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Enough about Apple!
The mornings RSS News Feed reader is bursting with news and opinion about Apple (AAPL), the IPhone price cut, and who did what to whom and why. If you don’t know what I am talking about then consider yourself lucky because it is all meaningless noise.
The explanation is simple. There is a consumer slowdown. Apple is at the very knife edge of discretionary consumer spending. $600 Phones don’t sell in an environment like this. The price had to be cut more rapidly than planned to ensure market penetration. It is not some masterful marketing plan by Steve Jobs.
Apple is a great company. The iPhone is a killer product. I am not alone in that opinion.
What is unseen is that Apple has evolved from being a computer company to a consumer products company with a highly elastic relationship to discretionary consumer spending. People who are paying $500 more a month on their ARM mortgage aren’t going to be buying $599 iPhones.
We can debate the presence and depth of a consumer slowdown, but can anyone debate with a straight face that the iPod and iPhone are at the extreme margin when it comes to consumer discretionary spending? Why doesn’t anyone else see this? Am I mad? Discuss.
Andrew,
Spot on! And you are not mad; just very insightful, which makes you who you are (and we are thankful for that). The reason why others are not seeing the same thing has to do with analytical depth or, more precisely, the lack thereof. Religion is also based on the same principles. Namaste.
As James J. Cramer puts it “Apple is a style play”. Isn’t it custom to have high initial prices to increase the cachet of said item? Just as with a meaningless upscale purse they have to start high to induce lust. I personally thought this was in the works before the subprime problems. They wanted to get a good christmas season. At most it seems it came early by only a few months. Following up on your **killer product** I’ll be impressed when I can get a dataplan that doesn’t charge by the kilobyte when you go over 5 Meg transfer per month. Cell phone systems are walled gardens of such pathetic backwardness. When I think of all I SHOULD be able to do now but can’t short of mortgaging the farm or not at all I realize how badly it sucks to have regulated monopolies. Its like a flash back to the bad old days of wired phones when you could not even buy your own damned phone equipment. I hope google actually buys the spectrum space and puts up some open network architectures.