Apple's Market Share is "Under Attack"

DO NOT PUBLISH until Saturday, April 6 Apple AAPL may have reported a great first quarter, but this is no time for the company to get cocky. The iPhone maker has remained silent about the ongoing rumors surrounding the firm's 2013 lineup. Meanwhile, Samsung, HTC and other competitors are gradually stocking their portfolios with dozens of competitive products. Many analysts have expressed concerns about Apple's future, particularly when the company failed to meet their lofty expectations. Analysts are not the only ones who doubt Apple, however. Investors do as well. "It just looks like the wheels are falling off [at] Apple," Bob Auer, the Senior Portfolio Manager of SBAuer Funds, LLC, told Benzinga. Auer did not base his decision on rumors or product sales. Before investing in any firm, he wants the company to meet three characteristics:

• "They had to have reported a quarter with 25 percent up earnings year-over-year."
• "Sales had to be up 20 percent year-over-year."
• "They had to be at below a 12 P/E."

SBAuer Funds has invested in Apple twice before. "We made a nice profit on it both times," said Auer. "But we sold it at, I think it was at $640 when it unqualified, and it was simply because the quarter came in and it didn't have the 20 percent and the 25 percent. It was kind of a flattish quarter and it was a big disappointment in the stock." Auer said that he is not a "techie geek," but he "had a smartphone before anybody had a smartphone." "I had a Motorola smartphone that was a generation one smartphone where you could get stock quotes and different things," he said. "What I see with Apple is just the same thing that has happened with [other smartphone makers]. They make wonderful products. But when you look at the history… Motorola came out with the RAZR and that was just so hot. Then Nokia NOK was just so hot. Then BlackBerry BBRY was so hot. Then Apple came and knocked BlackBerry off." Now Auer believes that the Android ecosystem -- which supports different sizes and different form factors to meet the needs of multiple users -- is the way of the future. "It's kind of like the board game Risk," Auer explained. "If everyone is against you, even if you're the strongest, you will fail. They have different tablet sizes -- why not have a bigger screen like the Samsung Galaxy Note II? Why not one with a cute keypad for people that like the tactical keyboard like BlackBerry had? Why not have four different iPhones?" Auer said that Apple's market share is "under attack" by Android-based competitors. "Quite frankly, the 'gee-whiz' factor has kind of warn off," he said of the iPhone. "I think we're about a year away from it being un-cool to have an Apple [phone]." The rumored iTV concept may not be enough to offset any losses that may afflict Apple's smartphone business. "I don't know if the TV can save them," said Auer. "The TV business is more fraught with risk than the smartphone business. The TV business is just absolutely brutal. Look at Sony SNE. They've just been decimated in the TV business. Sharp is bankrupt and has been decimated in the TV business. Now Apple wants to go into that business." That said, Apple could still make a comeback with some incredible, unexpected item. "They are gonna need a 'gee-whiz' product," said Auer. "If they come up with that, that will just help them tread water and keep even, because with the other stuff fallen off -- it is almost like a big drug company where all of their main drugs have gone off patent protection." Auer also took issue with Apple's use of the patent system. "Apple has resorted to defending the patents and trying to get Samsung all tied up in court," he said. "When all that happened, that was the beginning of the end of the stock. "When you've got such a hot product, and you let the consumer decide, and the consumer is picking it up off the shelf so fast, you don't care about patent protection because the consumer and that person's pocket book are deciding. But what Apple was really telegraphing to the market -- which I don't believe people picked up on -- was that when all that litigation started, they were really saying that they can't depend on the glamour of their products and strength of its product line. They now have to intellectually defend their property. I was glad we were getting out of the stock." Despite his attitude toward Apple as an investment opportunity, Auer has still purchased several of the company's products. "I have three iPod Touches and two iPads," said Auer. "My wife and both of my sons have iPhones. But I have Android. I think [the iPhone] is a good product, but [not] as an investment." "Now you have investors turning on them and wanting them to cough up the cash," Auer concluded. "Who knows where that's gonna go. I would actually say they better keep that cash -- they're gonna need it." Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis@benzingapro.com. Follow him @LouisBedigianBZ