Apple and the Recession

[MBX]

When and if at all will Apple adjust to the Recession or do you think it won't happen at all and they (along other tech companies) will rather have their items rot on the shelf than lower prices?

I'm not saying Apple's stuff is more expensive than others necessarily though.

But will some kind of price drop along all the industry begin soon?

[NT1440]

They won't. People who actually want apple products buy them, its that simple, even if they have to save a bit before.

They know they can outlast the recession with a cool 25 billion in the bank.

[MBX]

They know they can outlast the recession with a cool 25 billion in the bank.

Just in paper money or gold too?

[NT1440]

Just in paper money or gold too?

Does it matter? Everyone knows they have it.

Apple does things the apple way, including pricing. Its worked so far.

[Eidorian]

I expect Apple to continue being Apple. What more?

[Zombie Acorn]

If they drop prices it has to be calculated (as usual), Apple doesn't want people to think they can't sell and are dropping prices due to the recession. I would suggest any price drops to happen with a new line of apple products, it makes it look like they are giving their people a gift instead of lowering prices because they are hitting rocky times.

[BigHungry04]

Apple will not lower prices, they offer features on their computers that are different from other computer manufacturers. They feel that those features are worth the price increase. Since they are still selling a lot of computers, their strategy is paying off. They will probably only lower prices when they need to move old product off the shelves.

[SactoGuy18]

I think it is the deep recession that Apple will have to consider abandoning the iMac and going to mini-tower machine route, selling what looks like a reduced height Mac Pro for around US$800 to US$1,000 fully equipped and allowing the use of third-party monitors that have Apple certification for color and sharpness quality. This would allow Apple to sell a machine in the US$1,350 range (including third-party 24" LCD panel) instead of paying around US$2,000 for an all-in-one iMac.

[liptonlover]

I don't think apple will be dropping prices. Last quarter was their best ever, even though we're already in the recession. Also, I agree they aren't going to make it look like they're forced to drop prices. You know how they haven't made a netbook yet? They may be saving it in case they need a cheaper computer to get them through looking good. Sure they can wait out the recession, but why do that when there's money to be made? It also looks better if they're making money anyways.

[Eddyisgreat]

Apple will only raise their prices, not drop them. Apple caters to a different crowd, upscale consumer niche whatever you want to call it. Jobs already said he isn't interested in budget comps because that always has been and will be a 'race to the bottom' where the choice is alot more diverse and it'll be harder to stand out from the pack, dealing with consumers who are looking to stack rebates on top of coupons on top of stripped features just to have the bare minimum.

Since their products probably reap in more profit anyway they don't need as much volume sales as the other guys to make it.

[IJ Reilly]

Companies rarely drop product prices, and effectively they can't unless their costs of production are lower. They may lower prices on products already in inventory, but this is usually very bad news for the company. Apple's inventory control has been excellent in recent years, so I wouldn't expect them to be caught in this recession with excess inventory that they need to dump at lower margins.

It is also extremely unlikely that Apple will completely revamp their product line, if only because their strategy has been extremely successful to date -- in fact, the envy of the industry. Anyone who believes that Apple will or should start selling mid-towers or cheapo laptops now, because of the recession, is making the same pie-in-the-sky arguments we've been hearing for years. Apple has never been interested in selling low margin products.

[SwiftLives]

I think it is the deep recession that Apple will have to consider abandoning the iMac and going to mini-tower machine route, selling what looks like a reduced height Mac Pro for around US$800 to US$1,000 fully equipped and allowing the use of third-party monitors that have Apple certification for color and sharpness quality. This would allow Apple to sell a machine in the US$1,350 range (including third-party 24" LCD panel) instead of paying around US$2,000 for an all-in-one iMac.

Nope. I don't see a minitower in Apples future. I do see a revised Mac Mini - which they may reduce the price point to $500 instead of $600. I also would not be surprised to see a netbook or tablet or some variation among those concepts.

The Mac Mini is Apple's answer to the minitower. The iMac is their best selling desktop, and is competitively priced, so it's a very safe bet that Apple is not going to drop it anytime soon.

[mogzieee]

I think Apple will walk though this recession like it's a sunny day in the park.

Apple is a strong company that makes millions every day. It's not like they're going to crash and die anytime soon, as with most other companies.

[Amdahl]

This isn't a recession, boys.

[IJ Reilly]

This isn't a recession, boys.

BS. Hard to say it more clearly than that, boys.

