Saxo Bank “Outrageous Prediction:” AAPL Declines 50% in 2012

| Analysis

Apple's Cloudy Crystal BallEuropean bank Saxo announced on Friday ten so-called “Outrageous Predictions” for 2012, and number one on the list is that shares in Apple Inc. will decline 50 percent off the all time high set in 2011. The firm’s reasoning runs the gamut of most of the entries in our Apple Death Knell Counter, namely that open licensing always wins and Apple’s profit margins won’t be able to withstand the heat from the Android and Wintel/WinARM hordes.

The point of the company’s “Outrageous Predictions” list is to identify events that are “unlikely to happen,” but that have more chance of happening than the markets are currently accounting for. The firm says that it believes investors should consider such events that have “under-recognized probabilities.”

So what better headline grabber is there than the idea that AAPL will run off a cliff? None, it would seem. Saxo bank not only lead with its AAPL prediction, it sent Steen Jakobsen, chief economist for the company, on the rounds at many financial outlets to discuss the issue.

First, let’s look at the numbers. AAPL’s closing high was set on October 18th, when the stock closed at US$422.24. AAPL set an intra-day high of $426.70 on October 17th. The stock closed this Friday at $381.02, up $2.08 (+0.55 percent), on moderate volume of 14.6 million shares trading hands. A decline of 50 percent from its all-time closing high would mean the stock would have to drop to $211.12 per share.

Saxo Bank wrote that, “Going into 2012 Apple will find itself faced with multiple competitors such as Google, Amazon, Microsoft/Nokia, and Samsung across its most innovative products, the iPhone and iPad. Apple will be unable to maintain its market share of 55 percent (three times as much as Android) and 66 percent on the iOS and iPad.”

Note that the firm’s market share numbers for iPhone are off substantially. Apple has held approximately 27 percent of the smartphone market for the past few quarters, the highest share Apple has enjoyed. That’s far below Saxo’s 55 percent share claim. The company is more or less right about Apple’s tablet market share being 66 percent (if not higher—it depends on whom you ask).

Mr. Jakobsen told CNBC that, “In relation to current earnings, Apple is not expensive but expectations about future profit growth will come down hard as competition reaches insane levels and crushes Apple’s profit margins.”

When asked by Bloomberg how Apple could be threatened when it has such a high share in the smartphone and tablet markets, Mr. Jakobsen replied, “That’s exactly the point, the point is that no product, no company is able to maintain such a lead relative to other players. On top of that, of course, you have the micro-economics of the open source [nature of Android]; you have Microsoft coming into the frame; if you look among younger people, you’ll find that Samsung is becoming very popular.”

These are the same arguments that have been used to predict Apple’s doom and destruction for years. We heard it in 2009 about Android, and we heard it in 2010 about Android. We’ve heard it about the iPhone and we’ve heard it about iPad. For more than a decade, we heard it about the Mac.

Yet today, the iPhone remains the top selling device, and Apple has increased its market share consistently in the smartphone business (note that Android did pass iPhone’s market share in 2011, but it did so at the expense of everyone but Apple).

This quarter, we do have a legitimate competitor for the iPad in the form of Amazon’s Kindle Fire, but that device appears at this point to be taking share away from all other would-be competitors, and it remains to be seen how it will do after the Christmas buying frenzy is over. It could continue to do quite well, but it won’t overtake Apple’s iPad in total share.

Even the Mac is doing well, and the company has outgrown the PC market as a whole for 22 quarters in a row.

Let’s come back to Saxo’s central premise, however, and that’s the idea that no company has ever maintained a dominant share against other companies. This is something that seems to be a comfort food for many people who simply can’t grasp the idea that Apple’s whole widget model works.

Time and again we’ve seen people argue that this is the week/month/quarter/year when Apple’s iOS empire gets buried in the Android mud slide, and yet it hasn’t happened. This time, the proponent of the idea states boldly that no company has ever maintained the kind of lead Apple has in its iOS devices.

And yet one company has done so, and is doing so even now. That company is Apple, and the market is MP3 players, and the product is iPod. Apple has owned somewhere between 60 percent and 70 percent of the MP3 player market since it brought iPod to Windows, and that is still true today.

Which makes Mr. Jakobsen wrong.

He also specifically states that Apple’s margins won’t be able to withstand the Android/WinARM/Wintel hordes. What’s so fascinating about that is that Apple is the price leader and the margin leader in tablets and the so-called Ultrabooks that Intel modeled after Apple’s own MacBook Air.

In tablets, the only way to beat Apple is to offer low end cheap plastic devices, something that Amazon has done with its Kindle Fire, and something that we believe only Amazon is capable of doing successfully. The rest of the industry can’t survive selling devices below cost, and if they make 7” cheap plastic devices, no one will buy them because there’s no ecosystem of Android content outside of Amazon.

When Apple is the price and margin leader, how can competitors put the hurt on Apple’s margins? It makes sense if you’re stuck in 2005, but it requires a weird kind of delusional faith in a world where Apple isn’t an electronics giant with the best supply chain in the world.

