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  • Can Apple Withstand the Recession?

    November 18th, 2008

    Unless you are one of those precious (and lucky) few who might be considered in the class of the filthy rich, you know it’s been a difficult Fall. Money is tight, sales are light, and it’s hard to know whether it’s even worth spending large amounts of money for the holiday season.

    Maybe it’s better just to fill your Christmas stocking with — well — stockings!

    Indeed, Apple hasn’t fared too well as far as Wall Street is concerned, as its stock remains at the lowest levels in over a year. Now perhaps a lot of this discontent reflects the general flavor of the stock market these days. And, no, I won’t speculate on whether the new president is a positive or negative influence. I don’t think the so-called political pundits that pollute 24-hour cable TV here in the states really know the score either.

    But when you look at preliminary reports of Apple’s sales, you have reason to feel surprisingly optimistic. According to a story in AppleInsider, which carries a lot more than just plain rumors these days, Mac retail sales in this country were up 28% in October, compared to last year according to recent retail surveys.

    Sure, some of those surprising statistics may be due to the pent-up demand for the new Apple note-books introduced last month. No doubt sales declined ahead of their release in anticipation of a major product refresh, and then grew rapidly because of pent-up demand. So it’s quite possible things will settle down to a less-favorable rate this month and the next.

    It also appears that the iPhone is selling at a pace similar to that in the previous quarter, even without another new model rush. Now remember that smartphones aren’t necessarily purchased on a seasonal basis. Quite often, it’s a matter of when the contract with the present carrier expires, or, if you’re using the same carrier that supports the iPhone in your country, when you actually become eligible to get one at the standard discount price.

    That and the news that even the previous best-selling phone in the U.S., the Motorola RAZR, couldn’t beat the iPhone is exceedingly encouraging, if not surprising. Remember that the RAZR nowadays is frequently given away in exchange for a two-year contract, or sold at a token price. I paid $25 for mine, by the way, at AT&T in the contract that also included my first iPhone.

    As far as the iPod is concerned, well they’re talking about a slight drop in sales compared to over 22 million units sold last year. Now if that really happens, perhaps Apple will fudge things a bit and remind us that the iPhone is often bought instead of an iPod.

    Whether true or not, the analysts have been saying that iPod sales are due to drop off any time now. It is inevitable, since the market for digital media players is cooling off. That may be true, but if you’re looking for a relatively cheap gift, certainly an iPod shuffle or nano would be just the ticket. So perhaps the negative expectations are due to be disproved by Apple just one more time.

    Moreover, there were reports just last month from a couple of analysts talking of major cutbacks in iPhone production. The claims were never verified, although they were supposedly based on contacts with some of Apple’s suppliers.

    Since I tend to think that Apple has contracts with these companies that bind them to secrecy, I don’t think they’d risk those deals in order to feed the wolves in the pundit community. So I rather doubt the reports have any basis in fact, though logic would seem to dictate that Apple must be hurt seriously by the state of the economy.

    You see, Apple is still regarded as a company that builds premium-priced products. Some writers, no doubt influenced by some ill-informed executives from Microsoft, continue to claim that there is an “Apple Tax” that you pay for the privilege of owning a Mac, an iPhone, or an iPod.

    The facts, of course, are often otherwise. iPods can be had for as little as $49. The $199 you pay for the 8GB iPhone is competitive with the BlackBerry, its major competitor. As far as Macs are concerned, well I suppose that’s debatable.

    Indeed, if you want the very cheap PC that is ubiquitous at a Wal-Mart, or a discount club outlet, such as Sam’s Club, none of those boxes bear Apple labels. That makes perfect sense, since Apple wants decent profits from everything it does, and Steve Jobs has often said that they won’t build cheap junk and put a Mac label on it.

    My position has long been that a Mac is priced real close to an identically-equipped PC. However, some of the detractors of that theory list personal preferences in their argument, that maybe they don’t need some of the features on the Mac, and would like to eliminate them. They can’t, but you can on the PC, and hence the latter must be cheaper.

    Regardless of where this argument goes, it’s nevertheless obvious that, despite the obstacles, Apple is clearly doing surprisingly well this holiday season.



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