[synagence]

Apple don't tend to hang with the rest of the market forces ... they have $30bn in cash - they'll ride out this out ... they may even use the oportunity to acquire a new company although thats not really been apples main style.

Things maybe will change based on Q2 earnings call ... but then most likely new imac's, macpro and macmini will be on the verge of being released (or will have been in the market a short time) and the next iphone will be appearing at the end of Q2 early Q3 (based on Phil's comments about iphone cycle being june) so i think they're quite well placed to sit pretty for 2009.

[Eidorian]

BS. Hard to say it more clearly than that, boys.Read their post title...

[IJ Reilly]

Read their post title...

Sorry, don't follow -- unless you were referring to the word "depression" in the post title. That's exactly what I was calling BS.

[SactoGuy18]

Nope. I don't see a minitower in Apples future.

I do--for one reason: the iMac in the current economic climate is too expensive for most users, and Apple knows this even with US$30 billion in cash on hand.

While the product may not see the light of day (depending on the what happens with the economy later this year), Apple probably has a fallback position to have a minitower machine ready to be greenlighted for production very quickly so Apple can keep the buyers that will normally buy the iMac.

[NT1440]

I think it is the deep recession that Apple will have to consider abandoning the iMac and going to mini-tower machine route, selling what looks like a reduced height Mac Pro for around US$800 to US$1,000 fully equipped and allowing the use of third-party monitors that have Apple certification for color and sharpness quality. This would allow Apple to sell a machine in the US$1,350 range (including third-party 24" LCD panel) instead of paying around US$2,000 for an all-in-one iMac.

Do you go on tour???

Its been a while since I've had a good laugh like that.:p

[MBX]

Guys i never intended this thread to be about Apple and how they're going to do during recession/ depression.

But about US and if us people can expect lower prices in such a bad economy.

[NT1440]

Guys i never intended this thread to be about Apple and how they're going to do during recession/ depression.

But about US and if us people can expect lower prices in such a bad economy.
Well that answer is no.

[IJ Reilly]

Well that answer is no.

Add to that, we'd better hope not. A lot of lower prices means deflation, and deflation can mean depression. On the list of things you better not wish for, deflation is right near the top, not too much after nuclear war and bubonic plague.

[i7.920]

Its worked so far.
Except for that dark era in the mid nighties...:rolleyes:

Pah, a good recession now and then keeps people on their toes. On Average every 7-9 years. this time it's a little worse than the last (2001.) and the one before that 1996/7. We'll see if it gets as bad as 1987/88.

I'm in the mining game (work for Xstrata Coal) and you have to roll with the punches, Apple like every cooperate giant will do what it needs to do to look after it's stock holders. If lowing prices to move stock is seen as a good move it'll occur, if sacking 5% of the work force in administration and sale seems like a better option for saving cash don't rule it out.

Cheers
J

[SactoGuy18]

Do you go on tour???

Its been a while since I've had a good laugh like that.:p

You can laugh all you want until Apple realizes they can't sell many iMacs because it has priced itself out of the market. In our increasingly frugal economic environment, I really do hope Apple does have a "fallback" plan to build machines that can prevent at least new users from not buying a midrange Mac computer, especially now with new desktops preloaded with Windows 7 coming as early as August 2009!

[IJ Reilly]

You can laugh all you want until Apple realizes they can't sell many iMacs because it has priced itself out of the market. In our increasingly frugal economic environment, I really do hope Apple does have a "fallback" plan to build machines that can prevent at least new users from not buying a midrange Mac computer, especially now with new desktops preloaded with Windows 7 coming as early as August 2009!

Do you really believe you understand the computer market and current economic conditions better than the people who run Apple? I have to ask, if only because you seem so certain.

[Amdahl]

This ought to liven this thread up.

Ballmer likens economy to depressions of 1837, 1873, and 1929
http://news.cnet.com/8301-13578_3-10158959-38.html?tag=newsEditorsPicksArea.0
Microsoft Chief Executive Steve Ballmer sketched a dire portrait of the world economy on Friday, likening it to market conditions in 1837, 1873, and 1929, each of which involved bank failures, high unemployment, and a depression.

"This is a once-in-a-lifetime economic crisis," Ballmer told a retreat of House Democrats in Williamsburg, Va. "There is a lot of history around that, and frankly if you stop and think about it, 1837, '73, '29, 2008, it's almost exactly a whole lifetime between each of the major economic difficulties that we face."

