Time to short Apple?

Time to short Apple?
Commentary: Functionality of iPhone will be duplicated by others
By John C. Dvorak
Last Update: 2:05 PM ET Jun 7, 2007


BERKELEY, Calif. (MarketWatch) -- If you follow the rules and sell on good news and buy on the bad, now would be time to short Apple Inc. There is no company out there with this much good news.

The good news that's over the top is about the iPhone. It's going to set the world on fire once it's released, according to all the experts.

This leaves me as perhaps the only mainstream naysayer, since I remain skeptical that Apple (or anyone else for that matter) can jump into the deep end of the mobile-phone swimming pool without knowing how to swim. See previous column.

I was reluctant to revisit this subject, since the media already has beaten it to death. But the legions of Apple (AAPL : Apple Inc
AAPL124.49, +0.42, +0.3%) mavens that will buy anything bearing the company's logo demand more and more coverage.

So here is the latest I've heard, and it comes from yet another industry insider.
I got a call last night. "I think it's time to sell Apple short," said the voice.
"I think that's premature," I responded. "What have you heard?"
"The keyboard is a disaster, and people are going to return the phone in droves. I'm guessing 20% will go back."
There will be the inevitable iPhone production flaws that hopefully will not be catastrophic. If a production catastrophe does occur, call your broker.
"It's not the scenario I'm predicting," I said. "Besides, Jobs said the keyboard is great."
"No, he didn't. He said that if you 'trust the keyboard you can really fly.' Nobody will get that far. It's frustrating to use."
The conversation drifted off and I wasn't convinced, because I do not think people are going to buy the Apple phone because they want to type on it.
I could be wrong about this, since Apple is emphasizing the Web-surfing capability of the device. The company has bought into the groupthink premise that people will want to surf the Web endlessly on a small device.

While Apple may have an interface that works on a small screen, I have never subscribed to the idea that Internet use is going to gravitate to handhelds. It would be like newspapers gravitating to the paperback-book format.

My unnamed friend also offered an odd anecdote that I found somewhat weird, but worth mentioning. He said that he was in the Apple store and the personnel there were showing videos of the iPhone, when a customer said, "Wow, you mean it is also a cell phone!"
What did the person think it was, a fancy new iPod?

As for the iPhone keyboard leading to disappointment and returns, I'm not convinced. I'm sticking with my scenario where the phone is hugely successful for a couple of quarters until the fashion goes stale. By then, the functionality will be duplicated by others and Apple will be treading water.

In the meantime, there will be the inevitable production flaws that hopefully will not be catastrophic. If a production catastrophe does occur, call your broker.
I can say for a fact that all the other handset players are freaked out by this device, and have contacted the independent design firms to come up with something as jazzy as the iPhone, in case it becomes a runaway hit.

But what about the Big Two, Motorola Inc. (MOT : Motorola, Inc
MOT17.89, +0.20, +1.1%) and Nokia Corp. (NOK : Nokia Corp
NOK28.05, +0.38, +1.4%) ?

I'd follow Apple's lead -- not the lead in design and marketing, but the lead in ridiculing the competition in company advertising.

As for shorting Apple? Maybe it can wait, but it's coming