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Apple's iPhone Apology Weighs on Stocks

By John Maxfield - Apr 1, 2013 at 2:03PM

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The way things are going lately, it appears Apple's newest product may be apology letters.

Steve Jobs must be rolling in his grave.

Early this morning, The Wall Street Journal reported that Apple (AAPL 2.32%) has issued "an apology letter signed by chief executive Tim Cook that vowed to revamp aspects of its customer service policies in China after more than two weeks of pointed attacks by government-run media." In case you're curious (and can read Chinese), here's the letter.

In it, Cook states: "We are aware that a lack of communications ... led to the perception Apple's attitude was arrogant and that we do not care and attach importance to consumer feedback. We express our sincere apologies for any concerns or misunderstandings this gave consumers."

Apple was first targeted by the Chinese media in the middle of last month after the People's Daily newspaper, the communist party's "traditional mouthpiece" according to the Journal, accused the company of not responding to press inquiries and of treating Chinese customers differently from those living elsewhere. More specifically, the piece alleged that Apple fixes broken devices under warranty in China, rather than simply replacing them as it does in the United States.

In response to the original allegations, Apple posted a message on its Chinese website saying that it fixes iPhones with new components but then reattaches the original casing. It also claimed that "Apple's Chinese warranty is more or less the same as in the U.S. and all over the world."

Regardless of the veracity and motives behind the attacks, one thing is certain: The news is having a negative impact on Apple's stock and is fueling negative sentiment among technology stocks more generally. With roughly an hour left in the trading session, shares of the technology giant are down 2.2%.

Following Apple's lead downward are virtually all of the tech stocks on the Dow Jones Industrial Average (^DJI 1.61%), which itself is off by 24 points, or 0.16%, at the time of writing.

Intel (INTC 3.03%) is the index's biggest laggard today, down by 2% in afternoon trading. As my colleague Matt Thalman noted earlier, the chip maker found itself on the business end of an analyst downgrade. JMP Securities' Alex Guana said he believes Intel's full-year EPS will be lower than previously expected. He now expects it to come closer to $1.85 a share, versus his earlier forecast of $2.15 per share.

Shares of Hewlett-Packard (HPQ 3.37%) aren't far behind, down by 1.9%. Absent the dour sentiment among tech stocks, there doesn't appear to be any concrete catalyst for HP's move. That said, given that HP is the Dow's top-performing stock this year, up nearly 70% since the beginning of January, it's always possible that traders are simply taking the opportunity to realize profits.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,637.19 (1.61%) $516.91
Apple Inc. Stock Quote
Apple Inc.
AAPL
$143.78 (2.32%) $3.26
HP Inc. Stock Quote
HP Inc.
HPQ
$36.77 (3.37%) $1.20
Intel Corporation Stock Quote
Intel Corporation
INTC
$43.48 (3.03%) $1.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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