Ballmer said that economic growth in the last 25 years was fueled by innovation, globalization, and debt--and that the current levels of debt were unsustainable. "In 1929, for example, just before the stock market crash, the private debt-to-GDP ratio was 160 percent," he said. "Last year, private sector debt as a percentage of the GDP: 300 percent, far more leverage."

His warning of a protracted downturn that could become a depression comes amid a stock market that is down by more than 40 percent from its October 2007 peak, and housing prices in many metro areas that have been falling consistently since July 2006--a feat not equalled since the Great Depression.

IMF Says Advanced Economies Already in Depression
http://www.bloomberg.com/apps/news?pid=20601087
The U.S. economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the postwar period as companies from Macy’s Inc. to Caterpillar Inc. cut costs. The U.K. economy will shrink this year by the most since 1946, the IMF forecasts.

What came before the "postwar period?" A depression. One you might have heard of: The Great Depression.

[ravenvii]

You can laugh all you want until Apple realizes they can't sell many iMacs because it has priced itself out of the market. In our increasingly frugal economic environment, I really do hope Apple does have a "fallback" plan to build machines that can prevent at least new users from not buying a midrange Mac computer, especially now with new desktops preloaded with Windows 7 coming as early as August 2009!

Well I have an iMac and love it. I hope Apple won't get rid of the iMacs.

This ought to liven this thread up.

Ballmer likens economy to depressions of 1837, 1873, and 1929
http://news.cnet.com/8301-13578_3-10158959-38.html?tag=newsEditorsPicksArea.0

Heh, quoting Ballmer on the economy is like quoting Plumber Joe on the Presidency - they don't know ****.

[SactoGuy18]

(getting on soapbox)

I'm surprised that Ballmer hasn't wondered why American citizens and companies have socked away somewhere between US$10 and US$16 TRILLION in offshore banking centers (OFC's) at places like the Bahamas, Bermuda, Cayman Islands, Panama, Singapore, Switzerland, and so on.

The reason is simple: they're "offshored" to keep their assets out of the hands of the most dreaded Federal organization of all: the Internal Revenue Service. And Americans are going to spend just over a mind-boggling US$300 BILLION this year complying with our Federal tax laws, a huge waste of money in my humble opinion.

It is WAY past due that we actually look at the Federal income tax system itself and either drastically simplify it or replace it altogether. Once we fix what's wrong with our taxation system and design it to encourage savings and investment in US-based financial institutions and also allow Americans and American companies to make economic decisions no longer based on keeping taxes low, the US economy will start to recover as we can bring back a huge fraction of that gigantic amount of money offshored for tax reduction reasons.

In short, there is a US$10 to US$16 trillion gold mine of American-owned financial assets out there that when brought back to the USA will end the economic crisis in very short order.

(getting off soapbox)

[Amdahl]

Heh, quoting Ballmer on the economy is like quoting Plumber Joe on the Presidency - they don't know ****.
What is strange is why he was invited to the House Democrats retreat to say it. I guess they want to pork out the porkulous package and need Ballmer-style cheerleading to get ready for the big vote. Oh, but I think Plumber Joe would most certainly know ****.


In short, there is a US$10 to US$16 trillion gold mine of American-owned financial assets out there that when brought back to the USA will end the economic crisis in very short order.


Money never sleeps. Since this is already a global problem, who would we be taking this money from? Changing the tax code to suck that kind of money in to our country might be seen as protectionism or trade war.

[SactoGuy18]

Money never sleeps. Since this is already a global problem, who would we be taking this money from? Changing the tax code to suck that kind of money in to our country might be seen as protectionism or trade war.

Not necessarily. Why do you think the Cayman Islands and Bermuda have so many financial offices? The reason is simple: they can shelter assets held by foreigners out of the hands of tax authorities of other countries. Besides, once we fix our tax system so it encourages savings and investment inside the USA with little or no concerns about income tax implications, it would not only revive the US economy, but will eventually float up our trading partners as our economy starts expanding again. :)

[DiamondMac]

Right now, I doubt we will see anything

But if the economy gets even worse for the next 1-2 years, I wouldn't be shocked to see not just Apple but many other companies being FORCED to drop prices as sales get worse.

