News Column

$26B gone: iCloud rains on Apple stock

September 3, 2014

By Matt Krantz, @mattkrantz, USA TODAY

Lines may be forming for Apple's latest gadget, but investors on Wednesday couldn't run away fast enough from its stock.

The stock came under major pressure following reports over the weekend -- disputed by Apple -- that its iCloud service might be vulnerable to hackers and news of a smartphone partnership between Samsung and Facebook.

Shares of Apple on Wednesday fell $4.36, or 4.4%, to $98.94. That's the biggest dollar decline by Apple since it lost $6.19, or 8%, to $71.17 on a split-adjusted basis on Jan. 28, according to data from Yahoo Finance. Given Apple is the most valuable U.S. company, with a market value of more than $618 billion, Wednesday's decline cost investors $26.1 billion on paper.

To put that in perspective, the market value lost in Apple in one day exceeds the entire value of more than half the companies in the Standard & Poor's 500. For instance, the entire company Marriott International is valued at $20.2 billion.

Apple's decline even pushed the entire broad Standard & Poor's 500 into the red. Had Apple been unchanged, the S&P 500 would have been up 1.41 points to a new high. Instead, the S&P 500 fell 1.56 to 2000.72.

Investors are worried about Apple's continued slide behind rivals pushing in new technology. The latest iPhone is expected to add a larger screen and wireless payment technology, features long offered by Samsung's Galaxy and Microsoft's Lumia lines. Apple plans to announce on Sept. 9 the latest updated model of its smartphone.

"Stocks can trade with increased volatility around events, and there is a big event expected for next Tuesday," says Walter Piecyk, analyst at BTIG.

Meanwhile, on Wednesday, Facebook's virtual-reality unit, Oculus, said it plans to add its technology to select Samsung gadgets. The companies are developing a device called Gear VR, which is a virtual-reality helmet that works with Samsung's Galaxy Note 4 smartphone. Investors see virtual reality as a way for tech companies to breathe life in the increasingly mature and saturated smartphone market.

"We think Apple has little room for error in delivering on a spectacular iPhone 6 launch," says Brian Colello, analyst at Morningstar.

Reports arose over the weekend about hackers gaining access to private nude photos stored on some celebrities' smartphones, possibly through the Apple online service, called iCloud. Apple said the leak wasn't caused by any breach of its electronic systems. The security question calls into debate Apple's skill at the ability to store mobile data on remote servers, or "the cloud."

"Concerns over iCloud have hit at the worst possible time for Apple a week before a major launch," Colello says.

illustration by Kris Kinkade,

iCloud image by Apple; illustration by Kris Kinkade, USA TODAY

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Source: USA Today

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