Apple's Core Is Solid, Even With Bruised Skin

NEW YORK (TheStreet) -- After reading the negative headlines about Apple (AAPL) issuing an apology to Chinese consumers, you may understand why the shares fell in price, but does it make sense? I don't believe the media or the market made the right call.

Sometimes the media forgets the entire purpose of a company is to provide goods and services to consumers. In the free market, we allow consumers to decide which products will be made, at which price and in what quantity, etc. ... Once a company forgets who its "real boss" is, that enterprise is doomed to the corporate dust bin (absent a government bailout, of course).

The real genius behind Apple's success is the ability to meet consumer needs better than the competition. We don't have to travel far to find examples of companies that forgot who genuinely decides what is made and what companies prosper. Nokia ( NOK) and BlackBerry ( BBRY) are two notable examples of the market punishing failure. In the free market, you either deliver what the consumer wants, or you perish.

Apple, under pressure from Chinese media (think the government at least in part), did the right thing. Apple's leadership correctly understands that at the end of the day, success comes from serving the Chinese in the Chinese way. If the Chinese want a product warranty and service in a different way than Apple is accustomed, then Apple can decide if they want to fill that need, or leave the market.

The question isn't about right or wrong, and regardless if anyone else believes Apple should or should not kowtow to the Chinese consumer, because if they don't, someone else will. That's the free market, and as a consumer, I'm thankful for every bit of free market we do have.

Pull up a weekly or monthly chart for BBRY or Nokia, and you don't need me to tell you that an apology or change in operations to meet consumer desires is a cheap and effective method of staying on top. Make no mistake, Apple is on top and is the space leader in the one and only metric that matters: profit.

My good friend and The Street writer Rocco Pendola recently wrote an article that called into question the tactics of Apple CEO Tim Cook for issuing the apology. Pendola is no fan of Cook or his management methods, but under Cook, Apple has reported record profits and revenue not only for Apple, but for any company.

Similar to others, Pendola doesn't see the positive that will come from Apple's actions because he hasn't spent the amount of time I have in Asia, in general, and China, in particular. For me, this appears to be an easy and a cost-effective one at that. But let's look at the situation in another light.

Imagine you're a guest in someone's home with different cultural beliefs. Now imagine your hosts are Chinese, and you're American. After finishing dinner, it's not uncommon for Chinese or Americans to use a toothpick; however, the manner in which it is used is quite different.

As an American, you probably won't make an effort to cover your mouth with the hand that is not holding the toothpick, because, in American culture, it's not necessary. The Chinese hosts, on the other hand, won't profoundly appreciate it.

While using the toothpick, your friend leans over and quietly informs you of your "offense." You now have a few choices. You can have the attitude that you're an American, and you should be able to do what you believe is within your social manners. After all, you're the guest. You obviously risk the chance that you won't be invited again.

Another option is to conform to what is expected in their home, or third, you can apologize while conforming to the norms. Apple wisely understood that regardless if it believes it did something wrong, it's the hosts that decide if Apple gets "invited back for dinner or not."

It's obvious, or should be obvious, for Apple shareholders that you want Apple to be invited back to dinner. China has one of the biggest dinner tables, and if you believe the market was hard on Apple for issuing an apology, can you imagine the market punishment for inaction and loss of sales and or market share?

The fallacy of the market always being right might hold water for short-term traders, but for long term investors, it's the exact opposite. The market is usually wrong, either too much irrational exuberance, or too many double helpings of pessimism drive share prices.

As an investor, you must look past the headline and find the value that others are passing by. Trading on Target by Adrienne Toghraie from Wiley Trading is a fabulous resource to learn more about investing based on goals, not emotion.

Apple currently finds itself in the Wall Street bargain bin. (Still, Canaccord analyst T. Michael Walkley this week raised earnings estimates on Apple due to stronger iPhone 4 and iPhone 4S sales.) Those who enjoy buying an item worth $10 for only $5 are thankful. They know it's only a matter of time before others see the value.

Disclosure: The author doesn't hold a position in any stock mentioned.

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