Apple has done incredibly well in the last year compared to other companies but I am not sure how well Apple could do if the economy gets worse AND stays that way for a few years. People just won't be buying anywhere near as much

[NT1440]

You can laugh all you want until Apple realizes they can't sell many iMacs because it has priced itself out of the market. In our increasingly frugal economic environment, I really do hope Apple does have a "fallback" plan to build machines that can prevent at least new users from not buying a midrange Mac computer, especially now with new desktops preloaded with Windows 7 coming as early as August 2009!

Apparantly you have no idea what the target market for macs is.

[liptonlover]

Don't forget Apple has a thriving mobile device market too... not just expensive desktops and laptops. That will probably get them through the recession even if they take a loss from computers.

[zephyrnoid]

Since Apple hasn't been about market share in Computers for ages- prices stay stable. It's the Wintel bunch that will be sweating it out over the next 2 years :D

[SactoGuy18]

Apparantly you have no idea what the target market for macs is.

I remember Leo Laporte and a couple of panelists on a recent MacBreak Weekly podcast described the iMac market as the "BMW" of desktop computers. Problem is, given the increasingly bad economy, Apple might not be able to justify the very high cost of the iMac, especially the 24" model. As such, we all hope Apple has a "fallback" plan to sell medium-capability Macs that have the computing power of the iMac but as a much less expensive small tower machine and allow third-party monitor manufacturers such as LG, NEC, Samsung, Viewsonic, etc. to build "Apple certified" monitors.

Is the iMac a great machine? Of course. But economic realities may end the market for the iMac if Apple tries to continue to charge US$1,500-plus for a reasonably equipped model.

[IJ Reilly]

I remember Leo Laporte and a couple of panelists on a recent MacBreak Weekly podcast described the iMac market as the "BMW" of desktop computers. Problem is, given the increasingly bad economy, Apple might not be able to justify the very high cost of the iMac, especially the 24" model. As such, we all hope Apple has a "fallback" plan to sell medium-capability Macs that have the computing power of the iMac but as a much less expensive small tower machine and allow third-party monitor manufacturers such as LG, NEC, Samsung, Viewsonic, etc. to build "Apple certified" monitors.

Is the iMac a great machine? Of course. But economic realities may end the market for the iMac if Apple tries to continue to charge US$1,500-plus for a reasonably equipped model.

How many market analysts does it take to screw in a lightbulb?

The very tired and imprecise "BMW of computers" analogy has been demolished too many times to be worthy of further discussion here, but even if you were to accept it without question, consider whether BMW has decided to suddenly go down-market with their cars due to this or any other recession. The reality is, companies don't reinvent their product lines due to perturbations in the economy. They continue to do what they do best.

Anyway, if you're not going to respond to my questions, at least you could respond to his.

[SactoGuy18]

The very tired and imprecise "BMW of computers" analogy has been demolished too many times to be worthy of further discussion here, but even if you were to accept it without question, consider whether BMW has decided to suddenly go down-market with their cars due to this or any other recession. The reality is, companies don't reinvent their product lines due to perturbations in the economy. They continue to do what they do best.


Funny you mention that because BMW is seriously financially hurting right now because their product mix is too expensive for current buyers--note that BMW has cancelled a number of high-end new high-end models recently and is now making a major push to develop the next-generation 1-Series "entry level" model.

Interestingly enough, the likes of Volkswagen Audi Group, Opel, Ford of Europe, PSA Group, Renault and FIAT may actually survive this deep recession in Europe because their strong mix of low-cost models puts them in good position to build higher-end models as the economy starts its recovery.

Like I said earlier, the iMac is a wonderful machine. Problem is, the street price of an iMac is still very expensive compared to a PC with an Intel Core 2 Quad CPU, 8 GB of RAM, 1 TB Serial ATA-II hard drive, top quality graphics card and third-party 24" LCD monitor. Apple needs to realize the new economic realities (even with US$30 billion in cash on hand!) and develop models that can still capture the market that the iMac was intended for. Besides, if you get a good LCD panel from LG, NEC or Samsung, the picture quality is at least as good was what you get with the iMac's own 24" panel.

[NT1440]

Apple is not going to make a mini tower just because the market is hurting right now. Its just not going to happen.

I predict that Apple will walk out of this in MUCH better shape than other companies.

[IJ Reilly]

Funny you mention that because BMW is seriously financially hurting right now because their product mix is too expensive for current buyers--note that BMW has cancelled a number of high-end new high-end models recently and is now making a major push to develop the next-generation 1-Series "entry level" model.

