Apple Magic Doesn't Impress Investors

 | Jun 11, 2013 | 10:14 AM EDT  | Comments
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Monday's announcement at the Worldwide Developers Conference was a necessary but not sufficient step in Apple's (AAPL) comeback.

It was necessary because the competitive landscape has changed dramatically in the last year. Whether it's Pandora's (P) growth in online radio, BlackBerry's (BBRY) improvements in multitasking for their new line of phones, or Android's unique features for sharing information, the rest of the world has caught up with -- and in some cases surpassed -- Apple. This has weighed heavy on the Apple management team as well as its stock

The perception of Apple falling behind has only been made worse by the fact that Apple's allowed about an eight-month period to pass with no new product announcements. To all the critics, it appears that Apple can no longer "innovate." Phil Schiller was almost seething Monday when he unveiled some of Apple's new features on its MacBook by saying, "Can't innovate my ass!"

The Monday announcements -- which most importantly centered on iOS 7 -- were critical in showing the world and its users that Apple is back (or never left).

Apple showed the world that its software is even more beautiful than before, as well as functional. It was Jony Ive's coming out party as the chief of Apple's combined hardware and software products. Craig Federighi was also impressive in his debut as head of software.

Apple copied the best multitasking features of BlackBerry 10 -- and went beyond. It copied Android's photo sharing -- and made it easier and more intuitive. It put the biggest music library collection in the world as a radio service -- and made the ad-free subscription service 33% cheaper than Pandora.

The software is where the magic happens in a mobile experience and Apple's keynote Monday showed the world that Apple is still the place where magic starts in the mobile world.

Does it matter for the stock in the near-term? No. Whether you like it, Wall Street doesn't care a whit about new software. Investors yawned and the stock sold off in the afternoon.

The only thing that will get the stock moving will be when new products are introduced that will clearly be hits. Right now, the Street is skeptical on both TV and iWatch. They will need consumer validation of these products and others before they change their minds and earnings estimates.

I also worry in the near term that when Apple introduces its low-cost iPhone, which they surely will, that it will also spark hand-wringing about margin compression. I fear there will also be many who believe that Apple -- traditionally a high-end consumer electronic supplier -- doesn't know how to win in the dirty, no-holds barred, low-margin world.

Mind you, going after the low end of the market is exactly what I think Apple should do. I will be looking to buy Apple significantly on any low cost iPhone sell-off.

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