Computer giant APPLE INC (NasdaqGS:AAPL) saw a gain of 3.24 points (2.46%) today, closing at 135 per share which was a relief for worried Apple shareholders. Apple stock took a beating on Tuesday as a result of an unconfirmed rumor that the company is cutting back on the production of it’s iPhone multi-function handheld devices. Apple’s stock dropped a whopping 6.8% to 131.76 on Tuesday after the iPhone cutback information was reported by the New York trading firm Miller Tabak & Co. ¹ who also speculated that Apple might also be cutting back on production of their popular iPod devices as well.

Tuesday’s losses marked the largest single day percentage drop in Apple shares since April 2005, although Apple shares have been steadily on the rise with a 52 week range of 62.58 - 148.92 and an average trading volume of 36,507,700. Apple’s P/E Ratio (Price-Earnings Ratio) of 38.12 is relatively on par for a technology company ² in the Personal Computers sector.

I personally own stock in APPLE and have for quite some time. When they released the first news regarding the introduction of the iPhone, I was a bit taken back by the concept. Apple’s stock has been steadily on the rise since the launch of the iPod in October 2001. Their domination of the portable media player market has been astounding, edging out competitors such as Diamond Multimedia who’s Rio Player was a big success during the Christmas 1998 season. Subsequently, the iPod has had a significant impact on the stocks valuation and made Apple the darling of the industry analysts. That being the case, I don’t understand why Apple would release the multi-function iPhone which could potentially kill the goose that laid the golden egg. If iPhone takes off, comes down in price and achieves a wider market saturation beyond the early adopters, that would spell certain obsolescence for the iPod. Possibly many industry analysts and experts have awaken to this realization prompting many long time Apple shareholders to cash in on their profits before it’s too late.

Sources:

¹ http://biz.yahoo.com/ibd/070731/tech.html?.v=1
² http://beginnersinvest.about.com/cs/valueinvesting1/a/011101a.htm