Interestingly enough, the likes of Volkswagen Audi Group, Opel, Ford of Europe, PSA Group, Renault and FIAT may actually survive this deep recession in Europe because their strong mix of low-cost models puts them in good position to build higher-end models as the economy starts its recovery.

Funny you should mention that, because all of the car makers you mention are sharply cutting back on production, and BMW's sales declined less in recent months than Toyota. January over January sales at BMW declined 15%, at Toyota the drop was 31%. Clearly this is because the cars made by Toyota are too expensive. Right?

[mlts22]

Apple isn't going to go anywhere, IMHO. Lets say the absolute worst happens, all the cash they are sitting on vanishes overnight, and people stop buying their products (this is theory here...) Microsoft will make sure Apple stays around, so the SEC and EU have less ammunition to rip at them for monopolistic practices.

I'm sure Macs will probably stay at the same prices. They may not go down in price, but the next model refresh will cost the same. I'm also sure that a "Mac Pro Mini" won't happen, even though almost everyone would love such a beast. Apple makes money when people want a new, faster video chipset, so only having upgradable video in the top end machine makes marketing sense for them.

Apple has a good position in today's market. Microsoft is getting constantly assailed PR-wise about Windows security, and not just individuals are moving to Macs because of security and fewer malware issues; small and midsize businesses are also making the switch. The fact that OS X is more forgiving of sloppy security practices is one of its big advantages, especially where all it takes is one exploit through a Web browser on windows for a business's crown jewels to be stolen.

[SactoGuy18]

Funny you should mention that, because all of the car makers you mention are sharply cutting back on production, and BMW's sales declined less in recent months than Toyota. January over January sales at BMW declined 15%, at Toyota the drop was 31%. Clearly this is because the cars made by Toyota are too expensive. Right?

Most of that decline--especially the USA market--was because of major cutbacks in sales of Toyota-branded trucks and SUV's. Sales of Toyota's smaller models such the Yaris, Corolla, Matrix and lower-end Camry models have not fallen off so much, mostly because of the lower entry price to start with. I still see a lot of new Corolla and Yaris cars here in Sacramento, CA. :)

[IJ Reilly]

Most of that decline--especially the USA market--was because of major cutbacks in sales of Toyota-branded trucks and SUV's. Sales of Toyota's smaller models such the Yaris, Corolla, Matrix and lower-end Camry models have not fallen off so much, mostly because of the lower entry price to start with. I still see a lot of new Corolla and Yaris cars here in Sacramento, CA. :)

What you personally see in Sacramento -- now that's proof.

You haven't supported your argument that luxury carmakers are suffering more than others in this recession. In fact the opposite appears to be true, at least on the basis of objective evidence.

The fact remains that companies do not radically revise their product lines due to perturbations in the economy. They continue to make the products they know and for which they are known. You are not for example going to see BMW build a car to compete with the Corolla, no matter how many of these cars Toyota sells. There's a whole host of reasons why this is the case, not only for car companies like BMW, but also for computer companies like Apple.

[Amdahl]

Former Treasury Chief Economic adviser & an adviser to the Prime Minister says this is the worst recession in over 100 years. That means worse than the Great Depression.
http://www.independent.co.uk/news/uk/politics/this-is-the-worst-recession-for-over-100-years-1605367.html
'This is the worst recession for over 100 years'
Ed Balls, the PM's closest ally, warns that downturn is ferocious and says impact will last 15 years

By Nigel Morris, Deputy Political Editor, and Sean O'Grady, Economics Editor

Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown's most senior ministers and confidants has admitted.

In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers's closest allies.

Mr Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out."

He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".

The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent. He also appeared to hint that the recession could play into the hands of the far right.

The other great depressions

*Long Depression, 1873–96

Precipitated by the "panic of 1873" crisis on Wall Street and a severe outbreak of equine flu (Karl Benz's first automobile did not chug on to the scene until 1886), it was remarkable for its longevity as well as its global reach. In Britain, it was the rural south rather than the rich cities of the north that suffered. The UK ceased to be a nation that relied in any way on farming for its livelihood.

*Great Depression, 1930s

The "Hungry Thirties" were rough on many, at a time when welfare systems were rudimentary. The worst period was from the Wall Street Crash of 1929 to about 1932, but in places such as Jarrow, the unemployment rate hardly dipped below 50 per cent until the economy was mobilised in 1940. However, for many in the south and for the middle classes, the times were relatively prosperous.

[IJ Reilly]

One man's opinion.