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January 22, 2013

Wall Street Anxiously Awaits Apple’s Q1 Report

Apple’s first quarter earnings, which the company will report this week, may finally tell the story of the firm’s standing.

With Apple shares dipping in recent months — from $702 in September to $500 Jan. 18 — Wall Street and analysts alike have been prophesying doom for the iPhone  and iPad maker.

A good report by Apple Jan. 23, however, should have the company’s stock value on the rise.

In its October report, Apple forecast $52 billion in revenue and earnings of $11.75 per share.

Wall Street, however, is expecting the firm to come out with $54.69 billion and earnings per share of $13.41, according to analyst’s estimates.

Apple has had a number of issues to deal with in the past six months.

Competition was fierce during the holiday season as, in addition to its usual main competitors, Samsung and Motorola, Amazon, Microsoft, Barnes & Nobel, Nokia and Lenovo all came out with new tablets or Smartphones last fall in a bid to undermine Apple.

Legal issues continue to plague the company as well as it dukes it out over alleged patent violations with its chief rivals.

Samsung and Apple, for instance, are embroiled in a patent fracas in 10 countries as each accuses the other of copying one another’s mobile devices.

Apple and Google’s Motorola Mobility also continue to grapple with patent issues and licensing practices.

Apple was ordered Nov. 6 by a federal jury to pay $368.2 million to VirnetX Holding Corp. for violating its virtual-private-network technology patents. The company is also the focus of an investigation by the U.S. International Trade Commission. The ITC announced Oct. 16 it would launch a patent investigation on behalf of VirentX.

The turmoil also hit Apple’s head office. The man behind Apple’s Maps app debacle, Scott Forstall, was asked to resign. The head of Apple’s iPhone software development, led the unit that was responsible for the Maps app that has been widely criticized by consumers and analysts alike. He is to leave his post early this year.

Apple also announced the immediate departure of John Browett.

After less than six months with Apple, Browett, the company’s head of retail was shown the door for putting profits above customer service and staff morale.

And, while many analysts have been sounding alarm bells about lower than expected demand for the iPhone 5, others say the concerns are being blown out of proportion.

J.P. Morgan analyst Mark Moskowitz said in an investor note Dec. 20 that although reports have pointed to a 20 percent drop in Apple’s March-quarter supply chain orders for the iPhone 5, he believes there is a reasonable explanation and other analysts are panicking for no reason.

“Downshifting from ‘white hot’ order activity does not mean the world is ending,” Moskowitz was quoted by CNet.

It is likely Apple pushed its suppliers in the beginning to increase manufacturing of the new phone, and the downshift in orders is simply an aftereffect, he said.

“We also think that the supply chain adjustments could imply that manufacturing yields on iPhone 5 have improved, which means Apple’s gross margin profile could rebound to 40 percent, which would be a positive,” Moskowitz said.

Some analysts have said Apple needs to come out with some popular products this year to keep the company from floundering. Moskowitz, however, believes Apple’s present slate of products, the iPhone 5 in particular, will do well for the company.

“We acknowledge the increasing level of competition in the market, including Samsung, Google, HTC, and Lenovo,” Moskowitz said. “Overall, we continue to believe that Apple can deliver a 12-18 month upgrade cycle with the iPhone 5. The new device is not a pocket hog or battery hog, relative to other competitive LTE-capable devices. Further, the iPhone 5’s LTE performance separates the device from the iPhone 4S, which means that a meaningful upgrade cycle in the installed base stands to manifest in the coming year.”

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