Why Apple is in more trouble than you think

Max Wolff, chief economist and senior analyst at GreenCrest Capital, explains four big risks that no one is talking about.

By MSN Money Partner Jun 14, 2013 3:40PM

CNBCApple CEO Tim Cook speaks in San Francisco, Calif., on September 12, 2012 (© Eric Risberg/AP)By Alex Rosenberg


Apple's decline has been well-documented. One need only look at a stock chart, which shows that shares of Apple (AAPL) have lost more than a third of their value in nine months. Or one could look at the number of Google (GOOG) searches for "Apple," which peaked with the stock in September 2012 and have since dropped precipitously.


But Max Wolff says that Apple investors should look out for a variety of risk factors that haven't yet materialized. According to Wolff, chief economist and senior analyst at GreenCrest Capital, Apple faces four big risks that no one is talking about.

1. Privacy concerns could disproportionately hurt Apple

Privacy concerns raised by the NSA phone records revelations could be more troubling to people using Apple products and services than those using those of other companies, Wolff said.


"You pay more to be in the Apple ecosystem than in anyone else's ecosystem," Wolff said, "and people might be more upset that they're paying a lot of money and they're still getting spied on."


Wolff likens it to the difference between a free concert and one that a fan pays to attend.


"If I'm going to see a show in Central Park, and it's terrible, then I'm not angry at Central Park," Wolff told CNBC.com. Contrast that to paying $500 for top-notch seats and then getting moved to worse ones.


"Google is the free ecosystem and Facebook is a walled garden, but at least it's free," Wolff said. "If you're paying more to be in the Apple ecosystem, and if you find out that your privacy is no more sacred than it is anywhere else, that actually is problematic."


2. Apple's tax issues could become a problem

Wolff points out that Apple has been remarkably good at dodging serious consumer ramifications from a tax policy that some consider evasive.


"Every progressivey person that is upset that corporations don't pay taxes has an Apple," Wolff said. "And at the end of their email or text message about how horrible it is that companies don't pay their taxes, it says, 'By the way, this message was sent from the biggest tax cheat in American history.'"


Once again, Wolff says that the especially high cost of Apple products puts the company at a heightened risk. He notes that when buying a low-priced clothing item, a consumer should not be too shocked to learn that it was made in sub-par conditions by a young worker. "If you just paid $1,400 for a suit, on the other hand, you expect that it was made by someone who's at least 8."


Wolff said that while "Apple has been very good at being Teflon, and I don't see any reason to think that wouldn't continue, the tax issue is not going away.


3. Google's Chrome and Android integration
Wolff notes that Google is working to integrate its Chrome and Android platforms, and this could end up being a major concern to Apple.


"If Google figures out a way to market a Chrome operating system with an Andoid tie-in, they can sell you a notebook computer which is also a tablet, and has a nice integrated operating system, for $400 or $500," Wolff said. "If they get that then they'll have a single product that is very dangerous for the Macbook Air and the iPad."


Once again, Apple's luxury pricing makes it vulnerable.


"Even if you think Google's product is less good, then $1,500 worth of Apple products nicely duplicates it," Wolff said. "It is $1,200 less good? For a lot of people that's not a question mark, because they don't have $1,200."


Even people who might be able to afford Apple's products, though, might choose Google's cheaper choice anyway. "If a lot of what I'm going to do on these devices is Google Docs and Google Drive and Gmail, and I wouldn't have to get the free frames at Lenscrafters, I could be a dangerous new kind of hipster," Wolff said.


4. The education battle

Wolff believes that schools are the next battleground between Apple and Google.


"One of the next big fights is going to be education spending," Wolff said. "If I'm a school system, I can buying an entire classroom [of students] these Google devices, or I can buy two of them the Apple stuff."


In the developing world, Google's Chromebooks are an even more exciting possibility. "If you're a classroom in the developing world, for $3,000, you can have a globally competitive Web system." Or you could get one fantastic Apple computer and a huge LED monitor, "and just stare at it."


The bottom line, for Wolff? "Some of these price differentials might make some difference."


More from CNBC

Jun 15, 2013 2:24PM

"If Google figures out a way to market a Chrome operating system with an Andoid tie-in, they can sell you a notebook computer which is also a tablet, and has a nice integrated operating system, for $400 or $500,"


Sir there is a thing called windows 8 may be you want to check out

Jun 16, 2013 6:55AM

I don't know who wrote this article....whoever did is in serious need of major tutoring in English grammar.

Jun 15, 2013 10:21AM
Apple rode a perfect wave they created and everyone has now commoditized. That will mean decreasing margins, prices and market share unless they can create another wave which is doubtful.
Jun 15, 2013 11:44PM

Companies, like Apple, hide their money (tens of billions of dollars) off shore to avoid paying taxes, Pure and simple. The government responds by saying fine, but just try bringing that money back into the U.S. without paying taxes on it. And when these cheating tax dodgering companies bring the money back into the United States, the government gives them a "one time only" pass, which our government issues every time. Tax cheating and immigration law in the country are the same. Both involve amnesty. Both screw the American citizen. Why should we pay taxes when all these companies are nothing but tax cheats?


Apple CEO has been making all kinds of noises about how bringing their money back into the U.S. would be the best thing the government could do for Apple. Apple bringing all these out-sourced jobs back into the U.S. would help Americans, except there is no way that is going to happen. Why should we help Apple when Apple only wants to hurt the U.S.?

Jun 16, 2013 1:22PM
Are there any psychological case studies on Apple customers? Always wondered what made them so easily fork over extra $1,000's to buy no added benefits besides a name.  Or how they'll flock to buy a new iPhone every 6 months with no worthwhile upgrades added into each edition. And especially upgrades that should have been included into the first edition (camera, etc)..."Hey we just included a $2 app called Siri, let's release it as the new $800 iPhone."

