published Wednesday, September 26th, 2012

Is Apple in trouble?

In most cases, consumers and investors would be happy with a company that sold more than 5 million units of a highly anticipated product in the first three days of availability. But Apple, apparently, is a company that must answer to higher expectations. Despite the obviously brisk sales, the company still was punished in the equity market. The price of its shares dropped more than 1 percent Monday and the stock continued to fall on Tuesday. Success, it seems, does not always come easy in the high-tech world.

The 5 million-plus new iPhones sold, in fact, broke the same-period record set last year by the company's previous model. That wasn't good enough for analysts, who had predicted far higher sales figures. Many consumers were unhappy with the product, as well.

Complaints about the phone, especially software changes that include new mapping and navigation features, quickly filled the social media favored by tech-savvy consumers. Apple has another problem, too. Reports from China about a Monday riot between workers and security guards at a Foxconn factory that builds equipment, including the iPhone 5, are sure to further tarnish the company's once sterling image.

Apple, for the moment, seems confident that it can overcome problems associated with the new phone and that it eventually will be a major contributor to its already fat bottom line. A spokesman said that sales were slowed by demand that exceeded supply, and that analysts don't understand the manner in which Apple calculates its online sales. There was no word, of course, about the incident at the Chinese plant or what stirred events there again.

The supply-and-demand equation and sales issue likely will be resolved quickly. The labor situation is far more likely to harm Apple. That's because the company uses contracted labor in countries where wages are low, working conditions are abysmal and oversight intentionally lax. The Foxconn plant is an example of such practices.

Apple might publicly ignore such concerns, but it is aware of those conditions. Indeed, Tim Cook, CEO of Apple, has promised to work with Foxconn and other contractors to ensure that fair and humane labor standards are met. That has not happened.

Long hours, required overtime with no pay, high production quotas, lack of rest breaks and exposure to noxious chemicals and other products used in the manufacturing process continue to be the rule there and at similar plants. Apple might prosper as a result, but theirs is a corrupt business model that, like so many brand-name apparel manufacturers, relies on the same sort of cheap labor abuse that has long haunted off-shored jobs.

Apple has enjoyed a long and profitable run, but that success is no longer assured. Current sales figures and a lack of corporate focus following the death of Steve Jobs suggest possible corporate weaknesses. But the real concern should be Apple's long-term public acceptance and viability if it continues to exploit workers in pursuit of profits.

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