Should Apple Lock Down its Supply Chain?

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Apple (NASDAQ: AAPL ) is currently thought of as the world's most secretive tech company. It also happens to be the corporation with the most leaks.

Is it time for the Cupertino, California-based tech giant to put an end to the pre-release hoopla?

While Apple was once considered to be the hottest stock on Wall Street, the company's shares have plummeted more than 36 percent over the last six months. Year-to-date, Apple is down more than 21 percent.


In the early months of 2012, a simple iPhone 5 or iPad 3 rumor would have been enough to give Apple a much-needed boost. Investors, bloggers and consumers eagerly awaited every detail about the company's future products. Since Apple likes to avoid the spotlight until it is absolutely ready to unveil a new product, rumors have become the next best thing to an official announcement.

The popularity of Apple rumors is not without cause. While many turn out to be little more than a made up story that attempts to predict what Apple may or may not do, there are typically a few rumors that describe exactly what the company will release next.

They may be premature (the MacBook Pro with Retina Display was rumored for a year before it arrived), but the accuracy is what attracts people to the rumor mill. This is why investors kept coming back.

Hype and anticipation reached an all-time high last year before the iPhone 5 was unveiled. This was good for Apple. In the nine months before the device was unveiled, Apple rose more than 60 percent. In the months since its unveiling (September 12, 2012 to March 8, 2013), Apple has lost more than 34 percent of its value.

Some may argue that investors have been misled with overinflated sales expectations. Apple sold 47.8 million iPhones last quarter, setting a new record, but the Wall Street consensus indicated that Apple would sell 50 million units.

Others believe that Apple has simply run its course as a growth company -- in terms of its share price, at least. As true as that may be, the firm still earned more money last quarter than it did during the year-ago period. Why are investors not taking advantage of the opportunity before them?

It could be because of the rumors. The expectations for the iPhone 4S and iPhone 5 were so high that investors cannot be faulted for being disappointed. They are great devices, but their features were at the low-end of the rumor spectrum.

Every publication said that the iPhone 5 would be thinner , lighter and contain a wider display . That was all but a given. The more radical rumors turned out to be false.

The same thing happened when the iPad 3 was released. It was a very nice tablet with a very attractive display, but it lacked the impressive battery boost that had been rumored since December 2011.

Initially, rumors seemed like harmless tools to hype Apple's products before the company is ready to make an official announcement. However, if they have begun to turn off investors and create distrust among existing shareholders, then it is time for Apple to take action.

The company may not be able to stop fake rumors from circulating the Web, but it can most certainly lock down its supply chain to prevent legitimate information from being leaked.

If it does, investors, bloggers and consumers will eventually come to realize that there is no truth to any of the rumors. Then and only then will they begin to ignore the lofty (and often false) rumors that stand to hurt Apple the most.

Follow me @LouisBedigianBZ

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: AAPL

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