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Profiting from Apple's (NASDAQ: AAPL) Fall

Written By Jason Stutman

Posted June 28, 2013

I’ve never owned an iPhone, and I never will…

And that’s because I’m an intelligent and informed consumer – I buy products based on a combination of what they can do and the price for which they sell.

Now, don’t get me wrong: the iPhone is an amazing product. It’s just that you can do a whole lot better in terms of performance for the same price.

I’ve had this debate with a few iPhone proponents before, and it always plays out the same way.

First, the person claims the iPhone is faster. I tell them studies show equally priced Androids open web pages 50 percent faster and have median load times that are 30 percent lower than the iPhone.

They then tell me they like the interface, to which I reply there are Android applications that mimic iPhone’s interface perfectly. I also point out that you don’t need to unlock an Android to view your notifications and that Android has multitasking features, a “back button”, widgets, larger screens, third-party keyboards, and custom ROMs.

This goes on until the iPhone owner runs out of misconceptions about the device’s capabilities, and I feel like a bit of a jerk for sharing my knowledge so aggressively.

In the end, the person declares none of those things matter: they love their iPhone regardless.

But I already know why people love their iPhones, and it’s a fairly legitimate reason: In addition to being a smartphone, the iPhone operates as both a status symbol and a fashion statement. Unfortunately for Apple, that charm is beginning to fade.

The iPhone was once an innovative and unique product, just as Apple (NASDAQ: AAPL) was once an innovative and unique company. Apple was an underdog that created new and exciting things. Owning an iPhone was something to brag about.

But that allure has come and gone – you are no longer special just because you rock the bitten Apple.

The fact is, Apple has stopped innovating. The company continues to repackage and resize the same product in hopes that sales will rise. But this is a technological market, and progress is the name of the game. There is nothing cutting edge about Apple’s product lineup, and OS X is losing its once dominant market share as a result.

smartphone market share
Source: NPD Group

The figure above only represents North American sales, but Apples’ decline crosses multiple boundaries.

Apple’s market share in Western Europe dropped from 25 percent to 20 percent in the first quarter of 2013, while Samsung’s market share moved from 39 percent to 45 percent. Furthermore, Apple doesn’t even make the top five in India, a country that now dedicates 90 percent of its smartphone market to Androids.

Apple has made a lot of people very rich, but that train has long since left the station. If the company cannot resurrect the creativity and vision that was present during the Steve Jobs era, it will become the next Sony Corporation (NYSE: SNE) – just a blip on the technology industry’s radar.

But Apple’s fall just means opportunity elsewhere, and one company is benefiting directly from its decline.

Polar Bearish

If you are bullish on Android, this just might be the best pure play you can find.

And if you’re bearish on Apple, this is better than a short.

Synaptics Inc. (NASDAQ: SYNA) designs and manufactures human interface solutions for mobile computing, communication, and entertainment devices. Most notably, the company creates chips used for processing touch screen movements.

Synaptics provides critical components for touch screens to just about every major mobile device manufacturer. The company’s clients include Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Blackberry (NASDAQ: BBRY), Nokia (NYSE: NOK), Samsung (KSE: 005930), HTC, LG, and Sony.

But Synaptics doesn’t deal with one major company: Apple. In fact, the two companies have been operating as polar opposites.

apple vs syn

The divergence between these two stocks is uncanny. With Apple taking a major hit this year, Synaptics has been a direct beneficiary. If Apple continues to lose market share to Synaptics’s clients, expect the latter to keep reaping the benefits.

Synaptics saw a record high of $45.40 in April and jumped 11 percent this Wednesday in response to an increased revenue outlook. The company has observed gains close to 60 percent this year.

With mobile devices and Android still on the rise, investors should still be able to squeeze profits out of this play.

Turning progress to profits,

  JS Sig

Jason Stutman

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