Apple's shares have fallen by another $36 over the past week, closing below $400 for the first time since December 2011. Last week, I posted that Apple's shares "tumbled to a 52-week low of $400.78"with some expectation that this might be the floor. After all, looking at Apple's cash position and expected profits, a $500 price does not look unreasonable. However, the price has fallen another $36, from $426.51 at the market close last Tuesday to $390.53 today.
During Friday's trading, the shares even hit $386.50. This is a long way from last September's peak at $705.07.
The fall has a knock-on effect. Companies are used to seeing their stock price increase when they become Apple suppliers, but they are now more likely to see it decrease. This may make them less keen to deal with Apple. It will certainly discourage them from devoting all or most of their production to the American company (see: Apple's dimming luster roils suppliers, investors).
All this means that Apple's next financial results, to be announced tomorrow (Tuesday, April 23), will be watched even more closely than usual.
Analysts already expect Apple's results to be weak, by its own extraordinary standards. According to Reuters, this could mean revenues increase by 8 percent and profits by just 2 percent. A much better result could change the direction of the share price, which is still trending down.
Either way, sentiment has changed over the past six months, thanks mainly to Samsung's success with Android phones. As Harvard Business School professor Clayton Christensen -- author of The Innovator’s Dilemma and the defining expert on disruptive innovation -- said earlier this year, Apple's proprietary devices are being disrupted by the open Android operating system. This is now good enough to serve buyers who were not being served by high-priced iPhones and iPads.
This represents a threat to Apple's future profits, on which its share price depends.
On Friday, IBM's shares also tumbled, registering their biggest one-day drop in eight years, following disappointing financial results. IBM's shares fell by $17.15 (8.3 percent) to $190.00.
The American company is reportedly negotiating to sell its $5 billion x86 server business to China's Lenovo, which has already taken over IBM's PC division.
According to the Wall Street Journal, "IBM pointed to contracts slipping from the first quarter into the second quarter, possibly because of the early Easter; a slowdown in business spending in China; and the weakening yen" to explain its weak results. In which case, there should be a rebound in the next quarter.
Nonetheless, when two of the leading tech companies see their shares fall, this casts a shadow over the whole industry. It is bound to raise doubts about claims that Dell is worth much more than its buy-out price, for example.