Apple May Be in Trouble

By: Jared_Levy

I am a firm believer in the Peter Lynch style of investing. Peter Lynch's mantra was to "invest in what you know." So many of us tend to get caught up in complicated algorithms, strategies and analysis, when all we might have to do is simply open our eyes to what is happening right outside our front door.

Ahead of my trip to Baltimore and Philadelphia this week I was having a particularly frustrating time with my Apple iPhone. It was dropping calls and locking up frequently. My frustrations prompted me to take a look at some mobile alternatives and found some interesting results that I had to share. The AT&T/Apple iPhone dropped call saga is no secret and neither is the cult-like following of Apple's (AAPL:NASDAQ) products that keep consumers hooked on their "magical" devices. But how long can Apple's Kool-Aid effect last if there are simply better products on the mobile phone market at cheaper price points?

I have cited Apple's strong presence in the smartphone market and have recommended getting long the stock for over two years now as smartphones have grown in prevalence. I still believe that Apple will have its share and continue to grow, but there may be some cracks forming in the tech monolith's foundation. Let me explain.

The Apple iPhone
In 2004, before the Apple iPhone, there were a handful of smartphones with the BlackBerry, from Research in Motion (RIMM:NASDAQ), reigning supreme in all things cool and cutting edge. If you were a businessperson in the know and with the means, you had one, and you were addicted to it. It was the Apple iPhone of its time and back then I thought there could be nothing that would replace it. When the Apple iPhone was released, it really was a magical device and almost immediately made the "Crackberry" obsolete. Not because it was granting wishes, but because of its complex yet beautifully simple design and functionality.

Users flocked to the device and Apple stayed focused on marketing this one single mobile computer that changed the way smartphones were designed and used, and set a high bar not only for functionality and features, but for the integrated world we are now living in. The App store, messaging, gyroscopic feedback and the simple, sexy and robust user interface became normal features that users demanded and until recently had little real competition.

There have been a number of phones that were released after the Apple iPhone -- dubbed "iPhone killers" -- but none have single handedly been able to topple the Apple iPhone from the top spot... until now.

Several companies, now working in unison, may spell trouble for the Apple iPhone.

HTC, Google, Sprint (and Other Mobile Phone Carriers)
The Android family of smart phones dominated sales in 2010. Android was the No. 1 selling mobile phone (operating system) last year and continues to take smart phone market share away from Apple. Some experts are expecting Android to capture almost 50% of market share by the end of next year. Android, which is an open source operating system owned by Google (GOOG:NASDAQ), is expected to be dominant in both high-end and lower-priced smart phones. Apple will most likely stay focused in the upper end of the mobile phone market, although there is talk of Apple introducing a lower-end smart phone.

Apple iPhone Competition
HTC (2498:Taiwan) and Android have assembled some seriously powerful phones that have all the features of an iPhone and more. Motorola, Samsung and others have also created some amazing devices, but HTC seems to dominate in the Android world.

When I walked into the Sprint store on Tuesday, I was amazed to find that there were several people like me who were trading in their iPhone 4's for new HTC phones that day. This was at about 1:00 p.m., so definitely not peak time for the store.

The salesman, Robert, informed me that on Saturday he had converted 113 iPhone users. I asked him to try converting me. (He ended up doing so and I'm not an easy sell.)

After all was said and done, I walked away with a new HTC EVO 4G, which is faster and has better call quality than the iPhone4. Of course, there is a bit of a learning curve if you are a former iPhone user, but it's well worth it in my opinion. Even the CNET techies agree and rate it as a better phone all around -- check out the CNET review.

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Mobile Phone Plan Cost
The biggest driver for me was savings...

Sprint (S:NYSE) in particular is extremely aggressive in its plan pricing and offerings. For $79 per month (less if you qualify for certain discounts) you get unlimited text, talk (mobile phones), data, Sprint TV and GPS. No activation fee is charged and from my understanding, Sprint rarely asks for a security deposit, and if so it's capped at $50.

If you bring your number to Sprint from another carrier, they also offer a generous credit on your bill ($125-$175), and they bought back my iPhone for $270. I walked away cash flow positive, which I used to pay my early termination fee. Keep in mind that offers may vary from store to store.

This compares with $145 per month for unlimited text, talk, GPS and only 4GB of data per month on AT&T (they no longer offer unlimited data on the iPhone).

By the way, Sprint also offers FULL insurance on the EVO, which protects against everything including water damage, at a cost of $7 per month. AT&T does NOT offer this, although insurance can be bought for the iPhone through a third party.

Will Smart Phone Consumers Switch?
At 50% of the cost, the EVO 4G (or other Android phones) on Sprint amounts to an annual savings of at least $870 (more for overages on data). With that money I thought about the new 3D TV or home theater system I could buy and have fewer dropped calls at the same time. Or maybe just have more money for other things in my life.

Even though I can afford to pay more and liked my iPhone for the most part, I was compelled to make the switch. For someone who is stretching their budget on the iPhone, I think the change may be even more compelling.

Of course, the iPhone is also available on Verizon and from what I hear gets better reception, and I know that there are some folks who couldn't be without their beloved iPhones. But the aggressive anti-iPhone tactics being employed by Google, Android phone makers like HTC and carriers such as Sprint make me think that Apple has some serious work to do to maintain its command.

This isn't about Apple falling apart, but more about companies like Google and even Sprint perhaps capturing better than earnings in the smartphone space. HTC's market cap has recently eclipsed global phone giant Nokia and in my opinion has room to grow.

Unfortunately for most of us here in the States, HTC stock is not tradable. If you do have an account that allows you to trade internationally, HTC's stock can be found on the Taiwan Stock Exchange under the symbol 2498.

If you don't have an account that lets you trade international stocks, keep your eyes on Google and Sprint for the future...

Editor's Note: Without "technology metals" there would be no cell phones, no iPods and no personal computers. There would be no hybrid cars, solar panels or modern wind turbines. And you could say goodbye to almost all military technology.

Want to know exactly what "technology metals" are... why they are key to more than $4.6 trillion in global commerce... how China seized a choke hold on the market... and how you could make gains of 950% as shortages arrive? Read this free report!

Source : http://www.taipanpublishinggroup.com/tpg/smart-investing-daily/smart-investing-040811.html

By Jared Levy
http://www.taipanpublishinggroup.com/

Jared Levy is Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to successfully trade and invest while keeping risk low.

Jared has spent the past 15 years of his career in the finance and options industry, working as a retail money manager, a floor specialist for Fortune 1000 companies, and most recently a senior derivatives strategist. He was one of the Philadelphia Stock Exchange's youngest-ever members to become a market maker on three major U.S. exchanges.

He has been featured in several industry publications and won an Emmy for his daily video "Trader Cast." Jared serves as a CNBC Fast Money contributor and has appeared on Bloomberg, Fox Business, CNN Radio, Wall Street Journal radio and is regularly quoted by Reuters, The Wall Street Journal and Yahoo! Finance, among other publications.

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