Not So Big Apple

Shares drop as much as 7% amid questions of growth sustainability.
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Even

Apple Computer

(AAPL) - Get Report

, it seems, can't defy Newton's laws forever.

Shares of the company traded off as much as 7% Monday and are off some 22% since hitting an all-time high last month. The selloff follows a three-year run that has sent Apple shares up more than 900%.

Analysts and traders were at a loss to explain the immediate cause for the stock's Monday decline. But more broadly, a number of recent developments have made investors nervous, leading them to cash in on the stock in recent sessions, analysts said.

"Everyone's question now is how much more upside there is in Apple's products," says Tim Biggam, chief options strategist with Man Securities. "There's some pretty hard profit-taking" going on, added Biggamn. "A lot of longs have gotten nervous."

In recent trading, that nervousness was evident: Apple shares were off $4.55, or 6.3%, to $67.30. Earlier in the session, the stock traded off as much as $5.11 to $66.74.

And that apprehension didn't just crop up Monday. Since hitting an all-time high on Jan. 12, amid the hoopla following the company's

earnings preview at its

Macworld conference, the stock has dropped nearly $19.

Since then, investors have had to deal with a growing list of concerns. While sales of the company's iPod digital music players in the holiday quarter topped nearly everyone's expectations, the company predicted a sharp decline in sales this quarter.

Sales of Apple's Macintosh computer came in lower than expected in the holiday period, and the company cautioned investors that because of its

transition to computers based on

Intel's

(INTC) - Get Report

processors, computer sales could

continue to be soft in the current, or second, quarter.

Some analysts and investors have worried about the impact on Apple of the proposed sale of

Pixar

(PIXR)

to

Disney

(DIS) - Get Report

. Apple CEO Steve Jobs is also the CEO of Pixar and would become a board member of Disney if the deal goes through.

Analysts have also worried that the Disney position might distract Jobs -- who is widely viewed as having saved Apple from irrelevance or death -- from his duties at Apple.

Additionally, recent disappointing earnings reports at

Yahoo!

(YHOO)

and

Google

(GOOG) - Get Report

appear to have resonated with some Apple investors, Biggam says.

Investors are fearing that these and other technology companies are maturing, implying slowing growth, said Paul Foster, an options strategist at TheFlyOnTheWall.com.

"People are rotating out of maturing tech stocks," Foster said.

Another concern is the past weekend's column in

The New York Times

that denounced Apple's iPods as being fragile devices with a short, useful life and that accused Apple of having poor customer service.

The column accused Apple of being an "extraordinarily arrogant company" and warned that the company's customer service practices could cost it customers in the long run.

In general, the fear among investors, Biggam and others say, is that the valuations of Apple and other highflying technology stocks have gotten ahead of themselves. Last month, Apple, for instance, was trading at about a quarter of

Microsoft's

(MSFT) - Get Report

, valuation, says one hedge fund manager, who asked not to be named.

But Apple's earnings and revenue constitute a much smaller fraction of Microsoft's than that.

"There's no way you could say this business model is as good as Microsoft's or two doubles away," says the hedge fund manager, who is long Apple's shares but recently sold off 90% of his stake.

The opinion of investors seems to be "take the money and run," said the fund manager. "A lot of people are just doing that."