Apple falls for fifth day on concern carriers may cut subsidies

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April 16 (Bloomberg) -- Apple Inc. shares fell for a fifth day amid speculation that demand for the iPad may wane and that mobile-phone carriers will cut subsidies for the iPhone, eroding profitability of Apple’s best-selling products.

Verizon Wireless, a U.S. partner of Apple, said last week that it will begin charging customers $30 to upgrade to a new phone. The move suggests mobile-phone service providers may take other steps, including trimming subsidies, to keep sales of the iPhone from eating into their margins, said Walter Piecyk, an analyst at BTIG LLC in New York.

“Operators are trying to fight back against the impact that Apple is having on their business,” Piecyk, who last week reduced his rating on Apple to neutral from buy, said in an interview with Bloomberg TV’s “InBusiness With Margaret Brennan.”

Apple fell as much as 3.8 percent, the largest intraday decline since Oct. 19, after rising 49 percent this year before today. It had fallen 2.8 percent to $588.40 as of 12 noon in New York.

Analysts at Wedge Partners said in an April 13 research note that demand for the newest version of Apple’s iPad is beginning to wane, citing the prospect that Apple’s earnings report, due next week, will show sales of the tablet missed analysts’ predictions last quarter.

“Is Apple best name in tech? Yes,” they wrote. “Have we seen the stock price plummet in the past, when expectations were out of whack with results? Yes. In our view, there is some risk to this happening again in the March quarter, and the result would likely be the stock coming back down to earth.”

‘Snowball Effect’

Apple, based in Cupertino, California, has added $400 billion in market value since 2008, making it the world’s most valuable company.

“These stocks don’t just go straight up,” said Shaw Wu, an analyst at Sterne Agee & Leach Inc. After such a big increase over the past several months, investors have quicker triggers to sell if the stock dips, he said. “There is a little bit of snowball effect,” Wu said.

Apple’s slide may continue in the next few days because it’s trading above its typical trend line, according to Carter Braxton Worth, a technical analyst at Oppenheimer & Co. “Bottom line: we’re sellers,” Worth said in a report.

Nasdaq OMX Group Inc.’s decision late on April 13 to adjust the Nasdaq-100 Index may also be driving Apple down, according to Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus & Co.

First Solar Inc. was replaced with Texas Instruments Inc. in the Nasdaq-100 Index, the basis for this year’s fifth-most- traded U.S. exchange-traded fund. Because Texas Instruments has a market capitalization that’s about 20 times larger than First Solar’s, other stocks in the index are likely to see their proportion shrink, Baltimore-based Lutz said.

Bloomberg News

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