Why Wall Street Is Battering Tech's Biggest Names - Wired (blog)

The stock charts of Amazon, Google, and Apple have all looked a little Niagara-esque over the past month. Image: ipeters61/Flickr

Another day, another dive. Last week it was Google (GOOG), which lost more than $20 billion in stock market value in about 10 minutes after the company’s earnings results were accidentally released early. Google’s profits, while enviable, had fallen further than analysts expected, in part because the value of clicks on its ads â€" Google’s core business â€" continued to fall.

Yesterday it was Amazon’s turn. Though the e-commerce giant’s results came out when Amazon (AMZN) said they would, its stock price fell as much as 9 percent after hours on the news the company’s losses went well beyond what Wall Street expected. The deep plunge lasted only briefly, but Amazon is still off more than 10 percent this month. In the past, investors have seemed to take Amazon’s earnings slow-downs in stride. But as economic uncertainty persists and the presidential election approaches, the shares of tech’s most visible companies have taken a most visible beating.

The most obvious of these is Apple (AAPL), which after briefly topping $700, has lost nearly $100 per share in little over a month. Apple itself saw a brief, precipitous slip in after-hours trading last night when its profits missed analyst estimates, but investors didn’t allow shares to linger below $600 for too long.

Even with such a dip, Apple remains far more valuable than any other company in the world. But patience with tech companies that for much of the year could do little to disappoint the market has started to wane.

What’s going on here?

One likely scenario is, in a word, uncertainty. Not the uncertainty of whether share prices, revenues, or profits will rise or fall. These are givens. Rather, each of these companies has reached an apparent inflection point where, after performing steadily doing the things they do best â€" Google selling ads, Amazon selling stuff, Apple selling iDevices â€" each has seen forces of change looming and has started trying new things to steer away from the shoals of stagnation. Investors have noticed, too, and they seem antsy about waiting to see what works.

Image: Google Finance

In Google’s case, falling ad revenue appears to stem from the lower value of ads on mobile devices versus PCs. As The New York Times recently noted in a nice big-picture piece on the topic, mobile is upending the strategy of every big tech company. More searches on more mobile devices mean more Google ads served to audiences that advertisers are finding are tougher to engage. While Android’s dominance gives Google a peerless mobile presence, the company finds itself trying to figure out how to leverage that presence. Even Google hasn’t solved mobile, and some investors aren’t lingering to find out if they do.

Mobile disrupts Amazon in a different way. For a while, that disruption seemed to work mainly in Amazon’s favor. Now consumers had a device they could use to make online impulse buys wherever they happened to be â€" not just when they were in front of their PCs. Much more nefarious to brick-and-mortar retailers, Amazon added a bar code scanner to its smartphone app that brought “showrooming” to full fruition. Not only could customers comparison-shop right on their phones â€" now Amazon’s app took them straight to the item with a click of the camera.

But offline stores aren’t sitting idly while smartphones poach their profits. They’ve found ways to make themselves more like Amazon. To compete, Amazon is making itself more like them, mainly by building more distribution centers to give themselves a greater physical footprint, which should allow them to shorten shipping times. But that kind of construction costs money, which ate into Amazon’s returns this past quarter.

Apple, meanwhile, is the wellspring of all this mobile disruption. But what was disruptive five years ago has become the norm. The conventional wisdom on Apple’s less-than-totally-awesome earnings yesterday holds that lower-than-expected iPad sales stemmed from consumers waiting for the just-announced iPad mini.

But Apple’s share price started falling even as the iPhone 5 sold out and consumers appeared to ignore the flap over iOS 6′s subpar maps. Concerns about saturation are starting to swirl as products like the iPhone 5 and the iPad Mini come off feeling not like innovation but incremental diversification. Once you become a hit factory, anything less feels like a flop. The uncertainty around Apple isn’t so much their ability to make things people want, but whether they can make another thing people don’t know they want but when they see it will discover it’s something they can’t live without.