

But at a time when Apple faces stepped-up competition from Samsung — now the leading smartphone seller — and Android phones in general are growing market share, the iPhone now faces a PR problem too.

Apple's phone has been the "it" product in the tech world since it first launched in June 2007 — or even before, given the build-up of buzz and speculation that preceded Steve Jobs' announcement of the phone six years ago this month. For years now, blogs and mainstream media offered up rumor after rumor about iPhone features and specs, and if those didn't satisfy the hunger for all things Apple, there were plenty of mockups to pore over, accessories to analyze and leaked prototypes to discuss.

Read more: 13 Stocks That Have Done Better Than Apple

"“Apple is still the leader in mobile phone technology from a number of perspectives, not the least of which is the prestige of owning an iPhone. This, of course, amounts to fashion and fashion is fickle.”" -John C. Dvorak, PC Mag

The endless reports signaled an unmistakable excitement. The iPhone was cool. The iPhone was hot. The sleek design, smart software — it just worked — and premium pricing have long conferred a air of trendiness to owners, and Apple's brilliant marketing only added to the cachet.

The excitement has waned, though — at least a smidge. As John C. Dvorak notes at PC Mag, "Apple is still the leader in mobile phone technology from a number of perspectives, not the least of which is the prestige of owning an iPhone. This, of course, amounts to fashion and fashion is fickle."

That's the real risk for Apple. Whether or not demand has really slackened for the iPhone 5, as the media kicks around these latest reports, the buzz machine that benefitted Apple for so long has turned against it. Stories about weak iPhone demand – and others about how great sales of Samsung's Galaxy S line have been — could turn into self-fulfilling prophecies. If the phone is a fashion item, as Heidi Klum might say, one day you're in and the next day you're out.

Read more: The Smartphone Wars - Is Apple's Dominance Over?

Apple already faces strong competitors, with their own marketing teams dedicated to dulling the iPhone's aura. And it has already inflicted some pain on itself, mostly via the release of an inaccurate maps app but also by requiring a new "Lightning" connector that doesn't fit older Apple products — not earlier iPads, not the iPod, not your spouse's iPhone 4.

Apple gets a shot at winning back Wall Street next week, when it announces its results for the final three months of 2012. To build back its usual buzz with consumers and prove that it hasn't lost its innovative edge, it will have to impress later on this year. Crank up the iPhone 6 rumor mill.

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