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As Apple Stock and iPhone Sales Stagnate, Are the Faithful Wavering?

Is reality setting in among Apple's true believers on Wall Street and in the geek demimonde, the ones who have been enraptured in the first case by the stock (AAPL) and in the second by devices like the iPad and iPhone? A flurry of reports, analyses and critiques have suddenly made Apple seem like just another good company rather than the perfect technological and commercial confection that its acolytes have long imagined it to be. And Nasdaq is reducing Apple's weighting in the Nasdaq 100 index (QQQ) from 20 percent to 12 percent as part of an index rebalancing.

A recent look at the smartphone business from comScore shows almost no growth in the use of Apple's operating system (meaning little growth in the iPhone's market share) between November and February. Apple's share increased to 25.2 percent from 25.0 percent, ranking it third behind Google's (GOOG) Android system, which grew strongly to 33.0 percent of the market from 26.0 percent, and Research in Motion's (RIMM) platform, which fell to 28.9 percent from 33.5 percent.

Bloggers have been queuing up to recognize the ascendancy of Android and express disappointment in the way Apple's stock has leveled off after an astounding multiyear run. The author of a post in the latter group, Rocco Pendola, confesses to being "emotionally attached" to Apple, even as he explains why he is selling his shares.

Another commentator, Lucia Moses at the publishing trade magazine Mediaweek, acknowledges with humor and chagrin the "irrational exuberance," to borrow a phrase, with which the industry greeted the introduction of the iPad in 2010. Her piece includes a graphic that shows smiling people in suits issuing forecasts that, so far anyway, grossly overstate the impact of the device.

There is no way to know how much of the appeal of Apple's products are due to their quality and utility and how much is the result of the intangible elements that make up the reputation of the brand. As for the stock, its advocates argue that the price is reasonable relative to estimates of Apple's earnings growth, but those estimates are bound to be inflated by Apple's image too. Certainly money managers who track the index will have to adjust their holdings to reflect the rebalanced Nasdaq 100, which will increase the weightings of Google and Microsoft.

The latest hard numbers show that Apple's grip on the marketplace for sophisticated gadgetry is not as tight as many fans suppose, suggesting that Apple's brand cachet may be slipping. As more consumers and investors begin to notice a certain diaphanous quality to the emperor's clothes, Apple's shareholders may realize that they are similarly exposed.

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