Apple Inc. (NASDAQ:AAPL) dropped significantly during September-October of 2012 (24% to be exact), now there are headlines and articles shouting something along the lines of ‘iPad mini is the doom of Apple’, ‘after Steve Jobs, Apple has no future’. All of this makes me wonder, do people even read them tabloid styled headlines?

I’m not overly optimistic about Apple Inc. (NASDAQ:AAPL). I’m just applying lateral thinking to the market movement of Apple. It is a fact that Apple was above $700, and then it hit a low (lower than $525) after the launch of iPad Mini and iPad 4. I agree that these devices couldn’t support the stock price, but the continued decline can’t be blamed on them.

When something’s too big not to make a headline like Apple, it is very difficult for it to stay away from extreme views; both on the bearish and bullish sides. Apple Inc. (NASDAQ:AAPL) is not dying, it is not failing, and iPad 4 and Mini are not failures, period.

Apple is still the world’s largest company, thus is the perfect subject for discussion; there are analyst and tech gurus who exaggerate Apple’s success and then there are those that analyze it with the gloomiest mood – we’re all gonna die.

Studying market movement through social media activity is an effective way to analyze and predict stock prices, especially in the tech sector. There are over 900 million active users on Facebook Inc (NASDAQ:FB), and some 250 million on Twitter. People talk, tweet and post messages on social platforms in the figures of billions per week. That is invaluable information to corporates.

To give you an example on the accuracy of this measure, on September 6, 2012, when the judge approved US settlement with Apple over E-book readers, Apple Inc. (NASDAQ:AAPL)’s stock price and the sentiment (measured by user activity on social platforms) were exactly the same.

Apple Inc Invests sentiments vs Stock price

In the month of September and October of 2012, iPad Mini and iPad 4 were released and we’ve been hearing a lot of talk on how these two have shifted Apple’s  stock price downwards.

Let’s rationalize, market’s primary drivers are not company prospects, it is fear and greed. Which leads us to one thing; that neither the iPad Mini or the iPad 4 is the reason why the company’s stock price is still falling. It would be wrong to write headlines that Apple dropped after the launch of iPad 4 or Mini. The iPad Mini is a low margin device that Apple needed to fight the competition. Apple is without a doubt the most dominant force in the tablet market and it needs to keep that position. Apple’s Mini is popular, in fact it is cannibalizing the regular iPads.

Reason for Mini’s Success

When iPad users got their hands on iPad Mini, they immediately appreciated the light weight, and the regular Apple Inc. (NASDAQ:AAPL) tablet suddenly felt bulky. Avid eBook readers found mini especially useful, as using iPads for reading leaves an impression on their arm muscles. Mini provided the solution as it is much lighter.

Sales of Mini have been very successful all over the world, even in China. Topeka’s analyst Brian White commented that demand for iPad Mini has been “insatiable” in China.

What about Samsung, isn’t Samsung a factor?

Well yes, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) is the major competition, but I’d still rate Apple as the leader in Tablet market, despite the drop in Apple’s price. iPad Mini and iPad 4th Generation succeeded in selling 3 million units in merely three days. Here is the interesting thing, sales go up probably because it’s Apple launching something new, but the share price continues to decline – products are not the problem!

apple leads by customer retention rate

Apple share price was declining before launching iPad 4 and Mini, the launch supported the price a little but then resumed the slump. Apple is achieving sales target from Mini, in fact it’s the next big thing in China.

iPad Mini’s success was surprising. One simply cannot ignore the fact that Steve Jobs was never in favor of tablets with screens less than ten inches. In fact he was quite aggressive in talking down the competition that smaller tablets (like Mini) will never make it big in the market, they will be “DOA – Dead on arrival”.

Jobs’ fans know that he often changed his mind about things, and what he said about mini tablets was just a momentary thing.

So this brings us back to the anticipation for iPad 4 and Mini. People expected iPad 4 to uplift Apple’s declining stock price. In fact the user anticipation after the release of iPad 4 put the share price somewhere between $700 and $750, so what happened then? Why did the stock go down further?

Mini the Cannibal

Mini is eating sales of the largely anticipated iPad 4. It stole the spotlight from the device, which the stock holders were betting would sell a lot. Mini is gaining the market interest so much that people are saying that it will eventually become the main tablet for Apple.

Cannibalization might not directly impact the stock price but stock price does move on sentiments. iPad 4 didn’t impress the fans much (Mini is one reason people lost interest in the 4th generation) and the sentiment graphs shows a decline and so does the share price.

The Apology

To make things worse, the order came for Apple to apologize to Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), pushing market sentiments further down and the share price followed.

What I’m trying to argue is that Mini and iPad 4 themselves are not the reason why the share price is falling. If the same device iPad 4 would have been launched , with exactly the same features from some other company it would have done much better and definitely would have supported their stock price.

Unexpectedly, Mini stole the show. Had mini been launched separately with the usual ‘i-hype’ that iPads get, the share price would have been much better today.

Techy Reasons for Stock Slump

After settling the case for iPad 4 and Mini, the real question is why Apple share price fell in the first place and why so significantly? Apple’s market capitalization is inflated and fund managers simply hate a huge chunk of just one company that can drag down their whole financial empire.

This is the real reason why the price is falling. Apple is too big and a mere shift in its standing position jolts the stock with considerable force. It has become a single stock proxy for the tech universe – Apple is a victim of its own success.

From computer hardware manufacturer to the creator of two of the world’s leading software platforms, and then the success of iTunes and iCloud show how Apple Inc. (NASDAQ:AAPL) has grown and will grow. Some major product launches this year can capture user’s sentiments and shoot up stock price, like when Apple doubled its price to $350 during September 2009 and July 2011.