The point of Saxo’s “Outrageous Predictions” is to be outrageous and to look at things most people aren’t thinking about, but the firm’s predictions for Apple are rooted in an alternate reality where Wintel rules and whole widgets are merely a faded echo of a bygone era.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

Popular TMO Stories



One possibility not mentioned: A repeat of fall 2008, this time with ground zero in Europe.  Very ironic that an European bank would be making such a prediction…

Claiming 50% decline is sensationalism, but I have a feeling even healthy, well-ran companies will be sharing the pain of an Euro zone crisis.


After seeing the “competition” trying to record video at a recent rock concert I was laughing as my 4S took beautiful HD video. The others looked like they were recording a bad, stuttering cartoon on their mini-tablet sized “phones”  Yeah, Apple is doomed. tongue laugh


It appears the end-of-year stupid prediction season has started early this year. Let’s review this one in 12 months, shall we?

Isn’t there another prominent exception? It seems to me that MS has maintained a pretty substantial market share lead among OSes for quite a while now…


On October 11th, AAPL set an intra-day high of $426.70 on October 17th.

Bryan: Er, ah…might want to correct this!


re d’monder comment & possibility of European financial Armageddon, the financial folks I listen to, mostly Bloomberg, say that Europe accounts for about 13% of US exports.  even if the US lost all of that, it still wouldn’t take Apple down 50% - especially since Apple is growing in other parts of the world, notably, China

Bryan Chaffin

Thanks, MacFrogger. smile


re d?monder comment & possibility of European financial Armageddon, the financial folks I listen to, mostly Bloomberg, say that Europe accounts for about 13% of US exports.

An European crisis would have little to do with Apple’s business or their exports.  But it might have everything to do with stock prices as institutions swoon.

I’m not saying everyone should take Saxo’s prediction & short AAPL… just that the current market is enough to make one queasy, whether you’re long or short.


Maybe they hired Bosco to do the background research ?

Paul Goodwin

They’re all high on something in Denmark evidently. I sure won’t be investing with Saxo Bank. If Apple goes near $210 a share, I’ll convert my entire 401K into Apple stock. My prediction,given the rate of Apple’s stock prices over the past two years, is that it will hit $500/share in about 15 months or about the end of the 2nd quarter of 2013. Like Mr Potter, I’m not selling, I’m buying- well whenever I can anyway. Investors buy stock in companies that know how to make money, and Apple does that better than any other phone or tablet maker.


I wonder if Saxo would like cole slaw or mashed potatoes with their bucket of southern-fried stupid. As d’monder wrote, this claim is pure sensationalism on Saxo’s part, but it is the kind of claim that will make them look ridiculous when the exact opposite ends up happening.

rw mccoy

When I saw these predictions, my reaction why should Saxo bank have all the fun. So, I thought up my own ten outrageous predictions. I, however, refrained from making any comment on the stock markets directly. Everything else was fair game, and some of my predictions would either have a direct impact on the stock markets or have been influenced by stock market prices.

Like Saxo, this is for fun. There is less than a 5% chance of any of these predictions coming true by Dec. 31st 2012. But in an open-ended space time continuum, there is a chance.

My 10 outrageous predictions for 2012:

1. Bonds go down 20%. This means interest rates will go up by about 2 to 3 % for 10 to 30 year bonds. Bonds, especially Treasuries, had a great run last year and may have peaked; thus, they are overdue for a correction.

2. Many municipal bond defaults in the US. Meredith Whitney, now rated by somebody on CNBC as the worst forecaster in the US, was ahead of the curve on this prediction last year which when making investment decisions can be deadly.

3. Gold falls to $1,000 or just below. As fear of inflation dims, and people need cash to stave off the wolves of debt, this stuff could get liquidated.

4. Oil goes to $50 a barrel. Global recessions lead to less energy consumption, and OPEC is looking divisive.

5. Belgium divides into two countries. This country is starting to remind me of Czechslovakia. They appear leaderless and apathetic at the same time, and keeping the country together is somebody else’s problem ? fertile ground for a divorce. Maybe they should get the Austrians to run the place again.

6. Ron Paul is elected President of the US. This is not as outrageous as Saxo bank’s prediction of an independent, but I think it would have the same effect on the Washington establishment. This prediction follows the idea that when times are tough, the tribe always elects the meanest chief which isn’t Newt.

7. Japan starts to recover and actually has a good year. They’ve been down so long that they are due for a comeback. There are countries such as Zimbabwe and N. Korea in this category, but Japan obviously has a lot more going for it.

8. Real Estate prices fall a further 20% in the US. Three generation households could be coming back, and if I’m right about bonds, guess what happens to mortgage rates. Houses keep losing their luster as a retirement nest egg on top of this.

9. Italy leaves the Eurozone before anybody else including Greece. Unlike Greece and Portugal who actually try to implement reforms, the rumour is Italy just passes reform laws that go no where. So what’s wrong with this picture?

10. Financial turmoil wreaks havoc in China. Widespread unrest disrupts trade and deliveries for export. Many foreign companies operating in China decide to pick up stakes. This scenario is predicated on the ‘soft landing’ being a mirage.

Take Care
rw mccoy


Please note that there is a grammatical difference between “your” and “you’re”.

Log in to comment (TMO, Twitter or Facebook) or Register for a TMO account