Is demand for the iPhone shrinking?

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An out-of-work iPhone is kicked to the curb.
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An out-of-work iPhone is kicked to the curb.

Apple's stock sinks amid reports of lackluster sales

The Wall Street Journal reports that Apple has cut orders for components of the iPhone 5 due to lackluster demand, prompting a sell-off of Apple stocks on Monday before shares rebounded. The Journal's story followed an equally damning report by Japan's Nikkei newswire, which claimed that Apple had cut its expected order of iPhone 5 displays by half in the first quarter.

Apple's stock momentarily sank below $500, down from a high of about $705 in September. The reports fueled concerns that Apple is steadily losing market share to Samsung, whose Android-powered Galaxy series recently overtook the iPhone as the world's most popular smartphone. In the third quarter of 2012, Apple enjoyed 14.6 percent of the world's smartphone shipments, down from 23 percent in the third quarter of 2011. And Apple can expect even more competition as Chinese manufacturers like Huawei churn out cheaper smartphones for emerging markets.

The reported drop in demand would certainly represent a stark turn of fortune for Apple — the company's main problem in past years was keeping up with the ravenous appetite for iPhones. However, analysts warn that reports of Apple's demise could be premature: Apple may well have failed to meet its own projections for demand, but those could have been stratospheric. It's perfectly possible that the company sold a healthy number of iPhone 5s in the latest quarter, and no one will know for sure until Apple releases its earnings report later this month. 

Still, it might just be that the smartphone market Apple once dominated has grown far more competitive in just a few short months. How Apple should approach the problem has been heatedly debated, with many analysts saying the company would commit brand suicide by churning out cheaper versions of the iPhone to regain some market share from Samsung and other challengers. That leaves Apple once again facing a question that has dogged it for months: Can the company make another, paradigm-shifting product without Steve Jobs?

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