It's Ike and Tina syndrome, Apple consistently beats their customers up yet the customers keep coming back.
Jun 15, 2013 9:14PM
The last time I saw an Apple it had a worm in it.
Jun 15, 2013 10:19PM
Google already has a tie-in with android unbeknownst to many.  If you are smart...never download google chrome.  Microsoft is "suspect" as well as are most of the internet providers. . . social networks, etc,  They work in 'concert' sharing information and not one is any better than the other insofar as this is concerned. You are seeing the aftermath of all this now with some high school dropout telling a "story".  All this "technology" has over-reached itself and we are the stupid compliant partners in this and have been.  Get a clue, people.    
Jun 16, 2013 2:13PM

Mr. Wolff needs to get out more.   


I have apple, Microsoft and Android devices.  The Apple doesn't offer any clear advantages over the other products, in fact, they are lagging behind in many aspects.

Jun 16, 2013 7:30PM
Well look what they cost, just another big corp. ripping the american people off. Steve jobs would be proud huh!
Jun 16, 2013 3:30PM
This article had soooooo many typos.  It's pathetic that no proof-reading can be done before a story can be published.  Alex Rosenberg should be ashamed of himself
Jun 16, 2013 7:27PM

Remember what Sony tried to do with VCRs and televisions?  After a period of time the buying public figured out that what Sony offered was available for less money from others, despite all the Sony advertising.  Most of the items Apple produces are becoming commodities and consumers eventually figure this out. 


Apple’s planned obsolesce scheme will only carry the products so far, despite the occasional innovation that actually translates into utility for the buyer. 

Jun 17, 2013 7:27AM

Fracking-- the question emerges about the process-- why aren't the frackers forced to desalinate ocean water and then reconstitute it to contain the environmental damage? Notably, in states where fracking is allowed, the cost of water has already risen substantially.

Bernanke-- the number of people worldwide calling for his arrest is growing. Arrest? The question to be posed in this week's G8 Summit is-- who bungled first, our chicken-gizzard Fed Chair or the eggheads in other Central Banks? QE didn't work, created a global schism and is prompting war. How does that figure into their math?

Security-- WHAT security? Essentially, everything that involves privacy and personal rights have been sold to the highest bidder. Add the money scandals and you get a plausible reason for Big Brother. The Reality is-- government, business and GROUPS that conspire and collude need an attitude adjustment and supervision. Maybe instead of holding elections for who goes IN key offices, we hold elections for who gets yanked, thrown off the tallest building we can find and liquidated in every sense of the word. If leadership is now a windfall "career" field, failure must be a terminal offense.

Employment- who ISN'T asking WHY? If YOU were the leader of the Free World and looked out to see that most of your citizens were un and under-employed while business platforms were becoming richer than at any other time ever in History, abolishing Incorporation and veiled anonymity would be a FIRST ACT. It only makes sense, too bad commonsense is avoided like a plague.

WAR--- coming to a country near each of us, unless we can throw the alumni and colluder groups off the bus! Mr. Obama... a job well done, GETS THINGS DONE, not breeds more crises.

Jun 14, 2013 6:21PM
Apple IS toast. Apple plowed it's way into our society and discombobulated every advance that was gaining ground steadily without upsetting the cart. There's more to life than just glimpsing at it while steering a car at 80mph.  
Jun 16, 2013 1:52PM

Apple is not a tax cheat. They obeyed the law and took the deductions written into the law just like you and I do.


Some of the money they saved goes into increased R&D, which produces American jobs, which increases tax revenue.


How did Americans get so stupid about economics? The Chinese get it.

Jun 16, 2013 10:22AM
1.) According to the reports that have come out so far, more information was retrieved from Google and Microsoft users.
2.) Apple is following the laws. They are NOT dodging paying taxes. They paid over $6 billion in taxes to the U.S. in 2012. The laws are the problem--not Apple. In fact, Microsoft and Google take advantage of putting money overseas than Apple does. 
3.) Chrome/Android integration is nothing new.
4.) Apple has a strong education commitment. They provide huge discounts to educators for their products. They already are doing this whereas "Google's Chromebooks are an even more exciting POSSIBILITY." Great...

Doesn't "MSN" stand for "Microsoft Network"? 

Start reporting facts instead of "possibilities" and manipulative opinions.
Jun 16, 2013 3:32PM
"One of the next big fights is going to be education spending," Wolff said. "If I'm a school system, I can buying an entire classroom [of students] these Google devices, or I can buy two of them the Apple stuff.

Jun 16, 2013 9:18PM
Apple's had an amazing run because of superior marketing, a string of excellent products, and an anti-establishment "coolness," which in turn led to a rabid fan base. But, now they are the establishment; their proprietary products will lead to their demise as they fail to continually deliver the next big thing, while hardware and software makers like Samsung, Google, Microsoft, and others continue to pick away.
Jun 16, 2013 5:48PM
Is this really MSN? I thought I was on Goog. The question is, can Msft really be dumb enough to let Goog shills use their boards to bash Aapl? good grief, lol. Or did Goog buy MSN in addition to Yhoo and Waze? Maybe that's a good idea, its been awful for years.
Jun 16, 2013 2:20PM
I hate how invasive Google (Chrome, YouTube) is. How many times to I have to say - "No. I don't want to create a profile on YouTube, or on my cell phone. If anyone is acting like d*cks, it's GOOGLE, which is why I will always support APPLE. (And Microsoft is just sad, in PC and OS...of course, Office is great. Perhaps they should just stick with that).
Jun 16, 2013 3:20PM

Apple has been written off before and look where that ended up, the I Phone , and a total electronic and communication revolution. I don't know if anyone looks at an Android phone , but it copies Apple.  

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.